“We must restore competition in the banking sector,” Chopra told the Justice Department last year.
In September, former President Donald Trump’s DOJ asked for public comments on changing its reviews of bank deals, suggesting through some of its questions it might take a more lenient approach. The rules haven’t been updated since 1995.
In response, banks made the case that the government should do more to facilitate bank mergers.
Increased regulatory burdens and the need to adopt new and better technology are pushing smaller banks to merge, said the Independent Community Bankers of America, which advocates for the smallest players.
The Bank Policy Institute, which represents the nation’s biggest lenders, argued that banks face a barrage of competition that didn’t exist in 1995. It said financial technology upstarts “compete in all aspects of consumer lending” and that they don’t rely on local branches to offer their products.
But Warren, García and 10 other House Democrats pressed DOJ to strengthen rather than weaken its reviews, as did Chopra, currently a FTC commissioner.
The Justice Department and federal banking regulators work together to vet proposed bank mergers. The banking industry and its critics both argue the agencies’ approach is out of date.
The Justice Department and the Federal Reserve, for example, rely on a statistical formula that adds up the number of banks in a given area and their deposits to determine how much competition exists.
That calculation is “a blunt instrument which doesn’t necessarily reflect the market,” said John Carusone, president of the Bank Analysis Center, a consulting group that has advised dozens of bank mergers over the past 30 years. “They are using an antique approach to a rapidly changing industry.”
The analysis is overly focused on deposits, without considering other banking products, and omits competition from online and non-bank players, he said.
The Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. examine how a deal affects the financial stability of the banking system, whether it meets community needs and how well the banks abide by federal lending laws to offer credit to low and moderate-income families.
“These aren’t very aggressive reviews and agencies are very deferential to the mergers that come across their desk,” said Jeremy Kress, a professor at the University of Michigan who previously reviewed bank mergers at the Fed.
With Biden in office, any big changes to the DOJ’s approach are on hold as prosecutors wait for the White House to nominate the department’s antitrust chief, two individuals familiar with the matter said, speaking anonymously to discuss internal discussions.
In the meantime, the Biden administration and banking regulators will have to decide what to do about a spate of pending bank deals.
PNC announced in November that it would buy the U.S. unit of Spain’s BBVA for $11.6 billion — a merger that will give it an additional 637 branches in the South and Southwest. The newly combined bank would have about $563 billion in assets, becoming the fifth-largest commercial bank.
Rep. Maxine Waters, the California Democrat who heads the House Financial Services Committee, expressed concerns about the size of a combined PNC-BBVA. She called on the Biden administration to “take a hard look” and hold hearings as regulators did with the 2019 SunTrust-BB&T merger.
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