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Reuters, WASHINGTON, July 9 – According to a source familiar with the situation, President Joe Biden’s anticipated executive order to foster greater U.S. competition will target bank mergers by requiring the Federal Reserve and the Department of Justice to update merger criteria and strengthen inspection of agreements. According to the source, it would also seek the Consumer Financial Protection Bureau (CFPB) to adopt laws allowing consumers complete ownership over their financial data, making it easier for clients to move banks. After a spate of mergers fueled by the Trump administration’s more industry-friendly regulatory policies, the anticipated order, which is slated to be signed by Biden on Friday, is likely to cool M&A in the banking sector. Among these were BB&T Corp’s $28 billion merger with SunTrust, the largest bank merger since the 2007-2009 financial crisis, and Fifth Third Bancorp’s $4.7 billion acquisition of MB Financial Inc, as well as a slew of smaller transactions. According to Dealogic data, the value of M&A among commercial, savings, and investment banks reached $54.66 billion by November 2020, the most since 2009. According to a report by Jeremy Kress, a University of Michigan professor who previously worked on bank merger monitoring at the Fed, while such deals have been subject to federal examination, government authorities have not formally declined a bank merger application in more over 15 years. “There has been a rash of bank closures across the United States, and we’re dealing with the negative consequences for a lot of people, and it’s also difficult to switch alternatives… so it’s, in a sense, a competition crisis,” the insider explained. The number of commercial banks in the United States has decreased by around 10,000 during the last two decades, according to a research by the Federal Financial Institutions Examination Council and the Federal Reserve Bank of St. Louis. According to studies by the National Community Reinvestment Coalition, this has resulted in higher fees for customers, less access to banking services for communities of color and low-income working families, and raised worries about financial system risk. Progressives, such as Senator Elizabeth Warren, have criticized bank mergers, claiming that they damage consumers. The presidential order, which would also affect merger criteria at two other federal agencies that regulate banks, has the potential to draw big banks into a high-stakes antitrust battle, even as they warn that they need aid from Washington to compete with financial technology upstarts. In 2020, the Bank Policy Institute, which represents the nation’s largest lenders, argued that such players pose a threat to banks. Biden’s plan to issue a competition executive order was originally reported by Reuters. Details on the administration’s specific moves, which will affect industries like farm equipment makers, rail and sea shipping, and the labor market, have subsequently emerged. find out more The moves are part of Biden’s efforts to boost competition by not only enforcing antitrust laws but also leveraging federal power to spark competition in a variety of industries. He has nominated proponents of harsher antitrust enforcement to prominent positions at the White House and organizations such as the Federal Trade Commission since assuming office. A similar directive was issued by former President Barack Obama’s administration in 2016, but it had no effect. According to the source, the Biden order includes instructions on how government agencies should assess agreements and competition in industries. Customers should be able to swap banks and take their financial transaction history data with them, according to Biden’s instruction. The Consumer Financial Protection Bureau (CFPB) asked for feedback in October on a potential proposal to give consumers more control over their financial data, which is being gathered by an increasing number of financial institutions and applications. The new leadership of the agency has yet to take action on it. According to the source, the White House is hoping that the executive order will encourage the agency to move forward with the modifications. The improved ability to share such data could also aid in the development of more accurate credit scoring models, which could help underserved and minority communities gain access to credit, according to the source. Nandita Bose and Michelle Price contributed reporting, while Leslie Adler edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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