It is unclear what the net impact will be, but if all firms pursue the same strategies in search of higher risk-adjusted returns, greater similarity could result. This pressure is potentially stronger now than in the past due to the highly competitive nature of banking and this is an area for further study. Technology A third theme is the emergence of “fintech”, which I think of as the intersection between technological innovation and the provision of financial services. While innovation has always been a competitive driver in banking, there is a sense that both the pace of change and the potential impact have become more pronounced. As prices for technology services and capacity continue to fall and technological opportunities expand, more firms are able to adopt and leverage the latest technological breakthrough. Scale is likely to remain a relevant factor in the deployment of the latest technology, but, at least among the largest firms, the playing field may be leveling as firms have the opportunity to benefit from direct investments, consultants, and third-party vendors offering the latest services. If the largest financial firms are responding to the same technological forces and pursuing the same opportunities, one might expect their resultant strategic choices to contribute to greater similarity over time.8 Again, this is an empirical question that deserves further inquiry. Next Steps An important next step is to look at the data to assess whether recent industry trends are consistent with the premise that large banks are becoming more similar.
If true, an obvious follow-up question is whether this should be a concern from a supervisory and regulatory perspective. Today, I will discuss the premise that large banks in the U.S. have indeed become more similar and then consider some reasons why this might be a topic of interest for the official sector. I can think of several compelling microprudential and macroprudential reasons why this would be the case: the need for an appropriate risk management framework that is commensurate with evolving risks; the need for supervisors to ensure that our assessments are 1/5  BIS central bankers' speeches  proactive and flexible enough to evaluate evolving firms; the potential for similar firms to become “systemic as a herd,” where a given shock leads to correlated responses and large-scale disruption in the provision of financial services; and the potential for firms to move away from areas of comparative advantage, which could diminish the overall efficacy of the financial sector. I’ll conclude with some implications for our supervisory regime. Environmental Context The performance of financial firms in the decade since the financial crisis has been influenced by a broad range of external forces. I’ll focus on three factors impacting how financial services are provided and their impact on large firm similarity: the regulatory response to the financial crisis, the interest rate environment, and technological innovation.