Large Bank Mergers: Fair Lending Review Could be Enhanced With Better Coordination
GGD-00-16
Published: Nov 03, 1999. Publicly Released: Nov 03, 1999.
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Highlights
Pursuant to a congressional request, GAO reviewed large bank holding company mergers and regulatory enforcement of the Fair Housing Act and the Equal Credit Opportunity Act, focusing on the: (1) fair lending issues raid by consumer and community groups during the application process for six large bank holding company mergers; and (2) Federal Reserve Board's (FRB) consideration of those issues.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Board of Governors | To enhance the consideration of fair lending issues during the bank holding company merger approval process, the Board of Governors of the Federal Reserve System should develop a policy statement and procedures to help ensure that: (1) all parties asked to provide information or views about the fair lending performance of entities within the bank holding companies are given or directed to sources for structural information about the holding companies; and (2) all federal agencies responsible for helping to ensure the fair lending compliance of entities involved in the proposed merger are asked for consumer complaints and any other available data bearing on the fair lending performance of those entities. |
Federal Reserve System staff are using a Fair Lending Contact Form to document their discussions with other relevant federal agencies on merger applications in which concerns have been raised about fair lending compliance. On April 27, 2001, FRS issued letters to the FTC, DOJ, and HUD that (1) requested information on an ongoing basis about any significant supervisory or investigatory actions initiated by the agencies concerning nonbank subsidiaries of a holding company; (2) stated FRS would provide the agencies with a list of the nonbank home mortgage lending subsidiaries associated with merging institutions whose merger applications are protested on fair lending grounds; and (3) stated that FRS was prepared to forward comment letters received during the merger application process that raise fair lending issues to the agencies for their consideration.
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| Board of Governors | To aid in ongoing federal oversight efforts, the Board of Governors of the Federal Reserve System should develop a policy and procedures to ensure that it provides federal agencies relevant comment letters and any other information arising from the merger application process that pertains to lenders for which they have fair lending enforcement authority. For example, the other agencies may be interested in receiving FRB's Home Mortgage Disclosure Act analysis as well as the other data obtained and analyzed by FRB in response to the fair lending allegations raised in the comment letters. |
Federal Reserve System staff are using a Fair Lending Contact Form to document their discussions with other relevant federal agencies on merger applications in which concerns have been raised about fair lending compliance. The Fair Lending Contact Form contains a section for FRS staff to document whether or not they offered to provide the agency with comments/protests received on the application. On April 27, 2001, FRS issued letters to the FTC, DOJ, and HUD that (1) requested information on an ongoing basis about any significant supervisory or investigatory actions initiated by the agencies concerning nonbank subsidiaries of a holding company; (2) stated FRS would provide the agencies with a list of the nonbank home mortgage lending subsidiaries associated with merging institutions whose merger applications are protested on fair lending grounds; and (3) stated that FRS was prepared to forward comment letters received during the merger application process that raise fair lending issues to the agencies for their consideration.
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| Board of Governors | The Board of Governors of the Federal Reserve System should monitor the lending activity of nonbank mortgage subsidiaries and consider examining these entities if patterns in lending performance, growth, or operating relationships with other holding company entities indicate the need to do so. |
FRB was already providing statistical analysis of Home Mortgage Disclosure Act data to HUD each year for independent mortgage lenders. FRB will broaden its effort to also provide the statistical analyses for nonbank mortgage subsidiaries of bank holding companies to HUD and provide the same information to FTC as well. FRB emphasized that the responsibility for monitoring the lending activity of nonbank mortgage subsidiaries has been expressly allocated to the FTC by statue for these entities (including nonbank mortgage subsidiaries). However, FRB has not ruled out the possibility of conducting a fair lending investigation in a particular case if circumstances warrant.
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Bank examinationBank holding companiesBanking regulationCorporate mergersLaw enforcementLending institutionsMortgage loansRacial discriminationReporting requirementsFair lending