Agencies Launch Full-Bore Attack on Non-Traditional Activities
In this report, we provide an in-depth analysis of last week’s inter-agency report on bank and BHC structure. Generally perceived as an FRB attack on merchant banking, we conclude that both the FRB and OCC, and to a lesser extent also the FDIC, have now agreed upon a campaign to expunge non-traditional activities from banking organizations even if an activity is well-captured by current prudential rules and has evidenced no high-risk characteristics. This critical and dramatic policy change – one reason we are told that the report is more than four years overdue – has sweeping implications across the range of M&A opportunities as well as for the manner in which banks of all sizes will be able to take on innovative operations in the fintech arena. Non-banks looking for bank charters along the lines contemplated last year by PayPal will also face significant obstacles in light of the new inter-agency policy.