According to people familiar with the matter, US President Joe Biden plans to issue executive orders for mergers and acquisitions in the banking industry to promote competition. The order will urge the Federal Reserve and the Department of Justice to update the M&A guidelines and strengthen the review of transactions.
The source said that the order would also require the Consumer Financial Protection Bureau (CFPB) to issue regulations to give consumers complete control over their financial data, which will make it easier to switch between banks.
Biden is anticipated to sign the order on Friday, which may cool the banking industry’s mergers and acquisitions boom. During the Trump administration, under the more industry-friendly regulatory policies, there was a wave of mergers and acquisitions in the U.S. banking industry.
These include the $28 billion mergers of BB&T Corp BBT.N and SunTrust STI.N, which became the largest bank merger since the 2007-2009 financial crises; the acquisition of MB Financial Inc. by Fifth Third Bancorp for $4.7 billion and many smaller ones. According to Dealogic’s data, as of November 2020, the total value of mergers and acquisitions of commercial banks, savings banks, and investment banks reached 54.66 billion U.S. dollars.
Although such mergers and acquisitions are subject to federal government review, according to the research of University of Michigan professor Jeremy Kress, government agencies have not formally rejected a bank merger application for more than 15 years. Kress has worked in the supervision of bank mergers and acquisitions at the Federal Reserve.
As per the report by the Federal Reserve Bank of St. Louis and Federal Financial Institutions Examination Council, the number of commercial banks in the United States has decreased by about 10,000, or 70%, in the past 20 years.
According to the National Community Reinvestment Coalition (National Community Reinvestment Coalition) research, this has led to higher fees for consumers, reduced access to banking services in communities of color and low-income working families, and increased people’s perception of the financial system.
Bank mergers have always been the goal of progressives, including US Senator Elizabeth Warren. She said the merger harmed the interests of consumers. In October last year, the CFPB asked for comments on a proposed proposal to increase consumers’ access to their own financial data. An increasing number of financial institutions and applications collect consumer financial data. The agency’s new leadership has not yet taken action.
The source said that the White House hopes that this executive order will inspire the agency to advance reforms. The source added that an increased ability to share this type of data would also help promote more accurate credit scoring models and help improve underserved and minority communities’ access to credit.