Gov. Andrew M. Cuomo’s chief counsel, in a letter he sent to regulators, said the state has “strong concerns” about KeyCorp’s planned acquisition of First Niagara Financial Group.
Alphonso B. David said the state is concerned that the deal would create an anti-competitive banking marketplace, particularly in upstate New York, and harm the state’s economy with expected job cuts.
David said the state is “increasingly concerned” with the ability of some consumers to access certain financial products and services offered by banks, and the sometimes high cost of nonbank alternatives such as payday loans and check cashing. He said that in some counties, including Erie, Niagara, Monroe and Onondaga, the number of banks per 10,000 people is below the national average, and that “the availability of banks to serve the needs of the community are limited.”
“For these counties, the merger would likely result in a further reduction in the number of banks to serve those communities, exacerbating anti-competitive concerns,” David wrote.
The letter, dated Nov. 10, was sent less than two weeks after KeyCorp announced plans for a $4.1 billion deal for the Buffalo-based bank. It was addressed to the Federal Reserve’s Board of Governors, the Office of the Comptroller of the Currency and the U.S. Department of Justice. The letter was released as part of a Freedom of Information Act request submitted by The Buffalo News.
David said the “potential impact and job losses of the contemplated closing of banking facilities in our state associated with the proposed acquisition would have a significant, negative impact on New York’s economy.”
He noted that several other banks believed to have been interested in acquiring First Niagara, including Ohio-based Huntington Bancshares, “would not raise the same anti-competitive concerns or negatively impact New York state’s economy.”
“The proposed acquisition should be consistent with the principles of fair competition, economic sustainability and consumer access to critical products and services offered by banking institutions; not simply driven by shareholder profits,” David wrote.
The Federal Reserve Bank of Cleveland released copies of letters it received in early December from 45 organizations – including a performing arts center, a church, a college school of medicine and a variety of nonprofits – calling for approval of the deal, citing KeyCorp’s record of support for them. Many of the organizations are based in or near Cleveland, home of KeyCorp’s headquarters. Generally speaking, the organizations said they believed that the acquisition would strengthen KeyCorp as an institution, enhancing its ability to support community causes.
One letter of support for the deal came from the Buffalo Niagara region. Kathleen A. Granchelli, CEO of the YWCA of the Niagara Frontier, said the organization and the people it serves “have been very positively impacted by KeyCorp’s business strategy of community responsibility.”
Granchelli cited examples ranging from the bank working with the YWCA on an adaptive reuse project in Niagara Falls, to KeyBank Foundation support for an employment and training program, to volunteer work by Key employees in programs related to women’s leadership development.
The Federal Reserve has set a Jan. 31 deadline for the public to submit comments about the KeyCorp-First Niagara deal.