The FRB issued an order (the “Capital One Order”) in which it approved Capital One Financial Corporation’s (“Capital One”) acquisition of ING Bank, fsb (“ING Bank”), a large, internet-based depository institution. The Dodd-Frank Act amended the Bank Holding Company Act to require that the FRB consider whether a proposed acquisition would pose a “risk to the stability of the United States banking or financial system.” The Capital One Order is the second FRB decision that has addressed the FRB’s financial stability analysis. The first FRB decision that applied the FRB’s financial stability analysis was the FRB’s approval of PNC Financial Services Group, Inc.’s acquisition of RBC Bank (USA) (the “PNC Order”), which was described in the January 10, 2012 Financial Services Alert.
The Capital One Order uses the same financial stability factors that the FRB used in the PNC Order. The Capital One Order, however, provides additional detail on how the FRB evaluates the individual factors and provides guidance on types of transactions that would not be likely to present financial stability concerns.
Some key guidance provided by the FRB in the Capital One Order is that large size may, of itself, be a factor that could cause the FRB to deny an acquisition application. The FRB also states that transactions likely to have only a “de minimis impact on an institution’s systemic footprint” would not be likely to raise financial stability concerns, and the FRB provided three examples in the Capital One Order of such de minimis transactions: (1) an acquisition of less than $2 billion of assets; (2) a transaction resulting in a firm with less than $25 billion in total assets; and (3) a corporate reorganization. It is useful to note that in the Capital One Order the FRB found that neither Capital One nor ING was engaged in the type of complex financial activities that would have further complicated the FRB’s analysis of risks to the financial system posed by the transaction.