News: Bank merger vibe check

Friday, June 9, 2023

Bank merger vibe check

Jun 09, 2023

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A top lobbyist for big U.S. banks is hearing more openness from government officials on the topic of mergers for midsize lenders in the wake of banking stress earlier this year. But the industry wants more than just talk.

“There’s been something of a sea change in Washington over the last two months,” Bank Policy Institute CEO Greg Baer told MM in an interview this week. “I do think, at the highest level, and at the highest levels, there is a recognition that midsize banks need to be allowed to merge and be acquired potentially by larger banks.”

“The problem, though, is that’s easy to say,” he added. “But you have to convince banks that in fact, you mean what you say.”

MM wrote last month about comments by Treasury Secretary Janet Yellen and Acting Comptroller of the Currency Michael Hsu that suggested the kind of attitude shift Baer is mentioning. But around the same time, Canada’s Toronto-Dominion dropped its bid to buy U.S. regional bank First Horizon because it didn’t have a clear timetable for regulatory approvals, which landed like an ominous thud in banking circles, even if the circumstances there might have been idiosyncratic. It comes amid a broader antitrust push by the Biden administration.

“One TD-First Horizon deal speaks louder than words,” Baer said. “There’s an old saying: a cat that jumps on a hot stove will never jump on a hot stove again. But it won’t jump on a cold one either. So I think if you’re thinking about doing a deal, some tangible evidence that the mood has changed would be helpful.”

This policy issue is top of mind both for bank investors and those within the sector. Indeed, some bank executives believe the U.S. has more lenders than it really needs.

In a new set of policy recommendations rolled out yesterday and shared with MM, BPI has a lot of thoughts on what regulators should do in the wake of SVB’s failure (and you can read a longer Q&A with Baer and your guest host here). One of them: acting promptly on potential bank unions. The group urges regulators to stop delaying merger decisions indefinitely on the grounds that they need more information.

“This practice does serious harm to both acquirer and target, as well as their employees and customers, and is now chilling a market that should be active,” according to the document, which calls for applications that are “still materially incomplete as of the 90-day statutory deadline” to simply be denied by the Federal Reserve.

Happy Friday — Stay safe out there. If you’re stuck inside, send tips: Zach Warmbrodt, Sam Sutton.

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Driving the day

Waters, Warren clash on investment rules — Our Eleanor Mueller and Declan Harty report that Rep. Maxine Waters and Sen. Elizabeth Warren — longtime allies on Wall Street issues — are at odds over whether to support a House GOP push to ease investment regulations.

At issue is a series of bills Waters has helped Republicans pass that would allow more individuals to qualify as accredited investors — meaning they can put money into privately held companies that aren’t subject to the same level of SEC scrutiny as publicly traded stocks.

Waters argues that existing restrictions tied to wealth and income shut out otherwise-savvy investors from economic opportunity.

Other progressive lawmakers oppose the effort. Consumer advocates will try to convince senators to block the legislation from moving beyond the House.

“House Financial Services passed legislation to reduce the number of people who will be covered by basic consumer protection laws,” Warren said in an interview. “That's not good for investors, and ultimately, not good for markets.”

Biden, Sunak pledge economic cooperation — President Joe Biden and U.K. Prime Minister RIshi Sunak agreed to an “Atlantic declaration” to strengthen economic ties, according to the FT. The pledge, timed with Sunak’s visit to the White House Thursday, is aimed at U.S.-U.K. trade related to defense, nuclear materials and critical minerals used in electric car batteries.

A eurozone recession — The eurozone experienced a recession earlier this year, as energy shocks, the Ukraine conflict, inflation and tighter monetary policy sapped growth.

Treasury gathers execs on critical minerals — Deputy Treasury Secretary Wally Adeyemo on Thursday hosted business leaders and senior U.S. officials at an event on critical minerals. Adeyemo discussed the need to build secure and resilient clean energy supply chains and the ways government and the private sector can work together to achieve climate goals, including by leveraging investments under the Inflation Reduction Act, according to a source familiar with the matter.

Deputy National Security Adviser Mike Pyle and senior adviser to the president for energy and investment Amos Hochstein were in attendance, in addition to top executives from clean energy, metals and materials companies.

Crypto

Gensler rebukes crypto industry gripes — Declan reports that SEC Chair Gary Gensler on Thursday dismissed crypto executives' claims that falling in line with the agency's rules is impossible, saying the industry knows "how to register.”

Speaking days after suing Binance and Coinbase, he outlined steps that firms could take to come into compliance, including breaking up businesses, setting up a new rulebook and revamping how client assets are safeguarded.

A message from the American Bankers Association:

World Elder Abuse Awareness Day on June 15 shines a light on the financial exploitation of older Americans. An estimated 1 in 5 seniors is a victim, with losses averaging $120,000 per person — and adding up to billions of dollars annually. America’s banks protect seniors from scams and fraud every day with the help of the ABA Foundation’s Safe Banking for Seniors program and other industry initiatives. Learn more.

On the Hill

Warren pushes for clawback bill vote — Eleanor reports that Sen. Elizabeth Warren is working to ensure that the Senate Banking Committee votes next week on her bill to claw back executive pay at failed banks.

Asked Thursday if it would be on the agenda, Warren said: "I sure hope so."

"We're still working through the right way to do it," Warren said when asked if it would get a vote on its own or as part of a broader executive accountability bill from Chair Sherrod Brown. "What matters most to me is that it just happens."

A message from the American Bankers Association:

Economy

SBA No. 2 confirmed after long saga — The Senate Thursday confirmed Dilawar Syed as SBA deputy administrator, more than two years after he was nominated. Syed will be the highest-ranking Muslim official in the Biden administration, after overcoming a Senate Republican blockade that nearly stalled his confirmation.

A message from the American Bankers Association:

Older Americans hold approximately 65% of bank deposits in the U.S., and criminals see this as an opportunity for financial exploitation. America’s banks are fighting back to protect seniors and their money with help from the ABA Foundation’s Safe Banking for Seniors program. On World Elder Abuse Awareness Day on June 15 and every day, banks of all sizes are helping older adults, their families and financial caregivers understand and mitigate the risks of elder financial exploitation. Learn more about how banks are safeguarding America’s seniors.

Regulatory Corner

A response to Moynihan — Americans for Financial Reform spokesperson Carter Dougherty sent this in after MM reported on BofA CEO Brian Moynihan’s warning that higher capital requirements might eat into bank lending: “If Bank of America simply curbs share buybacks or dividends so it can retain earnings, it can boost capital without curbing lending. But Brian Moynihan cares more about shareholders — and his bonus — than customers.” The group has further reading here.

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