Warren releases plan to overhaul bank merger approval process

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WASHINGTON — Sen. Elizabeth Warren announced a bill Wednesday to overhaul the bank merger review process in the wake of regulators’ approval of a deal between BB&T and SunTrust Banks.

The Massachusetts Democrat and presidential candidate introduced the Bank Merger Review Modernization Act with Rep. Jesús "Chuy" García, D-Ill., which would require Consumer Financial Protection Bureau approval of bank mergers and set standards for banks’ Community Reinvestment Act compliance in order to get merger approval, among other things.

"Nearly two years ago, [Federal Reserve] Chairman Powell confirmed my worst suspicions that the Fed has not declined a single merger request since before the financial crisis,” Warren said. "The bill Congressman García and I are announcing today would ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need, reward banks that cheat or discriminate against their customers, and risk another financial crisis.”

The current framework for bank merger approval requires a green light from the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. Those regulators consider factors such as whether the merger will create local monopolies for banking services, whether the merged bank will be well managed, whether the new bank creates risk to the financial system, and the merger's overall effects on the public, including consumers.

But the lawmakers said in a press release that, in practice, regulators almost exclusively focus their analyses on the impact of the merger on competitiveness and often preview the merger “in secret with banks before they announce it publicly.” Of the 3,819 bank merger applications the Fed received between 2006 and 2017, the Fed did not decline any.

Warren’s bill would require CFPB approval for mergers when at least one of the parties offers consumer financial products. It would restrict merger approval to banks with the highest rating in two out of three of their last CRA exams. And it would require disclosure of discussions between the institutions and regulators before a merger application is filed.

The legislation would also require regulators to use a quantifiable metric developed by the Basel Committee on Banking Supervision to evaluate systemic risk in a merger, examine how the merger would impact market concentration for individual banking products, and review the leadership of the merged institution to ensure they have strong records with respect to risk management.

The legislation comes after the Federal Reserve and Federal Deposit Insurance Corp. last month approved BB&T and SunTrust's $28.8 billion deal to merge as Truist Financial.

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M&A Regulatory reform CRA Elizabeth Warren CFPB Federal Reserve FDIC BB&T SunTrust Truist Financial