How Should Banking Markets Be Delineated?

The Bank Merger Act and Bank Holding Company Act require regulatory agencies to assess the competitive impact of a proposed merger or acquisition of a bank or a bank holding company. Any merger or acquisition that would tend to lessen competition substantially or create a monopoly in any section of the country must be denied by these agencies. The delineation of a geographic banking market is usually an important factor in the assessment of competition. Yet, it is often a very difficult task to determine the extent of a geographic market area, as indicated by a recent statement of Governor Henry C. Wallich of the Federal Reserve Board: “In this case an array of alternative market delineations has been presented for the Board’s consideration. Each of them, with the exception of Applicant’s ten-county market, has some merit, reflecting recognized economic and competitive relationships, but no one of them is entirely satisfactory.”