Bloomberg, October 29, 2018: The U.S. secretly halted JPMorgan’s growth for years
For almost six years, Washington secretly shackled JPMorgan Chase & Co., the nation’s biggest bank. Now the chains are off, thanks to bank-friendly regulators in the Trump administration.
In actions never before made public, Obama administration regulators prevented the bank from opening branches in new states as punishment for violating banking rules, according to people familiar with the matter. JPMorgan’s ambitious plan to expand nationally, announced earlier this year, was made possible by the Trump administration’s rollback of those restraints, which date from 2012, said the people, who asked not to be identified discussing regulators’ impact on the bank’s plans.
JPMorgan, the biggest U.S. bank by assets, operated 5,130 branches in 23 states at the end of last year. With fresh assurances from regulators under President Donald Trump, the people said, it’s planning to open 400 branches in as many as 20 new markets in the next five years, including plans to build in Boston, Philadelphia and Washington, D.C. This is the first time the bank is opening branches in a new state in more than a decade. The moves could translate into an additional $1.5 billion of revenue a year by 2022, according to Morgan Stanley.
In loosening their grip on JPMorgan, authorities removed a critical barrier to the lender’s growth. A 1994 law prohibits mergers between banks if the transaction would give any of them control of more than 10 percent of U.S. deposits. With $1.3 trillion, JPMorgan already controls more than 10 percent — second only to Bank of America Corp. The reversal comes amid anti-regulatory fervor under Trump. It’s also consistent with the declared willingness of the new OCC head, Joseph Otting, to give financial institutions more flexibility when resolving concerns raised by OCC staff.
Banks are responding to friendlier regulators under Trump by pushing into new markets and reassessing deals that likely would’ve been vetoed under Obama. Many elected officials and policymakers blamed reduced oversight for the 2008 financial crisis, which triggered the longest and deepest recession since the 1930s.
JPMorgan is embarking on the biggest expansion of its consumer bank in a decade as new liquidity rules encourage banks to draw more funding from deposits, which tend to be cheaper, and rising interest rates stiffen the competition for retail customers. Bank of America also announced plans to open up branches in new markets earlier this year.
