Capital One Financial is refuting charges that its proposed takeover of ING Groep NV’s U.S. online banking unit would underpin the next financial crisis.
During a public hearing held by the Federal Reserve, John Finneran, general counsel for Capital One, said that the bank’s credit card focus would not put the financial system at risk, according to Reuters.com.
"The credit card market is substantially smaller, far less complex and far less impactful on the broader economy," Finneran said, Reuters.com reports.
Consumer advocates claim that the $9 billion deal would allow Capitol One to supercharge its credit card portfolios and warn that the deal would lead to a subprime mortgage boom like the one that caused the 2007-2009 financial crisis.
The Federal Reserve is hearing both sides of the argument during the hearings, which were requested by House Financial Services Ranking Member Barney Frank (D-Mass.). Many observers have said that the Fed’s decision on the case will serve as precedent to how larger bank mergers will be treated in the post-bailout financial world, Reuters.com reports.
Capital One’s merger would make it the seventh largest U.S. bank by assets. It currently receives over half of its revenue from credit cards. The deal with ING would allow Capital One to access approximately $80 billion in deposits and seven million new customers.
Finneran said that the securitization amounts to less than 20 percent of the company's total funding and that the company's card portfolio has fallen by $17 billion, or 25 percent, since 2008.
"This product diversification, combined with our conservative and industry-leading underwriting capabilities, helped make us one of only two credit card businesses not to lose money in any quarter during the Great Recession," Finneran said, Reuters.com reports.
If the merger is approved, Capital One said that it will create 500 new jobs in Delaware and promised to make $180 billion in new community-development loans and investments over the next 10 years.