Financial Supermergers and the Business of Banking in the 1990s

The passage of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 marked the creation of a national banking market in the United States. Gone were the arcane geographical limits that had hitherto obstructed the nationwide expansion of banks. While these limits were frittered away over the course of several decades, the landmark congressional legislation of 1994 cleared the way for the massive consolidation of the industry. This presentation examines how Nationsbank, headquartered in Charlotte, North Carolina, emerged as one of the largest banks in the 1990s after its merger with California’s Bank of America in 1998. The giant represented the new frontier of late twentieth century commercial banking. Building on the experimentation that accompanied Nationsbank’s efforts to sidestep the interstate banking prohibitions in the 1980s, the bank boldly entered new territory in the 1990s. Ironically, at the moment when territorial constraints on banking operations were lifted, geography ceased to be a central concern for the business of banking. Competition in the commercial banking industry shifted from the realm of locality to that of activity. As they had mobilized against interstate banking prohibitions in the 1980s, commercial banks moved aggressively to expand into investment activities in the 1990s. Riegle-Neal allowed the creation of superbanks with the financial and political capital to succeed by the close of the century.