Banks are not ordinary businesses. They are critical infrastructure of the economy. This is why we provide them with many public benefits, and in exchange, they have obligations to meet the “convenience and needs” of the communities they serve.
The final rule is the product of compromise between the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board of Governors, and it is a step forward from the rules developed decades ago. The final rule should help increase investment and lending in historically excluded communities, including rural communities.
With these rules completed, it is now time to address the “convenience and needs” factor in bank merger applications covered by the Bank Merger Act. Based on the input we have received to date, it is clear that there needs to be considerable reforms to existing merger application review protocols. To satisfy this factor, the agencies should carefully evaluate whether the community would be better served by the combined entity in the future than it was in the past by the banks individually. While market participants now understand that the banking agencies and the Department of Justice have shifted mindsets from “cheerleader” to “referee,” I think it will be particularly important to publicly communicate how applications are being evaluated under this factor.
In addition, it is also time for state legislators to accelerate efforts to ensure certain nonbank entities have Community Reinvestment Act-like requirements, particularly in sectors where there is significant public subsidies or support for their business activities. This would make for a level playing field, and I am encouraged by actions at the state level to ensure fair access to financial services.