This trend is likely to continue or accelerate under the Riegle-Neal Act, which has already allowed increased interstate banking, and which will allow interstate branching into almost all states this summer. Importantly, an increase in local market concentration is not a major issue in most of these mergers and acquisitions, as they are primarily of the market-extension type.
This dependence on banks is in contrast to the US, where capital markets play a bigger role in financing the economy. Central, Eastern and Southern European economies are also bank-based financial systems in which capital markets remain relatively underdeveloped. Consequently, bank deleveraging, combined with increased risk aversion on the part of investors, has affected the ability to finance sustainable growth throughout the region.