On Tuesday, a trade group that represents community banks in the U.S. called for a moratorium on mergers that involve financial firms holding more than $100 billion in assets.
The Independent Community Bankers of America testified during the first in a series of public hearing the Fed is holding to determine the outcome of Capital One Financial Corp’s proposed takeover of ING Group NV’s U.S. online banking portfolio, BaltimoreSun.com reports.
The ICBA is requesting a hold on allowing large banks to merge until Dodd-Frank has been defined and implemented.
"It has been 14 months since the Dodd-Frank Act was passed and we still don't have a regulatory apparatus in place to deal with those banks over $50 billion in assets…and haven't figured out an accurate way to measure their systemic risk," Chris Cole, the senior vice president of ICBA, said, BaltimoreSun.com reports.
Capital One’s proposed deal would make it the seventh largest U.S. banks based on assets.
Many observers see this particular case as a new precedent for how the Fed will handles its new requirement by Dodd-Frank to take systemic risk into account when approving a merger.
Capital One said that its merger would actually minimize risk because it would derive more than half its revenue from credit cards with its access to ING’s $80 billion in deposits, BaltimoreSun.com reports.
John Taylor, the president of the National Community Reinvestment Coalition, is also discouraging the merger.
Taylor called the move “unsafe, moonoline business that relies on a highly sensitive single-source of income and then spreads three quarters of its risk to the public through selling its securities to America’s retirement funds and insurance companies,” BaltimoreSun.com reports.