US financial authorities approve Capital One, Discover agreement
April 18, 2023, New York U.S. financial authorities said on Friday they sanctioned Capital One’s (COF.N), opens new tab Paving the way for the merged companies to become the nation’s eighth-largest bank, U.S. banking authorities said on Friday they approved Capital One’s (COF.N), opens new tab $35.3 billion acquisition of Discover Financial Services (DFS.N), opens new tab.
Financial executives have been keenly monitoring the agreement as a litmus test for how fast President Donald Trump’s administration would authorize acquisitions in a sector they consider ripe for consolidation.
Approving a transaction meant to produce the largest U.S. credit card issuer by balances, the Federal Reserve and Office of the Comptroller of the Currency said they had finished a “fulsome review” of the banks’ 2024 proposal, giving Capital One control of Discover’s large card payment system.
According to the Fed, the merged business will be the sixth biggest bank under government deposit protection. Roughly $637.8 billion in assets will make up 2.2% of the insured deposits in the country.
The firms said in a joint statement that Capital One and Discover have obtained all required regulatory clearances for the transaction, which will finalize on May 18.
Competing against Visa (V.N), opens new tab and Master card (MA.N), opens new tab, Capital One will grow to be among the largest payment-processing systems in the nation.
Michael Shepherd, acting president and CEO of Discover, said the merger “will increase competition in payment networks, offer a wider range of products to our customers, increase our resources devoted to innovation and security, and bring meaningful community benefits.”
The merger drew criticism from advocacy organization Better Markets. The merger, according to Shayna Olesiuk, director of banking policy at Better Markets, which was established during the 2008 financial crisis, would lower competition, provide less customer choice, and result more charges and expenses for consumers.
The united U.S. credit card company would rival JPMorgan Chase (JPM.N), opens new tab, Citigroup (C.N), opens new tab and others.
The OCC’s clearance depends on preparations for remedial measures to handle the underlying reasons of any pending Discover enforcement proceedings, the regulator said.
Along with a $100 million penalty for overcharging fees from 2007 to 2023, the Fed placed a consent decree on Discover as a regulatory sanction.
The Federal Deposit Insurance Corporation, another banking authority, said separately that Discover was being ordered to pay a civil penalty of $150 million for fee overcharging.
News sources say the Justice Department had already decided there were no competition issues strong enough to prevent the transaction.
