US: Elizabeth Warren takes aim at bank mergers

Senator Elizabeth Warren plans to introduce a bill in coming weeks that would intensify the scrutiny of bank mergers, a signal less of legislative action to come than of her intentions for the finance industry if she is elected president, reported The New York Times on Wednesday (Dec. 4)

She is already planning to introduce a bill that calls for additional scrutiny of bank mergers, a companion to the bill Rep. Jesús “Chuy” García (D-Illinois) is introducing. It’s not expected to pass the Republican-controlled Senate, but it does indicate that Warren would prioritize the issue as president.

The “fundamentally broken” review process for bank mergers has been a constant refrain during Warren’s candidacy. Her bill calls for additional scrutiny and vulnerability testing when mergers are proposed, and she is not in favor of extensive consolidation or the creation of massive banks.

Warren has said she sees too much leniency in the Fed’s supervision of the banking industry. She was against the 2018 nomination of Jerome H. Powell to become the Fed chair.

She has joined some analysts and Democrats in contesting the Fed’s approval of BB&T’s merger with SunTrust, the biggest bank merger since 2008. It was approved due to Trump’s rollback of regulations in 2018. Opponents said the reversal would lead to consolidation in the industry.

From 2006 to 2017, the Fed gave the green light to 3,316 mergers of the 3,819 applications submitted, a letterfrom the central bank to Warren indicated. No merger was disallowed, but 503 were withdrawn.

In February, the Federal Reserve released data that found the average review time for deals in the banking sector declined to 3.8 months in the first half of 2018, from 5.6 months in the first half of 2017. The average merger review time at the Office of the Comptroller of the Currency declined between 2016 and 2018.

Bank mergers aren’t the only factor behind closing bank branches, however. A rise in alternative lending and FinTech service providers has driven the digitization of both traditional and alternative financial services, leading some banks to invest in their online platforms and cut costs by shutting down physical branch locations.