Acting Comptroller Discusses Bank Mergers


The Acting Comptroller of the Currency says there is a need to update the frameworks used to analyze bank merger applications.

In a speech before the Brookings Institution on Monday, Michael Hsu discussed proposed mergers in the context of bank competition, financial stability, and facilitating the needs of communities.

“Bank mergers have received significant attention this past year. Concerns about the negative effects of bank mergers on competition, communities, and financial stability have prompted some to call for a moratorium on merger activity,” Hsu said.

“In response, others have defended the benefits of mergers. They note that the U.S. financial services market is highly competitive, and mergers allow institutions to achieve needed economies of scale and to diversify risk through geographic or product expansion.”

Hsu said from his perspective the frameworks for analyzing bank mergers need updating but imposing a moratorium on mergers would lock in the status quo and prevent mergers that could increase competition, serve communities better, and enhance industry resiliency.

Hsu said the banking system has changed significantly over the past three decades.

“Industry assets, which totaled $5 trillion in 1995, now total nearly $25 trillion. At the same time, the number of insured depository institution charters has decreased by about 60 percent. As a result, the size of the average bank has increased to almost $5 billion. Assets have become concentrated in the largest
banks,” Hsu said.

Hsu said that in 1995, the 25 largest banks accounted for almost 30% of industry assets. In 2021 they held 65% of total industry assets.

“The largest bank in 1995 had approximately $250 billion in total assets. Today, there are 13 banks with more than $250 billion in total assets, and the largest bank has over $3 trillion in total assets,” Hsu said.

Hsu said the broader competitive landscape has also changed significantly.

Between 1995 and 2020, membership in credit unions doubled, and total assets held by credit unions grew by more than 550 percent, Hsu said.

Hsu also pointed out that the demographics of the country have changed as well.

An estimated 85% of the population owns a smartphone. 70% of Americans look online and on mobile channels for their banking needs, Hsu said.

In his conclusion, Hsu said he has directed senior members of his staff to work with DOJ and the other federal banking agencies to review their merger framework.

In the meantime, Hsu said they will continue to review merger applications on a case-by-case basis.

“In our actions, we will take into account changes in the banking industry and
apply our best judgment to approve only applications that would promote competition, would not threaten financial stability, and would facilitate the convenience and needs of all the communities served by the banks,” Hsu said.

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