Consumer groups have long argued that bank consolidation leads to diminished competition and higher loan rates in low-income neighborhoods.
A study published in the April edition of The Journal of Finance says it also leads to more burglaries. It concluded that break-ins, car thefts, and other property crimes increase as the number of bank branches decreases.
The authors, Mark J. Garmaise, an assistant professor of finance at the University of California at Los Angeles, and Tobias J. Moskowitz, a professor of finance at the University of Chicago, looked at 80 mergers from 1992 to 1995 of banks with more than $1 billion of assets and assessed their impact through 2000 on neighborhoods where branches were closed.
Mr. Garmaise said in an interview that when a neighborhood loses branches, loan costs rise, the number of new construction projects declines, property values fall, and poorer people move in. This combination leads to more thefts, Mr. Garmaise said.
The authors said there is no apparent link between mergers and more serious crimes, such as assault or murder. They also concluded that crime rates rose for only about three years; other banks see that interest rates are high in a given area, and "after a certain length of time" step in to fill the void, Mr. Garmaise said.
Regulators should consider the possibility of increased crime and other social effects when deciding whether to approve a merger, especially in neighborhoods of low and moderate income, the report said.
The Office of the Comptroller of the Currency told American Banker that it takes into account comments from the public and community groups on credit availability.
The Federal Reserve said it considers "convenience and the needs of the community." The Office of Thrift Supervision and the Federal Deposit Insurance Corp. did not reply to a phone call and an e-mail message.
