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Sen. Warren Revives Bill to Rein In Bank Mergers

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What You Need to Know

  • The legislation is intended to curb mergers that create the kinds of giant institutions that created the 2008 financial crisis, Warren said.
  • Of the 3,819 bank merger applications the Fed received between 2006 and 2017, it did not decline a single one.
  • The bill would require CFPB approval of deals when at least one applicant offers consumer financial products.

Sen. Elizabeth Warren, D-Mass., and Rep. Jesús “Chuy” García, D-Ill., reintroduced on Thursday legislation to rein in “Too Big to Fail” bank mergers as part of President Joe Biden’s recent competition executive orders calling for increased merger oversight.

The Bank Merger Review Modernization Act would restrict consolidation in the banking industry and protect consumers and the financial system from “Too Big to Fail” institutions, like those that caused the 2008 financial crisis, the lawmakers said.

“In recent years, our banking sector has become more and more dominated by the largest banks,” Warren said in a statement.

“Community banks are being gobbled up by larger competitors or forced to shut down because they can’t compete on a level playing field. This results in more concentration, higher costs for consumers, and increased systemic risk to our financial system,” Warren said.

The bill, García added, “ensures our regulators consider the impacts of a merger on consumers, workers and our financial system.”

The Bank Merger Review Modernization Act, the lawmakers said, would “ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need and help prevent another financial crisis.”

The two argue that the review process for bank mergers “is fundamentally broken.”

Voluntary bank mergers have driven a rapid decline in the number of banks from over 12,000 in 1990 to less than 5,000 today, the lawmakers said.

“Studies show that bank mergers can result in higher costs to consumers and decreased access to financial products, particularly in low- and moderate-income communities. And when two large banks merge, it poses even greater risks for the economy, potentially creating a bank that’s too big to manage effectively or one that’s ‘Too Big to Fail,’ threatening the stability of our financial system,” the lawmakers stated.

Of the 3,819 bank merger applications the Fed received between 2006 and 2017, it did not decline a single one, they said.

The Bank Merger Review Modernization Act, the lawmakers said, would strengthen the statutory framework under which bank and savings and loan holding company mergers are evaluated by:

  • Requiring Consumer Financial Protection Bureau approval when at least one applicant offers consumer financial products;
  • Strengthening the Community Reinvestment Act by only allowing institutions with the highest rating in two out of three of their last CRA exams to merge; and
  • Requiring transparent disclosure of discussions between the institutions and regulators before the merger application is filed.