On Feb. 7, SunTrust Banks and BB&T Corp. announced their intent to merge. Both companies’ boards of directors have unanimously approved a definitive agreement to combine in an all-stock merger of equals valued at approximately $66 billion. The combined company will be the sixth-largest U.S. bank based on assets and deposits.

The combined company will operate under a new name and brand, which will be determined prior to closing. The combined company’s board of directors and executive management team will be evenly split between the two institutions. The merger is expected to close in the fourth quarter of 2019–subject to satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by the shareholders of each company.

The merger is drawing the scrutiny of Congressional Democrats, less for the details of the merger than the regulatory atmosphere that encouraged it. Among them is Rep. Maxine Waters (D-Calif.), chairman of the House Financial Services Committee.

“The Trump Administration’s appointees to the bank regulatory agencies are providing regulatory relief to very large banks, creating further incentives for big banks to get even bigger … This proposed merger between SunTrust and BB&T is a direct consequence of the deregulatory agenda that [the President] and Congressional Republicans have advanced,” Waters said in a statement. “It raises many questions and deserves serious scrutiny from banking regulators, Congress, and the public, to determine its impact and whether it would create a public benefit for consumers.”

Sen. Elizabeth Warren (D-Mass.) Elizabeth Warren, a declared 2020 presidential candidate, is also scrutinizing the deal and has expressed her general concerns regarding merger approvals to the Federal Reserve. In a Feb. 7 letter to Federal Reserve Chairman Jerome Powell, she cited data that, in her view, illustrates the Fed's “anemic scrutiny” and “weakened oversight” despite a predicted wave of bank consolidations in 2019.

“The Board's record of summarily approving mergers raises doubts about whether it will serve as a meaningful check on this consolidation that creates a new too-big-to-fail bank and has the potential to hurt consumers," she wrote.

Warren raised similar concerns in an April 2018 letter to Powell inquiring about the Federal Reserve approval process for bank mergers and acquisitions. Since that correspondence, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), a bill that reduced federal oversight of banks with between $50 billion and $250 billion in assets, a group that includes both SunTrust and BB&T. Also, the Office of the Comptroller of the Currency has taken steps to alter rules implementing the Community Reinvestment Act, which requires financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods.

“Industry analysts correctly predicted that these changes will result in an increase in M&A activity among banks. One reporter predicted that 2019 could be the ‘year of the big bank merger,’ ” Warren wrote.

Powell’s response to her previous letter, she says, reveals “that the Federal Reserve System approves virtually all bank M&A applications it receives.”

From 2014-2017, the Federal Reserve System approved over 89 percent of merger applications each year, with approval rates rising as high as 94.1 percent in 2017 (the highest approval rating recorded between 2006-2017). Meanwhile, according to recent data, the Federal Reserve approved 94.4 percent of mergers in the first half of 2018.

Warren, fueled by this data, questioned the Fed’s diligence and oversight in the context of the recently announced merger. "Both SunTrust and BB&T have between $50 and $250 billion in assets and the Board has moved even more quickly than the law required to loosen regulatory protections on these banks," she wrote to Powell. “Data you provided my office indicate that the Board would likely approve almost all of the wave of M&A applications ... This would result in the precise outcome I raised concerns about last year: more mergers that result in reduced competition and choice for consumers and small businesses."

Among the information Warren wants Powell and his Fed colleagues to provide:

  • Information on the number of merger applications submitted to the Board between May 24, 2018, and Dec. 31, 2018. Does the Board anticipate that the number of merger applications submitted will increase in 2019, decrease in 2019, or stay constant (describe the factors considered by the Board in its assessment)?
  • For each year from 2006-2018, how many merger applications were withdrawn as a result of an applicants’ less-than-satisfactory CRA compliance? How many merger applications were withdrawn as a result of an applicants’ less-than-satisfactory consumer compliance or fair lending record?
  • How does the Board communicate and work with other financial regulators, including the Office of the Comptroller of the Currency, to coordinate financial regulators’ approach toward CRA enforcement?
  • How often does Federal Reserve System staff request additional information from applicants?
  • Does the Board permit Federal Reserve System staff to have informal conversations, outside of the pre-filing process, with applicants to discuss potential mergers and acquisitions activity?

Warren requested a response to her letter by Feb. 21, 2019.

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