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ICBA Expresses Concerns About Large Bank Mergers

Washington, D.C. (Jan. 15, 2004) - ICBA warned today that large bank mergers such as the recently announced JPMorgan/Bank One and BofA/Fleet mergers are radically changing the industry and are challenging the ability of the regulatory system to effectively regulate banks.

"These mergers have enormous public policy implications. First, the trillion dollar banks that will result from these megamergers will be too big to regulate effectively," said Ken Guenther, President of ICBA. "Secondly, these banks will be too big to fail and therefore will pose a systemic risk to the FDIC's Bank Insurance Fund."

Guenther also predicts that, following these mergers, the largest banks will attempt to amend the Riegle-Neal Interstate Banking and Branching Efficiency Act which prohibits a bank merger if the resulting bank would control more than 10 percent of the deposits in the United States. "Community banks will resist any attempt to increase the 10 percent cap imposed by the Riegle-Neal Act or to broaden the definition of "deposit" under that Act," said Guenther.

At yesterday's hearing on the BofA/Fleet merger before the Federal Reserve Bank of Boston, ICBA testified that large bank mergers adversely impact consumers, small businesses and local communities.

"Unfortunately, the evidence shows that increased concentration in the banking industry has not benefited bank customers and has not had a positive effect on the convenience and needs of the communities served by the acquired banks," said Chris Cole, ICBA's regulatory counsel. ICBA urged the Federal Reserve to examine closely the effect that the BofA/Fleet merger would have on deposit pricing and fees in the New England area, and whether consumers and small businesses would be adversely impacted by the merger.