on small towns and rural areas, Comptroller of the Currency Eugene A. Ludwig says. Because these areas have fewer and smaller banks, mergers are more likely to create concentrations than in metropolitan markets, Mr. Ludwig said last week at an antitrust conference sponsored by his agency. "Attention should be paid to the competitive effects of mergers in highly concentrated local markets," Mr. Ludwig warned. While mergers between banks in the same market may increase their efficiency, Mr. Ludwig said the combinations may be bad news for consumers. "The resulting increases in bank concentration tend to raise prices to customers, and the closing of overlapping branches, while lowering the merged banks' costs, also reduces customer convenience and eliminates alternatives," Mr. Ludwig said. However, Mr. Ludwig pointed out that the average concentration in metropolitan areas between 1985 and 1994, measured by the share of deposits held by the three largest banks in the area, increased less than one percentage point, to 68%. "Despite the newsworthiness of the recent megamergers, this is hardly the picture of a banking system becoming highly concentrated overnight," Mr. Ludwig said. The consolidation of the banking industry has not raised supervisory or competitive concerns at the OCC, Mr. Ludwig added. "I want to emphasize that the thought of a financial services system with larger institutions does not trouble me from a safety and soundness standpoint," he said. While the wave of mergers will create large, complex multistate banking companies, independent community banks will survive, Mr. Ludwig said. "I have never counted myself among those who feel that mergers spell the end of ... the benefits consumers enjoy from dealing with a small bank around the corner," he said. "The survival and continued chartering of small banks suggest they are serving special niches and can compete effectively with their larger brethren."

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