U.S. bank M&A surges as regulation eases: Fitch

“Most striking is the reduced timeline for regulatory approval of deals,” the report said.

For instance, it noted that Columbia Banking System’s latest acquisition was approved in under four months, whereas it took 15 months to get a deal approved under the regulators’ previous approach.

This fast tracking of bank mergers came as regulators sharply reduced their scrutiny of proposed deals, which had been dramatically tightened under the previous administration.

At the same time, the macro environment has been more conducive to dealmaking too — as interest rates have eased, and concerns about the impact on bank liquidity from turmoil in crypto markets has abated too.

“Previously, higher rates had sharply expanded unrealized losses in investment and loan portfolios, which deterred deals because any transaction would have forced those losses to be recognized on a mark-to-market basis,” the report said.

Yet, as rates have come down, that impediment has been curbed.

And, at the same time, banks’ stock prices are up — providing banks with currency to get deals done.

Against that backdrop, both the number and the size of transactions increased notably, Fitch said.

The number of deals is up by about 33% since the abrupt shift in policy, it noted — and the average announced deal size has jumped 64%.

Additionally, the number of new players in the banking sector has risen too. Alongside the easing of bank regulation and efforts to facilitate the growth of the U.S. crypto sector, the report noted that most applications for new banking charters are coming from fintechs and firms in the stablecoin space.

Under the current approach to banking regulation, M&A activity is expected to remain robust, Fitch said — “as many market participants view the current environment as a limited window of opportunity,” before the regulatory pendulum swings back the other way.