Washington is beginning to revamp the way officials review bank mergers. It’s not landing the way the industry nor the industry’s biggest critics would like. Acting Comptroller of the Currency Michael Hsu on Monday announced big changes to how his agency will scrutinize banking deals, in a bid to “improve transparency and trust in our bank merger processes.” The OCC plans to scrap a long-running practice of allowing some merger applications to be approved automatically after a comment period. The agency is pairing the change with what Hsu calls new “chalk lines” — guidance that indicates which transactions can expect to get timely approval, based on things like supervisory ratings, open enforcement actions and other compliance concerns. Hsu is also calling for a broader rethink of mergers. He’s proposing a “macro view of the banking system” to consider the extent to which bank consolidation is balanced with the needs of the “diversity, dynamism and size of the U.S. economy.” Banking experts say the moves will do little to reinvigorate deal-making, while critics argue it could have a chilling effect. “It feels like more of a mirage than an oasis,” BTIG director of policy research Isaac Boltansky said. “There is nothing here that shields bank M&A from the subjectivity and political winds that define the current process.” Karen Petrou, managing partner of Federal Financial Analytics, said the new policy will provide at least some certainty for national banks but that almost no deals of size will get done without the Federal Reserve and the Justice Department. The Fed and DOJ have been promising a new bank merger review policy but “it’s still nowhere to be seen.” Keith Noreika, a veteran banking lawyer who led the OCC during the Trump administration, said “it sounds almost like the people who want to filibuster and delay and go on forever are normalizing that.” The Bank Policy Institute, which represents larger lenders, also knocked the proposal. “If you’re going to have true transparency, show us transparency on the inside of the agency,” said Noreika, who is now executive vice president of Patomak Global Partners. Yet Hsu and other bank regulators are facing pressure to take a harder line on bank consolidation. Americans for Financial Reform, which advocates for tougher bank oversight, said via spokesperson Carter Dougherty that Hsu is “only taking baby steps away from the decades-long approach of rubber stamping most bank mergers.” “His remarks gave short shrift to the harms of bank mergers to disadvantaged communities, and the new policy statement is a poor substitute for finalizing updated merger guidelines,” Dougherty said. National Community Reinvestment Coalition President and CEO Jesse Van Tol said some of the broad highlights Hsu laid out are “promising.” He cited Hsu’s decision to end “default approval” of some mergers and his commitment to launch a public database on the agency’s merger reviews. Sen. Elizabeth Warren (D-Mass.) is pushing regulators to do more. She told MM in a statement that “it’s past time for the OCC’s actions to live up to its words.” “Under Acting Comptroller Hsu, the OCC has approved mergers that have worsened consolidation in the banking sector — including with its approval of JPMorgan’s purchase of First Republic last year that made America’s biggest bank even bigger,” she said. “We need regulators to crack down on bank mergers and to finally release stronger bank merger review guidelines.” Hsu responded to the initial wave of feedback in a statement to MM. “Every merger is different,” he said. “Some are good for communities, competition, and financial stability. Others aren’t. Instead of treating all mergers alike and playing ‘red light/green light’, we are clarifying and highlighting where the goalposts are to reduce uncertainty and to promote a diverse and dynamic banking system.” It’s Tuesday — What do you think? Send a note to zwarmbrodt@politico.com.
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