Magazine article American Banker

Branching Would Help Consumers in Many Ways, Fed Economist Says

Magazine article American Banker

Branching Would Help Consumers in Many Ways, Fed Economist Says

Article excerpt

WASHINGTON -- Interstate branching is opposed by some public advocates, but it would be a big boon for consumers, according to a Federal Reserve economist.

Not only would the broadened power force banks to offer more convenient, less costly services to their customers, but it would also spur industry competition and perhaps even increase the flow of funds into smaller communities, according to Paul S. Calem, writing in the Philadelphia Fed's May-June issue of Business Review.

"Anyone who frequently crosses a state line for work, for shopping, for business or pleasure stands to benefit from interstate branching," he said.

Benefits Seen to ATM Users

Mr. Calem said consumer groups oppose interstate branching partly because its benefits have not been thoroughly articulated. Sixty-six million people live in metropolitan areas that straddle state borders.

With interstate branching, these residents would have more convenient access to banking services, at lower cost, he said.

For example, these consumers would be able to use their own banks' automatic teller machines more often, avoiding extra fees for using other banks' facilities.

And while many consumer groups argue that interstate branching would choke competition and reduce the size and variety of banks from which customers can choose, Mr. Calem disagreed.

National banks would move into new areas, setting up new banks, thereby increasing competition, he said.

This would be especially true in areas that are dominated by a few institutions.

"As a result, consumers in these markets would likely be offered more favorable rates and fees," he said. …

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