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The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
The growing role of nonbank financial institutions, or NBFIs, in U.S. financial markets is a transformational trend with implications for monetary policy and financial stability.
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The Governance & Culture Reform hub is designed to foster discussion about corporate governance and the reform of culture and behavior in the financial services industry.
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The Consolidation of the Financial Services Industry
Consolidation has changed the nature of the financial services industry. Large multipurpose financial companies now offer retail customers not only traditional deposit and lending services but mutual fund, insurance, and brokerage services. For their corporate clients, these same companies offer lines of credit as well as payments, risk management, and securities underwriting services. In the past, U.S. banks were restricted from providing all of these services, but recent regulatory and court decisions have allowed them to expand their activities. More generally, globalization continues to increase the pressure for uniform legal and regulatory treatment across national boundaries. These developments raise several important questions: Why has the financial services industry experienced consolidation? Are banks and other financial services providers more efficient as a consequence? Has globalization of financial markets enhanced competitiveness? Will consolidation change the role of the central bank? Will small businesses and small depositors get lost in the shuffle?
At the Conference on the Consolidation of the Financial Services Industry, leading researchers from the academic community, regulatory agencies, and the financial services industry explored these and other questions. Our hope is that rigorous research subjected to thorough review will provide answers and suggest appropriate actions for policymakers. Proceedings of the conference will be published in a special issue of the Journal of Banking and Finance edited by Allen N. Berger of the Board of Governors of the Federal Reserve System and Rebecca S. Demsetz and Philip E. Strahan, both of the Federal Reserve Bank of New York.
WELCOMING REMARKS
William J. McDonough
Federal Reserve Bank of New York
SESSION 1: PERSPECTIVES ON BANK CONSOLIDATION
Chair: Paul B. Bennett
Federal Reserve Bank of New York
"Megamergers and Expanded Scope: Theories of Bank Size and Activity Diversity"
Arnoud W. A. Boot, University of Amsterdam
Todd T. Milbourn, London Business School
Anjan V. Thakor, University of Michigan
Discussion: Mark Flannery, University of Florida
"Bank Capital and Bank Structure: A Comparative Analysis of the U.S., U.K., and Canada"
Anthony Saunders, New York University
Berry K. Wilson, Federal Communications Commission
Discussion: Randall S. Kroszner, University of Chicago
SESSION 2: THE CAUSES AND CONSEQUENCES OF BANK MERGERS
Chair: Rebecca S. Demsetz
Federal Reserve Bank of New York
"Interest-Rate Exposure and Bank Mergers"
Benjamin C. Esty, Harvard Business School
Bhanu Narasimhan, Massachusetts Institute of Technology
Peter Tufano, Harvard Business School
Discussion: Christopher M. James, University of Florida
"Telecommunication Versus Processing Cost and the Consolidation of the Payments System"
Diana Hancock, Federal Reserve Board
David B. Humphrey, Florida State University
James A. Wilcox, University of California, Berkeley
Discussion: Darryll E. Hendricks, Federal Reserve Bank of New York
"The Poor Performance of Foreign Bank Subsidiaries: Were the Problems Acquired or Created?"
Joe Peek, Boston College
Eric S. Rosengren, Federal Reserve Bank of Boston
Faith Kasirye, Federal Reserve Bank of Boston
Discussion: Robert A. Eisenbeis, Federal Reserve Bank of Atlanta
Moderator: Beverly J. Hirtle
Federal Reserve Bank of New York
Lunch Speaker
"Financial Consolidation: Dangers and Opportunities"
Featured Speaker: Frederic S. Mishkin, Columbia University
SESSION 3: BANK CONSOLIDATION AND SMALL BUSINESS LENDING
Chair: Philip E. Strahan
Federal Reserve Bank of New York
"How Important are Small Banks to Small Business Lending? New Evidence from a Survey of Small Firms"
Jith Jayaratne, Federal Reserve Bank of New York
John D. Wolken, Federal Reserve Board
"Banking Consolidation and the Availability of Credit to Small Businesses"
Rebel A. Cole, Employment Policies Institute
Nicholas Walraven, Federal Reserve Board
Discussion: Mitchell A. Petersen, Northwestern University
"Youth, Adolescence, and Maturity of Banks: Credit Availability to Small Business in an Era of Banking Consolidation"
Robert DeYoung, Office of the Comptroller of the Currency
Lawrence G. Goldberg, University of Miami
Lawrence J. White, New York University
Discussion: Richard J. Rosen, Indiana University
PANEL: BANK MERGERS--WHAT SHOULD POLICYMAKERS DO?
Chair: Elinor H. Solomon, George Washington University
Panelists: Arnoud W. A. Boot, University of Amsterdam
Charles W. Calomiris, Columbia University
Anil K Kashyap, University of Chicago
Myron L. Kwast, Federal Reserve Board
Anthony M. Santomero, The Wharton School
SESSION 4: MERGERS AND EFFICIENCY
Chair: Allen N. Berger
Federal Reserve Board, Wharton Financial Institutions Center
"The Dollars and Sense of Bank Consolidation"
Joseph P. Hughes, Rutgers University
William W. Lang, Office of the Comptroller of the Currency
Loretta J. Mester, Federal Reserve Bank of Philadelphia
Choon-Geol Moon, Hanyang University
"Efficiency, Scale Economies, and Consolidation in the U.S. Life Insurance Industry"
J. David Cummins, The Wharton School
Sharon L. Tennyson, The Wharton School
Mary A. Weiss, Temple University
Discussion: Gary Ferrier, University of Arkansas
"The Impact of Mergers on Credit Union Service Provision"
Harold O. Fried, Union College
C. A. Knox Lovell, University of Georgia
Suthathip Yaisawarng, Union College
Discussion: Stavros Peristiani, Federal Reserve Bank of New York
SESSION 5: CONSOLIDATION, MANAGERIAL INCENTIVES, AND DEPOSITOR SERVICES
Chair: William C. Hunter
Federal Reserve Bank of Chicago
"The Role of Managerial Incentives in Bank Acquisitions"
Charles J. Hadlock, University of Illinois
Joel F. Houston, University of Florida
Michael Ryngaert, University of Florida
Discussion: Glenn Hubbard, Columbia University
"Consolidation and Bank Branching Patterns"
Robert Avery, Raphael Bostic, Paul Calem, and
Glenn Canner, Federal Reserve Board
Discussion: Gregory F. Udell
New York University
PANEL: EXPANSION OF BANK POWERS
Chair: Giorgio P. Szegö, University of Rome
Panelists: John Boyd, University of Minnesota
Edward J. Kane, Boston College
Anthony Saunders, New York University
Anjan V. Thakor, University of Michigan
Federal Reserve Bank of New York
33 Liberty Street
New York, NY 10045
