Clear, Objective M&A Standards Benefit Bank Customers and the Economy

Washington, D.C. – Mergers and acquisitions enable banks to make the necessary investments to serve their customers. A healthy M&A pipeline, with clear timelines and expectations for merger approvals, allows banks to make informed decisions about how to grow and meet the needs of their customers, but recent federal proposals would create harmful uncertainty in the M&A process, BPI said in a statement for the record for the House Financial Services Subcommittee on Financial Institutions and Monetary Policy hearing titled “Merger Policies of the Federal Banking Agencies.” Ultimately, the costs of languishing bank M&A ripple out to bank customers and the broader economy.

“We encourage the Subcommittee to consider the economic benefits of bank M&A activity and the costs of precluding it,” the statement for the record said. “A predictable path forward for bank mergers promotes a healthier banking system and a more stable U.S. economy.”

Competitive context: When considering bank mergers and acquisitions, it’s worth taking into account the marketplace for banking services. Not only are there thousands of different banks in the United States, but banking services like mortgages, personal loans and payments are increasingly offered by firms outside the banking system. Credit unions also offer competing products. At the same time that they face robust competition, banks are confronting regulators’ significant demands for capital, liquidity and prevention of financial crime and cyberattacks.

  • The challenge: Banks’ customers are increasingly seeking a one-stop lender, payment platform, financial advisor and investment broker with a seamless app interface and impenetrable cybersecurity. Banks’ regulators need a fortress with a strong balance sheet, diversified business model that can weather economic pressure and prevent fraud, money laundering and sanctions evasion. For many banks, meeting this confluence of needs requires investment that only size and scale can support. The bank M&A oversight process is already fraught with delays and uncertainty, and recent OCC and FDIC proposals would exacerbate this lack of clarity. 
  • Problematic policies: Recent proposed policy statements from the OCC and FDIC would harm bank customers by discouraging or precluding transactions that could benefit them and the banking system as a whole.
    • The risks: Prolonged uncertainty about a merger approval can lead to problems retaining customers and employees.
    • Departing from the law: The OCC and FDIC proposals depart from the law on bank M&A. For example, the OCC proposal assumes that a merger crossing a particular asset size would put the financial system at risk, but the Bank Merger Act – the relevant federal law – does not contain such size-based requirements or presumptions.

Bottom line: Regulators should stick to the statute rather than imposing new, subjective requirements that prevent banks from making economically sensible growth decisions. A clear path forward for bank M&A is critical for a thriving banking system.

Learn more about our work on M&A:


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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Tara Payne
Bank Policy Institute

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