Philadelphia Fed, Report: Has the Banking Industry Become Too Concentrated?

“There is no universal trend toward increasing con­centration. While deposits concentration increased substantially, none of these markets were concentrated by any traditional measures as of 2019, and they were not trending that way. Market entry, not increasing concentration, explains these trends. In mortgage lending, nonbanks have become major players. Meanwhile, small banks are still important providers of small-business loans, and lenders with-out a local branch or office have increased their share of small-business loans.”

“In short, as branch deposits become more concentrated, lending concentration is becoming less so. This indicates that branches are becoming less im­portant for lending. Perhaps deposits are no longer an adequate proxy for the cluster of services provided by a bank.”