The Federal Reserve Board has decided to delay a decision on Capital One Financial Corp.'s $9 billion deal for ING Direct USA, a spokeswoman for the central bank said Monday.
"The board considered the application at its meeting this afternoon, and it expects to issue a decision soon," said Barbara Hagenbaugh, a Federal Reserve spokeswoman. "No further announcement is expected today."
It was the second time in less than a week that the Fed had put off action on the deal. Fed officials were initially expected to meet last Wednesday but postponed the board meeting without offering any reason for the delay. At the time, Capital One said a scheduling conflict at the Fed was to blame.
No further details were provided on when the Fed will act.
"This is a thoughtful and deliberate process and we appreciate the thoroughness of the Fed's review," a Capital One spokeswoman, Tatiana Stead, said. "We look forward to their final decision and the positive impact the acquisition will have on our customers, associates, shareholders and our communities."
Critics have said the merger, proposed in June, would create another too-big-to-fail institution and put the financial system at grave risk.
The Fed has been widely expected to approve the merger, but two postponements in less than a week will surely fuel speculation about regulators' possible concerns .
"In my long career following bank mergers, I have never known the Federal Reserve to take this long in issuing a decision," John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC), said in a news release. The NCRC is one of the critics of the deal. "Today's vote postponement is encouraging news. This is a small sign that perhaps the era of rubberstamping bank mergers is over."
The deal has been largely described as a test case for regulators in how they will assess systemic risk — a new requirement under regulations in the Dodd-Frank Act.
Ultimately, that's the question the Fed must answer in evaluating the merger. The central bank is tasked with determining whether the public benefit of such a deal would outweigh any potential risk to the financial system.
Critics have argued that Capital One has done little to demonstrate what public gain would be achieved.
The central bank held three public hearings in Washington, Chicago and San Francisco to hear from all sides whether to allow Capital One, best known for its credit card operations, to buy the U.S. online banking unit of ING Group.