Federal Reserve Governor Michelle Bowman gave her first public remarks as a Fed policymaker at the American Bankers Association conference in San Diego.
Federal Reserve Governor Michelle Bowman said on Wednesday that the framework used to assess competition in the banking sector needs to be overhauled to make sure there remains a level playing field that supports consumer choice.
Bowman said in prepared remarks at a community banking research conference in St. Louis, Missouri, that new competitors are beginning to provide consumers with alternative delivery channels for the cluster of banking products and services they desire.
The framework for analyzing bank mergers needs to be updated. The goal should be to have a transparent, dynamic framework. The size shouldn't be the controlling factor. She said that risk analysis should be based on a careful analysis.
The rules that govern how the US central bank evaluates competition have remained relatively unaffected for more than a quarter century, despite the fact that banks have moved quickly to address competitive threats and changing customer demand.
Bowman pointed out that there were several areas of improvement including credit unions and nonbank financial firms in all competitive analyses.
To fully capture the impact of nonbank financial firms in some product markets, the deposit-market based thresholds in current bank merger guidelines could be relaxed, Bowman said.
The Fed should factor in deposits and loans offered by banks that have a national digital presence, with deposits weighed in pro rata in each banking market at the percentage reported annually in the Summary of Deposits in any competitive analysis, Bowman said.
Bowman stated that the Fed should review its approach to defining banking markets to make sure it is updated consistently and reflects changes in how consumers access banking products and services.