The Biden administration
By contrast, Trump's election has
"Any deal that significantly expands the footprint of a large bank will face scrutiny, even from Republicans," said Ian Katz, a policy analyst at Capital Alpha Partners. "The difference is that now such a transaction has a real chance of getting approved despite the scrutiny. But M&A has always been, and will continue to be, case-specific."
Just days after Trump's second inauguration, the bank lobby seized on the opportunity for change. The Bank Policy Institute, an industry advocacy group,
Max Bonici, partner at Davis Wright Tremaine says the first logical step towards resumption of mergers would be for the regulators to agree on a shared set of rules of the road for these kinds of mergers and transactions.
"I think back to the first Trump administration, when we saw things like … the
Trump's pick for Acting FDIC Chair Travis Hill, who has long criticized the previous administration's merger-skeptical posture, has signaled he will work to repeal the FDIC's Biden-era Statement of Policy on bank mergers to expedite approvals for transactions while maintaining legal requirements for reviewing bank combinations.
Hill
Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition — which has been critical of bank mergers in the past, as well as the pending merger of
"The Federal Reserve, FDIC and OCC they've always been battleships," he said. "They've always been slow to turn, much more so than other agencies… but part of it feels like all bets are off [this time]."
While Trump's outstanding cabinet picks introduce some uncertainty — his administration has yet to nominate a leader for the
'Musical chairs'
During Trump's first week in office, the FDIC approved West Virginia-based WesBanco's acquisition of Ohio-based Premier Bank, bringing the deal closer to completion pending Federal Reserve approval. The merger, backed by shareholders of both companies, is relatively small, but will create a $27 billion-asset regional bank with 250 locations across nine states.
Dylan Walsh, a partner and head of the corporate and institutional banking group at the consulting firm Oliver Wyman, expects large bank mergers and acquisitions to at least return to their pre-pandemic volumes in the years ahead. Between the advantages of scale and the anticipation of regulatory changes — like eliminating the exemption of unrealized gains and losses for calculating capital requirements — he said banks will be incentivized to combine with one another.
In total, Walsh said there could be as many as seven more banks with at least $1 trillion of total assets by the end of the Trump administration, though he said it would be more likely to see between two and four banks pass the trillionaire threshold.
"If large banks start to consolidate at any reasonable scale — and for them, these really do have to be meaningful transactions — then somebody is going to follow suit, because you get into the musical chairs dynamic in the market pretty quickly," he said. "Absent a market stress of some kind or a real shift in tone from the regulators, we think you'll start to see that level of consolidation."
Given that there are only a handful of banks that could surpass the trillion-dollar mark simply by combining with one other institution, Walsh said some would have to employ aggressive post-merger growth strategies while others might pursue "roll-up" strategies, in which several firms combine, either in a single transaction or over time.
These newly formed banks would be true super regionals, he said, adding that while some groups will prioritize geographic expansion, others will seek to expand the scope of their businesses, perhaps marrying traditional consumer-oriented banks with more specialist models.
But before any of this activity commences, Walsh said banks will need a clear signal from incoming regulators that they will be amenable to consolidation. He said changing the OCC's Biden-era guidance would be a start.
"We think the signaling around it will be fairly positive, that the administration wants mergers to create stronger banks," he said. "If you look back, pre-Covid, the volume of large bank transactions … was much, much higher. If we just get back to that level, we would expect to see some significant consolidation across the market."
Trust the process
When a bank wants to merge with another financial institution, it must submit an application under the Bank Merger Act and potentially the Bank Holding Company Act to its primary federal regulator — either the FDIC, OCC, or Federal Reserve. The regulator then forwards the application to the DOJ, which assesses competitive concerns and issues a competitive factors report. The banking agency can approve, deny, or require modifications like divestitures to address competition issues. If the agency approves the merger despite DOJ concerns, the DOJ has 30 days to challenge it in court.
