Capital One's $35 Billion Acquisition of Discover Receives Regulatory Approval
In a significant move in the financial sector, Capital One Financial Corporation (COF) has been granted regulatory approval for its impressive $35 billion acquisition of Discover Financial Services (DFS). This monumental transaction is poised to create the largest credit card company in the United States.
On Friday, two crucial regulatory bodies, the Federal Reserve Board of Governors and the Office of the Comptroller of the Currency (OCC), officially sanctioned the merger. Their collective approval came after a thorough assessment, confirming that the involved companies met the necessary final conditions for the deal.
In a letter detailing the decision, the OCC's Large Bank Licensing office emphasized, This approval is granted based on a thorough review of all information available. The OCCs evaluation concluded that the merger aligns with the stipulations outlined in the Bank Merger Act, which governs such financial transactions.
Specifically, the OCC determined that the integration of Capital One and Discover would not significantly diminish competition within the market. It also assessed that the merger would not jeopardize the convenience and service quality for the communities served by both banks. In addition, the regulators found no evidence that combining these two entities would undermine their efforts in combating money laundering, nor would it add undue risk to the overall banking and financial systems across the United States.
While the approval marks a pivotal step in the merger process, it came with a stipulation: Discover must adhere to a consent order related to a $100 million penalty for overcharging customers through certain interchange fees from 2007 to 2023. Notably, Discover has already rectified these practices and is in the process of reimbursing affected customers, as noted by the Federal Reserve.
The OCC's approval is also contingent upon Capital One submitting a comprehensive plan addressing the root causes of existing enforcement actions against Discover Bank and providing a strategy for remediating any damages.
With this acquisition, Capital One is set to solidify its status as the leading credit card issuer in the U.S. in terms of loan volume, surpassing even the banking giant JPMorgan Chase (JPM). This merger will culminate in a consolidated asset portfolio of approximately $637.8 billion, positioning the newly formed entity as the eighth-largest bank in the country, according to Federal Reserve data.
The move highlights the expansive reach of Capital One, which is widely recognized for its memorable advertising campaigns featuring the slogan, Whats in your wallet? The acquisition will also enhance the bank's payment network, which serves over 300 million cardholders. This substantial customer base will allow Capital One to exert significant influence over merchant fees associated with card transactions.
The OCC is committed to a regulatory framework that expands access to financial services for consumers, businesses, and communities, stated Acting Comptroller of the Currency Rodney Hood in conjunction with the announcement. All necessary regulatory approvals have now been secured, and the merger is anticipated to close on May 18, 2025, pending the fulfillment of standard closing conditions outlined by Capital One.
