Some Recent Trends in Commercial Banking

I n this article I review some recent trends in the evolution of U.S. commercial banks. The banking industry has experienced a series of significant transformations in the last two or three decades. Among the most important of them is the change in the type of organizations that dominate the landscape. Since the eighties, banks have increased the scope and scale of their activities, and several banks have become very large institutions with a presence in multiple regions of the country. After this long period of transformations, now is a good time to stop and look back at the changes that have occurred. Reviewing these trends over the last thirty years may also help to put in perspective the behavior of the banking system during the 2001 recession. We have not had many recessions since the major transformations in banking happened. In fact, the only other recession took place in 1991–1992 and found the banking system in the middle of the resolution of a widespread crisis. After two years of slow recovery, this is an appropriate time to assess how the new banking system behaved during the last recession. For such evaluation, it is useful to have a long-run (thirty year) perspective on the direction of change in the relevant variables. This perspective is the focus of the present article. This study concentrates only on commercial banks, most of which are part of a larger company, a bank holding company. Sometimes, more than one commercial bank belongs to the same bank holding company. These banks are called sister banks. In general, sister banks tend to be managed as different branches of a single bank rather than as independent banks. In fact,