NEW YORK–Two senators have expressed concerns a rash of bank mergers and purchases is hurting the average consumer.
Sen. Elizabeth Warren (D-MA) and Sen. Sherrod Brown (D-OH) have issued statements citing recent data on bank acquisitions and saying the deals are only making it more difficult for smaller community banks to be competitive.
CNN Business cited S&P Global Market Intelligence data showing there were 52 banks with more than $50 billion in assets at the end of the first quarter of 2021, up from 39 banks at the end of 2017.
Among the deals so far this year: PNC bought BBVA USA Bancshares to become the fifth-largest bank in the United States by assets and Huntington Bancshares merged with TCF. Pending regional deals include M&T Bank's purchase of People's United, the acquisition of Flagstar Bancorp by New York Community Bancorp, and a merger between Webster Financial, and Sterling Bancorp, according to a list compiled by CNN Business.
‘Shotgun Weddings’
“The frenetic pace of bank shotgun weddings is largely a result of changes in financial regulations over the past few years,” CNN Business reported. “It's no coincidence that there have been a slew of bank mergers since lawmakers ruled in 2018 that banks had to have $250 billion in assets, and not ‘just’ $50 billion, in order to be considered systemically important financial institutions (SIFIs) that are subject to more regulations.”
Only a dozen US banks currently are large enough to get a SIFI designation. The SIFI change from $50 billion to $250 billion opened the door for many mid-size banks to scoop up rivals without fear that they would suddenly be required to go through more strict and onerous oversight, CNN Business added.
But it's not clear how much longer the bank M&A wave will last, the report added, pointing out the most recent changes to bank laws in Washington were accomplished during the Trump administration and with a Republican-controlled Senate.
New Scrutiny
As CUToday.info reported, President Biden recently signed an executive order that he intends to scrutinize mergers more closely than his predecessor.
Warren, along with Democratic Congressman Jesus "Chuy" Garcia, introduced a Bank Merger Review Modernization Act in December 2019 that could possibly be reintroduced now that the Democrats have a slim majority in the Senate due to a tie-breaking vote from Vice President Harris, according to CNN Business, which said the goal of the Warren-Garcia legislation is to "end rubber stamping of bank merger applications."
‘Can’t Let Big Banks Get Bigger’
Brown, who chairs the Senate's Banking, Housing, and Urban Affairs Committee, has signaled he is supportive of giving the deals more scrutiny.
"We can't let big banks merge into bigger and bigger megabanks, making it harder for small banks to compete and leaving rural and Black and brown communities behind," Brown said during recent hearings.