Including off-balance sheet revenues in pricing power measures suggests competition in the US banking sector could be less than previously thought, according to a researcher from the Federal Reserve Bank of St Louis.

In an economic letter, David Wheelock assesses a measure that calculates the degree of a firm’s pricing power, called the Lerner Index. He develops the measure to include the revenues banks generate from off-balance sheet activities.

Using data from the 10 largest US banks from