Antitrust analysis framework needs revision to reflect competitive pressures on smaller banks, Fed governor says

Revisions to the framework governing banking antitrust analysis should be considered to better reflect competition smaller banks face, a member of the Federal Reserve Board said Tuesday.

In a prerecorded video shown at the American Bankers Association (ABA) Conference for Community Bankers, Fed Gov. Michelle (“Miki”) Bowman said the Fed’s approach to analyzing the competitive effects of mergers and acquisitions “needs to keep pace.”

“I believe we should consider revisions to that framework that would better reflect the competition that smaller banks face in an industry quickly being transformed by technology and non-bank financial companies,” she said. “As part of this effort, we have engaged in conversations and received feedback from community banks about the Board’s competitive analysis framework and its impact on their business strategies and long-term growth plans.”

Bowman, who serves as the community banking representative on the Fed Board, said the central bank is in the process of reviewing its approach to antitrust analysis, and is specifically considering “unique market dynamics” faced by small community banks in rural and underserved areas.

“As part of this effort, we have engaged in conversations and received feedback from community banks about the board’s competitive analysis framework and its impact on their business strategies and long-term growth plans,” she said.

In other comments, regarding accessible innovation and technology integration, Bowman said the Fed “is committed to developing a range of tools that will create pathways for banks to develop and pursue potential partnerships with fintech companies.” She said that includes clearer guidance on third-party risk management, a guide on sound due diligence practices, and a paper on fintech-community bank partnerships and related considerations.

“These tools will serve as a resource for banks looking to innovate through fintech partnerships,” she said.

Finally, the Fed governor said efforts taken by the Fed last year when the financial impact of the coronavirus became apparent provided a “certainty of regulatory treatment” that “created an environment that built trust between regulators and bankers.” Among the efforts, she said, were pausing examinations and issuing supervisory guidance to make it clear that the Fed would not criticize a bank or take public enforcement actions against them when the institution was taking prudent steps to help customers and making good faith efforts to comply with regulations.

These efforts, she said, “enabled banks to continue to meet the needs of their customers who were struggling with circumstances through no fault of their own.”

Fed Gov. Michelle W. Bowman: My Perspective on Bank Regulation and Supervision

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