Better Markets filed a comment letter with the Federal Deposit Insurance Corporation on ways in which the review of bank mergers could be enhanced.
Why It Matters. An insufficient merger review process, combined with other factors such as changes in laws and economic events, has contributed to massive consolidation in the banking industry over the last three and a half decades. Since the mid-1980s, the number of commercial banks has declined around 70 percent.
Currently, the very largest banks virtually control the U.S. banking system:
- The top four banks hold about half of all assets in the banking system.
- The top ten banks hold almost half of all deposits and loans.
- JPMorgan Chase, Goldman Sachs, Bank of America, and Citigroup hold about 90% of the total notional amount of all derivatives contracts.
What We Said. The consolidation both in number of banks and in products and services has completely changed the landscape of the U.S. banking industry, reducing competition and concentrating risks into systemic concerns. Large mergers not only increase financial stability risks, but can also harm hardworking Americans and small businesses. Mergers more generally can lead to a reduction in consumer banking services or increase the cost associated with them, or even to a lack of access altogether when branches are closed, especially in low-income communities.
Bottom Line. The bank merger review process must work to enhance the public interest and the servicing of the convenience and needs of underserved communities while reducing, or at least not increasing, the level of risk in the system. The common-sense enhancements to the review process proposed in our comment letter would go a long way to achieving this. After nearly forty years, the agencies need to take account of the ever-increasing consolidation of the banking industry and strengthen the merger review process.
Read our full Comment Letter here or click the button below.