Senate Banking Committee Considers Impacts from Bank Consolidation

In testimony before the Senate Banking Committee, witnesses warned against the dangers of excessive concentration in banking, increased systemic risk resulting from bank mergers, and threats to small business.

At a hearing entitled: Bank Mergers and the Economic Impacts of Consolidation, the following witnesses testified:

• Americans for Financial Reform Senior Policy Analyst Alexa Philo. Ms. Philo warned against the "dangers of excessive concentration" in banking and urged banking regulators to review their bank merger review frameworks. She highlighted the "wave of bank mergers and acquisitions," pointing to the record high rates of approvals in bank mergers. She stated that this disproportionately impacts marginalized and rural communities by (i) reducing the availability of credit, (ii) increasing fees for banking services and (iii) decreasing interest rates available to depositors.
• American Economic Liberties Project Director of Policy and Advocacy Morgan Harper. Ms. Harper highlighted the risks of bank mergers for the greater economy by (i) threatening competition in industries outside of the financial sector and (ii) increasing systemic risk by concentrating the risk of failure within the banking system. Instead, she advocated for preserving the decentralized U.S. banking system, prioritizing competition and allowing a "diverse array" of banks in communities to support small business growth.
• University of Maryland and America First Policy Institute Dean’s Professor of Finance and Chief Economist Michael Faulkender, PhD. Dr. Faulkender underscored that the availability of credit from local and regional lenders is crucial to supporting small businesses. He cited a report from the Federal Reserve Board which found that "large banks tend to be proportionately less committed than smaller banks to small business lending."