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The consolidation of the financial services industry: causes, consequences, and implications for the future

Author

Listed:
  • Allen N. Berger
  • Rebecca Demsetz
  • Philip E. Strahan
Abstract
This article designs a framework for evaluating the causes, consequences, and future implications of financial consolidation, reviews the extant research literature within the context of this framework (over 250 references), and suggests fruitful avenues for future research. The evidence is consistent with increases in market power from some types of consolidation; improvements in profit efficiency and diversification of risks, but little or no cost efficiency improvements; relatively little effect on the availability of services to small customers; potential improvements in payments system efficiency; and potential costs on the financial system from increasing systemic risk or expanding the financial safety net.

Suggested Citation

  • Allen N. Berger & Rebecca Demsetz & Philip E. Strahan, 1998. "The consolidation of the financial services industry: causes, consequences, and implications for the future," Finance and Economics Discussion Series 1998-46, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1998-46
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