Given that it has been so long since there has been a major bank merger, here is a refresher on what the Federal Reserve will consider when examining whether to approve the proposed merger of Southeastern regional banks BB&T and SunTrust.
The Fed will focus on the firms’ financial capability, management capability and how they performed in their communities, experts said Thursday after the largest U.S. bank deal in a decade.
“The Fed will look at how they have been operating in their communities, have they done the right thing to help all groups of people,” said Stephen Nielander, an adjunct lecturer at San Diego State University and a partner at financial services firm Cerity Partners.
Nielander said BB&T
benefit from the fact that neither were in “the cross hairs” of regulators during the financial crisis.
“They didn’t come under scrutiny and have a bunch of lawsuits” filed against them as other major banks did, he said.
Jaret Seiberg, an expert on financial regulation at WRG Financial Services, said he expected the deal would win regulatory approval, although the process may extend beyond the expected closing date of December 2019.
Read: SunTrust and BB&T combining in merger worth about $66 billion
That’s because the deal will trigger some political criticism on Capitol Hill, he said.
“We’re in uncharted waters with Rep. Maxine Waters, [Democrat of California] now at the helm of the House Financial Services Committee,” Seiberg said in a note to clients. Waters might ask so many questions that it slows down the evaluation of the deal.
In a statement issued late Thursday, Waters said the proposed merger “raises many questions and deserves serious scrutiny.” She said Congress would look in the merger to determine it’s impact.
Seiberg said he expects there will be community hearings to give activists a chance to discuss the banks’ community records.
“In our experience, such hearings can slow the merger approval, but we have never seen them derail a deal,” he added.
The combined bank will have $424 billion in assets, $324 billion of deposits and $301 billion in loans, Seiberg estimated.
Because the combined bank will stay under $500 billion in assets, it would join PNC Financial Services Group
, U.S. Bancorp
and Capital One
as the “Awkward Four,” which means they are too big to benefit from the recent Republican-led deregulation efforts but small enough to avoid being labeled systemically important.
Opinion: BBT-SunTrust merger signals more bank deals are coming