Dear Assistant Executive Secretary Sheesley:
The U.S. Chamber of Commerce (“Chamber”) believes the Federal Deposit Insurance Corporation’s (“FDIC”) proposed statement of policy on bank merger transactions (“Proposal” or “SOP”) lacks statutory authority, is substantively and procedurally deficient, and is unnecessary. This proposal could distort the market forces resulting in the combination of banks and could undermine the institutions which the FDIC oversees.
If the FDIC were to move forward and finalize the Proposal, we urge you to consider and resolve the following issues :
- Any guidance on bank mergers should be proposed through an interagency process after the U.S. Department of Justice’s (the “DOJ”) review is completed;
- In order to reduce the chilling effect on bank mergers and decrease the likelihood of arbitrary decision-making, any final SOP should establish clear guidelines and a predictable merger review process;
- The FDIC should continue its long-standing practice of allowing applicants to withdraw merger applications without risk of public criticism by the agency;
- A final SOP should establish clear thresholds for transactions that do not raise financial stability concerns;
- A final SOP should not seek to impose “single point of entry” or other resolution requirements; and
- A final SOP should explicitly require the FDIC to consider the regulatory framework of the resulting institution but also articulate how any financial stability concerns are not addressed by the existing framework;
- Transactions should not impose additional requirements beyond the current test to meet the convenience and needs of the community to be served; and
- The level of agency involvement in the community benefit agreements is unwarranted.
Our concerns are listed in greater detail below.
I. Significant Benefits of Bank Mergers
As noted, the Proposal risks upending a pro-competitive merger regime that has yielded significant benefits to financial stability and consumers. As discussed more fully in our 2024 white paper, Antimerger Regulatory Proposals Threaten U.S. Financial Markets (“2024 White Paper”)[1] and elsewhere, the current landscape for banking and financial products is highly competitive, which is due in large part to the current regulatory regime for bank mergers. In contrast, the Proposal would discourage bank mergers,[2] helping to reshape the current landscape into a “barbell” banking sector composed almost entirely of community banks and global systemically important banks (“GSIBs”).
The existing regulatory regime for mergers and acquisitions has substantially increased competition in credit markets over the last quarter century.
The consumer credit market has seen new entrants, innovative products, aggregate growth, reinvention of incumbents and the decline or departure of companies that could not keep pace or maintain necessary economies of scale. A recent study found that bank output was “supercompetitive” and that bank fees declined from 1984-2016.[3] For example, bank branches and ATMs have increased by the tens of thousands, expanding banking to underserved communities and bringing banks closer to consumers in large markets. In addition, online banks, and the expanded geographic reach of brick-and-mortar banks with an online presence, also have significantly expanded competition in credit markets. Consumers also have other choices to find credit, including from certain retailers, auto lenders and other non-depository lenders.
Bank mergers have helped to facilitate this competitive landscape.
Mergers can free resources to protect consumer data and defend against cyberattacks, to invest, particularly in lower-income communities, and to improve customer products, such as digital services. The DOJ has recognized that the “great majority of bank mergers do not cause antitrust concerns” and that a bank merger can allow “the merging firms to achieve significant economies of scale or scope,” thereby offering consumers lower costs and/or improved services.[4]
Both financial institutions and consumers can benefit from scale. For example, after Congress allowed banks to operate across state lines, many banks merged in ways that allowed them to compete more broadly and effectively in more of the country. Digitization, for instance, requires major investments in fixed capital and ongoing investments in digital security. Scale also can help to ameliorate compliance burdens and the need for lower-cost deposit funding. At the same time, smaller banks often have difficulty attracting the necessary talent to deal with ever-changing risks. Ultimately, acquisitions can allow acquirors with greater managerial and financial resources than their targets to better or more quickly resolve existing problems and identify strategic opportunities.[5]
Read the full comment letter here.
[1]See U.S. Chamber of Commerce, Antimerger Regulatory Proposals Threaten U.S. Financial Markets ([●], 2024), available at [●].
[2]See infra Sections II through IV.
[3]See Slade Mendenhall, Commercial Bank Competition, Riegle-Neal, and Dodd-Frank (June 10, 2019), available athttps://deliverypdf.ssrn.com/delivery.php?ID=862024094122115081094086127014013007102003037074039062086007069064098091028067097031038026119061045028111109029013083092086019117075046037076118085092107066106127025001089067126028124018080013121090118081100099016073003073075026007102071024025073007083&EXT=pdf&INDEX=TRUE.
[4]See DOJ, Address by Anne K. Bingaman before the Comptroller of the Currency’s Conference on Antitrust and Banking (November 16, 1995), available at https://www.justice.gov/atr/speech/antitrust-and-banking.
[5]See Bank Policy Institute, Financial Stability Considerations for Bank Merger Analysis (May 16, 2022) at 6-7, available athttps://bpi.com/wp-content/uploads/2022/05/Financial-Stability-Considerations-for-Bank-Merger-Analysis.pdf.
