Limiting Bank Size Poses Bigger Risks

By Karen Shaw Petrou

The Capital One acquisition of ING Direct USA is, as far as we know, the first time size alone has been made an M&A approval criterion for the Federal Reserve.

Fans of breaking up big banks think denying this deal will strike a blow against systemic risk. But, scotching this transaction solely on size would worsen systemic risk. Prudential or CRA criteria might militate against this transaction, but sheer size surely shouldn’t.