Biden directs closer scrutiny of bank mergers

President Joe Biden last week directed the Justice Department and federal banking regulators to more closely scrutinize bank mergers and make it easier for customers to switch banks. 

As part of his July 9 executive order Biden said is intended to promote competition, the president:

  • Encouraged the DOJ and banking industries to update guidelines on bank mergers to provide more robust scrutiny, 
  • Encouraged the Consumer Financial Protection Bureau to issue rules allowing customers to download their banking data and take it with them when they switch banks.

The move could help accelerate implementation of Section 1033 of the Dodd-Frank Act, which calls for the CFPB to issue regulations detailing financial data access and sharing. The agency only began the official rule-making process for Section 1033 last fall, and despite appearing on the bureau’s six-month rule-making agenda, no specific timeline was given.

According to the Biden administration, federal agencies have not formally denied a bank merger application in more than 15 years. The White House says excessive consolidation raises costs for consumers, restricts access to credit, and harms low-income communities.

“Consolidation has increased the power of corporate employers, making it harder for workers to bargain for higher wages and better work conditions,” Biden said. “Powerful companies require workers to sign non-compete agreements that restrict their ability to change jobs. And, while many occupational licenses are critical to increasing wages for workers and especially workers of color, some overly restrictive occupational licensing requirements can impede workers’ ability to find jobs and to move between states.” 

Last fall, the ICBA encouraged the Department of Justice to:

  • Update its guidelines on reviewing bank mergers.
  • Prioritize mergers in small markets that preserve the financial viability of small banks.
  • Institute parity in its considerations of credit unions, Farm Credit System lenders and online banks. 

The ICBA noted the Riegle-Neal Interstate Banking and Branching Efficiency Act established concentration limits on banking, including a 10 percent nationwide deposit cap as well as statewide caps of 30 percent of total deposits, “to ensure that the too-big-to-fail banks” do not entirely dominate the banking industry.” The ICBA also expressed support for national concentration limits on total consolidated liabilities established by Section 622 of the Dodd Frank Act. Specifically, the ICBA stated the DOJ Antitrust Division should prioritize allowing mergers in rural and other small markets that preserve the financial viability of small banks so that those areas can continue to have a physical banking presence. 

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