This paper is aimed at the analysis of the banks’ decisions to open or close branches in  submarkets and, in particular, to test if these decisions can be considered mainly determined by what is happening in each submarket, irrespectively of what has happened in other submarkets, as the Sutton’s independent submarkets model suggests. With data on the Spanish retail banking sector for the period 1994-98, I specify and estimate a discrete choice model to examine the entry probability of potential new entrants into submarkets and the probability of incumbents to open or close one branch in their submarkets. I find that the entry decisions of potential entrants are mainly determined by submarket characteristics, as opposed to entity-specific characteristics. And that the incumbents’ decisions to open or close branches only depend on the submarket expected profit stream and the number of branches owned by each incumbent in it. These results are consistent with the assumptions of the theoretical model.