Fed: Capital One to be 5th Biggest by Deposits, 4th in Credit Cards

Capital One is poised to become the fifth largest U.S bank by deposits following the Federal Reserve approval of its $9 billion acquisition of the online banking business ING Direct.
Capital One is also positioning itself to become the fourth largest credit card issuer – it is currently fifth – with the anticipated approval of its purchase of the U.S. credit-card business of HSBC Holdings.
Its planned acquisition of ING Direct is the biggest bank deal to win Fed approval since the 2010 Dodd-Frank reform was enacted to prevent the prevalence of “too big to fail” institutions that would pose a threat to other financial firms or the broader economy.
McLean, Virginia-based Capital One would become the fifth largest U.S. depository organization, with consolidated deposits of about $210 billion, representing about 2.3 percent of the total insured deposits.
The Fed concluded that the purchase of ING Direct and its nonbanking subsidiaries “can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources…”
During a public commentary period last year, the Fed heard from many opponents to the acquisition. Those opposed cited “a number of specific concerns regarding Capital One’s compliance with fair lending and consumer protection laws,” the Fed said.
Those complaints included policies on originating home mortgage loans insured by the Federal Housing Administration (FHA) that produced charges of “illegal discriminatory impact on minorities,” the Fed said.
Some alleged that Capital One refused to lower its minimum FICO credit score required for FHA loans from 620 to 580, the minimum threshold established by FHA for such loans, the central bank said.
To address these concerns, Capital One is preparing to offer FHA loans to borrowers with FICO scores of between 580 and 620, “with appropriate protections to minimize the risk of the borrower’s default,” the Fed said in its approval order of the ING Direct acquisition.
Capital one will also develop “the servicing and reporting platforms necessary to sell such loans directly to the Government National Mortgage Association (Ginnie Mae),” the order said.
In June, Capital One revealed plans to buy ING Direct USA, the Internet bank famous for its orange lion logo and high-interest savings accounts. It is also a unit of ING Groep NV, the biggest Dutch financial-services firm.
The bank is also planning to complete a separate $2.6 billion plan to buy the U.S. credit-card business of HSBC Holdings PLC in the second quarter. Capital One has applied to the Office of the Comptroller of the Currency (OCC) for approval to acquire up to $29 billion in credit card assets from HSBC.
Capital One is currently the fifth largest provider of credit cards in the United States. Assuming the acquisition of the HSBC credit card assets, Capital One would increase its share of outstanding credit card balances in the United States from 7.7 percent to 11.8 percent, becoming the fourth largest provider of credit cards in the United States.
The Fed said Capital One’s share of credit card loans “does not appear to be substantial enough to cause significant disruptions in the supply of credit card loans,” assuming the HSBC acquisition is approved.

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