By David French

NEW YORK, (Reuters) – The delay by the White House in naming the Federal Reserve’s regulatory chief will likely increase the difficulty in approving bank tie ups. These have been on ice for most of September because of uncertainty about personnel changes at U.S. Central Bank.

While Democratic President Joe Biden said https://www.reuters.com/business/finance/biden-renominates-powell-fed-chairman-brainard-vice-chair-2021-11-22 last week he would re-nominate Jerome Powell as Fed chair, he left the industry guessing as to who would take on the powerful vice chair for supervision role overseeing Wall Street’s biggest lenders.

Randal Quarles stepped https://www.reuters.com/world/us/fed-announces-quarles-step-away-internal-regulatory-lead-role-vice-chair-term-2021-10-12 down from that role in October. According to the White House, it will announce Quarles’ replacement in October. Keith Noreika of Simpson Thacher, a partner, stated that it may take some time for the person to undergo vetting and then a long nomination process.

A lag in approvals for bank tie-ups is likely to delay announcements. This is making banks nervous about new deals.

According to a senior banker working on financial institution mergers and acquisitions, “Noone has the ability to approve deals.”

The Fed spokesperson declined to comment.

Bank holding companies are covered by the Fed. These structures are used by many of America’s largest banks, as they offer services that go beyond deposit-taking and lending.

The Fed did not adopt a policy change but it stopped its approval process in September. Sources said that the source, who refused to discuss client matters, had no other information.

Currently, seven big deals have been awaiting assent for longer than the median close time of 142 days from Jan. 1 to Nov. 15 this year, according to S&P Global (NYSE:) Market Intelligence.

First Citizen Bancshares purchased CIT Group (NYSE :). New York Community Bancorp Flagstar Bancorp was acquired by (NYSE:) In October, both stated that the expected completion dates for their acquisitions had been pushed back to 2022 because of delays in regulatory approvals.

A lawyer said that reviews were “effectively” on hold.

According to sources, the Fed’s policy of not allowing personnel changes in the near future could cause the freezing. This includes the potential for the removal of the chair.

Some of the concerns were eliminated by Powell’s renomination, but the supervision chief is still considered the gatekeeper. This person heads the oversight committee, which examines possible tie-ups and kicks them to central bank’s board for formal voting.

Progressives say Powell is too friendly to the industry. They are pushing https://www.reuters.com/markets/us/progressives-frustrated-white-house-punts-regulation-chief-2021-11-22 for the White House to appoint a supervision chief who will be tough on the industry and curb tie-ups, which they say harm consumers by creating bank deserts and pushing up fees.

Todd Phillips, director of the Center for American Progress (a liberal think-tank), stated that “they have been too permissive with mergers.” “We…really desire small banks. Smaller banks are more inclined to lend in their communities.”

Sherrod brown, the Chair of the Senate Banking Committee, said to the Wall Street Journal Tuesday that he is discussing various candidates with President Obama.

Brian Gardner, chief Washington policy strategist for Stifel Investment Bank, stated last week that “whoever is elected…will be more aggressive in banking regulation.” It is not known how aggressive or high the hurdle banks will have to overcome in order to get their merger applications approved.

The White House’s decision to elevate Fed Governor Lael Brainard to vice chair may also bode badly for multi-billion-dollar deals given that she voted against https://www.federalreserve.gov/aboutthefed/boardvotes2020.htm Morgan Stanley (NYSE:)’s purchase of E*Trade and TD Ameritrade’s acquisition by Charles Schwab (NYSE:) Corp.

COMPETITION SCRUTINY

Banks can merge to increase their scale and lower costs. They also have to contend with historically low interest rate, which has reduced net interest income and increased competition from fintechs.

However, the Biden administration is proving more skeptical about mergers.

The president signed an executive order in July to examine potential reforms to competition laws. He cited concerns about uncontrolled mergers having contributed to the lack of energy in key sectors and hampered consumer choice.

Federal Trade Commission also has been putting greater emphasis on economic deals.

Biden’s executive order directed https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy the Justice Department, along with the bank regulators, to review bank merger policies, with the results due next year.

Phillips from the Center for American Progress stated, “The problems are how we balance size, such as is a Bank too big to fail? versus (and how) do we value competition?”