Fed approves Capital One’s $9 Billion purchase of ING Direct

February 15, 2012
By Staff | Richmond Times-Dispatch

Capital One Financial Corp.'s planned purchase of ING Groep NV's U.S. online bank won approval from the Federal Reserve, clearing the way for the Virginia-based credit-card lender to add about $80 billion in deposits.

The deal will make Capital One the nation's fifth-largest bank by deposits.

The Federal Reserve, which regulates bank holding companies, announced the unanimous vote late Tuesday. It had delayed making an announcement Monday after a closed-door meeting on the matter.

"The board's action directed Capital One to take specific steps to ensure that its risk-management functions, including compliance, are commensurate with its new size and complexity," the Fed said in a statement.

The ING transaction, announced in June, will add more than 7 million customers.

Capital One, the Richmond region's largest private employer, agreed to buy ING Direct USA for $9 billion. The transaction will be completed within days, Capital One said.

"The ING deal is going to prove to be one of the strategically most transformational things that's ever happened in this company," Richard Fairbank, the company's chairman and chief executive officer, said at a Feb. 8 investor conference in Miami.

"It is a very low-cost way for Capital One to become a national player in banking."

Costs rose 25 percent in the fourth quarter as Capital One spent more to build out infrastructure and technology systems, the company said last month. The company derives more than half its revenue from credit cards.

Capital One spokeswoman Julie Rakes said the company is pleased with the Fed approval. "With the Fed's approval, Capital One has the opportunity to build upon the strong foundation of ING Direct for the benefit of our customers, associates, shareholders and local communities."

The deal is the first the Fed reviewed under a provision of the Dodd-Frank Act, which requires the central bank to consider whether mergers will result in "greater or more concentrated" risks to the financial system.

Regulators held three hearings to allow public input on the purchase and extended the comment period amid opposition from advocates for consumer rights and affordable housing, including the National Community Reinvestment Coalition.

The coalition, in a September letter to Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner, said that the ING deal threatens the goals of Dodd-Frank.

The transaction will create another "too-big-to-fail" institution and should be allowed only if Capital One implements a "meaningful plan showing a true commitment to do more for the public," John Taylor, the coalition's CEO, said at a Sept. 20 hearing in Washington.

"We're extremely disappointed in [Tuesday's] decision," Taylor said in a statement. The organization is considering its options to challenge the approval, he said.

Capital One pledged to make $180 billion in new community-development loans and investments over the next decade, including $28.5 billion in home lending to borrowers characterized as low- and moderate-income. The bank also announced plans to hire thousands of workers.

ING, the biggest Dutch financial-services firm, was ordered by the European Union to sell the U.S. unit as a condition of its government bailout during the financial crisis. The agreement will give ING a seat on Capital One's board.

In August, Capital One agreed to purchase HSBC Holdings Plc's U.S. credit-card portfolio. That transaction is set to be completed in the second quarter.

Copyright Richmond Times-Dispatch. Used by permission.

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