Court battles over bank mergers used to be a routine affair — especially in the 1960s and 1970s, when the DOJ would regularly highlight competitive issues in proposed mergers. The OCC — which has historically been the more bank-friendly regulator — would also regularly approve deals despite the DOJ recommendations, and the DOJ would subsequently sue, leaving the merger up to the courts.
The bank merger consideration process changed in 1995 with the Bank Merger Competitive Review guidelines, issued jointly by the banking agencies and the DOJ. Under those guidelines, the DOJ moved to a posture of negotiating divestitures with the merging banks in order to strike a deal that satisfied the metrics for approval.
"The DOJ really started sanitizing bank mergers for the banking agencies," said Jeremy Kress, assistant professor in business law at the University of Michigan. "So the DOJ would negotiate divestitures and then tell the banking agencies 'Nothing to see here, no competitive problems.'"
In a 2023
"The idea was, Congress told the DOJ to provide advice," Kress said. "Under Kanter's watch, that's what they went back to."
Like Kanter's speech, the Biden-era FDIC and OCC's revised merger guidelines marked a move away from the 1995 guidelines.
"The FDIC, in its policy statement, may not have said explicitly that we are withdrawing from the 1995 guidelines," Kress said. "But it clearly said that the 1995 guidelines are way too narrow, and therefore the FDIC is going to take into account other indicators of competition, consistent with the [Biden] DOJ approach."
The Fed never adopted the more stringent bank merger regulations or guidelines seen at the end of the Biden administration,
Katz says this is all set to change in the second Trump term.
"During the Biden era, we viewed the regulators as being wary of political backlash from progressive Democrats regarding M&A, with the Fed slightly more amenable than the other regulators to mergers," Katz said. "That political wariness will dissipate with Republicans taking the reins. We also believe there will be more openness to considering a potential merger involving one or more large regional banks, something that would have been dead on arrival during the Biden era."
The populist problem
However, just as the heels of a horseshoe bend toward each other, the populist streaks on the political left and right flanks have shown similar skepticisms towards big bank mergers. Sens. Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., teamed up in 2024
While the second Trump administration has staked out a pro-business agenda, his first administration challenged major mergers as well. In 2017, the Trump administration challenged AT&T's acquisition of Time Warner, though the Trump DOJ lost and the merger ultimately went ahead. In his second term, Trump's cabinet is filled with an ideologically diverse range of staff spanning from right-wing populists to traditional pro-business Republicans. Trump's vocal support for the crypto industry, which has historically been hostile to big banks, could mean Trump 2.0 has more populist-minded staffers influencing policy, says Van Tol.
"There may be some spaces from a deregulatory perspective, where crypto people and bank people agree: less regulation, less oversight, less penalties, less restriction," he said. "But there may be places where they're directly at odds with each other, and we'll see what influence that has within the administration. Bank mergers are one place where that could come into play."
Bonici said that dynamic could be tempered by the president's personal stake in the action of cutting business deals, since Trump is a businessman at heart and he likes to stimulate business deals.
"At the end of the day, this administration is about deals — they are deal-oriented," he said. "I think they're like, 'Yeah, if you're doing deals, you're doing business.'"
Given the likelihood of more merger activity, Kress says that state Attorneys General may play a bigger role in challenging deals they believe would hurt consumers in their state. This, he says, would be particularly salient in large states where large banks are headquartered.
"There is a strong case that state attorneys general have authority to block anti-competitive bank mergers, and I suspect we may see some state [attorneys general] exercise that authority in the coming years in the same way that the DOJ can sue to block a merger that a banking agency has already approved," he said. "It's not entirely clear, because this authority really hasn't been tested in recent years, but there's a strong statutory argument that because the states implement antitrust rules that look a lot like the federal rules, a state — for example, New York, which is reportedly investigating Capital One [and] Discover — would have the same right to take a case to court and have that allegedly anti competitive deal analyzed."
