US Bank’s $8 billion purchase of Union Bank approved

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A branch of American Bank in Omaha, Neb. Top financial regulators having approved the US bank’s $8 billion acquisition of the Union Bank franchise of Japanese financial titan MUFG. (AP Photo/Nati Harnik)

NEW YORK (AP) — Top financial regulators on Friday approved US Bank’s $8 billion acquisition of the Union Bank franchise of Japanese financial titan MUFG, removing significant regulatory hurdles to a deal that will bring US Bank closer to the size of the mega banks on Wall Street.

But in securing those approvals, the Office of the Comptroller of the Currency and the Federal Reserve expressed concern over the recent growth of so-called “super regional” banks like US Bank, Truist and PNC Financial.

The OCC stipulated in its approval that US Bank should find ways to quickly and easily sell parts of its business in the event of severe economic distress.

“In making this decision, the OCC has carefully considered the effect of the merger of US Bank and MUFG Union Bank on communities, the banking industry and the American financial system,” said the acting Comptroller of the Bank. Mint Michael J. Hsu. “The OCC also considered … how best to ensure that the big banks don’t become the next class of too-big-to-fail institutions.”

Meanwhile, Fed governors said the central bank should consider new regulations for these super-regional banks that take into account their recent growth in size and the risks they may now pose to the global financial system.

The nation’s largest Wall Street banks, technically known as global systemically important banks, became one of the most tightly regulated institutions after the 2008 financial crisis. They are required to have what is known as “living wills” to show how they would best resolve their business in the event of bankruptcy.

While the Fed may not want to go as far as it has in putting safeguards on megabanks like JPMorgan, it has signaled that super-regional banks are a growing concern.

“Since we know from experience that even non-complex banks in this range can pose risks to the wider financial system when they experience financial difficulties, I am encouraged that the Board is seeking feedback on a prior proposal to improve their resolvability,” the Federal Reserve Vice Chairman said. says Lael Brainard.

The Minneapolis-based U.S. bank has offered to buy the Union Bank franchise from MUFG in September 2021, the latest of several large mergers between institutions of similar size. The wave of mergers began with the merger of two Southern banks – SunTrust and BB&T – to create Truist. PNC Financial acquired the retail banking franchise of Spanish bank BBVA last year.

Union Bank has retail branches primarily in the West Coast states, with its main banking office in San Francisco. It also has commercial branches in Texas, Illinois, New York and Georgia.

But unlike the SunTrust-BB&T merger and the PNC-BBVA merger, regulators appeared to be taking longer on the deal. US Bank and MUFG had to extend their purchase agreement earlier this year to allow for longer regulatory approval.

The Justice Department approved the US Bank-MUFG deal late last month, forcing US Bank to sell three bank branches on anti-competitive grounds.

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