House lawmakers go light on BB&T-SunTrust merger
WASHINGTON — The proposed merger between BB&T and SunTrust Banks cleared another hurdle Wednesday as lawmakers questioning the companies' chief executives showed little interest in slowing the deal.
Democrats on the House Financial Services Committee probed BB&T CEO Kelly King and SunTrust CEO William Rogers on how the merger would impact branch closures and jobs, and the quality of service for the combined bank's consumers. But they stopped short of any calls to block the merger.
The deal, which if approved by regulators will result in an institution named Truist Financial, has faced heavy scrutiny from lawmakers and community groups. Members of the House committee questioned King and Rogers on everything from job losses for current employees, Truist's proposed community reinvestment pledge in its eventual market and a new name for SunTrust Park, where the Atlanta Braves play.
“I am concerned that this proposed merger would ultimately not be beneficial for consumers, or the communities that these two banks currently serve,” said House Financial Services Committee Chairwoman Maxine Waters, D-Calif. “It remains unclear how many of the 57,000 people who work at these two banks would lose their jobs as a result of this merger, which the banks say will save them $1.6 billion annually. It is also unclear how many bank branches may be closed, given that the two banks have 740 branches that are within two miles of another branch, according to news reports.”
But lawmakers from both parties also praised steps the two banks have taken leading up to the merger.
Rep. Emanuel Cleaver, D-Mo., said he appreciated that the banks included data on the number of women and minorities they employ in merger proposal documents.
“I thought it was revealing and significant that your two companies did in fact furnish diversity and inclusion data to the regulator… so let me compliment you,” Cleaver said. “That’s rare in other companies that I hope would take a page out of your book."
“You’ve got to fuss just a little because it’s almost required in Congress, but I’m going to yield back because I am impressed with what you are doing,” Cleaver added.
Heightened interest in the merger was demonstrated by the fact that the hearing was held in the first place; Congress rarely weighs in on bank mergers. The deal was already the subject of two field hearings hosted by the Federal Reserve Board and Federal Deposit Insurance Corp. But in a sign that approval of the merger is only a matter of when, the North Carolina state banking regulator has already signed off on it. The Fed and FDIC must still weigh in on the deal.
Rep. Patrick McHenry, R-N.C., the ranking member of the House committee, said Congress shouldn’t interfere with regulators’ consideration of the deal.
“The regulators are examining this and many other possible implications of this merger in a detail this body cannot,” McHenry said. “Mergers are grounded in procedure; concerns are not simply swept under the rug.”
He added that neither bank is involved in capital markets activities.
“Furthermore, these two institutions are in essence large Main Street banks doing standard, non-capital-markets-oriented business,” McHenry said. “This is a standard merger process by which the Fed is well equipped to deal with the law.”
King and Rogers defended their plans to combine forces, citing their Community Reinvestment Act commitments, technology investments and diversity initiatives. The merging banks and the National Community Reinvestment Coalition recently agreed to a new $60 billion "community benefits plan." However, the plan represents only $3 billion more than BB&T and SunTrust's previous allocations.
Despite concerns about the overall consolidation of the banking industry and its impact on consumers, numerous Democrats said they realize that the current regulatory system has led banks to merge.
Rep. Chuy Garcia, D-Ill., cited a regulatory relief bill, known as S 2155, which was signed into law last year, as a potential catalyst for bank mergers. But King insisted that legislation had no bearing on the deal to combine BB&T and SunTrust.
“The 2155 change that you are referring to had absolutely nothing to do with our decision to merge,” King said in response.
Rep. Stephen Lynch, D-Mass., took issue with the current industry environment that favors consolidation and banks increasing their scale in order to compete, noting that the loss of smaller institutions hurts communities. But he said the BB&T-SunTrust merger is more a symptom of that environment than a cause.
“The antitrust formula that has been approved by the Supreme Court doesn’t recognize the damage to consumers and the damage to communities,” Lynch said. “They just look at … a very limited set of factors. So I’m not blaming you. But I’m saying what you’re asking for contributes to the problem.”
The executives touted their investments in communities and technology that will come with the newly formed bank.
King, who will be the CEO of Truist Financial if the merger is approved, said in his prepared testimony that the community benefits plan agreed to with the NCRC “exemplifies what Truist will stand for and how it will support local communities in the years to come.”
He added that the scale provided by the merger will enable investments in technology.
“The merger will provide us with additional scale to make the investments in technology that will allow us to provide the digital services our clients expect,” King said in his prepared remarks. “We have pledged to invest an incremental $100 million annually into innovation and technology to create a digital client experience that is second to none.”
The companies also highlighted their commitment to diversity when the merger moves forward. Rogers said that when the companies considered its combined executive structure that they pushed to include women and minorities in executive roles.
“Although we wished we’d made more progress, our collective executive team is 25% more diverse than it would have been if we had just added the two companies together,” Rogers said.
The hearing was largely civil but the questions at times were pointed, including when lawmakers raised the issue of job losses resulting from the merger.
Rep. Al Green, D-Texas, asked the executives whether they could commit to retaining all employees.
“Are you amenable to having it be a part of your merger documents … in fact make it conditioned upon no jobs being lost?” Green said.
King acknowledged the probability of job losses, but not for client-facing, performing associates.
"It is likely that some people will lose their jobs. … We will do everything we can for our associates,” he said.
“We have said that to our client-facing performing associates; they will not lose their jobs," he said. "There may be other opportunities throughout the entire enterprise when associates may be offered different jobs or opportunities will change.”