Will Frank’s Systemic Concerns Trigger Delay of Capital One-ING Deal?

By Rob Blackwell

While lawmakers raising concerns about a potential merger is nothing new, Rep. Barney Frank added a unique twist to his letter asking the Federal Reserve Board to take more time to review the Capital One-ING Direct transaction: the potential for systemic risk. The Massachusetts Democrat said that because the merger would create the fifth-largest bank by deposits, “care should be taken to thoroughly examine the impact of this purchase with respect to the consolidation of banking assets.” What remains unclear is whether the letter will force the Fed to hold hearings or delay the merger. The central bank had appeared on track to approve the transaction despite protests from some consumer groups who cited fair-lending concerns. Some observers said Thursday the Fed may at least decide to hold hearings as a result of Frank’s intervention. “It does create a set of new questions for the Fed,” said Karen Shaw Petrou, managing director of Federal Financial Analytics in Washington. “This is a seemingly routine transaction that is challenged on the size criterion as a leading indicator of the complexity of transactions like this going forward. They may well have hearings.”