US Ponders Tougher Regs for Regional Banks, Muddling Merger Deals

Regulators in the U.S. are looking into whether big regional banks should be required to add to the debt buffer that helps them in times of crisis, which could slow down some pending mergers.

Both the Federal Reserve and the Office of the Comptroller of the Currency (OCC) are talking about whether regional lenders should hold more debt to help absorb losses during difficult times, The Wall Street Journal reported Saturday (Aug. 6).

Some of the issues being talked about include how the requirements should apply to the bigger regional banks trying to close deals, which were hatched before the OCC raised the possibility of trying to get banks to raise more capital.

The report noted that one such deal involves U.S. Bancorp, which has already missed its initial goal of completing its acquisition by June.

Regulators have reportedly been working on their own timeline, and will have to consider how Michael Barr, the newly-appointed pointman for financial regulation, wants to go forward.

This comes as the Biden administration is looking into concerns that the steady growth of the biggest regional banks has added more risks. The companies don’t have the big trading floors and international operations of J.P. Morgan or other huge megabanks, but the balance sheets have been growing a lot anyway.

For example, U.S. Bancorp — which is the fifth-biggest U.S. bank by assets — would add $130 billion in assets by buying MUFG Union Bank’s core retail banking business, which it’s currently trying to do.

PYMNTS wrote recently that the Consumer Financial Protection Bureau is considering new rules to help regulate open banking, with director Rohit Chopra looking at the rules facilitating how consumers share financial data with numerous providers.

Related: CFPB to Seek Feedback on Open Banking Rulemaking in November

The CFPB has been working on the rules, which would implement more standards on open banking, since 2021. There have been some delays, though, because of the agency’s concerns with how to deal with consumer privacy and data protection issues.