Regulators Seek to Halt Banking Monopolies
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 consumers and the economy. In response to the joint statement, Americans for Financial Reform said:
Americans for Financial Reform welcomes the FDIC’s action on reviewing bank mergers. In the last 15 years, the federal bank regulators have rubber-stamped merger applications. This has led to unprecedented consolidation in the industry which has hurt consumers and small businesses, in the form of bank deserts and decreased lending to small businesses while lining the pockets of the banking executives. We look forward to commenting on ways to strengthen the bank merger guidelines to protect the interest of the communities they are supposed to serve.
We appreciate the majority on the Board taking this action, as permitted by statute, to advance this important policy matter.
By contrast, the Bank Policy Institute — a group representing America’s “leading” banks, opposes the review of bank mergers and suggests the status…