FR2060_20160630_omb

Supporting Statement for the
Survey to Obtain Information on the Relevant Market in Individual Merger Cases
(FR 2060; OMB No. 7100-0232)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the voluntary Survey to Obtain Information on the Relevant Market in
Individual Merger Cases (FR 2060; OMB No. 7100-0232). The Board designed this survey to
determine from what sources small businesses and consumers in a particular geographical area
obtain financial services. The Board uses this information to define relevant banking markets for
specific merger and acquisition applications and to evaluate changes in competition that would
result from proposed transactions, including purchase and assumption agreements. The eventgenerated survey is conducted by telephone and has been used no more than once per year since
1990. The current annual burden for the FR 2060 survey is estimated to be nine hours.
Background and Justification
Under the Bank Holding Company Act of 1956 (12 U.S.C. §§ 1841 et seq.), the Bank
Merger Act of 1960 (12 U.S.C. § 1828(c)), and the Change in Bank Control Act of 1978
(12 U.S.C. § 1817(j)), the Board is required to evaluate merger and acquisition applications
submitted by bank holding companies to determine the effects of proposed transactions on
competition. The standards of the antitrust laws, specifically section 7 of the Clayton Antitrust
Act, must be applied. If a merger may substantially lessen competition or tend to create a
monopoly, the Board shall not approve the merger.
The foundation for an analysis of competition by the Board in such merger applications is
the economic concept of the relevant market. Applying this theoretical concept to specific
situations requires the determination of the geographic area that includes all direct competitors
(this area could be a town, a county, a state, a region of the country, or the entire country) and the
relevant product market (which requires identifying the firms within the relevant geographic area
that compete with one another).
For some time, there was widespread belief that the geographic markets in commercial
banking were local (for example, a single county) and that the product market was composed
only of commercial banking. This definition was accepted and applied by the Supreme Court
and accepted by the Board.1 However, as a result of substantial changes in banking and in the
financial services industry as a whole in the past two decades, some have questioned the
traditional definition of banking markets, even for households and small businesses.
1

In its Philadelphia National Bank decision in 1963 and again in its Connecticut National Bank decision in 1974,
the Supreme Court concluded and reaffirmed that banking should be treated as a distinct and separate line of
commerce and that only firms offering the full array of bank products should be included in the market definition of
banking. Furthermore, the Supreme Court determined that banking markets for small businesses and consumers
were limited to small geographic areas. Survey research conducted in conjunction with individual bank merger and
acquisition cases between 1963 and 1974 supported this view.

Specifically, numerous changes in bank regulation and technology have raised questions
regarding the traditional definition of locally limited commercial banking. The most notable of
these changes are:
 Thrift institutions are now permitted to offer the majority of banking products, including
transaction accounts and commercial loans,
 Non-depository institutions now offer various financial services,
 Securitization and sales of loan products have increased, and
 Electronic technology has increased the potential for remote delivery of some financial
services to end users, including small businesses and consumers.
The definition of a relevant geographic banking market is therefore an empirical
question. Prior to the implementation of the FR 2060 in 1987, there was no direct means by
which to gather empirical evidence to assess the geographic scope of banking markets in specific
situations. Although the findings of the Board’s Survey of Consumer Finances (FR 3059; OMB
No. 7100-0295) generally confirms the validity of the local market approach as a general
proposition, these findings will not necessarily apply in specific merger and acquisition cases. In
addition, the Board’s Survey of Small Business Finances (FR 3044; OMB No. 7100-0262),
which formerly provided information of the proximity of small businesses to their financial
institutions, was discontinued.2 Although the Board occasionally uses small business loan data
from the Reporting, Recordkeeping, and Disclosure Requirements Associated with Regulation
BB (Community Reinvestment Act) (OMB No. 7100-0197) as a source of information for
analyzing small business financing, there are cases where the Board needs the small business
portion of the FR 2060 survey for supplemental information. Thus, for both consumer and small
business finances, the use of local depository institutions in specific cases can be ascertained
only by conducting a survey such as the FR 2060.
The empirical evidence compiled since the implementation of the FR 2060 survey has
indicated that relevant banking markets for smaller businesses and households are still generally
limited to small geographic areas, such as a county or a metropolitan area, and that there is a
tendency to purchase a cluster of services from commercial banks. The data obtained from this
survey have provided the Board with a more accurate picture of the relevant banking market for
selected merger applications. This type of case-specific information on the market definition in
merger applications has provided an empirical foundation for staff analysis, Board decisions, and
published Board orders prepared by the Board’s Legal Division.
Out of the several hundred bank merger and acquisition applications reviewed by the
Board each year, as required by law, fewer than a dozen typically are evaluated by the Board as
having potentially serious competition problems. In a few of these cases, there is not sufficient
data to allow a sound economic analysis as the basis for a decision by the Board and a written
Board order by the Legal Division. In these cases, the FR 2060 survey provides useful
information for analyzing competition or clarifying the market definition.

