Banking Acquisition and Merger Procedures

Publication Date: May 1998

Publisher: Library of Congress. Congressional Research Service


Research Area: Banking and finance; Business



This report discusses in general terms the basic process and time line for banking industry acquisitions and mergers and briefly discusses the May 4, 1998 application by Travelers Group to merge with Citicorp. When banking concerns, such as NationsBank and BankAmerica, announce plans to merge, they begin a process that involves applications under various federal statutes that must be approved by the Federal Reserve Board, by the primary federal regulator of the banking institutions involved, and by the state banking authorities in states in which the banks are chartered. The review includes public notice and opportunity for comment. In the course of the review, an assessment will be made of the companies' management, safety and soundness, capitalization, Community Reinvestment Act record, as well as the potential impact of the transaction on competition. Approval may not occur if a monopoly would result or if competition would be substantially lessened unless the anticompetitive effects are found to be outweighed by community convenience and needs.

The structural and procedural components for affiliation among financial services companies and activities are the subject of H.R. 10, the Financial Services Act of 1998, which was passed by the House on May 13, 1998. That legislation would rewrite the rules for affiliations in the financial services industry. It would, thus, directly affect the procedures that are discussed in this report that will govern current acquisitions and mergers. At an April 29, 1998, hearing, the House Banking Committee heard testimony on the mergers within the context of the financial modernization debate. Among the issues discussed were: potential impact on consumers; whether the new entities would be too big to fail; and, whether competitive equity calls for financial modernization legislation with functional regulation of the securities, banking, and insurance sectors of companies offering customers a full range of financial products and services. Legislative developments on financial modernization issues in the 105th Congress are reported in CRS Issue Brief 97034, which is available on the Legislative Information System