Merger of Regional Banks
Globalization is reversing gears Banks stop to be everything everywhere Now we see the rise of super-regional banks What if one of the super regionals fails? If no changes regarding current rules, The only viable solution is to sell it to a GSIB. That would make the industry more concentrated. OCC’s Hsu proposed a three-pronged approach to safeguard the failures of large regional banks. 1. Large regional banks have a Single-Point-Of-Entry resolution strategy. 2. Their parent companies held adequate long-term debt to absorb the loss. 3. Lines of business within the banks be easily separable. These changes need cooperation from the Federal Reserve and FDIC. The Biden Administration and Democrat regulators have targeted bank mergers as a ground for reform. Hsu warned that blanket disapproval of mergers involving large regional banks may shield Global Systemically Important Banks from the competition.