Joel Griffith
Without oversight or transparency, federal banking regulators at the Office of the Comptroller of the Currency (OCC) and FDIC are rolling out onerous new restrictions on bank mergers that will impede free-market activity and harm the financial system. Specifically, the new proposals scuttle certain expedited review procedures, eliminate the streamlined business combination application, and threaten to subject vital business decisions to expansive and vague bureaucratic discretion.
FDIC chair Martin Gruenberg, Acting Comptroller Michael Hsu, and other regulators claim that these changes would increase transparency and help clear up the process for “good” or “healthy” mergers”—defined by Hsu as those that “benefit communities, support bank resilience and financial stability, and enhance competition.” In reality, the proposals add needless complexity to routine business dealings, discourages many “good mergers” from taking place, and leaves banks’ investors and employees hanging in limbo during the drawn-out merger process.
At the heart of the issue is some policy-makers’ misunderstanding of the U.S. banking sector. Support for more regulations on the banking sector are often justified by the fact that ten banks control two-thirds of all domestic deposits.
Contrary to conventional wisdom, however, the banking sector is less consolidated than numerous other industries, including airlines and department stores. Regulations on bank mergers are more stringent than less regulated competitors such as FinTechs. Moreover, the primary reason for concentration on banks and many other financial institutions is the ever-increasing regulatory burden imposed upon them, sometimes with good reason, but all too often to excess. The regulatory burden, rather than concentration, is the problem.
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This burden places smaller institutions at a competitive disadvantage to their larger counterparts who enjoy lower compliance costs per customer, per employee, and per dollar of revenue. In large part, this is why a small cadre of registered investment advisors (RIAs) and two proxy advisory firms have such a powerful influence over virtually every publicly traded company in the country. » Read More
https://www.heritage.org/government-regulation/commentary/biden-administrations-efforts-curb-bank-mergers-fuel-uncertainty