Banks Thrive at Scale, and So Do Consumers

BPI today commented on the Department of Justice’s request for public input on bank merger analysis. Bank M&A today takes place in a thriving, competitive marketplace and already undergoes rigorous antitrust review under a long-standing analytical framework that leaders from both political parties have stood behind for decades.

“M&A allows banks to achieve the scale necessary to provide seamless digital banking, robust cybersecurity and innovative products and services,” BPI President and CEO Greg Baer said. “Any objective review of the U.S. banking industry reveals an intensely competitive marketplace.”

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Why it matters: When U.S. banks seek to merge, they face government competition review standards that are far more rigorous than any other U.S. industry. Moreover, those standards generally ignore competition coming from Big Tech and FinTech, which has grown substantially since those standards were last updated. New restrictions on bank M&A would undercut the industry’s ability to keep pace with the evolving financial technologies, consumer needs, and marketplace structures, ultimately undermining the competitiveness the Administration seeks to achieve.

Crucial context: The existing approach to assessing the legality of bank mergers was developed incrementally over decades at the DoJ and the federal bank agencies under both Democratic and Republican Administrations and based upon analyses conducted by highly professional and expert career staff. Consistent with the underlying statutes and the case law, the current DoJ approach to competition analysis of bank mergers focuses on local geographic markets and seeks divestiture of branches in any local markets in which competition would be harmed.

  • Mergers benefit customers: Bank M&A serves customers through greater lending capacity, greater innovation and tech investments, a wider range of products and services, stronger cybersecurity and additional community investments as a result of lower operating costs from the presence of scale economies. One healthy bank is better than two failing ones.
  • The DoJ’s current framework reflects a consensus approach that works well: The consensus approach developed under Administrations from both parties that has governed bank merger competition review for decades has proven successful in protecting customers and competition. If anything, it’s too stringent: bank mergers face stricter standards than any other industry, even as they compete with less regulated Big Tech and FinTechs whose competitive presence is ignored.
  • Branches have increased even as the number of banks has decreased: Between 1981 and 2021, the number of bank branches nearly doubled as banks responded to federal legislation that allowed interstate branch networks. The result is that the average bank’s branch network grew from 2.7 branches to 17.1 branches over 40 years. That is a far more relevant statistic than the nominal number of banks in terms of customer convenience and efficiency. 
Graph showing Number-of-Banks-and-Branches-in-1981-vs-2020
  • Less concentrated: The U.S. banking industry is much less concentrated than other industries that serve U.S. households, such as airlines, department stores, telecom, autos, and prescription drug manufacturers. (Also, the comparison understates the true level of competitiveness in financial services from FinTechs or money market funds.)
  • Local concentration has not increased: Banking competition at the local market level continued to thrive, with market concentration as measured by branch deposit showing little change between 1998 and 2021. This measure of competitiveness, in fact, understates the true extent of financial choices that customers have because it is based solely on the presence of brick-and-mortar branches and does not include digital-first or digital-only options.
  • DoJ lacks statutory authority to review proposed mergers for systemic-risk issues. Congress authorized the federal banking regulators specifically to consider this factor outside of the competition analysis provision, not DoJ, whose mandate is to review competition.


BPI requests that DoJ’s Antitrust Division and the federal bank regulators

  1. adhere to the well-developed approach that has governed bank-merger policy for over 40 years
  2. take into account competitors lacking a physical branch in a local geographic market when assessing a merger’s likely competitive effects (especially financial institutions that offer banking services but do not have a banking license)
  3. provide notice, public comment, and an opportunity for judicial review of any new bank merger guidelines, and
  4. apply any changes to bank-merger policy only prospectively.

To access a full copy of the letter, please click here.


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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Bank Policy Institute

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