OCC's Hsu Zeroes in On Large Regional Banks as Source of Systemic Risk

Source: American Banker (subscription may be required)

Large regional banks could become the country’s next too big to fail firms, acting Comptroller Michael Hsu said, and the agency it looking at ways of incorporating resolvability into its bank merger review process.

Bank merger policy has become a hot-button financial regulation issue after it sparked the power struggle on the board of the Federal Deposit Insurance Corp. late last year. While Hsu has supported moving forward on bank merger issues in his capacity on the FDIC board, he’s been more quiet than fellow Democrats Martin Gruenberg, who now leads the FDIC, and Rohit Chopra, director of the Consumer Financial Protection Bureau. The OCC plays a critical role in overseeing mergers among larger banks.

Hsu’s remarks, given at the Wharton Financial Regulation Conference on Friday, outline his concerns on bank mergers largely in the context of what he says could be a threat to financial stability. His comments signal a tougher time for banks going through the merger review process, said Bao Nguyen, a partner at Skadden's Financial Institutions Regulation and Enforcement Group. 

“Larger transactions involving regional banks are going to be more costly for organizations both as a transaction cost matter and on an ongoing basis,” he said.