Banking Reform: An Increase In Scrutiny

By: George Mastoris & Artem Khrapko (Winston & Strawn/Competition Corner)

On September 17, 2024, the DOJ’s Antitrust Division officially withdrew its 1995 Bank Merger Guidelines and announced it would now apply the 2023 Merger Guidelines, along with a new 2024 Banking Addendum, to assess the competitive impact of mergers and acquisitions in the banking industry. This shift follows an executive order issued by President Biden three years earlier, which urged the DOJ to strengthen the enforcement standards outlined in the previous guidelines. The Biden administration highlighted, in a fact sheet accompanying the order, that over the past four decades, the number of banks in the U.S. has decreased by around 70%, disproportionately affecting communities of color, particularly in rural areas. The fact sheet also pointed to a lack of regulatory action, noting that no bank merger application had been formally denied by federal agencies in more than 15 years. We previously covered the implications of Biden’s 2021 executive order for commercial banking in a prior Competition Corner post.

Below is a concise summary of key takeaways from the 2024 Banking Addendum and how it fits into the broader framework of the 2023 Merger Guidelines and the heightened antitrust scrutiny of mergers overall.

1. The 2024 Banking Addendum
The 2024 Banking Addendum addresses several policy concerns related to increased banking concentration, emphasizes the importance of protecting underserved communities, and signals ongoing attention to narrowly defined markets. Specifically, the Addendum:

• Lowers the Herfindahl-Hirschman Index (HHI) threshold for banking mergers. Under the 1995 guidelines, a bank merger was unlikely to face further review if it did not raise the HHI by more than 200 points or result in a post-merger HHI exceeding 1,800. The new Addendum eliminates separate thresholds for bank mergers, making it clear that all mergers, including those involving banks, will trigger a rebuttable presumption of harm to competition if they increase the HHI by more than 100 points in a market with an HHI above 1,800 or if the merged entity holds more than 30% of the market share…

CONTINUE READING…