Interstate Banking Essay Example | Topics and Well Written Essays - 500 words

Interstate Banking - Essay Example Economies of scale are realized since loan activity is increased with the merging of assets brought about by expanded business in different states. Another advantage to interstate banking is the convenience it offers to its clients. With interstate banking, more branches are within the reach of the clients (Berry, 2011). The flow of bank activities are easily facilitated which makes it easier for the clients to do business. A smooth flow in bank activities may result in increased revenues because of the ease in doing business. Interstate banking makes it possible for banks to offer a wider range of banking services to its clients because of the interstate acquisitions and branches (Berry, 2011). Some of these services include more ATMs, electronic banking options and varied loan products. Financial security and stability is one of the major off-shoots of interstate banking. Since banking consolidation is allowed provided that the capital requirements are met, this means that the resources of the banks increase, making it more stable and secure. The liquidity and solvency of the banks improve with interstate banking. Bank clients benefit the most from interstate banking. The increased competition brought about by interstate banking makes banks think of strategies to capture a bigger market; thus, improving their services and developing new products which are attractive to the clients. Aside from bank clients, banks also benefit from interstate banking. Operating costs are greatly reduced as the bank subsidiaries are converted to bank branches. Geographic diversification will help improve the risk-return opportunities of banks (United States General Accounting Office, 1995). The most likely loser in interstate banking is the Federal Reserve (Berger & Humphrey, 1988). Since there will be an improvement in the efficiency of the payment system, multiple bank payments will decrease because most checks will be