Greater regulatory scrutiny and a focus on community commitments are needed amid the collapses of Silicon Valley and Signature banks.


SAN FRANCISCO – In wake of the recent failures of Silicon Valley Bank (SVB) and Signature Bank, the California Reinvestment Coalition on Monday called on federal and state regulators to halt all merger activity until current bank merger rules are updated. 

“The past few days have exposed the volatility in the banking sector, partially due to the aftermath of the Trump Administration’s 2018 pro-big bank and pro-risk rollbacks on the Dodd-Frank Act, and have brought to light the potentially large consequences such volatility can have on working-class communities.

“As we watched these two banks fail, one thing has become clear: The public rightfully deserves greater regulatory scrutiny of financial institutions to ensure that “too big to fail” and “too big to manage” banks don’t run adrift, leaving depositors, small businesses, low- to moderate-income households and communities holding the bag. For this reason, we are calling on federal and state regulators to freeze all merger activity until bank merger rules are updated to better protect consumers and communities. 

“As federal regulators work to find buyers for SVB and Signature Bank, all community benefits agreements—which are entered into as part of the bank merger process—and other commitments made by these failed banks should be treated as liabilities of the banks that an acquirer must assume. In other words, whoever acquires SVB must honor its community benefits agreement with California community groups as a condition of the acquisition. So too for any Signature Bank commitments and for other institutions that may run into liquidity or other challenges.

“Working-class borrowers of color rely on community benefits agreements as a lifeline, yet they are being ignored in this conversation. The attention is currently focused on the plight of venture capital firms and tech companies, and those depositors well-heeled enough to place more than $250,000 into each bank. Alarmingly, little concern is being expressed about the impact of bank failures on low-income communities and communities of color with which banks make commitments to serve by reinvesting back into communities and entering into community benefits agreements. 

“Such commitments are critical to keeping communities at the forefront of bank mergers, which provide short-term gains for banks, but are generally bad for consumers as they are provided fewer banking options and greeted with higher fees while experiencing branch closures, job loss and reduced reinvestment. Bank mergers also lead to a greater concentration of risk and create large institutions that are harder to manage—as we have learned with these two banks. 

“Banking consolidation puts us all at risk. Until bank merger rules are updated and community needs are elevated, we will continue to call for a halt to all bank mergers.”