These remarks discuss why the “cluster” of financial services and local banking markets are still relevant for antitrust analysis in banking. A key portion of the Federal Reserve’s Order approving the NationsBank–Barnett merger is interpreted, and the extent to which antitrust is a practical constraint on the development of a nationwide banking structure is commented upon.

The creation of a number of very large and sometimes increasingly complex financial institutions, resulting in part from the on-going consolidation of the financial system, has raised concerns that the degree of systemic risk in the financial system may have increased. We argue that firm inter-dependencies, as measured by correlations of stock returns, provide an indicator of systemic risk potential. We analyze the dynamics of the stock return correlations of a sample of US large and complex banking organizations (LCBOs) over 1988–1999, and find a significant positive trend in stock return correlations. This finding is consistent with the view that the systemic risk potential in the financial sector appears to have increased over the last decade. In addition, we relate firms' return correlations to their consolidation activity by estimating measures of the consolidation elasticity of correlation. Consolidation at the sample LCBOs appears to have contributed to LCBOs inter-dependencies. However, consolidation elasticities of correlation exhibit substantial time variation, and likely declined in the latter part of the decade. Thus, factors other than consolidation have also been responsible for the upward trend in return correlations.

We investigate whether uninsured depositors, insured depositors, and general creditors exhibit evidence of quantity market discipline during the recent financial crisis. To establish which types of creditors expect to incur loss, we evaluate the FDIC's expectations about losses to creditors at banks that failed between 2008 and 2010. Our results show that quantity market discipline tends to begin far enough in advance to signal to both banks and supervisors that corrective actions can and should be taken. Furthermore, creditors are able to distinguish between banks of different risk levels. Our findings support several policy implications for encouraging market discipline.