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June 18, 2024

FDIC Must Do More To Protect Main Street From Problematic Bank Mergers

WASHINGTON, D.C.— Better Markets filed a Better Markets’ Comment Letter to the Federal Deposit Insurance Corporation (FDIC) on its proposal on bank mergers.

Why it Matters. The dramatic increase in the largest, too-big-to-fail (‘TBTF’) banks over the last two decades raises a host of concerns, and chief among them is the threat they pose to the financial system, the economy, and the standard of living for every American. That threat became a reality in 2008 when a deep and prolonged financial crisis nearly destroyed our financial system and plunged our economy into the worst downturn since the Great Depression, ultimately costing over $20 trillion.

What we said. That’s why we fully support the broadened scope and jurisdiction of the FDIC’s proposal. Nonbanks have become a prevalent and dominant force in the financial system so it is critically important to have clear rules to maintain appropriate regulatory oversight and consumer protection when they combine with banks.

Bottom Line. However, the proposal misses the mark relative to the strong and enforceable rules that are needed to govern mergers. While the proposal attempts to improve upon prior merger policy statements by specifying, for example, that the resulting bank would need to better meet the convenience and needs of the community and be financially stronger than the original entity, it lacks specific metrics and details that are needed for regulators, banks, and the public to oversee and understand what is and is not acceptable for merger transactions.

At the end of the day, like the OCC’s proposed policy statement, this proposal moves in the wrong direction by codifying a set of broad and vague statements rather than defining specific guidelines to govern bank mergers and ultimately protect Main Street Americans and businesses.

You can read the full comment letter here.


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