10 07, 2023

Karen Petrou: The Bankruptcy of Bank-Merger Policy

2023-07-10T14:18:07-04:00July 10th, 2023|The Vault|

On Wednesday, a Senate Banking subcommittee will consider bank-merger policy, surely providing a platform for its chair, Sen. Warren’s pronounced views opposing all but the smallest bank mergers and maybe not even those.  Many other senators are not as adamant, but even pro-business Republicans – see J.D. Vance – think bank mergers beyond the itty-bitty are at best problematic.  The politics of this debate is obvious; the substance not so much.  As with many other questions, bank-merger policy is best set with a keen understanding of recent, objective research and what it actually says about concentration as it occurs outside the gaze of those fearful only of still bigger big banks.

That there is undue market power in a financialized economy that brings a raft of woes is all too clear.  I thus hoped that Assistant Attorney General Kanter’s remarks last month would be a meaningful update of the Department of Justice’s anachronistic 1995 policy.  It helped, but only a bit because Mr. Kanter focused principally on enforcement, leaving “broader” questions solely to the banking agencies.

They in turn have long promised a transparent merger policy, but it’s still deal-by-deal, case-by-case, crisis-by-crisis.  More than a few mid-sized banks will wither away as deliberations continue because the sheer uncertainty and delays of most bank mergers undermine their economic value, particularly at a time of high interest rates, slow or no growth, tough new rules, and withering competition.

Recent antitrust research does not substantiate easy, blanket assertions about the benefits or …

27 06, 2023


2023-06-27T16:53:41-04:00June 27th, 2023|2- Daily Briefing|

Treasury, FIO Target Insurance, Banking Interconnections

In conjunction with FIO’s new report on Insurance Supervision and Regulation of Climate-Related Risks, Treasury’s Assistant Secretary for Financial Institutions, Graham Steele, today emphasized the need for further work to understand the insurance industry’s climate-related financial stability risks, especially from housing and banking sector spillovers.  In a panel discussion, FIO Director Steven Seitz also highlighted the report’s recommendations around macroprudential risks, including prioritizing the growth of the residual and surplus lines markets, “hardening” of the reinsurance market, and realizing the effects climate risk may have on state insurance guarantee funds.

Warren Gives No Merger Ground

In a letter sent today to Chair Gruenberg, Acting Comptroller Hsu, Vice Chair Barr, Assistant Attorney General Kanter, and Secretary Yellen, Sen. Warren (D-MA) demands fast action on the rewrite of bank merger guidelines pending since at least the President’s executive order in 2021 (see FSM Report MERGER10) as well as an end to large-bank M&A.  Sen. Warren takes particular issue with Secretary Yellen’s recent comments suggesting the need for industry consolidation and again confronts Acting Comptroller Hsu’s “openness” to at least some transactions.  It thus seems clear that her opposition to his nomination as Comptroller remains as firm as ever.


20 06, 2023


2023-06-20T17:15:39-04:00June 20th, 2023|2- Daily Briefing|

ECB Targets Bank Risk to NBFIs

A speech earlier today from the ECB’s top bank supervisor makes it clear that the EU is pressing ahead with FSOC’s proposed limits on bank inter-connections with NBFIs (see FSM Report SYSTEMIC95).  Karen Petrou’s memo today also addresses this issue.

New M&A Policy Sets High Bar For Banking-Agency Approval, Increases Odds Of DOJ Rejection

Making M&A a good deal harder to pull off, Assistant Attorney General Jonathan Kanter today redefined U.S. bank-merger policy in light of comments on a recent RFI (see FSM Report MERGER10) and dramatic changes since current policy was set in 1995.  The new approach reflects Biden Administration competition policy (see Client Report MERGER6) and will make it considerably more difficult for banks of all sizes to win DOJ approval if the banking agencies approve their proposed transaction after getting a new, likely more dire competitive-factor report from the Department of Justice.

FRB-KC: Community Banks Better Capitalized than GSIBs

The Kansas City Fed today released an analysis of 2022 bank capital, finding that community banks continued to hold higher levels of capital compared to G-SIBS: ten percent to six percent, respectively.  The study also found that G-SIB supplementary leverage ratios (SLR) increased thirty basis points to 5.94 percent, the first increase since the beginning of the pandemic, excluding the impact of the Fed’s temporary capital relief.


Go to Top