Today, the American Antitrust Institute (AAI) released the banking and financial services chapter of its forthcoming Transition Report on Competition Policy to the 45th President of the United States. The chapter is entitled Banking & Financial Services: Globalization, Regulation, and Consolidation in a Troubled Industry. This release is the fifth in a series of previews in which the AAI will make select chapters of the transition report available for download in advance of the November election.
“The economic and political consequences of increased consolidation and decreased competition are particularly grave in the banking and financial services industry,” said AAI President Diana Moss.
“It has become increasingly clear why competition experts and antitrust enforcers are essential contributors to public discourse about benchmark manipulation, the ongoing Too-Big-To-Fail problem, and many other issues that plague this sector,” said the Transition Report’s editor, AAI Associate General Counsel Randy Stutz.
The banking and financial services chapter makes a variety of recommendations to the next administration to ensure both effective antitrust enforcement and effective regulation informed by competition policy, including:
- Antitrust enforcement agencies should pay closer attention to the adverse effects—including the increased potential for collusion—produced by rising levels of concentration in national and international markets for financial products and services, such as investment banking services. Investigations should reflect awareness that important segments of these markets are highly concentrated, now have a track record for collusion, and should therefore be presumed to be particularly susceptible to collusive and manipulative behavior.
- Congress should require regulators to consult in a timely manner with DOJ on the economic and competitive implications of major structural changes in the banking and financial services industry, including issues associated with increased concentration of financial and economic power, following standards that are clearly stated and administrable. DOJ should be given a statutory consultative role in a number of important instances that invoke regulatory oversight under Dodd-Frank, the Bank Merger Act, and the BHC Act.
- Competition policy considerations should inform regulatory solutions to the Too Big to Fail problem. Regulatory efforts should focus on creating incentives for company-by-company decisions to divest activities and assets, including progressively higher capital requirements and taxes based on considerations of systemic risk, especially where size is likely to confer competitive advantages based on investor and lender beliefs that the government will prevent a disorderly failure of the company.
- The enforcement agencies should continue to monitor the activities of the dominant payment card networks as the industry migrates into digital commerce and mobile payments.
Visit the Transition Report section of the AAI website for a free download of the entire chapter and links to the AAI’s related work.
The AAI Presidential Transition Report makes policy recommendations based on the AAI’s mission of promoting competition that protects consumers, businesses, and society. The Report is one way the AAI serves the public through education, research, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.
Randy Stutz, Associate General Counsel, American Antitrust Institute
Diana Moss, President, American Antitrust Institute