Download Article

RWP 21-19, January 2022

We identify a new source of bank consolidation in the United States. For decades, both the financial and real sides of the economy have experienced considerable consolidation. We show that banking-sector consolidation is, in part, a consequence of real-sector consolidation; because small banks are a disproportionate source of small business credit, they are disproportionately exposed to shocks to small business growth. Using a Bartik instrument based on national small business trends and county-level industry exposure, we show that changes to the real-side demand for small business credit are partially responsible for the relative decline in small banks’ deposits, income, and loan growth.

JEL Classifications: G21, G34, L25, R12

Article Citation

  • Brennecke, Claire, Stefan Jacewitz, Jonathan Pogach. 2021. “Shared Destinies? Small Banks and Small Business Consolidation.” Federal Reserve Bank of Kansas City, Research Working Paper no. 21-19, January. Available at External Link


Stefan A. Jacewitz

Research and Policy Officer

Stefan Jacewitz is a Research and Policy Officer at the Federal Reserve Bank of Kansas City. He joined the Economic Research Department in April 2021 after serving 12 years at th…