Fed Raises Bar For Bank Deals
By Maya Jackson Randall
U.S. regulators eventually gave the green light to the $9 billion merger of Capital One Financial Corp. and ING Direct in a key test of the financial rules-of-the-road since the Dodd-Frank Act. But the Federal Reserve Board may be less accommodating to more-complex medium and large banks, analysts and experts said. Capital One’s purchase of the online banking unit of ING Groep NV, which closed Friday, was the first major U.S. bank deal to undergo heightened scrutiny designed to prevent the emergence of larger banks with greater systemic risk that could be deemed “too big to fail” or put the economy at risk. Now, large banks that are seeking to purchase as little as $2 billion in financial assets will likely face delays and more examination to make sure any potential benefit to the public from the deal isn’t outweighed by heightened risk. The Fed analysis is a warning sign to the nation’s giant firms—J.P. Morgan Chase & Co. , Bank of America Corp., and Citigroup Inc.—which engage heavily in more-complex activities such as investment banking and securities underwriting. “It’s a speed-bump for traditional M&A [mergers and acquisitions] for regional banks. It’s a game-changer for anything else,” said Karen Shaw Petrou, co-founder of Federal Financial Analytics, which provides analysis on financial policy.