Bank Mergers & Acquisitions: Federal Reserve Board’s Approval of Capital One's Acquisition of ING Direct Discusses Financial Stability FactorSullivan & Cromwell LLP - February 15, 2012
Late yesterday, the Federal Reserve Board ("FRB") issued an Order (the "Capital One Order") approving the acquisition of ING Bank, fsb ("ING FSB") by Capital One Financial Corporation ("Capital One"). ING FSB is a leading internet-based depository institution and operates under the name "ING Direct". This decision followed a highly unusual series of public hearings and an unusually long processing period.
The Capital One Order represents the second time the FRB has analyzed a proposed bank acquisition transaction under the “financial stability” factor added to the Bank Holding Company Act of 1956 (“BHC Act”) by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The FRB’s first articulation of its methodology for analyzing the financial stability factor was included in its December 23, 2011 order approving the acquisition of RBC Bank (USA) (“RBC Bank”) by The PNC Financial Services Group, Inc. (the “PNC Order”).
In the Capital One Order, the FRB expands upon the financial stability analysis set out in the PNC Order, which we believe will have significant implications for bank expansion through merger and acquisition transactions in the United States. Although the overall analysis, including the factors considered by the FRB, is generally the same as that set out in the PNC Order, the Capital One Order includes some additional explanation of how the FRB evaluates the individual factors that support its financial stability analysis and the relationship among those factors, and provides additional guidance as to the limited types of transactions that, in the FRB’s view, are not likely to present financial stability concerns.