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Industry data for 1990-99 suggest that the increased market share of the largest bank holding companies is attributable almost entirely to external growth through mergers and acquisitions, rather than internal growth of the holding companies subsidiaries.
Although the largest bank holding companies control a growing market share, these institutions actually grew more slowly than smaller institutions after one accounts for the effects of consolidation.
As the industry evolves from a fractured banking system, large bank holding companies appear to be choosing a more consolidated, and likely more efficient, industry structure.
Kevin J. Stiroh is an economist and Jennifer P. Poole is an assistant financial analyst at the New York Fed.