2

The 2003 survey is the last version available.

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Description of Information Collection
The Board would conduct the survey by telephone. Information would be obtained from
approximately 50 consumers and approximately 25 small businesses selected at random from
local telephone directories. The survey would focus on local consumers and businesses to
determine whether, as in the past, they generally rely on local providers of financial services or
instead obtain financial services from a broader geographic area such as a state or the entire
country. In the survey of small businesses, responses would be obtained from the most
knowledgeable available individual, usually the president or treasurer. The proposed sample
selection process is described in Attachment 1.
The survey questions would serve as a guideline for Reserve Bank staff and have been
developed in consultation with staff from throughout the Board who have considerable
experience in defining relevant banking markets in cases where competitive issues arise. The
questions are designed to assess the extent to which nonbank and nonlocal financial services are
used by or offered to small businesses and consumers. The main objective of the questions
would be to determine the importance and influence of nonbank and out-of-area sources of credit
and deposit services. In several merger and acquisition cases, past surveys have provided the
Board with key information for defining the relevant banking market and assessing competition.
The Board has worked with Reserve Banks to tailor the survey questions for certain mergers or
acquisitions, as appropriate. An example of one of these tailored surveys is provided as
Attachment 2.
The survey data would permit the use of statistical tests to determine the confidence that
may be placed in the findings. Because the samples would be drawn from a specific local
market, the findings would be valid only for the particular case under consideration, and
extrapolation to other markets or to the nation as a whole would not be appropriate.
Time Schedule for Information Collection and Publication
Generally within the first week after a Reserve Bank accepts a merger application,
Reserve Bank staff would make a preliminary evaluation of the merger’s possible effects on
competition. If certain Board delegation criteria are not met, the Board would analyze the likely
competitive effects and decide whether it would be advisable to conduct the survey. If a survey
was deemed advisable, the appropriate Reserve Bank would conduct the FR 2060 survey. The
number of questions in the survey would be kept at a minimum so that the entire process of
conducting the survey, tabulating the responses, and summarizing the findings could be finished
within the confines of the Board’s internal 60-day limit for processing merger and acquisition
applications. Once the Board summarizes the responses of small businesses and consumers, the
survey results would be analyzed and the relevant findings incorporated into a memorandum to
the Board of Governors. The responses would be confidential and therefore would not be
published.

3

Legal Status
The Board’s Legal Division has determined that the FR 2060 is authorized pursuant to
the Change In Bank Control Act (12 U.S.C. §§ 1817(j)(7)(A) and (B)), the Bank Merger Act
(12 U.S.C. § 1828(c)(5)), and section 3(c)(1) of the Bank Holding Company Act (12 U.S.C.
§ 1842(c)(1)). Each of these sections require the Board to evaluate merger and acquisition
applications by banks and bank holding companies to determine the effects of proposed
transactions on competition in a particular banking market. In order to make this determination,
the Board must determine the relevant market and then determine the level of competition in the
market. This survey provides the data necessary to make such determinations when the Board
otherwise would not have such information. The FR 2060 is a voluntary survey.
Information obtained from small business and individuals may be kept confidential under
the Freedom of Information Act (FOIA). Information obtained from small businesses can be
considered confidential under exemption (b)(4) of the FOIA because the release of information
obtained from small businesses would (1) impair the Board’s ability to obtain this information
from entities that could not be compelled to respond and (2) cause substantial harm to the
competitive position of the entity from whom the information was obtained (5 U.S.C.
§ 552(b)(4)). In addition, information obtained from consumers may be kept confidential under
exemption (b)(6) of the FOIA because the information the survey collects is the type of
information that would constitute a clearly unwarranted invasion of personal privacy (5 U.S.C.
§ 552(b)(6)).
Consultation Outside the Agency
On April 4, 2016, the Board published a notice in the Federal Register (81 FR 19181)
requesting public comment for 60 days on the extension, without revision, of the FR 2060. The
comment period for this notice expired on June 3, 2016. The Board did not receive any
comments. On June 29, 2016, the Board published a final notice in the Federal Register
(81 FR 42359).
Estimate of Respondent Burden
The current burden for the FR 2060 survey is estimated to be nine hours annually as
shown in the following table. Because the survey is event-generated, it is not possible to predict
exactly how many surveys would be conducted in a given year. The burden estimate shown in
the table below is based on the number of surveys conducted during the past three years. These
reporting requirements represent less than 1 percent of total Federal Reserve System paperwork
burden.

