Banking consolidation, spurred by interstate branching deregulation, is changing markets' competitive structure. Policymakers and regulators have focused on the implications for customers in retail and wholesale markets rather than consolidation's impact on correspondent banking markets (where...

This paper shows that bank performance improves significantly after restrictions on bank expansion are lifted. We find that operating costs and loan losses decrease sharply after states permit statewide branching and, to a lesser extent, after states allow interstate banking. The improvements...