Treasury Plumbs the Depth of Nonbank Finance, Seeks New Merger Policy, Rules

As promised, this report provides an in-depth analysis of Treasury’s report and resulting recommendations to the President’s Competition Council on the impact of new nonbank consumer-finance entrants from a competition, consumer-protection, and financial-stability perspective.  Although the report calls for reconsideration of bank-merger policy with an eye to the growing role of fintechs and bigtechs, its overall view of market power fails in our view to capture the actual landscape in which these important new entrants compete with banks.  For example, its focus on deposit-market concentration compares banks principally to neobanks, failing to consider deposit-like products such as prime MMFs and in many cases also credit-union deposits.  As a result, erroneous conclusions are drawn about market power that exists when all competitors – not just bigtechs or fintechs – are considered.