Banking groups: the CFPB must stay away from bank mergers


A banking regulatory agency asked if the Consumer Financial Protection Bureau should be involved in the decision whether or not to give the green light to bank mergers.

The industry’s response? A resounding “no”.

Trade groups such as the American Bankers Association and the Independent Community Bankers of Americasay it would go beyond the scope of the CFPB, which has authority over certain industries, including mortgages, as well as lenders with more than $10 billion in assets.

The decline of the banks came after the Federal Deposit Insurance Corporation (FDIC) announced that it is considering changes to the regulations that govern bank merger transactions and sought industry input. Last year, the Biden administration asked federal agencies — which have not denied a bank merger in the past 15 years — to update their bank merger policies.

The FDIC asked for comment on whether it should consult with the CFPB when considering “the convenience and needs,” or community impact, of a potential merger. The comment period ended in May.

Fair housing advocates have argued that the community impact assessment of mergers, required in the Bank Merger Act, has been largely ignored in the assessment of bank mergers.

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The ABA, in its response to the FDIC’s request for input, said that regulations already exist that govern how mergers are assessed and that “the agency’s specific responsibilities are well defined, with a appropriate consideration of [Community Reinvestment Act] performance among them.

Banking regulators look at a bank’s past ARC performance, which shows how well banks serve low- and middle-income borrowers. But while there are no examples of bank mergers failing due to poor CRA performance, several banks have failed their CRA exams and subsequently passed mergers. .

“A separate role for the CFPB would therefore be superfluous to existing considerations, inconsistent with bank merger law and beyond the scope of the CFPB’s own licensing legislation,” the ABA said.

The Banking Policy Institute (BPI), the Consumer Bankers Association and the Coalition of Midsize Banks of America in a joint letter to the banking regulator echoed this message.

The trade groups said there may be “special situations” where the FDIC should consult with the CFPB, such as in matters relating to enforcement action against potential applicants.

However, trade groups say there is “no legal basis” for federal banking regulators to consult with the CFPB on whether a merger meets the convenience and need standard.

In the opinion of the professional group, the participation of the CFPB in the bidding process “would go beyond the role that Congress has defined for the CFPB”.

“When Congress created the CFPB in the Dodd-Frank Act, there was no suggestion in the statute or legislative history that the CFPB should have any sort of concurrent role regarding mergers, or even be granted a special right of comment”, trade groups. said in their letter.

However, some outside the banking sector, such as the liberal think tank Center for American Progressargue that the CFPB should have a bigger seat at the bank merger review table.

The CAP said federal banking agencies “have not placed enough emphasis on [the convenience and needs factor] despite significant evidence that bank mergers have negative effects on consumers and communities.

“We believe the CFPB should weigh in on every bank merger involving institutions it reviews or mergers that would create a CFPB-reviewed bank (i.e. banks with more than $10 billion in assets ),” the advocacy group said.

The group said consumer compliance in recent years has “evaporated as a constraint on bank mergers” and that the CFPB has “the expertise and review data to assess whether banks that merged have properly complied with consumer financial protection laws”.

The FDIC’s request for comment coincides with renewed attention to bank mergers and redlining.

In his July 2021 order, President Biden instructed banking regulatory agencies and the justice department develop a plan for the “revitalization of merger oversight”.

The order says more than 10,000 banks have been closed over the past four decades in minority communities, in part due to mergers and acquisitions. The closure of these banks has impacted low-income communities, the administration said.

Meanwhile, senior officials from the DOJ, CFPB and OCC said eradicating the “modern red line” was a top priority for the administration. In December 2021, a disagreement between the CFPB and the FDIC over the FDIC’s bank merger statutes resulted in the ousting of its chairwoman, Jelena McWilliams.

In a sign that there may be changes to come, Lisa Cook, the first black woman to serve on the Federal Reserve Board of Governors, recently abstained from voting on a bank branch application. Community groups said the bank failed to provide small business and consumer loan services to African-American communities in South Dallas.


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