HAVE BORROWER CONCENTRATION LIMITS ENCOURAGED BANK CONSOLIDATION

Bank consolidation has been going on for more than a decade, in part t he result of legislative and regulatory changes and in part a reflecti on of the large number of banks that became financially troubled in th e late 1980s and early 1990s. However, the rapid consolidation of inst itutions still continues, even though the health of most banks has imp roved and many states long ago Liberalized regulations on intrastate b ranching and interstate merging. This suggests that other factors may also be playing an important role. The large number of mergers involvi ng target banks with assets under $100 million and the preponderance o f mergers where both target and acquirer are small banks suggest that some of the merger activity may be an attempt to overcome Limitations imposed by small size, such as borrower concentration limits. The fast est-growing segment of the lending market is loans over $1 million, an d borrower concentration Limits prevent the smallest banks from servic ing such loans. This article examines motivations for bank mergers and their regional patterns, and then considers the outlook for further b ank consolidation.