Protecting Big Banks Won’t Enhance Competition

Promoting competition is a laudable goal, one that President Joe Biden has rightly made a priority for his administration. Yet in its efforts to apply Biden’s directive in the banking industry, the Federal Deposit Insurance Corporation could well achieve the opposite result — and deepen the anticompetitive moat that already surrounds the country’s largest financial institutions.

Citing the president’s July 2021 executive order on competition, along with concerns about financial stability and industry concentration, the FDIC has requested public comment on its approach to bank mergers, a first step toward writing new rules. Specifically, it focuses on midsize banks, asking whether institutions with more than $100 billion in assets should be required to demonstrate that proposed combinations would be neither systemically unsafe nor anticompetitive. It notes that the number of U.S. banks has declined to 5,000 from more than 12,000 in 1990, and that the number of banks with assets exceeding $100 billion has risen to 33 from just one.