mr. davies looks at the tasks of the uk's new securities and investments board and how it will affect the business community speech by the deputy governor of the bank of england, mr. howard davies, at the futures and options association international derivatives week conference in london on 4 / 6 / 97. thank you for your invitation. and, particularly, thank you for not withdrawing it when you discovered that, rather than having on your platform a benign, soft - centred deputy governor of the bank of england, you found yourself face to face with the all - seeing, all - regulating head of super - sib. this may have come as a surprise to you - but nothing like as big a surprise as it was to me, i can assure you. and i have to say that, in spite of the way i have been presented in some of the newspapers, muscles rippling beneath a superman t - shirt, i still feel rather more like clark kent in his thick specs, stumbling myopically around the office. i haven ’ t yet found a phonebox in which to get changed. i do not plan, this morning, to talk at length about my new responsibilities, partly for the very good reason that i have not had the time to prepare a coherent plan of campaign. but i might just say a word or two about the new sib, and the way it will affect your business. i have been quite encouraged, so far, by the market reaction to the proposed new structure. warning notes have been sounded, of course, about the need to avoid a lumbering, slow - moving bureaucracy, and the need to ensure that regulation is appropriate for the type of market. i understand those points and, particularly as far as you are concerned, the need to distinguish between professional wholesale markets and the retail sector. there are some interesting developments in that direction in the us at present, which we shall certainly look carefully at as we decide our own new structures. but, overall, i sense that we begin the task with some goodwill in the marketplace. i was particularly interested to see the summary of the views of members of your association on regulation in the price waterhouse report published late last year. that is a helpful document which we will take into account. i was struck by the importance you attached to a clear but flexible regulatory environment, which scored highly as a success factor as far as the london market was concerned. and i took the strong point made about the need for cost control,

relaxation or removal of previously existing legal restrictions on intrastate and interstate banking and branching. following a decade and a half of significant consolidation, the percentage of banking assets held by the top ten banking organizations more than doubled, from about 22 percent in 1980 to about 45 percent in 2001, while the share held by the top twenty - five organizations increased from about 33 percent to 61 percent. despite the scale of consolidation and the substantial increase in banking concentration at the national level, banking concentration within local market areas has, on average, declined a bit over the past two decades. this apparent anomaly largely reflects the fact that many of the mergers and acquisitions have been between banking organizations in different geographic markets. in those instances when the merging parties did serve the same local markets, the dynamic nature of competition and antitrust enforcement by the federal reserve and the department of justice has helped to limit increases in local - market concentration. the stability of average local - market concentration over time is noteworthy because research suggests that competition for retail customers takes place substantially at the local - market level and concentration is an important determinant of competition. a second factor impacting the declining concentration in local markets was the expanded number of bank branches during that period. though the number of banks has declined, the number of bank branches has increased. besides commercial banking, other components of the financial service industry have experienced some consolidation in recent years. however, consolidation involving nonbank financial institutions such as insurance and securities firms has been much more modest than that in commercial banking, most likely because of the absence of preexisting restrictions on geographic expansion for these types of firms. like banks, insurance underwriting firms vary widely in size, ranging from several large national insurers to numerous small local or technically specialized firms. investment banking has been more heavily concentrated for some time, no doubt in part reflecting the greater geographic expanse of the markets for their services. in the past two decades, some degree of consolidation has also occurred across different segments of the financial services industry. during the 1980s and 1990s, as the federal reserve modified its regulations, many bank holding companies established so - called section 20 subsidiaries to carry out securities activities that had not been permitted within banking organizations since passage of the banking act of 1933, or glass - steagall. in 1998, travelers and citicorp combined to form citigroup in anticipation of the repeal of glass - steagall and the enactment of more liberal legislation. in november 1999, the congress passed the gramm