current capital rules are applied to institutions that do not adopt the new standard. in short, if we have sufficient indications that implementation of a new capital standard will distort the balance of competition, we can and will apply policies to mitigate this effect consistent with the risk profile of individual institutions. we cannot, however, respond to an unsubstantiated and generalized fear of change. such concerns should not halt the evolution of regulatory capital standards for the large, complex banking organizations that play such an important role in our banking system and in global financial markets. bank consolidation legislation designed to deregulate u. s. banking markets, technology, and other factors have contributed to significant structural change in the banking industry and to a decline of nearly 40 percent in the number of banking organizations since the mid - 1980s, when industry consolidation began. consolidation activity has slowed sharply in the past five years, but a recent uptick in merger announcements, including a couple of very large transactions, may signal a return to a more rapid pace of bank merger activity. since 1995, the ten largest u. s. banking organizations have increased their share of domestic banking assets from 29 percent to 46 percent at year - end 2003. yet, over the past decade, roughly 90 percent of bank mergers have involved a target with less than $ 1 billion in assets, and three - quarters have involved an acquiree with assets of less than $ 250 million. this ongoing consolidation of the u. s. banking system has not, in my judgment, harmed the overall competitiveness of our banking and financial markets. although they have facilitated consolidation, the reduced barriers to entry - such as were provided by the riegle - neal act ’ s relaxation of interstate banking laws - have provided net competitive benefits to u. s. consumers of financial services. other economic forces, such as technological change and globalization, have stimulated competition among depository institutions and between depositories and nonbank providers of financial services. in addition to other credit - extending businesses, our system of depository institutions alone continues to be characterized by many thousands of commercial banks, savings institutions, and credit unions. measures of concentration in local banking markets, both urban and rural, have actually declined modestly not just since 2000 but since the mid - 1990s. significantly, most households and small and medium - sized businesses obtain the vast majority of their banking services in such local markets. deposit insurance i would like to turn now to the issue of deposit insurance reform and to the need for

we all seek a solution that promotes sound banking practices and that we can adequately implement and enforce. i hope that in the days ahead the agencies can close the gap on credit cards within such an overarching framework. if we can do so, the basel committee should be able to reach agreement in principle on a new proposal around midyear, and the u. s. banking agencies expect to evaluate that proposal through another “ quantitative impact study ” that we plan to conduct at large u. s. banks this fall. committee members are aware that this survey and public comments on a forthcoming notice of proposed rulemaking may raise still further issues that will need to be addressed before we can implement basel ii in the united states. of course, other countries have their own national and european union - wide review processes to conclude, and those consultations too, may raise issues that will require additional attention. as this committee knows, the u. s. agencies have proposed that in this country the most - advanced version of basel ii is to be required only of the largest, most - complex banking organizations, although we anticipate that some of the other larger banks also will choose to adopt that version. non - adopters in the united states will continue to operate under the current capital rules. the current regulatory capital regime, as i noted, has become less effective for the largest organizations while consolidation has sharply increased the scale and scope of their activities. in this country, the basel ii proposal focuses on them. the current rules remain appropriate and prudent for other banking organizations in the united states, and the agencies have decided that imposing the cost of new rules on these banking organizations does not pass a cost - benefit test. nonetheless, change in the procedures for calculating regulatory capital for larger banks creates uncertainty among those entities to which the new rules would not apply. the comments we received on the anpr and from the congress last year indicate that some smaller banks are concerned that their competitive environment will change. more specifically, these fears include the possibility that basel ii will induce adopters, who are likely to have reductions in regulatory capital requirements, to redeploy their capital by acquiring non - adopters or to gain a competitive advantage, particularly in the markets for small business and residential mortgage loans. to judge the merits of these concerns, the federal reserve conducted two technical and empirical analyses of the underlying issues and made the papers available to the public last month ; congressional staff members were also briefed. a third study will be