As a result of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, no insured bank or bank holding company can accumulate a concentration of more than 10 percent of the domestic deposit market through an interstate merger with, or acquisition of, an unaffiliated insured bank. Banking organizations are permitted, however, to grow through the cap by increasing their market share organically, and failed bank transactions are expressly excluded from that restriction. Furthermore, national banks may use pre-existing merger authority to effect an interstate merger that would not be subject to the cap.

The issue is relevant for discussion today because we already have one banking organization which is pressing tight against the cap and – if the recent trends of consolidation and attention to the retail marketplace continue – we may well see other organizations come close as well.

The question here is whether the cap is necessary to ensure a diverse banking market and prevent the adverse accumulation of economic power by any one organization – or whether it is an impediment to an orderly, market-driven, evolution in bank consolidation.