the earnings and growing equity capital of community banks. moreover, the evidence suggests that community banks have avoided the underwriting mistakes that led to so many problems ten to fifteen years ago. borrower equity is much higher and credit criteria are much stricter. in the last recession and during the early weak recovery, we saw very few delinquencies in these credits. nonetheless, bankers need to be aware of the historical real estate cycle that, in the past, placed such exposures under severe stress. one hopes these improvements in underwriting standards are lasting. but the painful lessons of banking history underscore the ever - present need for vigilance in managing geographic and business line concentrations. consolidation mergers and acquisitions in banking continue, driven by technology, reduced barriers to entry, relaxation of interstate banking restrictions, and globalization. although attention has been focused on the larger banks, roughly 90 percent of mergers over the past decade have involved a target with less than $ 1 billion ; three - quarters have involved an acquiree with assets of less than $ 250 million. largely as a consequence, the number of banking organizations with assets of less than $ 1 billion has fallen since the mid - 1990s by more than one - fifth. neither the aggregate decline in the number of banking organizations of all sizes nor the increase in aggregate concentration ratios tells us much about the competitive effects of consolidation. competition in banking is fought on the battlefield of the local market, especially for households and small and medium - sized businesses. by that test, concentration in local markets has actually declined somewhat since the mid - 1990s in both urban and rural local markets. the apparent contradiction between aggregate consolidation and the virtually unchanged local market structure reflects the fact that many of the mergers and acquisitions by all sizes of banks have been out - of - market, or geographic - expansion, mergers. in addition, when consolidation occurs, it often induces de novo entry to take advantage of the inefficiencies or transition difficulties of the newly consolidated enterprise. over the past five years, for every four bank mergers that have been approved, three de novo bank charters have been granted. to be sure, expansion by large banks through acquisitions and branching has increased the number of local markets - urban and rural - in which a large institution is a rival. last year, 99 percent of the urban markets and 54 percent of the rural markets had an office of a banking organization with deposits of $ 25 billion or more. such an increase in the presence of large banking organizations at the

philipp hildebrand : setting the course for the swiss economy – challenges for the swiss financial centre and outlook for the future summary of a speech by mr philipp hildebrand, chairman of the governing board of the swiss national bank, to the zurcher volkswirtschaftliche gesellschaft, zurich, 17 may 2010. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the swiss banks face two major challenges. first, sooner or later, they will have to carry out their core business – asset management for foreign customers – in a tax - conform environment. second, the big banks will be required to operate under more stringent regulatory requirements. these challenges are likely to lead to structural changes in the financial centre. how are such changes likely to affect the swiss economy? an empirical analysis shows that, although the financial centre plays an important role in the swiss economy, it also entails considerable risks. in the case of cross - border asset management, the relationship between the risk to the economy and the income earned is acceptable. however, this is hardly the case for the banks ’ own trading activities. consequently, current regulatory efforts could not only improve the stability of the financial sector, but also increase both the profitability of banks and the benefit which the swiss economy derives from the financial sector over the long - term period. meanwhile, it is of key importance, not just for the financial centre but for switzerland as a whole, that an acceptable solution be found for the taxation of foreign bank deposits.