The degree to which mid-sized firms--the "middle market"- depend on large regional banks for short-term credit is an issue particularly relevant to New England. If this dependence is heavy, then the recent consolidation among the region's large bank holding companies could be forcing its mid-sized firms to accept short-term credit on uncompetitive terms. The dependence of New England's middle market on the region's banking institutions as a whole, both large and small, is also of concern. The greater this dependence, the more vulnerable are the region's mid-sized firms to sharp contractions in the availability of bank credit, such as the regional "credit crunch" that occurred during the early 1990s.

In order to address these issues, the Federal Reserve Bank of Boston surveyed the credit sources of the region's middle market firms. The results show that such firms are by no means exclusively dependent on the region's largest commercial banks, suggesting that uncompetitive pricing is currently not a concern. The implications of the survey's results for the vulnerability of the region's mid-sized firms to credit crunches are less clear. The degree to which these firms depend on the region's banks as a whole for short-term credit varies with the measure of dependence used.