In the biggest ever merger in nearly a decade, two banks in the US- BB&T Corp and SunTrust Banks Inc- will benefit from President Trump’s easing of banking regulations in the country.
Banking Regulations ease up
The aftermath of the Global Financial Crisis in 2007 -2008 was harsh and stringent with banking regulations exerting on financial institutions to hold capital reserves much bigger than what they held during the crisis.
Ten years later, the financial sector is getting a revamp under President Trump. Apparently, regulators of banking systems have been urged to break down on the earlier harsh rules and be relaxed in approving mergers, bank applications as well as enforcement with post-crisis rules.
The US Federal Reserve Bank, on Tuesday, gave its nod to the merger of BB&T Corp and SunTrust Banks Inc.
But the approval to merge the two banks includes several conditions including BB&T having to divest as many as 30 of its branches for investing $2.4 billion in deposits for mitigation of competitive effects of the merger.
Additionally, Sun Trust also has its own set of issues to be sorted, since the Fed is continually monitoring it. Previously the bank had not revealed the complete information with regard to operation and billing for many of its products, to concerned business customers. Feds have been issuing consent order to such mergers only upon strict conditions.
On the back of the merger approval being announced, shares of the banks being merged showed quick movement. BB&T shares were reportedly down several points. Though it did achieve higher profits, it lagged behind in terms of earnings forecasts.
The merger is expected to be the first of many such deals, given the administrations push to allow freer banking processes and other activities so that there is an investment-positive environment in the economy. After 2007-8, the stress on financial practices having to be reported regularly with necessary checks and balances in place; to seek approval before offering investment products to the general public. The severity of the financial crisis had a trickle-down effect on the housing sector and real estate as well.