Abstract
On January 2 1988 the United States and Canada signed the US-Canada Free Trade Agreement (FTA), which created one of the world's largest free trade areas. While the US and Canadian banking industries function very differently, the FTA reduced various banking regulations and resulted in greater competition among US and Canadian banks. The research issue addressed in this study is whether the loosening of regulations by the FTA actually benefitted the US domestic banking market. The overall results of this study indicate that the market responded positively to the passage of the FTA for US banks with significant Canadian operations. After the passage of the FTA, however, US banks were generally not successful in penetrating Canadian markets. In contrast, most Canadian banks did expand their operations in the United States.
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