Op-Ed: A Bank-merger Moratorium Isn’t Just Bad Policy. It’s Illegal.

Originally published by American Banker

As 2021 ended, several policymakers were calling for a moratorium on bank mergers above a certain size — uniformly, when the resulting firm’s assets would exceed $100 billion. Such a moratorium would be extremely poor policy. But of most immediate importance, it would be flatly illegal.

If effective, such a moratorium would have far-reaching effects. There are today 32 U.S. banking organizations that hold over $100 billion in assets. As a practical matter, a moratorium would have no consequence for a bank that holds more than 10% of nationwide deposits in view of the statutory ban on interstate bank acquisitions for banks at that deposit level. But a $100 billion-asset restriction would bar the remaining of these organizations (which today is nearly all of these banking organizations) from any bank acquisitions, no matter how small. In addition, six banking organizations hold assets between $75 billion and $100 billion; they would also be barred from significant acquisitions. Another five banking organizations have assets of between $50 billion and $75 billion, and they would be barred from any “mergers of equals.”

Such a moratorium would raise serious policy concerns, as it would prevent small, midsize and regional banks from fighting to remain competitive, as scale in banking has become all the more important given rising costs of digitization, cybersecurity and regulatory compliance. But the policy demerits of such a proposal should not overshadow the fact that its adoption would be legally void. …