Dive Brief:

• Sen. Elizabeth Warren, D-MA, introduced a bill Wednesday that would require the Consumer Financial Protection Bureau to sign off on bank mergers in which one of the applicants offers consumer financial products.
• Merging institutions must also have the highest rating in two of their past three Community Reinvestment Act exams under the Bank Merger Review Modernization Act, a companion of which was introduced in the House by Rep. Jesús "Chuy" García, D-IL.
• The proposed legislation comes during a week in which the long-awaited merger between BB&T and SunTrust is expected to be complete. The combined entity, Truist, would become the U.S.’s sixth-largest bank.

Dive Insight:

The Senate, given its Republican majority, likely would not pass the bill. But it may stand as a statement of intent from Warren, a longtime presidential candidate and one-time architect of the CFPB. Especially as regulators relax financial crisis-era regulations, sometimes at Congress’s suggestion.

Warren on Thursday tweeted a six-minute clip from last year in which she grilled Federal Reserve Chairman Jerome Powell about perceived lax oversight in the bank merger approval process.

The Fed declined none of the 3,819 bank merger applications it received between 2006 and 2017, Powell wrote in a May 2018 letter to Warren.

Not all mergers go through; about 13% of the applications in that time frame were withdrawn, according to the letter. But many of the withdrawals may stem from a Fed official’s misgivings about the viability of the merger.

“Prospective applicants may discuss a proposed transaction with Federal Reserve System staff prior to filing an Application, and applicants will be discouraged from filing Applications where it is apparent that the Applications would not meet all of the statutory factors required for approval,” Powell wrote in the letter.

In other words, regulators often preview potential mergers among banks in private before they’re announced.

“The review process for bank mergers is fundamentally broken,” Warren wrote in the press release announcing the bill.

Despite Powell’s assurance on Capitol Hill last year that the proposed BB&T/SunTrust merger would be subject to a “fair and open, transparent process,” Warren called the Fed’s track record a “rubber stamp,” arguing that the public — competing banks, consumers, bank employees or local officials — is given no chance to comment or protest potential mergers before they’re essentially agreed upon.

Warren’s bill would require disclosure of discussions between banks and regulators before a merger application is filed. It would also mandate that regulators use a metric from the Basel Committee on Banking Supervision to evaluate systemic risk in a merger, assess the merger’s effect on competition and market concentration, and review the leadership of the merged entity.

Bank mergers now require the approval of the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. And those regulators are meant to consider whether mergers would create local monopolies and how a merger would affect consumers. But in the press release announcing the bill, lawmakers said a merger’s impact on competitiveness is the overwhelming factor regulators consider. (Indeed, one of the conditions for approval of the BB&T/SunTrust merger was that SunTrust sell 30 of its branches and divest more than $2.4 billion in deposits.)

"The bill Congressman García and I are announcing today would ensure that regulators do their jobs by stopping mergers that deprive communities of the banking services they need, reward banks that cheat or discriminate against their customers, and risk another financial crisis,” Warren said in the press release.