4

Number of
Annual
respondents3 frequency

FR 2060

Estimated
average time
per response

Estimated
annual burden
hours

Small Businesses

25

1

10 minutes

4

Consumers

50

1

6 minutes

5

Total

9

The total annual cost to the public for this information collection is estimated to be $598.4
Sensitive Questions
This collection of information contains no questions of a sensitive nature, as defined by
OMB guidelines.
Estimate of Cost to the Federal Reserve System
The annual cost to the Board of conducting the surveys is negligible.

3

Of these respondents, all 25 of the small businesses are estimated to be small entities as defined by the Small
Business Administration (i.e., entities with less than $550 million in total assets) www.sba.gov/contracting/gettingstarted-contractor/make-sure-you-meet-sba-size-standards/table-small-business-size-standards.
4
Total cost to the public was estimated using the following formula: percent of staff time, multiplied by annual
burden hours, multiplied by hourly rates (30% Office & Administrative Support at $17, 45% Financial Managers at
$65, 15% Lawyers at $66, and 10% Chief Executives at $89). Hourly rates for each occupational group are the
(rounded) mean hourly wages from the Bureau of Labor and Statistics (BLS), Occupational Employment and Wages
May 2015, published March 30, 2016 www.bls.gov/news.release/ocwage.t01.htm. Occupations are defined using
the BLS Occupational Classification System, www.bls.gov/soc/. The average consumer cost of $24 is estimated
using data from the BLS Economic News Release (USDL-16-0462) www.bls.gov/news.release/cewqtr.nr0.htm.

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Attachment 1
FR 2060
Overview of the Sample Selection Process
Sampling Procedures
For the consumer component of the survey, the population of interest consists of all
households located in the geographic area that the Reserve Bank defines as the market. The unit
of observation is the household. The respondent will be the financial head of the household or
other financially knowledgeable adult.
For the business component of the survey, the population of interest consists of all
business enterprises that had revenues of less than $1,000,000 in the past year and that had an
establishment in the designated geographic market area. However, there may be rare occasions
where information from business enterprises with more than $1,000,000 in annual revenue would
be considered necessary. The unit of observation is the business enterprise. The respondent will
be an individual who is responsible for the lending relationships and financial decision-making
in the firm. That individual may be the owner, chief executive officer, president, treasurer, or
comptroller.
A random sample will be drawn from listings in the local telephone directory using a
random number table to select a page and then to select an entry on the page. The residential
listings will be used for the consumer survey. The business white pages will be used for the
business survey. In the event that business white pages do not exist, the yellow pages will be
used.
The number of listings selected should be large enough to yield fifty completed
household interviews and twenty-five completed business interviews. The proportion of blank
listings (for example, listings with the number not working or that do not belong to a small
business or household) and the response rate must be estimated to determine the number of
listings to be selected.
A small number of screening questions will be required to determine whether a listing is
an element of the population. If the survey yields substantially fewer than the desired number of
completed interviews, perhaps because of an underestimate of the number of blank listings, then
the first sample may be supplemented by a second random drawing. New listings, however, will
not be allowed to substitute for refusals. Not at home will be treated as a refusal but efforts
should be made to re-contact.
Sampling Errors
The following tables present sampling errors, for the target sample sizes, across various
hypothetical population sizes and across selected percentages of household or business
respondents that do something asked in the survey.

