Relaxation of government restrictions on multioffice banking (interstate banking and branching by banks) in recent years has facilitated substantial consolidation of the banking industry in the United States. In this article, the author examines the impact of this consolidation on the presence of large banking organizations in rural banking markets. Changes in the presence of large banking organizations in rural areas depend on the history of the state regulation of multioffice banking. In the states that have permitted statewide branching for many years, large organizations have had offices in most of the rural counties and accounted for large shares of local deposits in most of the rural counties since at least 1980. In contrast, the presence of large banking organizations in rural countries has increased substantially in recent years—in the states that relaxed their regulations of multioffice banking more recently—becoming more like those states that relaxed their regulation of mutlioffice banking many years ago. In almost all of the rural counties in the nation, however, relatively small banking organizations continue to hold large shares of local deposits. The evidence about the presence of large banking organizations in rural areas consistently supports the view that relatively small banks will continue to be major banking organizations in rural areas.
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