The Federal Reserve and the Office of the Comptroller of the Currency have approved Capital One’s acquisition of Discover Financial Services, they said Friday.
The approvals allow for the largest merger in the banking space in at least six years.
The Fed said in a website post that it approved the Capital One acquisition of Discover after evaluating "the financial and managerial resources of the companies, the convenience and needs of the communities to be served by the combined organization, and the competitive and financial stability impacts of the proposal." It also said it fined Discover $100 million for card interchange fee overcharges between 2007 and 2023.
The OCC cited, as a condition of its go-ahead, the need to approve “plans detailing effective and sustainable corrective actions and timelines to address the root causes of any outstanding enforcement actions against Discover Bank and remediation of harm.”
The OCC “conducted a fulsome review … to ensure all statutory and regulatory requirements have been met,” the agency said in a press release Friday, adding that its announcement “reflects the OCC’s careful analysis of the effect of the merger on communities, the banking industry and the U.S. financial system.”
The regulatory nod comes roughly two weeks after reports surfaced that the Justice Department’s new antitrust leader, Gail Slater, determined there isn’t sufficient evidence to challenge Capital One’s acquisition of Discover in court.
Capital One, which is slated to count $660 billion in assets after the transaction closes, proposed its $35.3 billion acquisition of Discover in February 2024 — a deal that would make the combined company the largest U.S. credit card issuer.
In a statement, the OCC’s acting comptroller, Rodney Hood, said his agency “is committed to a regulatory framework that expands access to financial services for consumers, businesses and communities.”
The companies expect to complete the transaction in a month, on May 18, according to a press release Friday from Discover announcing the federal approvals. That completion date will net Discover’s interim CEO, Michael Shepherd, a $2.4 million cash bonus, based on a regulatory disclosure from the company last month.
Discover hinted at being a stronger competitor in the network battle with Visa and Mastercard. The combination “will increase competition in payment networks, offer a wider range of products to our customers, increase our resources devoted to innovation and security, and bring meaningful community benefits,” Shepherd said in the release.
The companies don’t plan to make any immediately changes to customers’ accounts, and will notify them “well in advance of any future change,” according to the Discover release.
After the deal closes, they’ll begin implementation of a five-year community investment plan that they said previously would provide some $265 billion of “lending, investment and philanthropy” in U.S. communities that are underserved by the financial services industry. Those include low and moderate-income as well as rural areas, plus with respect to communities of color, according to the plan.
