WASHINGTON – The Federal Reserve Board announced its approval Monday of Goldman Sachs’ bid to buy roughly $17 billion in online deposits from GE Capital despite concerns from some community groups that the acquisition was contrary to the public interest.

In an order accompanying the decision, the Fed said that it took into consideration comments from more than 80 individuals and organizations related to the acquisition – both in favor and opposed – and concluded that Goldman’s acquisition of a substantial portion of GE’s online deposits would neither harm competition in the service areas of both banks nor create unacceptable risk in the financial system. In fact, the Fed found that the deal would reduce systemic risk by aiding GE Capital’s effort to reduce its financial businesses and shed its designation by the Financial Stability Oversight Council as a systemically risky nonbank.

“On balance, the proposal would appear to reduce the risks posed by Goldman Sachs, [GE Capital], and their subsidiary depository institutions,” the order reads. “In light of all the facts and circumstances, this transaction would not appear to result in meaningfully greater or more concentrated risks to the stability of the U.S. banking or financial system.”

The order further concluded that, contrary to the claims by commenters opposing the transaction, Goldman has exhibited considerable initiative on Community Reinvestment Act lending and investment, and the acquisition may spur the bank to expand its depository footprint. In that event, the Fed said, the central bank expects the bank to expand its lending activities to low- and moderate-income communities as well.

“As part of its application, GS Bank states that it is separately exploring a potential expansion of its lending activities, including an expansion of its lending to consumers,” the order reads. “The Board expects that GS Bank will continue to help meet the credit needs of all the communities it serves, including LMI neighborhoods … [and] will monitor GS Bank’s performance in this regard through the supervisory process.”

Esta Stecher, GS Bank's chief executive, said in a statement that the company is “pleased” with the Fed’s decision and noted that decisions by state regulators in New York and Utah, where GE’s deposits are based, are still pending. But Stecher said the acquisition would strengthen Goldman.

“This transaction, upon closing, will strengthen the funding diversification and the liquidity profile of GS Bank, and provide a new online channel for gathering deposits,” Stecher said. “We welcome the opportunity to serve these customers with the highest level of commitment and service.”

The announcement comes as KeyBank, a regional bank based in Cleveland, reached an agreement with the National Community Reinvestment Coalition to direct $16.5 billion toward community reinvestment programs over five years beginning in 2017. That deal was reached as Key seeks to finalize its acquisition of First Niagara.

The NCRC, which spearheaded the effort to oppose the Goldman deal or at least gain CRA concessions from the Fed as part of Goldman’s acquisition of GE’s deposits, was not immediately available for comment Monday morning.

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