Regulators Seek to Halt Banking Monopolies

Consumer Advocates Welcome Review of Bank Mergers

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra and FDIC Chair Martin Gruenberg yesterday issued a joint statement on the need for additional scrutiny of bank mergers. The effort is designed to prevent banking monopolies and the consolidation of banks that leads to “too big to fail” entities.

The statement by the regulators noted:

Effective implementation of the Bank Merger Act has deep implications for the safety and soundness, financial stability, community accountability, and competitiveness of the banking system.

Additionally, the 2008 financial crisis was used as an example to explain why new action is needed:

Both Washington Mutual Bank and Wachovia Bank, as a matter of size, would be viewed today as regional banks. Yet clearly their prospective failures in 2008, and the resolution challenges they presented, triggered systemic risk concerns. Experience demonstrates that consideration of financial stability risk under the Bank Merger Act should not be limited to the very largest Global Systemically Important Banks (GSIBs). Further, the solution utilized in 2008 of facilitating acquisition of failing regional banks by GSIBs arguably exacerbated concentration in the banking system and increased long-term financial stability risk.

Consumer advocates are applauding the move as a necessary step to protect…