ABA Statement for the Record on Merger Policy

The American Bankers Association (ABA) appreciates the opportunity to provide a Statement for the Record for this hearing entitled "Merger Policies of the Federal Banking Agencies." The ABA is the voice of the nation's $23.7 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.8 trillion in deposits and extend $12.5 trillion in loans.

Summary

ABA strongly supports the Subcommittee's examination of the current regulatory landscape surrounding bank mergers. The current standards for assessing the competitive impact of mergers, which date from 1995, are significantly outdated and do not accurately reflect competitive conditions in today’s financial services markets. By failing to capture the impacts of competition from online financial institutions and nonbank financial services providers, decisions on merger applications by the bank regulatory agencies and the Department of Justice (DOJ) may unjustifiably constrain mergers involving banks across the industry spectrum. One result is that community banks may be unable to consolidate with neighboring institutions, impairing their ability to continue serving their communities and meet the burdens of increasing regulatory and compliance costs.

The bank regulatory agencies are signaling new approaches to assessing merger impacts on the "convenience and needs" of affected communities and implications of merger transactions for financial stability. Though these matters have been part of regulators’ merger review for some years, current agency leadership appears poised to adopt dramatically new standards, which warrant scrutiny from Congress and the public.

Introduction

The laws governing bank mergers require the appropriate Federal regulatory agency to consider specific factors concerning the institutions, their markets, and the impacts of the merger:

• The potential impact on competition; 
• The financial and managerial resources and future prospects of the companies and banks concerned, including the competence, experience, and integrity of the officers, directors, and principal shareholders of the company or bank;
• The convenience and needs of the community(ies) to be served;
• The applicant’s record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution;
• The effectiveness of the company or companies in combatting money laundering activities, including in overseas branches; and
• The extent to which the transaction would result in greater risks to the stability of the United States banking or financial system.

The broad statutory language and the substantial room for interpretation it allows the Federal banking agencies call for detailed, ongoing Congressional oversight to assure both the soundness of the financial system and feasibility of institutions’ strategic planning and goals, as set by banks’ boards and management for their long-term success.

Download the statement for the record to read the full text.