US Bank Hopes $100 Billion Community Plan Will Advance MUFG Union Bank Merger

The news: American bank announced a $100 billion community benefits plan to accompany the proposed merger with the California-based company MUFG Union Bankby a hurry Release.

First American bank based in Minneapolis disclosed its acquisition plans last September. The deal is worth around $17.6 billion. The bank then indicated that it expected it to be finalized during H1 22; however, according to American Banker, a recent regulatory filing was more equivocal at the time.

More on this: The bank, which has met with more than 200 community groups, hopes the plan will muster community support to move the merger forward. The key points the bank outlines include:

  • Increase in mortgage loans by 20% nationally and by 30% to non-white and low-to-moderate income borrowers (LMI) in California.
  • Increase in loans to small businesses and farms in 15% nationally and 25% in California.
  • Consideration of community feedback before closing any branch in the region.

The bigger picture: US Bank-MUFG Union Bank Merger Happens Against a context of regulatory overhaul and associated uncertainty what types of agreements are likely to be approved. This includes the potential change to the criteria surrounding the Community Reinvestment Act (CRA), which is key to evaluating merger proposals.

Lately, regulatory approvals for big bank mergers have stalled. For instance, New York Community Bank and based in Michigan flag star recently extended their merger schedule, moving closer to a two-year period pending Federal Reserve approval. Regulators have been candid about their reasoning for the delays.

On May 5, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and the Office of the Comptroller of the Currency (OCC) requested reinforcement the ARC. The revamped ARC, which encourages banks to help meet the credit needs of their local communities, including LMI neighborhoods, would consist of

  • Tougher reviews for big banks.
  • New assessment criteria for certain banks to determine if they meet CRA standards.
  • Clarification on banking activities that would qualify for CRA credit.

On May 9, the OCC called for a review of the framework for bank mergers, indicating that the current framework poses an increased risk of mergers that lessen competition, harm communities and pose systemic risk.

The big takeaway: US Bank’s community plan appears to be a reactive measure to move the merger forward, but if successful, it may also help lay the groundwork for future bank merger proposals. In addition to gaining support from regulators, banks need to focus on the communities they enter, as social equity becomes an important value for consumers when choosing their banks.

  • ANC announced a similar $88 billion community to plan last year during the acquisition BBVA US.
  • A Deloitte report stated that incumbent banks could lose up to 10% of their market share to digital challengers if they don’t seriously serve underrepresented affinity groups.

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