Liberal FOM Rules Have Little Impact on Banks
MADISON, Wis. - Liberal field of membership rules have little impact on bank dominance in most markets, according to a study from the Filene Research Institute. The study's authors found that FOM policies have negligible effects on the degree of bank monopoly power in local markets. They also found negligible association with rates on new auto loans. However, they did find a significant association between FOM policies and unsecured (non-credit card) loan rates at banks. In markets in states with more liberal FOM policies these rates are lower. This suggests that the power of banks to exercise their pricing power is limited by potential credit union entry into the market, the authors argued, adding that consumers might benefit from more liberal FOM policies. Authors Robert M. Feinberg, American University, and William A. Kelly, University of Wisconsin-Madison also found a modest correlation between more a more liberal FOM and credit union share of deposits, and that more liberal FOM policies are modestly correlated with the growth rate in bank branches. It appears that banks respond to actual or potential increases in competition by increased branching to make access more convenient to consumers.