Foreigners arriving in the United States are often overwhelmed by the number and kinds of financial institutions that exist. The structure of the banking industry in the United States is quite different from that of other industrialized countries. America is the only country that does not have a true national banking system in which a relatively small number of banks have a large number of branches located throughout the country. The reason is that the U.S. banking system is governed by both federal and state regulations. Until the Riegle–Neal Interstate Banking and Branching Act was passed in 1994, interstate banking was prohibited. As a result, the United States has nearly 12 times the number of banks that other industrialized countries have. Japan has only about 1 percent as many commercial banks as the United States. (Note that means separate legal entities, not branches or offices.)

Because the United States has more banks, they are usually smaller than those in the rest of the world. U.S. banks may become even smaller in a relative sense as banks in the European Union (EU) increasingly offer complete banking services throughout all the EU countries. In addition, the EU has allowed universal banking – the right of banks to offer a complete line of banking-related services and to own shares of stock in other companies since 1988. In 1999, U.S. banks could engage in universal banking.

Why do you think that U.S. banking laws were changed?