Bank of America Corp. has started talking to state banking associations and legislators about the prospect of raising the cap that prevents banks from gaining more than 10 percent of U.S. deposit share through acquisition.
The Charlotte bank is the only U.S. bank near the threshold.
In a filing last month, it told the Federal Reserve it would control a little more than 9 percent of total deposits once it completes its pending acquisition of wealth manager U.S. Trust Corp.
Under the 1994 Riegle-Neal Interstate Banking Act, banks cannot exceed 10 percent of total U.S. deposits through an acquisition, but they can go over the limit through internal growth. The idea was to avoid concentrating business among just a few mega-banks.
Recent research by a Washington think tank argued the cap artificially restrained the banking industry, potentially resulting in less favorable interest rates for consumers. The research noted that other U.S. businesses, including the mutual fund industry, do not face similar restrictions and are more concentrated.
Bank of America had not openly lobbied for repealing the cap in the past, but executives have said that they would favor a tweaking of the calculation to include credit union and money-market deposits, effectively reducing the bank's percentage of total market share.
The Wall Street Journal first reported Bank of America's latest efforts in an article January 16, 2006.
In a position paper presented to banking associations this month, BofA argued that the cap hurts the global competitiveness of U.S. banks as the cap doesn't apply to acquisitions by foreign banks. The provision also prevents a U.S. bank from buying a foreign institution if that bank has too much in U.S. deposits.
In the paper, Bank of America contended that local competition is protected by state caps on market share, which usually prohibit banks from gaining 30 percent of a state's deposits through acquisition.
The Independent Community Bankers of America, a trade association, led negotiations for the 10 percent cap in 1994. The ICBA has stated public opposition to removing the cap arguing that lifting the cap would not be good for consumers, small businesses or rural areas.
The 10 percent boundary makes it difficult for Bank of America to make a sizable acquisition in the U.S., but it has been able to squeak under the limit in past deals by shedding deposits. The law also does not prevent a bank from exceeding the cap when buying a savings and loan.
Bank of America Chairman and Chief Executive Ken Lewis has said his bank does not need to do a major acquisition to succeed, but rumors continue to swirl about his appetite for further deals. One area where the bank would like to grow in the U.S. is Chicago, where it has been building branches, a more costly way to attain customers.
