Banking Competition Index

The Bank Competition Index measures the intensity of bank competition by county and MSA. This research project is joint work with Garrett McBrayer, former Finance PhD student at the University of Arkansas and assistant professor of Finance at Boise State University.

Frequently Asked Questions

The BCI measures the intensity of competition in U.S. banking markets (MSA or county) across markets and years. Each market's BCI in a given year represents the impact of bank competition on the average net interest income of banks operating in that market. Higher index values indicate greater competition intensity. The BCI is higher in markets where bank reliance on maturity liabilities is higher, the number of per capita bank offices is higher, and deposits are more equally distributed across banks.

Construction of the BCI is based on the intuitive assumption that increased competition intensity in a market should depress the earnings of banks in that market. We analyzed the statistical correlation over a twenty-year period (1995-2015) between average net interest income to average assets of all banks with operations in a market and three measures of competition: the reliance of banks on maturity liabilities (a proxy for noncore funding); the complement to the Herfindahl-Hirschman Index on deposits (1-HHI); and the number of per capita bank offices. Higher values of each of these competition measures results in more competition intensity within the banking market.

Higher values of the BCI lead to reduced net interest income for banks operating in the market because the intensity of competition is greater. The index has an intuitive interpretation. For example, a market where the BCI is 0.10 points higher than another market (e.g. 0.25 versus 0.15) means that competition intensity decreases net interest income of banks in the more competitive market by 10bp. The BCI index is constructed so that the mean value of the index between 1995 and 2015 is 0. Negative BCI values indicate that the competition intensity in a market is less than the average market over that period. Negative values do not indicate that competition increases profitability in those markets.

The BCI is highest in markets in the Midwest, Mid-South, and Southeast portions of the United States. BCI values are highest, on average, in the St. Louis, Kansas City, Chicago, Minneapolis, and Cleveland Federal Reserve Districts. They are the lowest in the San Francisco, Dallas, Boston, and New York Districts.

Despite intense competition, the banking industry is currently experiencing a smaller impact on profitability from competition intensity than it did a decade ago. The BCI index fell from an average value of 0.04 in 2010 to -0.44 in 2018, which indicates that competition intensity reduced the net interest income of banks in the average banking market in 2018 by 48bp less than in 2010. The primary reason for the decline is the abundance of low-cost deposits resulting from the extraordinary Federal Reserve monetary expansion.

The reduced intensity from bank competition, however, is likely to reverse. As the Federal Reserve withdraws liquidity from the economy, maturity liabilities will become scarcer and interest rates will rise. Banks with heavy reliance on noncore liabilities will experience a relative decline in net interest income because their funding costs will rise more than at other banks. The reduced profitability, in turn, will increase the competition intensity and increase the pressure for consolidation.

Banker Articles

These articles provide in-depth analysis of the construction and interpretation of the BCI.

Interactive Maps


To visualize differences in competition across banking markets in a given year relative to the long-term average level of competition:

To visualize differences in competition across banking markets within a given year:

The Data

Usage of the BCI should be cited as "McBrayer, Garrett A., Yeager, Timothy J., (2019) The Bank Competition Index.  Retrieved from

Download the index data (xlsx)