September 23, 2023
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Justice Department to Intensify Bank Merger Review Process, Antitrust Division Chief States

In an effort to adapt to the evolving landscape of financial services, the U.S. Justice Department antitrust division is set to broaden its bank merger review process, according to the department’s chief. Jonathan Kanter, the assistant attorney general for antitrust at the DOJ, acknowledged that the existing guidelines, last revised in 1995, might be too limited given the technological advancements in the industry.

During a speech at the Brookings Institution, a prominent think tank, Kanter expressed concerns about the outdated nature of the 1995 guidance and its potential mismatch with current market realities. His remarks, however, are likely to disappoint the financial industry, which had hoped for a more favorable stance from the Biden administration following a series of bank failures since March.

Kanter emphasized the need for a more comprehensive approach to antitrust reviews of mergers. He argued that assessments should go beyond the traditional factors of impact on local depositors and branches, urging consideration of a broader range of issues. For instance, he highlighted the availability of different types of banks serving distinct customer needs, emphasizing the importance of ensuring customers retain “meaningful choice.”

According to Kanter, bank competition significantly affects consumers’ financial well-being, influencing factors such as interest rates on savings accounts, monthly mortgage or car loan payments, and ATM withdrawal fees. He stressed the obligation to address the present market realities and adapt legal enforcement accordingly.

The push for increased scrutiny of bank mergers aligns with the progressive lawmakers and consumer advocates’ longstanding argument against the consolidation of large banks. In 2021, President Biden signed an executive order directing the Justice Department to collaborate with bank regulators to enhance oversight of such deals.

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While recent rescue deals in response to the banking industry turmoil following the failure of Silicon Valley Bank in March have demonstrated the potential benefits of strategic mergers, the speech by Kanter indicates a more skeptical stance from the DOJ. Isaac Boltansky, policy director of brokerage firm BTIG, noted that the Biden administration remains ideologically opposed to large bank mergers.

Furthermore, Kanter suggested that credit unions and non-bank financial entities like fintech companies should also receive closer consideration during the review process. This may present an opportunity for larger banks, as they increasingly face competition from these tech-driven players, explained TD Cowen analyst Jaret Seiberg.

Seiberg added, “We believe this policy change will not have as negative an impact on bank mergers as it might initially seem.”