February 24, 2024 / VOLUME NO. 302

Will Capital One’s Deal Get Approved?

Earlier this week, Capital One Financial Corp. announced its planned acquisition of Discover Financial Services. The deal would create a financial services behemoth — if it can get a blessing from regulators. 

Capital One has set an aggressive deadline, expecting to close the transaction later this year or in early 2025. But regulators have been taking longer to close deals, as Bank Director explored last month. Clint Stein, the CEO of Tacoma, Washington-based Columbia Banking System, assumed his bank's merger with Umpqua Holdings Corp. would take about nine months to close. In reality, the deal crossed the finish line in March 2023, 17 months after the merger was announced. 

A combined Capital One and Discover would dwarf $54 billion Columbia. As of the fourth quarter 2023, the two companies’ combined deposits total $457 billion, which could put their banking operations just behind U.S. Bancorp. Capital One would outrank the industry for credit card loans, at an estimated $250 billion based on 2023 figures.

Large, complex deals typically get more scrutiny from regulators, due to concerns about financial stability and competitive effects. Based on recent proposed rulemaking from the Office of the Comptroller of the Currency — Capital One’s primary regulator — there’s little indication that regulators want to speed up M&A approvals anytime soon. The proposal would nix a longstanding policy where certain deals were automatically approved within 15 days of the close of public comment if the OCC failed to act, according to the law firm Jones Day.

Capital One — already one of the biggest banks in the country — will just get bigger if it integrates Discover. 

Democratic Sen. Elizabeth Warren quickly objected to the deal, urging regulators to “block it immediately.” 

National Community Reinvestment Coalition CEO Jesse Van Tol also opposed the combination in a statement this week, citing antitrust concerns and Capital One’s “terrible track record on compliance.” The bank paid a $390 million civil money penalty tied to Bank Secrecy Act violations in 2021, and $80 million in 2020 due to information security gaps. 

Discover has also had recent skirmishes with its regulator. In a September 2023 consent order, the Federal Deposit Insurance Corp. cited purported consumer compliance deficiencies. 

Combining Capital One and Discover may make strategic sense. But that alignment won’t matter if the two companies can’t convince regulators to close the deal.


• Emily McCormick, vice president of editorial & research for Bank Director

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