There were 52 banks with more than $50 billion in assets at the end of the first quarter of 2021, up from 39 banks at the end of 2017, according to data from S&P Global Market Intelligence.
Congress is partly responsible for bank merger bonanza
The frenetic pace of bank shotgun weddings is largely a result of changes in financial regulations over the past few years.
The SIFI change from $50 billion to $250 billion opened the door for many mid-size banks to scoop up rivals without fear that they would suddenly be required to go through more strict and onerous oversight.
Banks have took advantage of the change and began pairing up. The reasons for doing so are pretty obvious: Larger institutions can cut costs and improve efficiencies to boost profits.
The pandemic jump-started more deals, too. The Federal Reserve’s emergency rate cuts have made it more difficult for banks to make money on loans since interest rates are near zero — and likely to stay there for the foreseeable future.
Changes from DC on the horizon?
But it’s not clear how much longer the bank M&A wave will last. It is worth noting that the most recent changes to bank laws in Washington were accomplished during the Trump administration and with a Republican-controlled Senate.
The goal of the Warren-Garcia legislation is to “end rubber stamping of bank merger applications.”
That’s likely to get a sympathetic ear from Brown, the Ohio senator who is chair of the Senate’s Banking, Housing, and Urban Affairs Committee.
“We can’t let big banks merge into bigger and bigger megabanks, making it harder for small banks to compete and leaving rural and Black and brown communities behind,” Brown said in his prepared remarks to Powell.