Fed Gov. Duke Describes New Consumer Banking Landscape
The financial crisis and the response by policymakers have changed the environment in which retail banks operate, said Federal Reserve Gov. Elizabeth Duke in a June speech to the Consumer Bankers Association. As a result, banks will have to make considerable changes to their business practices and products, she added.
The Federal Reserve took a number of actions to unfreeze credit markets and ultimately support consumers and the economy, said Duke, including the creation of the Term Asset-Backed Securities Loan Facility (TALF). The TALF, which expired at the end of March, provided funds for purchases of securities backed by nearly three million auto loans, more than one million student loans, and about 850,000 small business loans, she added. Actions to support credit markets were accompanied by new consumer protections in areas such as subprime lending, credit cards, and student loans. Additional protections for consumers, while long overdue, will have a considerable effect on banks' business models, Duke said.
Consumers struggle with debt payments, declining wealth
Crisis highlights need for balance
The new consumer banking model that emerges from the crisis will be shaped by past experiences, said Duke. Adjusting to these changes will require all stakeholders to work toward reestablishing "a financial services sector that is safe, transparent, efficient, and that effectively serves the needs of the real economy," she said.
June 28 , 2010