Contending that banking regulators have rubber-stamped thousands of mergers, two Democratic lawmakers have introduced legislation that would require a more thorough review of such deals.
The bill, introduced in the Senate by Sen. Elizabeth Warren, D-Mass. and in the House by Rep. Jesús “Chuy” García, D-Ill., does not include credit union deals in the list of mergers they believe should be more closely reviewed.
Banking trade groups have focused on bank purchases by credit unions, arguing that the credit union tax exemption gives them an unfair advantage in such deals, But a source familiar with the legislation confirmed that credit unions are not directly affected by the bill.
“Community banks are being gobbled up by larger competitors or forced to shut down because they can’t compete on a level playing field,” Warren said, in unveiling the legislation last week. “This results in more concentration, higher costs for consumers and increased systemic risk to our financial system.”
Warren is a member of the Senate Banking Committee, which has authority over the banking regulators. “Bank consolidation means more pay and profits for big banks and fewer bank branches in neighborhoods like mine, said Garcia, a member of the House Financial Services Committee whose district includes parts of Cook County, Ill.
The bill would require that a bank merger be reviewed by the Consumer Financial Protection Bureau if at least one applicant offers consumer financial products. Only banks that received the highest Community Reinvestment Act rating in two of their last three tests may merge, according to the bill. In addition, the bill would require “transparent disclosure” of discussions between institutions and regulators before the merger application is filed.
Regulators also would be required to examine how the merger would impact market concentration on individual banking products and whether the merged bank would have adequate financial and management resources.