Will Regulatory Scrutiny Chill Bank M&A This Year — or Hasten It?

For banks, there's a new rush to find merger partners, and it's not just about an acquiring bank’s desire to enter new markets or add new business lines. Federal regulators’ amped-up scrutiny of bank mergers has raised fears that M&A activity could stall later this year, and that’s creating a sense of urgency to cinch deals now, according to bankers and industry advisors.

In a way, the chill is already happening. Under pressure from President Biden, Federal Reserve regulators last year began looking closer at deals that had already been announced, industry observers say.

The Justice Department's Antitrust Division is considering revising its bank merger guidelines to "to guard against the accumulation of market power" and the Federal Deposit Insurance Corp. appears poised to impose its own crackdown out of concern that industry consolidation may be harming consumers.

Meanwhile, deals involving the sale of a bank to a credit union continue to grab headlines. Four such deals have been announced  in the past 10 days. In 2021 there were 13 instances of a credit union purchasing a bank, a little shy of the record of 16 such deals in 2019.

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