Community banks seek moratorium on big bank mergers
The Independent Community Bankers of America asked federal regulators this week to launch a moratorium on bank mergers and acquisitions involving financial firms with $100 billion or more in assets. If regulators heed the trade group's advice, the solution would effectively halt Capital One's (COF) planned acquisition of ING Direct USA until Dodd-Frank rules designed to monitor too-big-to-fail banks are solidified. The ICBA's chief regulatory counsel testified in front of the Federal Reserve Tuesday. The push back stems from the fears of community bankers, who believe new mergers and acquisitions are adding risk to an already shaky financial system while concentrating power in larger institutions that effectively cut into the market share and opportunities for smaller institutions. ICBA's leadership told the Fed that Dodd-Frank was designed to even the playing field between big and small banks, but, in fact, the threat of larger banks dominating the system remains. “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,” said Chris Cole, ICBA's senior vice president and senior regulatory counsel. Cole warned there is still no accurate way to measure systemic risk and regulators have yet to unveil a method to identify nonbank systemically important financial institutions. Cole recommended a ban on mergers involving big banks, as well as an immediate issue of standards on how regulators will evaluate systemic risk when big banks merge or acquire another firm. "Such standards should start with the presumption that any acquisition or merger that increases the number of institutions over $100 billion poses a systemic risk to our economy since it increases the potential number of institutions that are too big to fail," Cole said. Write to Kerri Panchuk.