‘Build a Better Mousetrap’: OCC Sets Out Stall on Mergers

Existing metrics for assessing competition need updating in order to keep bank merger and acquisition rules fit for purpose, the Office for the Comptroller of the Currency has said.

Introducing the OCC’s Bank Merger Symposium on Friday, Ben McDonough, senior deputy comptroller and chief counsel, warned that “without enhancements, there is an increased risk of approving mergers that diminish competition, hurt communities, or present systemic risks”.

“We need to build a better mousetrap so that healthy mergers get approved while unhealthy mergers get rejected,” McDonough said. “Importantly, this mousetrap needs to be not only theoretically sound and consistent with our values, but also capable of implementation within the statutory criteria for merger review.”

Standing in for acting comptroller Michael Hsu, McDonough explained that metrics such as the Herfindahl-Hirschman Index for market concentration “might have become less relevant” since they were last updated in 1995.

The huge growth in online and mobile banking — now many consumers’ path of choice to engage with banks — has fundamentally shifted the landscape, introducing new non-bank players and allowing banks to expand their reach. McDonough indicated that this could require a new approach from federal regulators.

Regulators have been consulting on updated M&A rules for banks since President Biden issued an executive order on the subject in 2021.

The OCC’s latest comments come as Canada’s TD Bank announced a potential delay to the completion of its acquisition of First Horizon. The two banks have extended the deadline for the deal to May 27, 2023, from February 27. The deal was first announced in February last year but has been awaiting regulatory approval for months.