Where the rubber meets the interstate

And could legitimately be called banking deregulation, Karthik Krishnan, Debarshi Nandy and Manju Puri find that it works to produce greater efficiency;

In our forthcoming paper in the Review of Financial Studies (Krishnan et al 2014), we study how the interstate expansion of banking and bank branching  allowed by the Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 affected firm-level productivity of small and large firms. Various regulations in the US restricted intra as well as interstate banking dating back to the 19th century. The McFadden Act of 1927 restricted cross-state banking and state-level regulations prevented banks from intra-state expansions. .... states gradually dismantled these restrictions and many states had laws in place allowing interstate banking by 1992, which primarily took the form of allowing out-of-state banks to buy in-state banks. However, interstate bank branching was still not allowed until the passing of the IBBEA in 1994.

The passing of the IBBEA effectively permitted bank holding companies to operate branches across state lines.

.... we find that firms located in states that allowed a greater degree of deregulation (i.e., imposed fewer restrictions) on the entry of out-of-state banks experienced a greater increase in their productivity following banking deregulation in that state.

Especially for small, credit constrained businesses.

And we stress, this is actual deregulation, not changed regulation.