BofA Raises Antitrust Issue in Merger Deal : Banking: Combining with Security Pacific could give the new firm heavy concentrations in 16 markets, including five in California.
BankAmerica Corp. on Monday identified 16 banking markets in five states--including five areas in California--where it is likely to face the toughest antitrust hurdles stemming from its proposed merger with Security Pacific Corp.
The information is contained in a voluminous application made by the San Francisco-based banking firm to the Federal Reserve Board, which is required to approve the merger of the once-fierce rivals. Most of the application was made public Monday by the Fed.
To head off major antitrust problems, BankAmerica already has proposed divesting about $4 billion of the combined banks’ deposits in branches throughout the West, although it has yet to list publicly which branches would be affected.
The information released Monday gives some indication of where some may be, listing markets in Washington, Arizona, California, Oregon and Nevada where the bank will still exceed basic antitrust “screening” criteria used by federal officials even after its planned divestitures are made.
Although California overall poses few antitrust hurdles for BankAmerica, the filing indicates that the bank would exceed by a small amount the basic criteria in five markets--Riverside, China Lake, El Centro, San Luis Obispo and Twenty-Nine Palms. In its application, the bank argues that competition will remain healthy in those markets, adding that out-of-state banks may now easily enter the California market.
The criteria used by antitrust officials is measured by a mathematical system, first used to measure concentration of business in the steel industry, that gives a numerical measurement to the concentration of a bank’s presence in a community. Justice Department officials could require BankAmerica to sell more branches and deposits, although merely exceeding the basic “screening” level does not necessarily mean officials will force BankAmerica to divest more.
Washington and Arizona pose bigger problems because the combined bank would continue to exceed the guidelines in the most populous areas in those states.
In Washington, the bank would exceed the basic antitrust criteria in Seattle, Stevens County, Grand Coulee, Othello and Port Angeles markets. BankAmerica argues that savings banks in Washington are especially competitive with banks, that credit unions such as the one for Boeing’s aerospace workers is highly competitive and that Washington’s healthy economy will continue to attract outsiders as competitors.
In Arizona, BankAmerica would exceed the basic levels in the Phoenix, Tucson, Flagstaff and Green Valley markets. BankAmerica argues, however, that it entered Arizona by buying failed thrifts from the federal Resolution Trust Corp. so its competitive clout as a bank is overstated.
The filing shows that the basic level in Oregon would be exceeded in only one market, Dalles. In Nevada, it would be exceeded only in Elko.
A number of banking authorities and lawyers have suggested that the government’s traditional method of evaluating antitrust measurements is antiquated because it does not take into account the growing presence of non-bank financial units, such as those of Sears, Roebuck & Co., and downplays the importance of thrifts as competitors. Although BankAmerica includes extensive arguments on those issues in its filing, the bank has so far steered clear of making them central issues with regulators because it wants to wrap up the merger quickly.