The Future of Banking: How Consolidation, Nonbank Competition, and Technology... (EventID=114093)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems ___________________________________ On Wednesday, July 29, 2021, at 10:00 a.m. (ET) Consumer Protection and Financial Institutions Subcommittee Chairman Perlmutter and Ranking Member Luetkemeyer will host a hybrid hearing entitled, “The Future of Banking: How Consolidation, Nonbank Competition, and Technology are Reshaping the Banking System." - - - - - - - - Witnesses for this one-panel hearing will be: • Paulina Gonzalez-Brito, Executive Director, California Reinvestment Coalition • Makada Henry-Nickie, Robert and Virginia Hartley Fellow - Governance Studies, Brookings • Sarah Jane Hughes, University Scholar and Fellow in Commercial Law, Indiana University School of Law • Desiree Jackson, Assistant Vice President for Treasury Management, Beneficial State Bank • Jim Reuter, Chief Executive Officer, FirstBank on behalf of American Bankers Association Overview The U.S. financial system has changed significantly over the decades. Through mergers, acquisitions, and organic growth, banks have become larger in size and fewer in number while serving a greater number of people, thereby limiting competition. Additionally, the rate of de novo (newly chartered) depository institutions has slowed. Moreover, nonbank and financial companies are increasingly playing a larger role in lending, payments, and offering other financial products and services to consumers and small businesses. In some cases, nonbank and fintech companies represent competition to traditional financial institutions, while in other cases, these companies partner with depository institutions to help them expand into other markets. These changes have impacted the availability and manner in which consumers can access financial products and services. The hearing will examine these evolving trends and their impact on consumers, small businesses, communities of color, bank employees, and other industry participants, and evaluate policy options to ensure there are robust safeguards in the public’s interest that improve competitiveness, promote innovation, and provide broad access to affordable financial products and services. Executive Order on Promoting Competition in the American Economy On July 9, 2021, President Biden signed Executive Order 14036, “Promoting Competition in the American Economy,” which initiated a government-wide effort, establishing dozens of initiatives that promote competition across the entire economy, including the financial services sector. It calls on the Department of Justice, in consultation with the Board of Governors of the Federal Reserve System (Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), to strengthen merger oversight under the Bank Merger Act and the Bank Holding Company Act of 1956 (BHCA). Those statutes specifically direct those agencies to consider factors such as the depository institution’s “financial and managerial resources” and “the convenience and needs of the community to be served” in the merger review process and discourages regulators from approving mergers that would result in monopolies or substantially less competition and present risks to financial stability or bank failure. In addition, the Executive Order calls for the Consumer Financial Protection Bureau (CFPB) toissue rules under Section 1033 of the Dodd–Frank Wall Street Reform and Consumer Protection Act, that would provide guidance on how consumers have access to their financial data and “can more easily switch financial institutions and use new, innovative financial products.” Mergers, Acquisitions, and Consolidation The total number of federally-insured banks in the U.S. has fallen from 17,811 in 1984 to 4,951 as of June 30, 2021. Similarly, the number of federally-insured credit unions has declined from about 15,000 in 2004 to 5,029 as of June 30, 2021. While the banking industry had been consolidating prior to the 1980s, some experts point to various laws passed in the 1980s and 1990s, such as the Riegle-Neal Act, that allowed for interstate banking where banks could open branches across state and even county lines, resulting in a decline in the number of community banks. The 2008 global financial crisis may also have been a catalyst for further mergers and acquisitions. According to the FDIC, the rate of voluntary mergers, among community banks in particular, “increased sharply following the financial crisis as a wave of post-crisis failures receded.” Additionally, since the 2008 financial crisis, several of the largest banks have increased in their asset size, by 30 to 44 percent according to one estimate. Financial institutions look for merger... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407959