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Assessing bank antitrust standards

  • Economics
  • Law


FRBSF WEEKLY LETTER May 15, 1987 Assessing Bank Antitrust Standards The antitrust standards applied to banking mer- gers and acquisitions have become less restric- tive in recent years. In large part, the change has come about because savings and loans and sav- ings banks are now treated as direct competitors with commercial banks by the federal banking regulatory agencies and the Department of Jus- tice in their antitrust analyses. The treatment of thrifts as direct competitors with banks was prompted by legislation in 1980 and 1982 that granted thrifts new bank-like powers. Key among those powers are the ability to make commercial and industrial (C&I) loans and to offer transactions accounts (NOWs). These two activities had traditionally dis- tinguished the banking industry from the thrift industry. However, the actual extent to which savings and loans and savings banks in the aggregate have made inroads into traditional banking services is limited. Recent data indicate that among FSLlC- insured savings institutions, C&I loans com- prised less than 2 percent of assets, and transac- tions accounts less than 4 percent, compared with figures of 19 percent and 21 1/2 percent for commercial banks. Moreover, we still have little direct evidence that the effects of thrifts on competition in bank- ing markets have changed appreciably since 1980. For example, a recent study by Stephen Rhoades at the Federal Reserve Board fails to find evidence that variations in thrift competition influenced the performance of commercial banks during either the late 1970s or the early 1980s. Do thrifts, then, really matter significantly to banking competition? Even more importantly, have banking antitrust standards become too liberal? One way to assess the current banking antitrust standards is to examine the competitive effects of those mergers or acquisitions in whose approval the less stringent guidelines were instrumental. This Letter considers one of the most significant of the cases to date - the mer-

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