As has been already indicated, the Civil War brought out an innovation which threatened to do away with State banks, and indeed, almost did so in some States. The outbreak of the conflict between the States was almost coincident with a suspension of specie payments. With the war costing a million dollars a day, the Federal government had to add to the difficulties of the situation by large issues of notes, and the battle between the "greenbacks" of the National government and the issues of the 1,600 banks in the country was on, with the outcome never in doubt. Meanwhile a better method of financing the war was found in bonds, in the sale of which, under the leadership of that genius, Jay Cooke, the banks of New York ably assisted.

The need was manifest of a uniform currency and a better market for the bonds, both of which were attained by the founding of a new banking system, which was little more than an application of the free-banking systems of the States on a National scale. After much discussion the National Banking Act was passed and signed by President Lincoln on February 25, 1862. The first National bank under this law was established June 20, 1863. The distinctive principles of this system were government supervision of the operations of banks, and a circulation based directly upon the securities and guarantee of the government. The Federal authorities had found the key which opened the door to the sale of National bonds, and a more uniform, more stable circulating medium.

The greatest opposition to these banks came from the East, particularly New York, where the State banks were more numerous and strongly entrenched. Most of the early National banks were established in the small towns of the West. Even the first three in New York were small institutions. The First National Bank of New York was number twenty-nine on the list. As late as the middle of November, 1864, there were only 584 National banks in the whole country. Possibly the intimation of Jay Cooke that if the "New York bankers kept out of the system a new bank with a capital of $50,000,000 might be established there, backed by the moral support of the Government" had much to do with the acceptance of the National bank in New York. More influential, however, was the imposition of a ten per cent tax on the notes of State banks which made the bankers see light. The tax was not to go into effect until July 1, 1866, so the banks in New York had a year to prepare to meet the inevitable. By 1866 there were double the number of National banks in New York than banks of all other kinds; the State banks, for a time, were greatly reduced in numbers.

When the National banking system went into effect there were 309 State banks in operation in New York; five years later there were but forty-five. In 1863 there were seven National banks in the State; in 1868 there were 304. This condition did not hold for long, for as years went on, the high premium on government bonds destroyed any profits there were on circulating notes based on them, many of them issuing no notes in the present day. The State banking system provides for as much safety as the National, so there is little incentive to forsake State banking by those who desire to conduct a general banking business of discount ,loan and deposit. From the low ebb of 1868, the State banks rose to more than 200 by 1894; meanwhile the National banks had increased only thirty, the total being 334, a number probably never since exceeded. 

Through the last four decades the commercial banks of the State have tended to decrease in numbers and increase in resources and capital. In New York City there are about as many such banks as there were forty-five years ago. In Greater New York in 1889 there were 141 State and National banks and trust companies; in 1926, 143. New banks had been organized during this period, but mergers had kept the numbers about the same. Up-State, in the three larger cities during this same period, there had been a reduction in the number of like institutions. In Albany, in 1889, there were ten such, in 1926 but five. Buffalo had thirteen banks and trust companies in 1889; in 1926 they numbered seven. 

Rochester had nine in 1889 and eight in 1926. The amount of resources of the institutions of these three cities had increased from $67,000,000 in 1889 to $847,000,000 in 1926. As illustrative of the centralization of resources one may note that while the three largest banks of Albany had fifty-five per cent of the resources of all the banks in the city, in 1926 they owned ninety-four per cent. In Buffalo the three largest had forty-two per cent of the resources of the banks in 1889, while in 1926 they held eighty-nine per cent. In New York City at this same time (1889) the ten largest banks had total resources amounting to $343,000,000; in 1926 by the same computation the sum was $6,098,000,000. The ten largest controlled thirty-three per cent of the banking resources of the city in 1889; in 1926 the percentage was fifty-nine. The concentration of banking power is not peculiar to New York but is more evident there.