August 03, 2021

At Hearing, Warren Blasts Federal Regulators for Lack of Bank Merger Oversight

Warren: “Merger review has become the definition of a rubber stamp – and the banks know it. It’s time for some changes.” 

Video of Hearing Exchange (Youtube)

Washington, DC - At today's Senate Banking, Housing, and Urban Affairs Committee (BHUA) hearing, United States Senator Elizabeth Warren (D-Mass.) raised concerns to federal regulators regarding the insufficient process in place to review bank mergers, which has resulted in no formal bank merger denials in 15 years. Senator Warren’s questions come on the heels of President Biden’s recent competition executive orders which call for increased merger oversight. During the last Congress, Senator Warren and Representative Jesús “Chuy” García (D-Ill.), introduced the Bank Merger Review Modernization Act which seeks to end regulators’ practice of rubber stamping bank mergers and protect consumers and the financial system from the negative impacts of industry consolidation and the further growth of “Too Big to Fail” institutions, like those that caused the 2008 financial crisis. Senator Warren plans to reintroduce this legislation in the coming weeks. 


At the hearing, Senator Warren questioned Jelena McWilliams, Chair of the Federal Deposit Insurance Corporation, regarding the lack of denied merger applications. Senator Warren highlighted that since 2013, zero out of 1,124 bank merger applications have been denied. During her exchange with Acting Comptroller Hsu, Senator Warren underscored some of the reasons why the banker merger review process is insufficient and highlighted the need for legislation such as her Bank Merger Review Modernization Act


Transcript: Oversight of Regulators: Does our Financial System Work for Everyone?

U.S. Senate Committee on Banking, Housing, and Urban Affairs

Opening Statement from U.S. Senator Elizabeth Warren

Tuesday, August 3, 2021 


Senator Elizabeth Warren: Thank you, Mr. Chairman.


So in recent years, our banking sector has become more and more dominated by the largest banks. Community banks are being gobbled up by larger competitors or forced to shut down because they can’t compete on a level playing field. This results in more concentration, in higher costs for consumers, and in increased systemic risks to our financial system—and fewer total banks. 


These transactions are happening in plain view of the federal agencies whose job it is to keep our system safe and competitive. In fact, every single bank merger requires affirmative approval from the Department of Justice and a banking regulator—banking regulators like the people we have in front of us today.  


So Chair McWilliams, the FDIC has a searchable database of all merger applications the agency has received since 2013. That’s over 7 years now. Do you know how many merger applications the FDIC received in that time?


Chair Jelena McWilliams: I don’t have the exact number. 


Senator Warren: I do. It’s 1,124. Chair McWilliams, how many mergers out of those 1,124 did the FDIC deny— total of denials for any reason whatsoever? 


Chair Jelena McWilliams: I don’t have that number, Senator, but I know that we go through the statutory process required.


Senator Warren: I do have the number. 


Chair Jelena McWilliams: Okay. 


Senator Warren: It's zero. 


So this isn’t just a problem at the FDIC. The FDIC, Federal Reserve and OCC combined have not formally denied a single bank merger in 15 years. Merger review has become the definition of a rubber stamp – and the banks know it. And it’s time for some changes.  


So just saying, “We’re going to get tougher on this” is not likely to persuade anyone— and certainly not a multi billion dollar bank. Bright lines could help set a new tone. 


So let me ask you, Acting Comptroller Hsu, are banking agencies like yours currently required to reject mergers when the resulting bank will be bigger or more complex than our banking rules are set up to handle?


Acting Comptroller Hsu: Are they required?


Senator Warren: That is my question. 


Acting Comptroller Hsu: I believe one of the statutory factors for bank merger review involves financial stability. 


Senator Warren: I’m not asking the question may you consider, I’m asking, I’m looking for bright lines here. Are you required to reject a merger?


Acting Comptroller Hsu: I don’t believe so but I’d have to check with my general counsel. 


Senator Warren: Well, I think the answer is no you’re not required so you may want to look again. 


Let me ask about another possible bright line. What if the banks trying to merge don’t receive the highest ratings in their Community Reinvestment Act exams to measure how well they’re serving their communities? Are you required to reject the merger then?


Acting Comptroller Hsu:  I don’t believe so. 


Senator Warren: No you’re not. 


So how about one more bright line. What if the merger could result in increased costs for consumers because of a lack of competition? Are you required to reject the merger then?


Acting Comptroller Hsu: I don’t believe so.


Senator Warren: So, the data here show that regulators have no credibility on mergers. And sure, there are rules under which you review mergers, but in practice for 15 years now, this has turned into a check-the-box exercise where the outcome has been pre-determined. Merger review has become a rubber stamp.


That’s why I was happy to see that President Biden’s Competition Executive Order called on the banking agencies to revamp their merger review guidelines to put an end to rubber stamping. And soon, I’ll be reintroducing my Bank Merger Review Modernization Act with Congressman Garcia to revamp the bank merger process and strengthen and modernize the standards under which mergers are considered.


Our regulators have a job to do. And it’s our job here in Congress to make sure that they do it.  


Thank you, Mr. Chairman.