© Reuters U.S. Federal Reserve Governor Michelle Bowman delivers her first public remarks as Fed policymaker at the American Bankers Association conference in San Diego, California, U.S., February 11, 2019. REUTERS/An Saphir
(Reuters) – The framework used to assess competition in the banking sector needs to be reformed to create a level playing field that favors consumer choice, Federal Reserve Governor Michelle Bowman said on Wednesday.
“As … new competitors offer consumers an alternative delivery channel for the cluster of banking products and services they need, we must ensure we take appropriate steps to understand the competitive pressures they pose and update our approach to measuring competition.” Bowman said in remarks prepared for the Community Bank Research Conference in St. Louis, Missouri.
“The framework for analyzing bank mergers should also be updated. The goal should be a clear, flexible framework… size should not be a regulatory factor… assessment… should be based on a careful analysis of risks,” she added.
While banks have moved quickly to respond to competitive threats and changing customer needs, the rules governing how the U.S. central bank assesses competition have remained relatively intact for more than a quarter century.
Bowman identified several areas for improvement in all competitive analyses, including credit unions and non-bank financial organizations.
Deposit-market-based restrictions in current bank merger guidelines could be relaxed to fully capture the influence of non-bank financial firms in some product markets, Bowman said.
The Fed will weigh deposits and loans offered by banks with a national digital presence in each banking market “by the percentage reported in the annual deposit summary” in any competitive analysis, Bowman said.
Bowman noted that the Fed is continually updating its approach to identifying banking markets to reflect changes in how consumers in the community access banking products and services.