Until this month, the Department of Justice hadn’t finalized the adoption of new bank merger policy guidelines since 1995. Given the banking industry’s rapid evolution during the last three decades, an update was certainly overdue. It unfortunately took the bank failures of 2023 to inspire action on a much-needed bank merger policy makeover, and regulators hastily charged ahead to propose sweeping reforms. Despite soliciting feedback from industry experts and policy analysts that revealed a swath of concerns, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency locked step with the DOJ to finalize their respective rewrites of bank merger criteria largely as proposed. This is not the bank merger makeover we needed. Banking regulators realize that allowing high-risk banks to make still-bigger bets by swallowing other banks can pave a swift path toward a systemic crisis. But, as I emphasized in a study submitted to the regulators, their new policies introduce other threats to the industry’s stability. Bank merger applicants now face heightened uncertainty and delays that are sure to deter the pursuit of sound deals, leaving the door wide open for those making last-gasp efforts to avoid failure. Scrupulous, modern and aggressive antitrust policy is necessary, but those who govern banks must recognize that midsize bank mergers aren’t monopoly rent-seeking. They are critical if we are to prevent more regional bank failures and stop more market power from shifting to a few giant banks and tech-platform companies. The new merger policies were clearly drafted by those who know that they do not like big bank mergers. What they just as clearly do not know is what they would like instead.
BankThink, American Banker, Monday, September 30, 2024
Bank merger policy has long needed a makeover — just not this one