WASHINGTON - The Justice Department wants to disregard thrift deposits when testing proposed mergers for antitrust violations.
The move, outlined in a draft that the department is quietly circulating, increases the likelihood that a merger would violate Justice's preliminary antitrust review, setting it up for a closer inspection.
"This may trigger more scrutiny in some mergers because of the thrift deposits," said Thomas Greco, associate general counsel at the American Bankers Association.
Justice uses its initial review to weed out mergers that don't pose competitive problems. Using a standard formula, it awards market share scores ranging from 1 to 10,000.
The department and the regulators, which conduct separate reviews, routinely allow banks to merge until their scores rise to 1,800. At that point, additional information is required on the deal's competitive effects. Justice also may require banks with high scores to divest branches.
Justice currently discounts the market presence of thrifts, counting only 20% of their deposits. By eliminating thrift deposits entirely, Justice further shrinks the market. That will boost every bank's market score, increasing the likelihood that a deal will cross the 1,800 threshold.
The guidelines state that banks with high scores can file supplemental information explaining how thrifts, credit unions, and out-of-market institutions affect the market.
Justice said in the guidelines that it is particularly interested in the amount of business start-up and working-capital loans these other institutions make.
Mr. Greco said the proposed guidelines should not impede mergers because banks that fail the screen have ample opportunity to show that their proposed merger is not anticompetitive.
"This is going to point out the current thinking of Justice," Mr. Greco said of the guidelines. "But it probably isn't new."
Banking antitrust experts agreed, saying they have suspected for years that Justice ignores thrifts.
"What's new is, they have put it on paper," said Gil Schwartz, a partner at Schwartz & Ballen. "They have finally articulated to the banking industry the real way they calculate anticompetitive effects."
"They mainly just continued an existing practice," agreed Mark A. Weiss, a partner at Covington & Burling.