(Adds context on FINRA; Related Content from Breaking Views)
By Michelle Price
WASHINGTON, Nov 21 (Reuters) – A possible purchase by brokerage giant Charles Schwab Corp. of rival TD Ameritrade reflects a more relaxed mood under Trump administration regulators, which has helped unleash other big-ticket takeovers in the financial sector, analysts said.
CNBC and Fox Business reported on Wednesday that the two brokerages were in talks to ink a merger that Fox said could be valued at $26 billion. The companies did not respond on Thursday to Reuters requests for comment.
Regulatory filings show the U.S. Federal Reserve has partial oversight over both firms and may need to approve the deal, depending on how it is structured.
Schwab is also regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), which may also have a say in the outcome.
The financial regulatory path, however, looks smooth despite potential protests from Democratic lawmakers, who worry that the creation of more financial behemoths increases systemic risks.
“We could see some policymakers question the resulting company’s growth in assets under management, but my sense is that overall interest in the deal will be low in Washington,” said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading.
Just two days ago the Fed and FDIC approved the $28 billion marriage of BB&T Corp and SunTrust, quickly sealing the biggest bank tie-up since the 2007-2009 financial crisis. In March, the Fed approved U.S. regional bank Fifth Third Bancorp’s purchase of smaller rival MB Financial Inc for $4.7 billion.
Goldman Sachs and Morgan Stanley have also been emboldened to do smaller deals that nonetheless would have been tricky for the Wall Street titans under the Obama administration.
Those deals have been helped by Congress’ move last year to ease post-crisis financial rules and by the regulators’ more relaxed attitude toward large tie-ups under Trump-appointed officials.
Banking deals in particular had languished after the financial crisis as strict capital and liquidity rules were imposed on lenders with more than $50 billion in assets, making it unattractive for mid-size firms to acquire more assets. Regulators had also aggressively enforced rules that allow them to bar firms with compliance issues from expanding.
The value of M&A among commercial, savings and investment banks reached $54.66 billion this year, the highest since 2009, according to data from Dealogic.
Over the past few years, the Fed has expedited approvals for high-profile deals that tend to attract public and industry scrutiny. The approval period fell from an average of 297 days in 2015 to 135 during the first half of 2019, Fed data shows.
The central bank has also taken a more flexible approach on compliance issues, according to Fed officials and lawyers.
In the case of BB&T & SunTrust, for example, the Fed approved the deal in just nine months despite discovering some unfair and deceptive practices in SunTrust’s business customer division. By contrast, it took M&T Bank more than three years to complete its 2015 tie-up with Hudson City Bancorp after the Fed found problems with M&T’s compliance systems.
The OCC last year gave JPMorgan the green light to expand its branch network, after years of shackling the bank due to regulatory lapses.
Securities lawyers said it was also unlikely the U.S. Securities and Exchange Commission, which oversees brokers and has also been easing rules under Trump officials, would be able to stand in the way of an Schwab-TD Ameritrade deal, although it might scrutinize the types of fees and services the new company provides.
Similarly, they said they expect the Financial Industry Regulatory Authority, or FINRA, the self-regulatory organization that oversees brokers, to bless the deal.
“There is always going to be scrutiny, but I think we’re going to see folks say, ‘OK, let’s do it’,” said Alois Pirker, director of research for wealth management at Aite Group.
The SEC did not respond to a request for comment. The OCC, FDIC and FINRA did not immediately provide comment, and the Fed declined to comment.
Reporting by Michelle Price; additional reporting by John
McCrank and Katanga Johnson; Editing by Dan Grebler