Current Merger Policy: Banking and Atm Network Mergers

• Author: Margaret E. Guerin-Calvert
• Published date: 01 June 1996
• Date: 01 June 1996
• DOI: http://doi.org/10.1177/0003603X9604100203
• Subject Matter: Article

The Antitrust Bulletin/Summer 1996 289

Current merger policy: banking and

ATM network mergers

BY MARGARET E. GUERIN-CALVERT*

1.

Introduction

In recent years, there have been a number of important develop-

ments in bank merger policy implemented at the federal agencies

responsible for antitrust review

of

mergers and acquisitions in the

banking industry. Among the most important

of

these develop-

ments have been (1) the issuance

of

guidelines for screening bank

mergers, (2) clarification of the agencies' policies concerning

divestitures, and (3) a number of key decisions in both bank and

automated teller machine (ATM) network mergers. These develop-

ments have followed (and have continued to be accompanied by)

*Principal, Economists Incorporated.

AUTHOR'S NOTE: I would like to thank Bruce Snapp, Jonathan Walker,

David Argue, and Stephanie McAree

for

their comments and supporting

research; Bernard Shull

for

his encouragement to write this article; and

Michael Greenspan, Chair

of

the Financial Institutions and Markets

Committee

for

many discussions on current bank merger policy; the

responsibility

for

errors remains mine.

© 1996 by Federal Legal Publications, Inc.

290

The antitrust bulletin

asubstantial number

of

bank mergers and acquisitions and some

consolidation in the ATM industry.

In each year since 1990, there have been well in excess of

1000 transactions filed with the federal banking agencies

for

mergers or bank holding company formations.' The banking agen-

cies primarily involved in merger review are: the Office

of

the

Comptroller of the Currency (OCC), the Federal Reserve Board

(Fed),

and the

Department

of Justice

(Department).

Agency

review encompasses mergers of both healthy and failing or failed

institutions, albeit with slightly different standards and regulatory

deadlines for transactions involving financially troubled firms. 2

All bank merger and acquisition transactions are subject to filing

of applications at one of the federal banking agencies. There are three

federal banking agencies, the FDIC, Board

of

Governors of the Federal

Reserve System (Board) and the Office of the Comptroller of the Cur-

rency (OCC) who regulate banking organizations in the U.S. Applica-

tions for merger are subject to requirements imposed by section 3 of the

Bank Holding Company Act (12 U.S.C. §1842 (1988» for bank holding

companies and the Bank Merger Act (12 U.S.c. §1828(c) (1988» and

are filed with the regulator

of

the acquiring banking organization. Gener-

ally, transactions involving larger banking organizations are filed at the

Board, which regulates bank holding companies, or at the OCC, which

regulates national banks. Transactions involving failing or failed banks

often involve the FDIC, and possibly subsequent action by one of the

other banking agencies depending on the identity of the acquirer. In addi-

tion to these federal banking agencies, the Department

of

Justice is

authorized under the Bank Merger Act and the Bank Holding Company

Act to review bank mergers and to file actions to enjoin mergers that

would result in a substantial lessening of competition; the relevant bank

statutes provide for advisory letters from the Department to the relevant

banking agencies. The federal banking statutes require the banking agen-

cies to

take

competitive concerns into account in their bank

merger

review, and to deny those applications that would tend substantially to

lessen competition. These statutes also provide for an automatic injunc-

tion of a merger approved by the banking agency, if the Department files

suit within 30 days of the agency's approval.

If

no suit is filed within 30

days

of

the

agency's

approval,

the merger is immune from federal

antitrust prosecution.

In general, transactions involving failed or failing banks are sub-

ject to shorter deadlines for federal antitrust review than those involving

healthy banks; with the 30-day period between agency approval and

Merger policy :291

This pace of merger activity appears likely to continue, with a rel-

atively large number

of

major mergers undertaken in the last 6

months of 1995 alone. For example, in the fourth quarter

of

1995

and in early 1996, the Federal Reserve Board approved several

combinations including Fleet Financial-Shawmut National, U.S.

Bancorp-West

One Bancorp, Chemical

Banking

Corporation-

The

Chase Manhattan Corporation, and Wells Fargo &Com-

pany-First

Interstate Bancorp.' In addition, 1994 and 1995 saw

the beginnings

of

consolidation and merger in the ATM industry,

which has continued in early 1996.

In light of the likely future acquisition activity in the banking

industry and new technological developments and arrangements

(e.g., new joint ventures), it is especially timely to set

out-and

make more

transparent-these

recent merger policy developments

and to assess their implications for ongoing evaluation of antitrust

policy.

This article addresses current merger policy in the context

of

the "new banking environment." That environment covers a range

of

possibilities including: interstate banking, new technologies,

and new modes of bank expansion or interaction with customers.

The article considers these developments in the context

of

sub-

stantial consolidation in the industry. As a result, this article goes

beyond an examination of current bank merger policy to consider

antitrust policy in banking as it applies to new technologies or

modes

of

delivery of banking services to customers.

Included

among the many types of banking services that involve new or

developing

technologies are ATM networks

and

point-of-sale

(POS) networks. Specifically this article addresses:

Department action shortened considerably. Only in the event of an emer-

gency transaction, in which the failing bank is shut down in an overnight

transaction and the new entity begins operation the next day, is there no

opportunity for the Department to halt a

bank

merger on competitive

grounds.

Fleet Financial/Shawmut National (November 1995); U.S. Ban-

corp/West One Bancorp (December 1995); Chemical Banking Corpora-

tionffhe

Chase Manhattan Corporation (January 1996); and Wells Fargo

&CompanylFirst Interstate Bancorp (March 1996).