The architecture of branch banking (or lack thereof)

Came across a 2004 article in the “Chicago Fed Letter”: (pdf, by Robert DeYoung and Thomas H. Klier) about bank headquarters — written in the aftermath of Bank One’s takeover by Morgan Chase, it notes that bank headquarters (unlike HQs in general) almost always end up in the larger of the two headquarters cities. Illinois’ silly branch-banking laws have put Chicago at a disadvantage in this regard, as Chicago entered the deregulated banking era with many smaller banks (i.e., prey) rather than a few strong banks (i.e., predators).

bq. Today the largest U.S. banks are located in international banking centers, such as New York or San Francisco, where agglomeration economies are strong and high demand for financial services has allowed even purely local banks to grow large, or in states like California and North Carolina where geographic regulations have historically been less restrictive. For example, California has never prevented its banks from branching freely within its very expansive borders, and North Carolina began permitting (by interstate agreement) its banks to operate affiliates virtually anywhere in the southeastern U.S. over a decade before Riegle-Neal. In contrast, Illinois’s strict unit banking laws placed an effective upper bound on the size that Chicago hanks could attain-hence, when nationwide banking became legal in the mid-1990s, Chicago banks were at a disadvantage because they lacked the critical mass and experience to participate fully in the wave of acquisitions that followed.

The lack of branch banks in Chicago left an odd architectural legacy: a few leviathan banking halls downtown (notably the First Chicago headquarters, where the retail bank has recently been downsized quite considerably to a fraction of the first floor) and a great many opulent bank headquarters in the neighborhoods — Uptown Bank (now Bridgeview), Hyde Park Bank, Noel State Bank (now Midwest). Many of these neighborhood palaces match the finest downtown banks elsewhere in grandeur.