NCRC Remarks To Federal Regulators On US Bank Merger

Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition, provided the following testimony on March 8, 2022, to regulators reviewing the proposed merger of U.S. Bancorp and MUFG Union Bank

Good morning. I’m Jesse Van Tol and I’m the President and CEO of the National Community Reinvestment Coalition (NCRC).

I will detail our position on this merger in a moment, but I will first focus on the regulators’ responsibilities with regards to this transaction. NCRC has long held that mergers and acquisitions should not be approved without a forward-looking commitment that demonstrates how the public will benefit, and particularly how those benefits will outweigh any adverse effects.

This is a position grounded in banking law, as established in the Bank Holding Company Act and the Bank Merger Act of 1966, which instructs the regulators to deny a combination with anticompetitive effects unless it finds that the impact is “clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.”

The idea that a merger must produce public benefits is also included in your general obligation under the law to “take into consideration…the convenience and needs of the community to be served,” not just in instances of anticompetitive effect.

We believe that the regulators have historically been deficient in their application of these legal requirements. Banks have been allowed to grow on general claims that size and scale will automatically benefit the public, without detailing those benefits. Indeed, former Federal Reserve Board Governor Daniel Tarullo once noted that “There is little evidence that the size, complexity, and reach of some of today’s SIFIs are necessary in order to realize achievable economies of scale and scope…[as such] the regulatory structure [for SIFIs] should discourage systemically consequential growth or mergers unless the benefits to society are clearly significant.”

The FDIC’s recent RFI on mergers, pursuant to President Biden’s Executive Order, said that “the FDIC will consider…the extent to which the proposed merger transaction is likely to benefit the general public through higher lending limits, new or expanded services, reduced prices, increased convenience in utilizing the services and facilities of the resulting institution, or other means.”

We urge both the Federal Reserve and the OCC to issue their own RFIs on mergers, and to adopt standards for rigorous evaluation of whether the public benefit clearly outweighs adverse effects, such as loss of products, price increases, and branch closures. Regulators must clearly establish both the public benefits and, on the other hand, the adverse effects of bank mergers and acquisitions.

To summarize our position: this transaction requires a forward-looking commitment that demonstrates significant public benefits. One way an increasing number of institutions demonstrate that commitment is by creating a Community Benefits Agreement. NCRC and its members have met with U.S. Bank to discuss a CBA, and I want to thank Andy Cecere, Reba and the bank for their willingness to engage in dialogue…those conversations have been productive, but they are not yet resolved.

We look forward to reaching a Community Benefits Agreement with U.S. Bank. We believe a detailed public commitment of public benefit must precede any approval by the regulators, and if you do approve, such a commitment should be cited in the approval. Thank you for the opportunity to testify. This concludes my remarks.

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