Banking and Finance Law Daily House committee examines proposed BB&T—SunTrust bank merger
Thursday, July 25, 2019

House committee examines proposed BB&T—SunTrust bank merger

By Colleen M. Svelnis, J.D.

The House Financial Services Committee has held a hearing on the proposed merger between BB&T and SunTrust banks, examining the potential risks posed by the resulting merged bank, which would be the 6th largest in the country.

The U.S. House of Representatives Committee on Financial Services has held a committee hearing, entitled "The Next Megabank? Examining the Proposed Merger of SunTrust and BB&T," to examine the largest proposed merger since the financial crisis. Committee Chair Maxine Waters (D-Calif) expressed concern that if the merger goes forward "it will create yet another megabank that is too big to manage and that poses a risk to our financial system." The proposed merger between BB&T and SunTrust Banks would create the sixth largest bank in the country, with $442 billion in assets.

Waters asked the Federal Reserve and the Federal Deposit Insurance Corporation to defer any final decisions on the application for the merger until after the committee "has had the opportunity to conduct a full review of the matter." Testifying at the committee hearing were Kelly S. King, BB&T Corporation Chairman and Chief Executive Officer, and SunTrust’s Chairman and CEO, William Rogers.

Rep. Blaine Leutkemeyer (R-Mo) delivered an opening statement, saying that "it is the job of this Committee to ensure the proposed merger is thoughtfully and thoroughly reviewed in accordance with current law." Leutkemeyer cautioned the committee against "judging these two institutions based on any factors outside of the legal process, and instead ensure these institutions comply with all of the requirements set forth by Congress and the regulators examining this merger."

Ranking Member Patrick Henry (R-NC) also spoke at the hearing, stating that since the financial crisis, the Fed has approved 1,812 mergers of banks but "[t]his is the first hearing of this kind in the last 20 years in this committee." Henry blamed the Dodd-Frank Act and the Democrats for making "the largest banks larger while suffocating smaller institutions." He pointed to the post Dodd-Frank regulatory landscape and the cost of compliance as a driver behind mergers, and for creating the idea that size of a financial institution equals survival.

BB&T community efforts. BB&T’s Chairman and CEO, Kelly King testified about the merger and the new combined company, stating it will "create a stronger organization that is strategically positioned to meet the evolving needs of customers." According to King, the goal is to "produce a bold, transformative organization that delivers a smarter and easier client experience through technology and human connection while embracing new technologies."

King discussed his organization’s commitment to communities, noting that, for the last decade, BB&T’s associates have participated in an annual community service effort called the BB&T Lighthouse Project, which has completed more than 12,000 community service projects and provided more than 640,000 volunteer hours. Kelly noted that BB&T consistently receives an "Outstanding" rating from the FDIC during its annual evaluation of the bank’s Community Reinvestment Act (CRA) performance.

Additionally, according to King, BB&T and SunTrust recently announced a new Community Benefits Plan that would provide $60 billion in loans and investments to low- and moderate-income (LMI) borrowers and communities over three years—from 2020 to 2022. This would include $31 billion for home mortgage loans to LMI borrowers, $7.8 billion for lending to small businesses, $17.2 billion in "Community Development Lending" to support affordable housing development, and $3.6 billion in "CRA Qualified Investments and Philanthropy." Kelly also stated that the new company will look to open at least 15 new branches in LMI and majority-minority communities.

King stated that the banks have pledged to invest an incremental $100 million annually into innovation and technology and create a new Innovation and Technology Center in Charlotte, N.C. to focus on creating an industry-leading digital experience. According to King, this will "enable the combined company to better compete with the largest banks, creating a more competitive and systemically stabilizing landscape."

King touted his bank’s "strong risk management practices and robust underwriting analytics," stating that it is "deeply liquid and well-capitalized," and has "consistently demonstrated very strong results in our respective annual stress tests." King stated, "While the merger will increase the total asset size of the legacy entities, such assets of the combined company will continue to be comprised of lower risk small- and middle market business loans, farm loans, student loans and mortgage loans."

King testified that the bank’s commitment to diversity and inclusion "begins at the top" and announced that it is joining Financial Services Committee member Alma Adams (D-NC), in a "partnership that will benefit historically black colleges and universities across the country."

Strength, not risk. SunTrust’s Chairman and CEO, William Rogers, stated that the merger will not increase risk. He said that each company "has a conservative risk profile now, and we will maintain so as a combined entity. We are adding scale, not complexity." According to Rogers, the combined BB&T/SunTrust entity will "actually increase competition by creating a stronger regional bank that reduces concentration of systemic risk at the top of the market." He promises that the combined company will have "an even more balanced profile due to greater diversification across customers, business lines and geographies, and it will bring new strengths to areas less served by major institutions."

Rogers stated that SunTrust’s commitment to putting customers, communities and employees on the path to financial confidence extends beyond any regulatory requirement. He highlighted their philanthropic efforts and inclusion, stating that in 2018 SunTrust employees volunteered more than 200,000 hours to support their communities, working with more than 5,300 organizations. In addition, Rogers stated that the SunTrust Foundation granted $19.5 million to charitable causes in the past year.

Rogers emphasized the bank’s commitment to diversity and its commitment to hire and develop a skilled and diverse multi-generational workforce. He stated that the bank is "committed to diverse representation at all levels of the organization to ensure that our teams reflect the communities and customers we serve." Rogers stressed that SunTrust seeks to hire "talented people who have served in the military, are living with a disability, and who represent different genders, races, sexual orientation and ethnic backgrounds, while striving to create an inclusive environment where employees learn from and leverage strengths across generations." The bank’s current workforce is 60 percent women and 43 percent people of color, he stated.

Companies: BB&T; SunTrust

MainStory: TopStory BankingFinance CommunityDevelopment DoddFrankAct FederalReserveSystem FedTracker FinancialStability FinTech Loans MergersAcquisitions NorthCarolinaNews

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