The Department of Justice (DoJ) should review its rules for bank mergers and acquisitions to take into account trends in rural communities, according to the American Bankers Association (ABA).
The association was responding to a consultation published by the DoJ on September 1, aimed its 1995 Banking Guidelines on mergers and acquisitions within the banking sector.
The ABA said the existing rulebook did not account for “significant competition in many product lines, especially in many rural markets”.
The association cited analyses of geographic data that showed customers would “often travel farther within rural markets to obtain financial products and services than the current geographic market definitions assume”.
“These data, therefore, provide insight into the actual degree of concentration in a market and thus the competitive landscape that would exist following a proposed merger,” the ABA said.
Since the rules were first introduced in 1995, the ABA argued that “the market for financial products and services has undergone tremendous change”, in particular due to the impact of online banking, as well as the expansion of branch networks.
The DoJ should ensure that competition analysis under the guidelines included all financial services providers in affected markets, such as Farm Credit System institutions, thrifts, and credit unions.
The department’s consultation – which closed to comments and responses on October 1 – included several questions covering “non-traditional banks” such as online-only firms.
It sought feedback about whether non-traditional banks should be included in its competition oversight, as well as whether the current rules give appropriate weighting to online deposits.
In addition, the DoJ called for suggestions as to how online deposits can be taken into account during its screening and competitive effects analyses, given that there is usually no geographical data attached to them.
Earlier this year, the ABA criticized a proposal from the National Credit Union Administration regarding rules governing credit unions acquiring banks.
In a letter to the administration’s board, the ABA said the approach would amplify an already rapid expansion of credit unions. It said it believed that credit unions were “aggressively targeting banks” to expand their service provision outside of their collective mandates to serve low- and moderate-income individuals.