Lawmakers from both parties today questioned recent efforts by the banking agencies to change how regulators evaluate bank merger applications. Representatives from the OCC and FDIC appeared before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy to discuss proposed policy revisions by both agencies. The FDIC in March proposed to expand the criteria it uses to review merger applications. The OCC has proposed ending the time limit for automatic approvals of mergers of the banks that it supervises.
In his opening remarks, Subcommittee Chairman Andy Barr (R-Ky.) said that clear expectations and timeliness for bank merger approvals are critical. “Mergers of financial institutions can promote competition and generate cost savings that can then be passed on to consumers through lower interest rates on loans, reduced fees and higher interest paid on deposits.” Barr said. “Bank mergers, especially those involving midsize and regional banks, help preserve a robust banking system and promote competition. They also allow community banks to overcome onerous regulations and meet technology needs.”
Rep. David Scott (D-Ga.) noted that when banks publicly announce that they are exploring a merger, time matters. “Uncertainties about progress [and] outcomes weigh on our customers, local communities, employees, shareholders,” he said. Scott asked how the FDIC can assure banks and the public that regulators will make decisions promptly and fairly that are in the best interests of everyone.
ABA urges caution
Federal banking regulators are poised to adopt dramatically new standards for how they evaluate proposed bank mergers, and those proposed changes warrant further scrutiny from Congress and the public, the American Bankers Association said in comments to the subcommittee.
In its comments, ABA said that current regulatory standards for assessing the competitive impact of bank mergers are “significantly outdated” and do not reflect competitive conditions in today’s financial services markets. The association added that as banking agencies update their merger policies, they must conduct “a more comprehensive analysis of competitive factors, beyond just deposit share based on physical branches. This will provide a more accurate picture of products and services available to customers and promote a healthy market and economy.”
ABA noted its support for H.R. 7403, the Bank Failure Prevention Act, which would require the Federal Reserve to decide on merger applications within 90 days. It asked lawmakers to consider similar requirements for the OCC and FDIC while also allowing flexibility for the submission of third-party expert submissions at the request of an applicant bank. ABA also expressed its support for two bills, H.R. 1806 and H.R. 1810, which would amend the Section 1071 small business reporting rule to exempt certain small lenders and require the CFPB to issue a rule on how the small business data it collects would be shared and used.