6

Attachment 1
Table 1
Sampling Errors for Survey of Consumers
(Sample Size of 50 Households)
Sampling error (plus or minus, in percentage points) for a population of:

Percentage of households
that do something asked in
the survey

2,000
households

4,000
households

10,000
households

20,000
households

90

9

9

9

9

70

13

13

13

13

50

14

14

14

14

30

13

13

13

13

10

9

9

9

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Table 2
Sampling Errors for Survey of Business
(Sample Size of 25 Businesses)
Sampling error (plus or minus, in percentage points) for a population of:
Percentage of businesses
that do something asked in
the survey

120
businesses

240
businesses

600
businesses

1,200
businesses

90

11

12

12

12

70

17

18

18

19

50

18

19

20

20

30

17

18

18

19

10

11

12

12

12

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Attachment 2
Sample of a modified FR 2060 survey form
Name: _____________________________________

Phone:

City:
Hello, I’m calling from the Federal Reserve Bank of _______, which is part of the Federal Reserve
System. We’re surveying small businesses in your area to find out where they do their banking and what
services they use. We’re asking a series of questions that takes about 5 minutes to complete, and we’d
appreciate your help.
Would you like to participate?
Appropriate person not in. (Terminate)
No. (Terminate)
Yes. Thank you. (Continue)
1.

Do you have any loans outstanding?
Yes
No
No Response

2.

If yes to question 1, where did you obtain the most recent loan?
Name ___________________________

3.

City

Do you have any other loans?
Yes
No
No Response

4.

If yes to question 3, where did you obtain these loans?
Name ___________________________

5.

City

Are any of your loans from
Finance companies?
Credit unions?
Brokerage firms?

Name _____________________ City
Name _____________________ City
Name _____________________ City

8

Attachment 2
6.
During the past two years, has your firm been directly solicited for its loan business by any
financial institutions?
Name ___________________________

City

7.

If you were solicited by a financial institution, did you accept the services or credit
offered? If not, why not?

8.

In which institution does your firm maintain its primary checking account?
Name ___________________________

9.

City

Does your firm have a formal line of credit outstanding?
Yes
No
No Response

10.

If yes to question 9, where was the line of credit obtained?
Name ___________________________

11.

City

I’m going to read a list of ranges for the annual revenue of firms. I want you to
stop me when I read the range that covers your firm’s annual revenue.5
$0 - $250,000

____

$250,000 - $1 Million

____

$1 Million - $10 Million

____

$10 Million and over
____
(Respondent does not meet sampling criteria)
Thank You!

Miscellaneous comments: _________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Interviewer: ____________________________________________________________________
Date: ____________________ Time:

5

This should include the entire firm rather than an office, branch, or franchise of a larger firm.

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Attachment 2
CONSUMER SURVEY
______ County, ______

Name:
Telephone Number:
City:
Date:
Time:
Interviewer’s Initials:

Hello, I’m calling from the Federal Reserve Bank of _______, which is part of the Federal Reserve
System. We’re surveying people in your area to find out where they do their banking and what services
they use. We’re asking a series of questions that takes about 5 minutes to complete, and we’d appreciate
your help.
Would you like to participate?
Appropriate person not in. (Terminate)
No. (Terminate)

Yes. Thank you. (Continue)

Questions
1.

Do you have a checking account?

2.

Where do you maintain this account?
Bank:

Skip to #

Yes
No
No response

2
3
3

Would not specify

3

Yes
No
No response

4
5
5

Would not specify

5

City:

3.

Do you have a savings account or CDs?

4.

Where do you maintain this account?
Bank:

Response

City

10

Attachment 2
5.

Do you use a bank for any other type of services such
as a mutual fund?

6.

Where do you maintain this account?
Bank:

Have you taken out any loans in the past five years?

8.

What was the purpose of the loan(s)?
Car
House
Personal Expenditure
Mobile Home
Farm
Home Improvement
Education
Other

10.

6
7
7

Would not specify

7

Yes
No
No response

8
10
10

Yes/No
Yes/No
Yes/No
Yes/No
Yes/No
Yes/No
Yes/No
Yes/No
Would not specify

9

Would not specify

10

City:

7.

9.

Yes
No
No response

Where did you obtain this loan (these loans)?
Bank:

City:

Bank:

City:

If you became dissatisfied with your bank, where would you go to do your banking? (list
nearby cities)
Bank:

City:

Next, we have a few general questions about what cities you visit for work, shopping, and entertainment.
11. Do you or any member of your household travel to
Yes
12
another town or city for work?
No
13
No response
13
12. Which towns or cities
Would not specify
13
13. In which towns or cities do you shop regularly?
Would not specify
14
City:
14. Do you go anywhere else to shop or for entertainment?
Yes
City:
No
Would not specify
Thank you very much for your help.

11