market concentration on retail deposit rates of about 50 basis points. research has also suggested that high local - market deposit concentration may lead to reduced managerial efficiency, as the price cushion provided by market power allows a “ quiet life ” for managers in which relatively little effort is required to be profitable. managers in these concentrated markets may choose to work less hard or pursue their own personal interests because the lower rates on deposits and higher rates on small business loans raise profits enough to cover for inefficient or self - serving practices. these findings support the need to maintain competition in local banking markets to deter the exercise of market power in pricing consumer deposits and small business loans, and to ensure that the local banks are under sufficient competitive pressure that they are operated in a reasonably efficient way. when bank mergers and acquisitions involve banks operating in different local markets, the issues raised are typically quite different from those i have just discussed. since the late 1970s, states have been liberalizing laws that previously restricted mergers and acquisitions between banks in different local markets, including allowing holding company acquisitions across state lines. the u. s. banking industry has responded strongly and has been consolidating at a rapid rate over the last 15 years. consolidation has picked up even more in the first half of the 1990s - - each year bank mergers have involved about 20 percent of industry assets. this trend is likely to continue or accelerate under the riegle - neal act, which has already allowed increased interstate banking, and which will allow interstate branching into almost all states this summer. importantly, an increase in local market concentration is not a major issue in most of these mergers and acquisitions, as they are primarily of the market - extension type. as such, these consolidations, and sometimes merely the threat of such actions, may be pro - competitive and reduce the market power of local banks over depositors and small business borrowers in the markets that are invaded. they may also improve the diversification and efficiency of the consolidating institutions. research generally suggests that most mergers and acquisitions, by improving diversification, allow the consolidating institutions to make more loans and improve their profit efficiency. mostly as a result of these mergers and acquisitions, the mean size of banking organizations has approximately doubled in real terms in the last 15 years. as i mentioned earlier, a frequently voiced concern about this consolidation is whether the supply of credit to small business may be decreased, since larger banking institutions tend to devote smaller proportions of their assets to small business lending

would not capture many of insurers ’ liability risks, such as from natural catastrophes. nor would any existing insurance capital rule appropriately assess the risks of a bank. so rather than trying to create a single capital framework that would work for all types of financial institutions, we decided to propose an aggregation approach that incorporates approaches developed specifically for each type of institution and its risks. the bba uses the existing and time - tested frameworks that have been tailored specifically to measure appropriately particular risks. it assesses insurance risks using an insurance capital framework and banking risks using our banking capital framework. the suitability of such an aggregation approach for regulating the capital of a large, internationally active insurance group is being debated currently at the iais, as i will discuss in a moment. while there are disagreements at the margins, there are also many areas of agreement on the appropriate uses of an aggregation approach. the iais ’ s insurance capital standard ( ics ) for internationally active insurance groups itself uses an aggregation approach to incorporate noninsurance risks. and at the other extreme, there is also agreement that it would not be appropriate to calculate the capital position of a large bank holding company that is not engaged in insurance by aggregating the capital positions of certain subsidiary banks and legal entities. a key issue in the international debate about the ics is whether products, capital markets, and laws vary so much by country or region that a single, unified methodology cannot measure risk accurately. are the differences in international insurance markets more like the significant differences between banking and insurance or like the less fundamental differences in the banking business models internationally? if the differences are large enough, a one - size - fits - all methodology could produce unintended consequences, send false signals to regulators or capital markets, and ultimately be destabilizing. the insurance policy advisory committee, or ipac, is currently studying this issue by looking at the impact of a hypothetical adoption of the iais ’ insurance capital standard on the u. s. industry, markets, and consumers. the ipac is a 21 - member advisory committee that was established by congress in 2018 to advise the board on international insurance capital standards and other insurance issues. the group is currently performing research on the potential impact of the insurance capital standard — specifically on u. s. life and retirement products — and hopes to complete a review on this in the coming months. and i ’ m looking forward to seeing the result. for those that would like to contribute as a member of