Biden directs closer scrutiny of bank mergers

President Joe Biden last week directed the Justice Department and federal banking regulators to more closely scrutinize bank mergers and make it easier for customers to switch banks. 

In the July 9 executive order which President Biden said is intended to promote competition, he:

  • Encouraged the DOJ and banking industries to update guidelines on bank mergers to provide more robust scrutiny, 
  • Encouraged the Consumer Financial Protection Bureau to issue rules allowing customers to download their banking data and take it with them when they switch banks.

The move could help accelerate implementation of Section 1033 of the Dodd-Frank Act, which calls for the CFPB to issue regulations detailing financial data access and sharing. The agency only began the official rule-making process for Section 1033 last fall, and despite appearing on the bureau’s six-month rule-making agenda, no specific timeline was given.

According to the Biden administration, federal agencies have not formally denied a bank merger application in more than 15 years. The White House says excessive consolidation raises costs for consumers, restricts access to credit, and harms low-income communities.

“Consolidation has increased the power of corporate employers, making it harder for workers to bargain for higher wages and better work conditions,” Biden said. “Powerful companies require workers to sign non-compete agreements that restrict their ability to change jobs. And, while many occupational licenses are critical to increasing wages for workers and especially workers of color, some overly restrictive occupational licensing requirements can impede workers’ ability to find jobs and to move between states.” 

Since the beginning of 2000, the number of bank charters in the United States has dropped by about 40 percent, with 4,958 FDIC-insured banks at the end of the first quarter this year.

Last fall, the Independent Community Bankers of America encouraged the Department of Justice to update its guidelines on reviewing bank mergers and to prioritize mergers in small markets that preserve the financial viability of small banks. The association has continued its push for credit unions and other nonbank lenders to be subject to similar rules and regulations, including when they acquire banks.

The American Bankers Association also has urged the White House to focus on nonbank acquisitions of banks in any updates to merger review guidelines. “We will also encourage the administration to review the barriers currently standing in the way of de novo bank creation and would welcome the opportunity to work together on commonsense policies to increase the number of banks in the country and further expand access to financial services,” ABA President and CEO Rob Nichols said in a statement.

Both associations said they support CFPB efforts to standardize rules around customer access to financial data.