Fed’s Bowman Addresses Effects of Bank Consolidation on Communities

Localities that lost a bank headquarters in a merger saw declines in local charitable contributions and volunteer service, Federal Reserve Governor Michelle Bowman said today, citing a Fed review of Community Reinvestment Act exam reports before and after bank acquisitions.

Speaking at a St. Louis research conference on community banking, Bowman explained that CRA reports showed extensive bank philanthropy, in-kind contributions and volunteering by bank officers and employees. “Many of these benefits were lost after a merger,” she said, adding that more research on the effects of losing a bank headquarters “could help determine whether these examples are isolated or a predictable result of consolidation.”

Bowman also discussed research on the effects of consolidation on small business lending, which she found mixed. “Studies have also shown that the post-merger bank tends to be healthier than the target institution was before the merger, which could to lead to an increase in the availability of credit in the community,” she said. “The bottom line is that some studies find small business lending goes up after mergers, and others find it goes down.”

Read more on the role of bank headquarters in local communities in the ABA Banking Journal’s “Bank City USA” magazine feature and podcast.