Gov. Andrew M. Cuomo called for federal regulators to reject KeyCorp’s proposed acquisition of First Niagara Financial Group, and threatened legal action if the deal goes through.
Cuomo, in a strongly worded letter dated Wednesday, said the deal “raises significant anti-trust concerns that, if allowed to proceed, will have a devastating impact on the retail banking industry and consumer access in upstate New York.”
The governor said the deal would “reduce banking competition by limiting consumer access in upstate New York to an unacceptably low level,” and contended the “consolidation is expected to result in thousands of lost jobs at the corporate and branch levels, with little hope these individuals will find alternative work in the retail banking field due to the oversaturated market conditions.”
Cuomo also mentioned some of the same concerns raised by community groups: that the deal would limit upstate consumers’ ability to access financial services and products offered by banks via branches, and likely force them to rely on alternatives such as payday loans and check-cashing operations.
“If the acquisition application is not blocked, we will be forced to consider legal redress with the courts to protect the rights of New York’s upstate residents,” Cuomo wrote.
In a separate statement, Cuomo called blocking the deal “the right thing to do – plain and simple – and my administration will not hesitate to stand up for New Yorkers by opposing this acquisition.”
Cuomo addressed his letter to the Federal Reserve, the Office of the Comptroller of the Currency and the U.S. Department of Justice, each of which is reviewing the deal. Cuomo’s chief counsel, Alphonso David, sent a letter last November to regulators raising concerns about the deal, but Cuomo’s letter went much further in opposing it.
KeyCorp hopes to complete its acquisition of First Niagara in the third quarter, but first needs the approval of shareholders and regulators. Both banks have scheduled special shareholders meetings for March 23. The deal is now valued at about $3.5 billion, since it is tied to Key’s share price, which has dropped since the deal was announced last October.
“At KeyBank, our purpose is to help clients and communities thrive and we are known as a responsible bank and citizen in the communities we serve,” said Therese J Myers, the banks’ vice president for external communications, in an email. “We wholeheartedly believe by further investing in New York we will increase our ability to better serve the people, businesses and communities of this state. We look forward to working with Governor Cuomo and his staff to address their concerns and share our commitments.”
Other elected leaders have also spoken out against the deal. Last week, County Executive Mark Poloncarz and Rep. Brian Higgins, D-Buffalo, said the acquisition would reduce jobs and consumer choice.
While elected officials argue that the deal would eliminate jobs and branches, regulators reviewing bank merger applications focus on criteria such as the impact on competition and the combined bank’s financial capabilities. Key is expected to have to divest itself of some branches in order to satisfy the Justice Department’s antitrust concerns.
The deal has stirred local anxieties about job cuts because both banks have a significant local presence. First Niagara has about 2,300 jobs in Western New York, while Key has about 1,000 employees in the Buffalo and Rochester areas. First Niagara is headquartered in Larkinville, while Key has a regional corporate office at 250 Delaware Ave.