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Geographic Banking Market Designations

A geographic banking market is a geographic area in which individuals and businesses would ordinarily shop for financial services. The Federal Reserve uses demographic and economic data to determine this area in which individuals and businesses normally choose among competing financial providers. The list below contains examples of information that can be useful in market definition work.  The list of information and data is not exhaustive, nor is it a list of items that must be included in every market analysis.

Commuting patterns: The commuting patterns of an area’s residents to work is useful because it reveals an area in which people are accustomed to moving on a regular basis. The U.S. Census publishes commuting data based on different geographies (counties, cities, etc.), refreshed on a periodic basis. When citing commuting data, it’s helpful to note changes in an area (such as plant openings or closings, or new or improved highways) that happened after the date that data were collected and that may influence commuting.

Shopping patterns: Data on where area residents regularly shop can be a useful supplement to commuting data, especially in more rural areas where commuting volumes may be lower.

Demographic differentiation: The presence of a Native American reservation, a significant U.S. military installation, or a concentration of residents of a particular age group, such as a retirement community, may influence the definition of a geographic banking market and the interpretation of other market metrics. For example, commuting data may not be as indicative of interaction between areas if a large number of area residents are retired.

Advertising: How and where do area institutions advertise, and what services do they promote? What is the geographic distribution and frequency of newspaper advertisements? What is the geographic target range for direct mail advertising? If radio or television ads are used, what is the broadcast range of the selected stations?

Institution-specific data: In a proposed merger, the merger partners can present data to the Federal Reserve that demonstrate the applicants’ understanding of the relevant geographic banking market(s). For example, information on loan and deposit pricing can demonstrate an institution’s view of the market for the related services. Banks can also share information on their depositors’ geographic location.  These data should be aggregated at a level such that it does not contain personally identifiable information about customers.