Modernizing Bank Merger Review

Abstract

Sixty years ago, Congress established a federal pre-approval regime for bank mergers to protect consumers from then-unprecedented consolidation in the banking sector. This process worked well for several decades, but it has since atrophied, producing numerous “too big to fail” banks. This Article contends that regulators’ current approach to evaluating bank merger proposals is poorly suited for modern financial markets. Policymakers and scholars have traditionally focused on a single issue: whether a bank merger would reduce competition. Over the past two decades, however, changes in bank regulation and market structure—including the repeal of interstate banking restrictions and the emergence of nonbank financial service providers—have rendered bank antitrust analysis largely obsolete. As a result, regulators have rubber-stamped recent bank mergers, despite evidence that such deals could harm consumers and destabilize financial markets.