Monopoly power
February 8, 2019

$66bn

Value of the biggest bank deal since the financial crisis

SunTrust and BB&T have announced they will merge, raising concerns about mounting concentration in the banking sector.

The two regional banking giants will become the US’ sixth largest bank in the biggest deal since the financial crisis. The merger seems to have been spurred by last year’s federal banking reform bill, which reduced federal oversight of banks worth between $50 billion and $250 billion. Kevin Barker, a senior research analyst at Piper Jeffrey & Co., told the Wall Street Journal“I think the green light for this deal was the relaxation of regulatory rules”.

That bill itself sparked some controversy. As it was going through Congress last Spring, concerns were raised by Senator Elizabeth Warren and others that it would reduce competition, hurting consumers as well as smaller banks, and increasing risk in the economy at large. The bill passed after a lobbying splurge from the Savings and Loans industry – between Q2 2017 and Q2 2018, their increase in lobbying spend (81%) exceeded any other industry.

Concentration in the banking sector has risen continuously, with the number of banks in the US falling 40% since 2000. Not even the 2008 financial crisis stemmed this tide. As of 2017, the six largest banks controlled 70% of US financial assets.

With the size of large banks blamed in part for causing the 2008 crisis, what are we doing creating another institution that is too-big-to-fail.