The National Community Reinvestment Coalition (NCRC) filed a comment asserting that reviews of bank mergers must place a greater emphasis on the needs of the public.
The Bank Merger Act specifically stipulates that bank mergers must benefit the public. Yet as mergers have halved the number of banks in the United States over the past 20 years, there is little evidence of any corresponding benefit to the public. Research suggests the opposite in fact: Mergers have been shown to lead to higher interest rates and fees on consumer loans in general, and a specific failure to meet the needs of less-profitable households.
“The increase in the number of ‘too big to fail” banks and their incredible profitability demonstrates that mergers have benefited the banks,” said Adam Rust, Senior Policy Advisor for NCRC. “But on-the-ground evidence shows that mergers lead to branch closures and more fees and do not reduce interest rates on loans. For too long, bank reviews have ignored Congress’ directive that mergers must benefit the public. We applaud the Administration for its efforts to reform the merger process.”
Very few applications are denied. The Federal Reserve has approved more than 3,500 consecutive publicly-announced merger applications. Congress’s mandate in the Bank Merger Act that the public benefit from any banking merger has received short shrift in these merger review processes.
NCRC’s comment stipulates that for larger-sized combinations, regulators should require that the banks participate in a community benefits agreement with the public to ensure that the financial institutions understand public needs. It states that all mergers should have a public benefit — not just those which significantly threaten competition. As well, it calls on regulators to consider the impact of a merger across all the activities that constitute the business of banking and not just on the distribution of deposits.
NCRC’s full comment letter is available here.