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Abstract

Since its inception, US. banking regulation has effectively prohibited a bank from opening or owning a branch located outside of its home state, commonly referred to as interstate branching. Only since the passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 have banks been able to engage in interstate branching, albeit still subject to significant state restrictions. Despite IBBEA 's removal of those barriers, it still allowed the states to impose anticompetitive restrictions governing the entry of out-of-state banks through the establishment of branch offices. As a result, states that were opposed to entry used IBBEA to erect barriers to out-of-state branch entry. This Article describes the changes in federal and state interstate branching law since passage of IBBEA and reviews how initial (1994-1997) and evolving (1998-2005) interstate branching laws affect out-of-state branch growth in a state's banking market. We provide a detailed fifty-state plus the District of Columbia survey of each state's initial interstate branch banking restrictions and changes to those provisions between 1994 and 2005. Based on the results of this survey, we employ regression analysis to determine whether there was an empirical association between restrictive state regulation and out-of-state branch banking entry. We conclude that anticompetitive state provisions restricted out-of-state growth when those provisions were more restrictive than the provisions set by neighboring states.

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