In comments today, the American Bankers Association shared multiple concerns about an FDIC proposal to potentially change how the agency reviews bank merger applications. Among other things, the association said that the FDIC’s assessment of a proposed merger’s competitive effects needs to be “modernized and broadened” to take account of nonbank lenders as well as online competition from banks without a physical presence in local markets.
The FDIC board voted 3-2 in March to consider expanding the criteria the agency uses for bank merger evaluations, including new considerations when assessing competitive effects. ABA said in its comments that a review of the Bank Merger Act application process was appropriate given some aspects are at least 25 years old and most financial products and services have undergone tremendous change in that time. Still, ABA found several aspects of the proposal problematic, including the failure to explain how FDIC would consider nonbank lenders and online competition from other banks when conducting a competitive effects assessment.
Among its recommendations, ABA said the FDIC should clearly define the financial stability analysis for bank mergers and avoid reliance on imprecise measures like asset size alone. The association also said the FDIC should drop a proposed requirement for applicants to demonstrate increased benefits to community convenience; it should not issue detailed public statements on merger application withdrawals; it should abandon a proposal to require certain divestitures before finalizing mergers; it should guarantee that nonpublic information provided in merger applications will remain confidential; and that routine transactions such as transfers of health savings account custodial functions should not be subject to BMA review.
ABA also pressed the FDIC to study the effects of the growing number of bank acquisitions by credit unions. “FDIC should scrutinize credit union-bank mergers more closely due to their increasing prevalence, potential competitive impacts, and the lack of transparency and regulatory oversight that may disadvantage consumers and communities,” the association said.
