Unit Banking

Unit Banking

A system of banking in which the government restricts or does not permit a bank to open branch offices. Unit banking systems encourage either small, independent banks or banks that are theoretically independent but are in fact owned by a bank holding company. In the United States, unit banking is largely confined to the Midwest and Southwest.
References in periodicals archive ?
There were the small country bankers, who emphatically defended the prevailing system of unit banking, with its legal limitations on branch banking.
The unit banking system was inherently unstable because banks could diversify neither loan portfolios nor deposits.
Party's state unit banking on Satish Upadhyay to lead it in fresh polls
This report reinforces our commitment to develop service-oriented architecture-based solutions that enable our customers to address their changing business needs," said Falk Rieker, global vice president and global head, industry business unit banking, SAP.
This report reinforces our commitment to develop service-oriented architecture-based solutions that enable our customers to address their changing business needs, said Falk Rieker, global vice president and global head, industry business unit banking, SAP.
Proponents of unit banking also argue that branching will hurt the small local borrower as the bigger, and more distant, bankers will perhaps be less willing to extend credit (Jay (1933)).
One important caveat with respect to the decreasing trend in unit banking is that before the complete removal of branching regulations in the early nineties, unit banks were often part of the same bank holding company and hence were managed as, essentially, one bank.
At the start of the century, virtually all states maintained unit banking laws, which restricted banks from opening subsidiary offices called branches.
Texas's unit banking rule compounded the problem by prohibiting branch banking and thus effectively keeping the larger institutions from diversifying their portfolios with consumer loans.
Some researchers, however, have argued that the prevalence of unit banking left the U.
At that time, passage of the 1970 amendments to the Bank Holding Company Act and liberalization of bank holding company laws by many states, particularly those with unit banking laws, set off a substantial increase in bank holding company formations, acquisitions, and expansion.
Evidence from the depression clearly shows that branch banking was safer than unit banking, but that safety increased with the widening of the geographical area over which a bank could branch.