President Joe Biden’s planned executive order to promote greater U.S. competition will target bank mergers by pushing the Federal Reserve and the Department of Justice to update merger guidelines and increase scrutiny of deals.
It will also ask the Consumer Financial Protection Bureau (CFPB) to issue rules giving consumers full control of their financial data. And this is to make it easier for customers to switch banks. The planned order, which is expected to be signed by Biden, is likely to chill M&A in the banking sector. Those included the $28 billion marriage of BB&T Corp and SunTrust and Fifth Third Bancorp’s $4.7 billion purchase of MB Financial Inc, and many smaller deals. According to data from Dealogic, the value of M&A among commercial, savings and investment banks reached $54.66 billion by November 2020.
According to a paper by Jeremy Kress, a University of Michigan professor who previously worked on bank merger oversight at the Fed, while such transactions have been subject to federal review, government agencies have not formally denied a bank merger application in more than 15 years. And there has been a rash of bank closures across the United States, and they are dealing with the bad effects for a lot of people and it’s also hard to switch options. A report by the Federal Financial Institutions Examination Council and the Federal Reserve Bank of St. Louis shows that the number of commercial banks in the U.S. has fallen by about 10,000 over the past two decades.
This has led to higher fees for consumers and that reduced access to banking services for communities of color and low-income working families. This increased concerns about risk to the financial system. Bank mergers have been a target of progressives including Senator Elizabeth Warren. The executive order would also address merger guidelines of two other federal agencies that oversee banks, could drag big banks into a high-stakes antitrust debate. The actions are part of Biden’s moves to strengthen competition by not just enforcing antitrust laws. But they use federal power to ignite competition in an array of businesses.
Since taking office, he has appointed advocates of tougher antitrust enforcement to top roles at the White House and agencies such as the Federal Trade Commission. The Biden order includes details on how government agencies should review deals and competition in industries. Biden’s order also pushes to allow customers to switch banks by taking their financial transaction history data with them. The source said that the White House hopes the executive order would spur the agency to push ahead with the changes. The increased ability to share such data could also help drive more accurate credit scoring models, helping to boost access to credit for under-served and minority communities.