Banking

Fed governor backs revamp of bank merger review process

WASHINGTON — The Federal Reserve should revamp its process for reviewing bank mergers to address the competitive threat posed by tech companies, Fed Gov. Michelle Bowman said Tuesday.

“The board’s framework for banking antitrust analysis hasn’t changed substantially over the past couple of decades,” Bowman said in remarks given for an American Bankers Association event. “I believe we should consider revisions to that framework that would better reflect the competition that smaller banks face in an industry quickly being transformed by technology and nonbank financial companies.”

The central bank is currently assessing the framework, Bowman said, months after the Department of Justice said in September that it would look to overhaul its bank merger review process to account for new trends in the financial sector.

“We have engaged in conversations and received feedback from community banks about the Board’s competitive analysis framework and its impact on their business strategies and long-term growth plans,” she said. “We are in the process of reviewing our approach, and we are specifically considering the unique market dynamics faced by small community banks in rural and underserved areas.”

“The board’s framework for banking antitrust analysis hasn’t changed substantially over the past couple of decades,” said Federal Reserve Gov. Michelle Bowman.

Bloomberg News

After the Justice Department announced its review, industry participants and M&A experts speculated that possible antitrust-related policy changes could favor smaller banks, and could even slow consolidation.

The Justice Department sought feedback on its process to determine whether a proposed merger would give the combined company too much control over a specific market. The Justice Department has also asked stakeholders for input on whether it would be “helpful to have joint guidance from the Antitrust Division and the banking agencies.”

Bank regulators, including the Fed, review merger applications for management expertise, capital and safety measures, and other elements. They also examine the impact on market competitiveness and can refer concerns to the Justice Department.



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