Senator Warren Questions the Fed's Approval of Bank Mergers & Acquisitions
Her Inquiries Come as Suntrust, BB&T Announce Plans for Largest Bank Merger Since Financial Crisis and as Warren Releases New Data Showing Fed's "Anemic Scrutiny," Weakened Oversight; Analysts Predict a Wave of Bank Consolidations in 2019
Washington, DC - United States Senator Elizabeth Warren (D-Mass.) released Federal Reserve Chairman Jerome Powell's response to her April 2018 letter inquiring about the Federal Reserve's approval process for bank mergers and acquisitions-a response revealing that the Federal Reserve System approves virtually all bank M&A applications it receives. The release follows the announcement this morning by Suntrust Banks, Inc. (Suntrust) and BB&T Corporation (BB&T) that they intend to merge, creating the sixth largest U.S. bank. She also sent a follow-up letter raising additional questions about whether recent regulatory changes will affect the process, transparency and frequency of M&A approvals at the Fed.
"This morning, Suntrust Banks, Inc. (Suntrust) and BB&T Corporation (BB&T) announced their agreement to merge, 'subject to satisfaction of customary closing conditions' including the approval of the Board," Senator Warren wrote in her follow-up letter to Chairman Powell. "The Board's record of summarily approving mergers raises doubts about whether it will serve as a meaningful check on this consolidation that creates a new too big to fail bank and has the potential to hurt consumers."
Senator Warren initially wrote to the Fed about her concerns in April 2018. Since then, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), which reduced federal oversight of banks with between $50 billion and $250 billion in assets, a group that includes both Suntrust and BB&T. In addition, the Office of the Comptroller of the Currency has taken steps to alter rules implementing the Community Reinvestment Act, which requires financial institutions to "help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods."
Industry analysts correctly predicted that these changes will result in an increase in M&A activity among banks. One reporter predicted that 2019 could be the "year of the big bank merger."
"Information you provided at my request reveals that the Board approves virtually all merger and acquisition requests, risking significant negative impacts on consumer choice and competition," Senator Warren continued. "...the Board's anemic scrutiny of applications for mergers and acquisitions raises concerns that the Board, under your leadership, may oversee a wave of bank consolidation-to the detriment of consumers and the financial system."
"Both Suntrust and BB&T have between $50 and $250 billion in assets and the Board has moved even more quickly than the law required to loosen regulatory protections on these banks," Senator Warren wrote. "Data you provided my office indicate that the Board would likely approve almost all of the wave of M&A applications... This would result in the precise outcome I raised concerns about last year: more mergers that result in reduced competition and choice for consumers and small businesses."
To better understand the factors underlying accelerating bank M&A activity and its impact on consumers, Senator Warren requested answers to her questions by February 21, 2019.