A group representing community banks urged federal regulators to impose a moratorium on all acquisitions and mergers involving large financial firms–including Capital One Financial Corp.’s (COF) pending plan to buy ING Direct USA.
“With assets of over $300 billion, this acquisition will catapult Capital One into the fifth largest bank from the standpoint of deposits from eighth place,” said Independent Community Bankers of America Senior Vice President Chris Cole, speaking at a public hearing on Capital One’s controversial plan to acquire ING Direct USA.
Cole argued that the nation’s largest banks should be shrinking rather than expanding, especially given that banking regulators have not outlined exactly how they will address new financial laws that seek to prevent banks from becoming “too-big-to-fail,” or so large and risky that they could topple the U.S. financial system. As an example, he noted that regulators haven’t put in place a framework for dealing with banks with over $50 billion in assets, a group referred to as systemically important financial institutions.
Cole said community banks should be allowed to acquire online banking business ING Direct USA, arguing that smaller banks would do more to boost small business lending.
While the 2010 Dodd-Frank financial law was created to help level the playing field between the megabanks and the rest of the industry, “so far, community banks have not seen much movement towards either goal,” Cole added.
“Not only are the large banks getting larger, their funding advantage over community banks, which has been estimated to be approximately 50 basis points, appears to be getting even larger,” he said.
Meanwhile, The Financial Services Roundtable, which represents larger banks said setting “arbitrary caps” ignores market realities.
“All mergers should be reviewed for competitiveness and the impact on the banking sector and the economy,” said Scott Talbott, senior vice president of government affairs at The Financial Services Roundtable.
Washington, September 20, 2011 (Dow Jones)
