U.S. Sen. Sherrod Brown, D-Ohio, and colleagues recently urged the Federal Reserve to reevaluate big bank merger policies, emphasizing a review on financial stability impact amid failures of several prominent banks.
"We cannot perpetuate a banking system that favors the largest, most complex institutions and puts consumers, smaller institutions and our financial system at risk," the senators said, according to an Aug. 9 news release.
Following the failures of several prominent banks, Brown and colleagues have called on Federal Reserve Chairman Jerome Powell and Vice Chair for Supervision Michael Barr to reconsider the Federal Reserve's policies on big bank mergers. The request emphasizes a review of the framework for evaluating mergers' impact on financial stability, the release said.
The letter expresses concern the Federal Reserve has not issued guidance on bank mergers that could implicate financial stability. They call for urgent changes to protect the system and ensure fairness and competitiveness.
This appeal follows Brown's previous efforts to have the Federal Reserve and the Office of the Comptroller of the Currency reassess their approach to bank mergers, according to an April 2022 release. The letter also references the Dodd-Frank Wall Street Reform and Consumer Protection Act, highlighting its mandates to consider financial stability in bank mergers, a provision that appears to be inadequately enforced.
Specific mention is made of recent acquisitions, including Credit Suisse's U.S. subsidiaries by UBS Group AG and JPMorgan Chase's acquisition of failed First Republic Bank. While necessary for public confidence, such acquisitions might increase long-term financial stability risk, the letter reported.
The letter concluded with a plea for modernization, fair competition and a banking system that serves all communities, reflecting the industry's evolution over the past 30 years.
“We are concerned that the Federal Reserve has still not issued any rules or guidance indicating the types of bank mergers that would implicate financial stability concerns,” the senators wrote in the letter.
It remains to be seen how the Federal Reserve will respond to these urgent concerns, but the request for reconsideration of existing policies is clear and pointed, echoing the voices of many who seek a safer and more equitable financial landscape, according to the letter.