On July 9, 2021, President Biden signed the wide-ranging Executive Order on Promoting Competition in the American Economy, aimed at increasing competition in all sectors of the American economy, including banking and consumer finance. The Biden administration also released a Fact Sheet in support of the Executive Order. The administration noted in the Fact Sheet that “excessive consolidation” has led to increased costs for Americans, including small business owners and low-income communities in relation to banking services. According to the Fact Sheet, in recent decades the U.S. has lost “70% of the banks it once had, with around 10,000 bank closures”. The administration notes that communities of color have been disproportionately affected by these changes, as 25% of bank closures in rural areas have been in majority-minority communities.
In issuing the Executive Order, Biden signaled to regulatory agencies that oversee the banking industry, including the Department of Justice, Federal Deposit Insurance Corporation and Office of Comptroller of the Currency, that they should revitalize their oversight of bank mergers in an effort to promote fair competition and remain consistent with traditional antitrust laws. The Biden administration hopes that such revitalization of oversight will offer Americans more choice in selecting financial institutions and prevent “excessive market power” within the banking community.
Additionally, the Executive Order called upon the Consumer Finance Protection Bureau to exercise its rulemaking capabilities to increase portability of consumer financial data in accordance with Section 1033 of the Dodd-Frank Act. The administration implied that such portability will also encourage competition because consumers will be able to more easily transfer their financial data to other financial institutions.
The Executive Order has resulted in mixed reactions within the banking community, with some doubting whether the Executive Order will have any enforceable effect on the industry. We expect the impacts of the Executive Order to manifest over the next few months and will keep the banking community up to date with any new developments or insights.