Good afternoon, and it’s a pleasure to be alongside other law enforcement agencies from around the world focused on consumer protection, competition, and privacy.
Let me start by briefly addressing the events of the last few weeks, including Silvergate, Silicon Valley Bank, Signature Bank, and Credit Suisse. U.S. financial regulators have collectively taken extraordinary measures to ensure the system remains resilient. There are several indicia to suggest that these steps have contributed to greater stability, though we continue to monitor risks in the system extremely carefully.
Across the U.S. government, there is a renewed focus to promote competition and resilience in sectors across the economy, and on the role of large technology platforms and the use of data. Agency leaders are demanding more rigorous analysis on all of these issues.
Regarding Competition Initiatives
Across the board, we are looking at ways to fulfill our mandate to ensure that markets are “fair, transparent, and competitive.” We have a host of initiatives that cover credit cards, auto loans, payments, and more.
Perhaps most importantly, the CFPB will be proposing rules later this year under a dormant authority, Section 1033 of the Consumer Financial Protection Act, to accelerate the shift toward “open banking.” By giving consumers greater access to their data, we are seeking to promote increased choice and easier account switching.
Regarding Tech Platforms
Around the world, financial regulators and central banks are looking hard at our payments systems. Facebook’s Libra proposal was a wakeup call, raising a host of financial stability and privacy concerns. While Libra never came to be, it is clear that a stablecoin or other digital asset used for payments could quickly gain massive scale if riding on the rails of a Big Tech platform or other major network.
The CFPB has ordered Big Tech firms and peer-to-peer payment apps to provide information to the agency. We are looking at how these firms honor existing consumer protections, how they decide to onboard or kick off users and merchants, and how they use our personal financial data. We also solicited public feedback and have conducted extensive market monitoring.
For example, there are concerns that the near-field communications features on iOS devices can only be used through Apple Pay. There may be other practices in the market that are deterring entry, undermining financial privacy, or frustrating efforts to minimize fraud.
Regarding Efforts on Data Protection
The CFPB is planning to undertake rulemaking under the Fair Credit Reporting Act, one of the few privacy laws at the federal level. Given changes in technology and the marketplace, there is clearly a need to update existing rules. We have recently launched an inquiry into data broker business practices to inform this rulemaking effort.
The Federal Trade Commission’s ongoing rulemaking on commercial surveillance practices is also an important step forward to protect personal data. If a rule is finalized, it will be enforceable by the CFPB for banks, credit unions, and other financial providers.
Regarding Bank Mergers
The Bank Merger Act, the Bank Holding Company Act, and the Clayton Act are the primary statutes governing mergers and acquisitions in the banking sector. The Bank Merger Act has long required an assessment of competitive effects, as well as the impact on the convenience and needs of the community, when evaluating an application. The Department of Justice is required to submit a report to the relevant agencies on competitive effects, while retaining authority to challenge transactions under the Clayton Act.
Given recent events, it’s worth remembering that similar to the failing firm doctrine in the antitrust laws, the Bank Merger Act allows the agencies to approve anticompetitive mergers when the anticompetitive effects are clearly outweighed in the public interest by the convenience and needs of the community. The federal banking laws also contain various other emergency-related exceptions to permit otherwise impermissible transactions in a crisis.
In 2010, Congress amended the Bank Merger Act to require regulators to consider the extent to which a transaction would “result in greater or more concentrated risks” to financial stability. This was an important improvement to the Act, given the role that rampant mergers and acquisitions played in creating the too-big-to-fail firms before the 2008 financial crisis.
We now have real-world evidence that the failure of a bank that is just a fraction of the size of the very largest Wall Street banks can also lead to contagion and risks to the financial system. I know many people in this room have dissected the Federal Reserve Board’s 2021 Order approving Silicon Valley Bank’s acquisition of Boston Private and its conclusion that the combined firm would not “pose significant risk to the financial system in the event of financial distress.”1
The recent stress in the system has re-ignited important questions about financial stability risks. The answers should inform our analysis of future transactions involving domestic systemically important banks (DSIBs). What metrics and indicia should we use to appropriately gauge the potential domino effects of a firm’s failure? How can we tailor our analysis of DSIB transactions to better capture their domestic footprint? What bright line presumptions in merger review would promote financial stability?
The Federal Deposit Insurance Corporation collected comment last year on its policies regarding Bank Merger Act protocols. It’s important for us to incorporate the lessons learned from the Silicon Valley Bank failure into the ongoing review. I expect the result of this effort will lead to greater transparency, more predictability, and much more rigor. Perhaps most importantly, it will provide meaningful guidance on how to analyze the new financial stability prong.
Regarding Labor Markets
The CFPB is closely analyzing employer-driven debt, including so called “training repayment agreements.” These provisions may harm people by coercing individuals into debt and limiting their ability to change jobs. In many ways, this complements broader efforts, such as those being undertaken by the Federal Trade Commission, to address non-compete agreements that limit worker mobility.
On the merger front, the role of labor non-compete clauses is now being analyzed more carefully in bank merger review. For example, in the FDIC’s Order regarding the merger of Columbia Bank and Umpqua Bank, the FDIC prohibited the exercise of certain labor non-compete provisions in divestiture markets. This is one of the first times such a restriction has been codified in a banking regulator merger order.
Thank you and I look forward to the discussion.