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1 1 (October 28, 2021)

handle is hein.crs/goveesg0001 and id is 1 raw text is: Congressional Research Service safinneInforrning the legislative debate since 1914 S October 28, 2021 Bank Mergers and Acquisitions On July 9, 2021, President Biden issued an executive order on competition, which, among other things, encourages the Attorney General and the federal banking regulators to review current practices and adopt a plan, not later than 180 days after the date of this order, for the revitalization of merger oversight. Congress has been interested in mergers among large banks in recent years (see Table 1), particularly how they might affect competition. This In Focus provides an overview of the bank merger process and policy issues. Table I. Recent IDI M&As Among Top 25 BHCs By BHC consolidated assets, as of June 30, 2021 Assets M&A Institutions ($billion) Date U.S. Bank $692 9/2021* (plans to acquire MUFG Union (pre-M&A sum) Bank) PNC Financial Services $555 6/2021 (acquired BBVA USA) Truist Bank $522 12/2019 (merger of BB&T with SunTrust Banks) Capital One Financial $423 2/2012 (acquired ING Bank) Citizens Financial Group $212 9/2021* (plans to acquire Investors (pre-M&A sum) Bancorp) Huntington Bancshares $175 12/2020 (merged with TCF Financial) Source: S&P Capital IQ Pro; Citizens Financial Group; MUFG Union Bank. Notes: This list includes the largest banks resulting from mergers and acquisitions (M&As) from the past 10 years where the M&A involved large insured depository institutions (IDIs). *Denotes an announced but uncompleted merger or acquisition. Asset totals are illustrative and may differ from post-merger total, if approved. Bank Merger Process Mergers and acquisitions (M&As) involving banks-or, more technically, insured depository institutions (IDIs), as there are a number of different types of banks-must comply with a number of statutory requirements. These vary based on the type of bank but are broadly similar. Bank M&As need approval by one or several of the banking regulators-the Federal Reserve (Fed), Federal Deposit Insurance Corporation (FDIC), or the Office of the Comptroller of the Currency (OCC)-depending on how the banks are legally structured. When banks with different charter types are involved, approval by more than one regulator can be required. Most of the largest U.S. banks are structured as bank holding companies (BHCs), and their M&As are approved by the Fed. (States may also have requirements, beyond the scope of this In Focus, but a state regulator can block M&As only on limited grounds.) Regulators review M&A proposals for, among other things, their effects on competition. For example, bank regulators and the Department of Justice (DOJ) review proposals for effects on market power in both national and local markets. DOJ has the authority to block an M&A on antitrust grounds. It is not uncommon for banks to divest branches before an M&A is approved to allay concerns about market power. For example, on 16 occasions between 2006 and 2017, the Fed required M&A applicants to sell off branches. M&As are also subject to statutory concentration limits to curb market power-the merged entity may not hold more than 10% of total deposits nationally or 30% of deposits in any state. In addition, for BHCs, the merged entity cannot hold over 10% of all financial company liabilities nationally. Regulators must also consider the convenience and needs of the community. They do so by seeking public comment through public outreach hearings, for example. Notably, the entities merging must resolve any issues related to consumer compliance or compliance with the Community Reinvestment Act (CRA; 12 U.S.C. §2901 et seq.)-a law that requires regulators to evaluate how well IDIs make credit available to the communities from which they accept deposits. The M&A approval process is one of regulators' main tools to encourage CRA compliance. (For more information on CRA, see CRS Report R43661, The Effectiveness of the Community Reinvestment Act, by Darryl E. Getter.) Statute lays out other factors regulators must consider, including financial resources (Would the merged institution have adequate capital and other resources?); managerial resources (Do the banks' officers, directors, and principal shareholders have competence, experience, and integrity?); money laundering (Are the banks effective at combatting money laundering?); and financial stability (Does the merger pose systemic risk to the United States banking or financial system?). There are also restrictions on how certain acquisitions can be financed. Regulators have discretion to reject M&A applications, require changes to proposals, and grant conditional approval. They can also waive certain requirements in certain circumstances, such as for a bank in default or in danger of default. For example, during the 2008 financial ittps://crsreports.congress.gov

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