Fed researchers: Banks that share name with failed institutions experience loss of business

Federal Reserve researchers said banks that share their name with a failed bank experience a half-percent drop in transaction deposits relative to banks with similar characteristics but different names.

Details: In a Trademarks in Banking paper, Fed researchers said:

• One in five U.S. banks share a similar name, which increases the likelihood of confusion among customers in the event of a shock to a similarly named bank.

• The drop in deposit effect doubles for failures that are covered in media.

• When distinguishing banks is more costly due to similar trademarks, depositors are more likely to confuse their banks' condition.

ICBA View: ICBA discussed potential issues arising from similarly named banks in a 2023 comment letter to the Fed about master accounts.