Letter to FDIC on Bank Merger Transactions

Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Attn: Harrel M. Pettway,
Executive Secretary

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates this opportunity to provide the views of our members to the Federal Deposit Insurance Corporation (FDIC) during its review of its rules, regulations, guidance, and statements of policy regarding bank merger transactions (collectively, Banking Guidelines)3 ABA’s members comprise the entire range of the US banking industry and compete vigorously in diverse product and geographic markets to serve their customers. Preserving this diversity and enhancing delivery of financial services to the national economy is a central concern of both our industry and our nation’s public policy.

ABA believes that a review of the Banking Guidelines, large parts of which are now at least 25 years old, is important to the health of the US financial system and economy. In the intervening years, the market for financial products and services has undergone tremendous change, thanks to the rise of availability and use of online banking, the interstate expansion of bank branch networks, enhanced market access made possible by advertising and communication innovations, and the increased market presence of nonbank financial firms, including “fintechs.”

Because of these significant changes in the financial services market, the current Banking Guidelines fail to account for significant competition in many product lines, including in many rural markets. More specifically, we urge FDIC to consider these key points:

• Competitive impact analysis should take into account financial services provided to a market through channels other than branch networks, and by nonbank firms.
• Joint guidance adopted by both the Antitrust Division of the US Department of Justice (Division) and the Federal banking agencies would be very useful because it would maintain consistency in approach of the agencies having jurisdiction over analysis of competitive impacts of mergers.
• FDIC should raise to 2500 the threshold of the Herfindahl-Hirschman Index (HHI) below which FDIC would generally not challenge proposed mergers or require divestitures of branches or other operations, to take better account of the sources of competition noted above that are not taken into account under the current methodology. This revision would align with the threshold currently applicable to all other industries under the Horizontal Merger Guidelines as adopted by the Division and the Federal Trade Commission. In 2010 the Division and the Federal Trade Commission raised the concentration threshold above which competitive harm was presumed for every industry except the banking industry, while concentration in the banking industry is low relative to other relevant industries serving consumers in the United States. Reconciliation of conflicting standards between the Banking Guidelines and the more general Horizontal Merger Guidelines is necessary and appropriate.

Download the comment letter to read the full text.