In the wake of BMO Financial Group’s acquisition of M&I Bank last week, U.S. Sen. Herb Kohl (D-Wisconsin) expressed concern that the acquisition of local banks by large out-of-state banks has a negative effect on small businesses and farmers.
“We have seen evidence that mergers of smaller banks can be good for small business,” Kohl said at a Senate Banking Committee hearing. “But when large national banks buy smaller banks, small business loans tend to decrease, that is the statistic.”
Ben Bernanke, Federal Reserve chairman, testified before the Banking Committee, of which Kohl is a member.
“As more national banks acquire regional and community banks, what can be done to ensure that they keep lending to small businesses? Is the Federal Reserve looking at the impacts of consolidation on lending to small business and farmers?” Kohl asked Bernanke.
Bernanke said community banks are, in fact, awarding more loans to small businesses than larger banks and that local banks are important. The Federal Reserve and Department of Justice take into account the local impact before approving mergers, he said.
BMO Harris recently announced it is making $5 billion in credit available to small and medium-sized businesses in the Midwest, Arizona and Florida over the next two years.
