Fed Elevates Cap One to 20th Large Bank, Adding ING Direct
–Capital One Becomes Fourth Largest U.S. Credit Card Provider
By Denny Gulino
WASHINGTON (MNI) – Rejecting arguments Capital One would become
large enough to be a systemic risk, the Federal Reserve late Tuesday
approved its acquisition of ING Direct, making it the 20th largest U.S.
bank by assets, the fifth largest by deposits.
The decision was eight months in the making, as the Fed held four
public hearings on the acquisition request, the latest Monday. One gauge
of the public interest was that 235 people testified and about 915
individuals and organizations submitted comments. The commenters, the
Fed said, included members of Congress, state legislators, community
groups, nonprofits organizations and customers.
“A large number of commenters supported the proposal,” the Fed
said, and “a significant number of commenters opposed the proposal.”
Many of the objections focused on the possible impact of the merger
on the financial system and that Capital One’s new, much larger size
could threaten to become too big to fail.
Nevertheless, said the Fed, “The statutory factors it is required
to consider under the Bank Holding Company Act are consistent with
approval of the proposal.”
With the acquisition of ING Direct, Capital One will hold about
2.3% of all bank deposits in the United States. Under new Dodd-Frank
regulations there is a 10% cap on insured deposits for any new U.S.
The Fed said the merger “would not result in any significant
adverse effect on competition in any relevant banking market.”
The acquisition is structured as a cash and share exchange, with
ING Groep getting about $6.2 billion as well as 55.9 million Capital One
shares valued at $2.8 billion.
Dodd-Frank added a requirement that the Fed consider any affect of
such mergers on financial stability. The Fed concluded that although the
combined institution “would be large on an absolute basis, its shares of
(total financial system) assets, liabilities, leverage exposures and
deposits would remain modest, and its shares of national deposits and
liabilities would fall well below the 10% limitations set by Congress.”
Capital One will now increase its share of outstanding credit card
balances to 11.8%, becoming the fourth largest credit card provider in
the United States.
ING Groep, based in the Netherlands, was required by the European
Commission to divest its U.S. Internet-based business by 2013 as a
condition of the bailout it received in the financial crisis.
Concluded the Fed, the acquisition can “reasonably be expected to
product public benefits hat would outweigh any likely adverse effects.”
The vote among the five Board members appeared to be unanimous.
** Market News International Washington Bureau: 202-371-2121 **