Narrow supervisory standards, inconsistent approval timelines and other regulatory impediments are limiting new bank formation and leading to further consolidation in the financial sector, the American Bankers Association said in comments to lawmakers.
The House Financial Services Subcommittee on Financial Institutions is scheduled to meet today for a hearing on hurdles to bank mergers and de novo bank formation. In a statement submitted before the hearing, ABA said that regulatory guidelines for reviewing bank merger applications largely date from 1995 and do not reflect profound changes in the financial services landscape since then. ABA also said that bank merger rules assess the effects of proposed mergers on competition too narrowly, hindering merger activity.
“The regulatory standards for assessing the competitive impact of mergers are significantly outdated and do not accurately reflect competitive conditions in today’s financial services markets,” ABA said. “By failing to capture the impacts of competition from online financial institutions and nonbank financial services providers, decisions on merger applications by the bank regulatory agencies and the Department of Justice may unjustifiably constrain mergers involving banks across the industry spectrum.”
ABA expressed its support for several bills to ease regulatory barriers to bank mergers and de novo bank formation. One was H.J. Res. 92, which would repeal the Office of the Comptroller of the Currency’s final rule governing bank mergers. Another is the Promoting Access to Capital in Underbanked Communities Act (H.R. 478) by subcommittee Chairman Andy Barr (R-Ky.) The bill would establish a three-year phase-in period for new banks to comply with federal capital standards and make other changes to promote bank formation.
