Before the holiday season, Randal K. Quarles, vice chairman of supervision of the Federal Reserve gave a speech at the prestigious Stanford University, California university. In perspective, his speech focused on what currently appears to be the evolution of the economy, especially as regards the movement of people, job opportunities and concentration in urban centres.
One of the salient points of the speech given by Quarles concerned the evolution of the economy and society in the western United States, emphasizing, in particular, how after decades in which there has been a progressive and homogeneous depopulation of the so-called rural towards big cities, in recent years, on the contrary, an opposite trend has been strengthening which sees small towns flourish again with a recovery in the growth of the resident population. A trend which, according to Quarles, must lead us to reflect on how the banking system must be imagined and designed in the coming years in order to once again guarantee that proximity which the renewed vitality of some areas far from the big cities needs again today.
The crisis that has occurred since 2007 has brought about profound changes in the US banking system, favoring the succession of a series of mergers and acquisitions in order to save the banks most in difficulty. This has clearly produced a reduction in the number of banks and the number of branches, especially in small centres. But today, precisely this new greater vitality of small towns necessarily requires, according to Quarles, a new framework of thought that contemplates, together with the advantages offered by technology and fintech innovations, a physical presence that allows offering even more services to customers, some of which cannot be delivered through digital channels.
What is relevant in the considerations expressed by Quarles concerns the beginning of a rethinking of the vision that has so far guided the Fed in the evolution of the US banking system, a vision that has favored the affirmation of increasingly large banking groups by stressing beyond all limits efficiency and profitability objectives are reasonable, often to the detriment of the possibility of providing services in a widespread manner. A return therefore to a new and more modern vision of proximity that is advocated by the Federal Reserve, with the aim of encouraging and accompanying development and economic growth even in those areas with a lower population density where the recovery seems increasingly take root and expand thanks also to the possibilities offered by technological evolution to decentralize work activities and without negative effects in terms of productivity.
A paradigm shift, therefore, the one that is appearing on the US economic and financial scene that seems to contrast with what is still being promoted in Europe today where, in recent years, all the interventions of the European Central Bank have been aimed at safeguarding the stability of the banking and financial system through a process of consolidation which, here too, has seen a reduction in the number of banks and branches. A process that has also been accompanied by increasingly stringent rules regarding capital requirements and the items to be set aside to deal with the growth of problematic items in the balance sheet and which has required the greatest sacrifices precisely from the smallest banks and those of the territory that base their work on credit mainly on the financing of the real economy.
It is hoped that the new vision that comes from the United States and the Federal Reserve will also be implemented by the ECB, given the conformation of the productive fabric in Europe where, together with numerous large companies, there are also millions of small and medium-sized enterprises which, in order to offer their contribution to the recovery of the economy they need to be able to dialogue closely with credit institutions rooted in the area and capable of offering compatible responses to their needs. Having the objective of safeguarding financial stability without taking into account the growth of the real economy risks being only a temporary and counterproductive illusion.
°°°°° The author is the Secretary General of the National Association of Popular Banks (Assopopolari)
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