Official Channels
The OCC and Fed almost never use official channels to block a bank’s attempt to engage in new activities like buying a rival or opening branches. Of the 12,869 proposals banks submitted for Fed approval between 2009 and 2018, the agency denied only two -- one in 2013 and another in 2014, according to regulatory data.
Instead, during the Obama years, watchdogs thwarted growth plans before banks had taken formal actions to seek approval, people with knowledge of the matter say.
Bank of America was discouraged from growing while the company worked to resolve a series of private notices, known as matters requiring attention, and public enforcement actions that identified weaknesses across the bank, according to two people with knowledge of the matter. In one example, regulators criticized the way the bank logged and kept track of customer complaints, and it took the company years to resolve the matter. The lender said last year it planned to open 500 new branches across the U.S., including moving into new cities.
“We’ve steadily opened more than 300 financial centers during the last decade, and plan to open over 300 more during the next few years,” said Bill Halldin, a Bank of America spokesman.
At Regions Financial Corp., supervisors stopped the bank from growing in the years following the financial crisis after an internal audit revealed shoddy loan practices, according to two people familiar with the matter. While the punishment was private, the impact was stark: The bank didn’t open a single branch from mid-2012 to March 2015, according to FDIC data.
In December 2015, Regions got into trouble for failing to meet Community Reinvestment Act requirements, which led regulators to restrict its ability to do M&A and open branches until it improved its rating. Regions has moved on, opening about 50 branches in the past year and a half. In February, the bank unveiled a three-year plan to boost growth.
Evelyn Mitchell, a Regions spokeswoman, said the bank doesn’t comment on supervisory relationships.
Dimon’s Ambitions
Then there was U.S. Bancorp, which had to put a strategy revamp on hold after the OCC slapped it with a consent order in 2015 for improperly handling suspicious transactions under anti-money-laundering and bank-secrecy regulations, according to a person with knowledge of the matter. It hasn’t opened a branch since 2015, according to data from the Federal Deposit Insurance Corp.
The Minneapolis-based bank alluded to the restrictions in a February regulatory filing: The termination of the consent order late last year “will give the company more flexibility to optimize its existing branch network and to selectively expand into new markets,” the bank said.
During their tenures, the message from Curry at the OCC and Dan Tarullo, the Fed’s bank-supervision chief, was clear: Compliance should be a top priority and anything that might distract management -- like a planned shift in corporate strategy -- was to be avoided.