Community groups in California are protesting Capital One Financial Corp.'s planned acquisition of ING Direct, saying the banks have done little to help low-income communities in a state that has accounted for a large chunk of their profits.
Capital One announced in June that it would buy the U.S. operations of Dutch banking giant ING Group NV for roughly $9 billion. The deal would boost Capital One's deposits by more than 60%, to $200 billion. In a news release Monday, members of the California Reinvestment Coalition demanded that the Federal Reserve hold hearings on the planned merger in California so that consumer groups can air their grievances.
Specifically, they pointed out that more than 10 percent of Capital One's credit-card lending and roughly the same amount of ING's deposits are in California, but the banks have been absolved of Community Reinvestment Act responsibilities in the state because they do not have branches there. "To make matters worse, the CRC's analysis of Capital One's home mortgage and small-business lending shows that it largely ignores lower-income neighborhoods in California," the release said. Capital One disputed the coalition's assertions.
"Our strong record of investing in low-to-moderate income communities is a matter of public record," Capital One said in a e-mailed statement to American Banker. "It has been attested to by scores of not-for-profit organizations from across the country that have sent the Federal Reserve letters in support for our transaction …These letters note that following each of our 3 bank acquisitions, we substantially increased community development loans and investments beyond those of the acquired banks."
Capital One also took issue with claims that the merger poses a systemic risk to the banking system. The deal would created the fifth-largest bank in the country by deposits, and last week, Rep. Barney Frank of Massachusetts, the top Democrat on the House Financial Services Committee, sent a letter to Fed Chairman Ben Bernanke requesting that the Fed "thoroughly examine the impact of this purchase with respect to the consolidation of banking assets." In its news release Monday, the California coalition echoed Frank's concerns. But Capital One noted in its e-mail that the combined Capital One and ING would hold only 1.5% of the nation's deposits. The deal "does not represent a new systemic risk to the U.S. banking system," Capital One said.
