US Bank Deposits

Like some many sectors, US commercial banks are an oligopoly. The market power power of the dominant players is often measured from the Herfindahl-Hirschman Index Index (HHI).

HHI is computed as the sum of the squares of the competitor market shares as whole numbers:

The term “HHI” means the Herfindahl–Hirschman Index, a commonly accepted measure of market concentration. The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 20= 2,600).

Here are the top 10 US Commercial Banks, by deposit share:

  • JPM (“House of Jamie”): 16.1%
  • Bank of America (“House of Brian”): 14.8%
  • Wells Fargo (“”House of Wells Notice”): 10.9%
  • Citibank (“Hamilton House”): 5.8%
  • US Bank: 3.4%
  • Truist: 3.4%
  • PNC Bank: 3.3%
  • TD Bank: 2.9%
  • Charles Schwab: 2.7%
  • Capital One: 2.6%

They control 75% of US deposits.

And yet, their HHI-10 is a still somewhat competitive 675.61.

DOJ says agencies generally consider markets in which the HHI is between 1,500 and 2,500 points to be moderately concentrated, and consider markets in which the HHI is in excess of 2,500 points to be highly concentrated (See U.S. Department of Justice & FTC, Horizontal Merger Guidelines § 5.3 (2010)).

Transactions that increase the HHI by more than 200 points in highly concentrated markets are presumed likely to enhance market power under the Horizontal Merger Guidelines issued by the Department of Justice and the Federal Trade Commission.

Let’s see how this shakes out as banks continue to hit the floor.

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