US banks are hungry for deals

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0:33Good morning from the Financial Times. Today is Monday, June 30th, and this is your FT News Briefing. U.S. banks can't wait to start doing deals again, and China's online stores might be going out of style in America. Plus, the White House is starting its search for the next central bank chair early. It's just going to sow confusion at a time when markets are already having to face a lot of uncertainties about economic policy. I'm Kasia Broussalyan, and here's the news you need to start your day.

1:20U.S. banks are hungry for takeovers, and their next meal might just be right around the corner. Executives are anticipating a surge in deals in the next year, even as the last few months have been hit by a bit of a food desert. Now, here to hopefully explain my tortured metaphors is the FT's Martin Arnold. He writes about financial regulation. Hey, Martin. Hello. All right. So tell me what's driving the positive outlook for U.S. bank consolidation. Why are we expecting a turnaround? Yeah. Yeah, so it's very much an expected turnaround. And the reasons people are anticipating that this is going to happen are mainly twofold, I would say.

1:59The first is a big shift in the regulatory climate. So the main watchdog and supervisors of the banks in Washington are proactively saying that they want to change the rules and regulations to encourage more bank mergers. And secondly, people are looking ahead to what they hope will be a reduction in the volatility and uncertainty that has been thrown up by the trade tensions and also many of the geopolitical tensions created under the Trump administration. Well, and speaking of the regulatory climate, what evidence are we seeing right now that a boom in consolidation could be right around the corner?

2:45So, as I mentioned, regulators are proactively saying they want to encourage more consolidation, and particularly Michelle Bowman, the vice chair of supervision at the Federal Reserve. She's planning to make significant changes to the regulations. Two things I would flag there. The first is she wants to speed up and increase the transparency of approval processes for acquisitions because previously bank acquisitions have been held up by the regulators for many months and even years. And secondly, she's announced plans to rework the way that the Fed and other regulators assign ratings to the banks because this has led to many of the biggest banks in the US having unsatisfactory ratings put against them, which limits their ability to do mergers and acquisitions.

3:38And we've picked up that there have been talks between one of the biggest US banks, BNY, with a slightly smaller rival, still very large bank, called Northern Trust, about exploring a potential combination of the two that would catapult the combined bank into the top 10 of U.S. banks by assets. All right, so we're starting to see, it sounds like, some sparks in the air. But can you just back up for a second and give me some context about the U.S. banking industry when it comes to consolidation? I mean, what has it looked like in recent years? Well, in recent years, it's definitely been subdued.

4:21People point to the influence of the previous president, Joe Biden, there was generally quite a restrictive approach to competition and antitrust policy. And we saw as a result of that, the number of banking deals fall by more than 50 percent over the past four years. Yeah, we're coming into this new era from a pretty low point for consolidation. And, you know, one thing that I've been wondering, Martin, is that clearly it seems that there are some pros, at least for the banks, when it comes to mergers. You know, presumably the people that were involved in deals would get some sort of windfall and smaller struggling banks that were taken over, they might get a little bit of a reprieve.

5:07But could there be cons to further consolidation in the U.S. market? Yeah. One is from the consumer's point of view, if the regulators start to take a more relaxed approach to consolidation. Some regions where there are fewer banks, less competition could mean a higher cost and maybe even a lower quality of service for consumers. And another concern that you sometimes hear from critics is that big banks are going to be getting even bigger and that will just make them harder to deal with if something goes wrong and they end up in trouble. That's the FT's Martin Arnold. Thanks, Martin. Thanks a lot.

5:58U.S. shoppers are ditching some of China's online retail giants. I'm talking about Xian and Temu. Traffic to Xian's app was down 12 % from March to June, while monthly engagement on Temu's platform tanked more than 50%. A lot of it has to do with Donald Trump's tariffs. The U.S. president has hiked up duties on goods out of China. And he's closed an important tax loophole that allowed Temu and Xi 'an to bypass import fees. Since then, the companies have said that they would need to raise prices, sometimes by a lot. Both are now instead turning their attention to Europe in hopes of avoiding similar fees.

6:44The Trump administration is on the hunt for a new chair of the Federal Reserve, even though Jay Powell's term isn't up until next May. But there's speculation that President Trump, who hasn't exactly seen eye to eye with Powell, could nominate his replacement early. That person would then act as a kind of shadow chair of the Fed. Here to unpack that for me is the FT's Claire Jones. Hey, Claire. Hi there. So now who's Trump looking at for Fed chair? So Donald Trump said last week that he'd whittled it down to three or four names. Now, the White House has not confirmed who those names are, but there's a lot of speculation and chatter out there about the candidates.

7:33So let me run through them. We've got an internal Fed governor, Chris Waller, who recently said he would support a rate cut as soon as July, which is likely to be music to the US president's ears. We've got former Fed governor, who's now at the Hoover institution in Stanford, Kevin Walsh. We have the head of Trump's National Economic Council, which is Kevin Hassett. And then we also have the possibility of the job going to U.S. Treasury Secretary Scott Bessent. Now, whoever gets this position, I mentioned that they would essentially be a shadow chair for the Fed. And that's kind of a strange term.

8:22What is it exactly? And why would Trump want one? So it goes back to what we like to call in monetary policy circles as the Maradona theory of interest rates. Back in 2005, then Bank of England governor Mervyn King described how the Argentine forward had this ability to score spectacular goals, all the while running in a straight line. How did he manage to do this? Well, it was done on the basis that defenders thought he would move to the left or right and adjust their behavior accordingly. Now, what does that have to do with the shadow Fed chair? Well, the idea is that if Trump nominates the Fed chair early and that Fed chair signals they will be more dovish than Powell and more willing to do what Trump wants and cut interest rates once they land at the Fed next spring, then markets could, in theory, adjust their expectations for future interest rates.

9:22And that could potentially lower the U.S. government's cost of borrowing. All right. I love the soccer analogy there. But what happens if the markets start to feel like they're getting conflicting information from what is essentially now two Fed chairs? I think that's an excellent point. I mean, the Maradona effect works, but it only works if the central bank is credible and if the message is convincing. Now, there's reasons to think that just won't happen at the moment. Even though we've had a couple of Fed governors suggest they'd support a cut as soon as July, the bulk of the FOMC don't. So just if they're saying that and a shadow Fed chair is saying something completely different, it's just going to sow confusion at a time when markets are already having to face a lot of uncertainties about economic policy.

10:13Yeah. And I guess that makes me wonder, we're talking about a new Fed chair that would be more in line with Trump's goals to lower interest rates. What does that mean for Fed independence? I think it does undermine Powell if Trump nominates his pick for Fed chair early. But I think there's a few things to consider which actually show how independent the Fed is. There's no incentive for people who are sitting on the FOMC right now to actually change their views. I mean, Trump's placed a lot of pressure on Powell. But remember, the Fed's also got this unique setup where they've got these 12 regional Feds scattered around the country.

10:57And their presidents, you know, they play a role on the FOMC. Some of them vote on monetary policy. And they're very difficult for Trump to get at. And if we're left with a scenario where the shadow Fed chair says one thing and a lot of the FOMC says another. It just highlights that, you know, those FOMC members will not necessarily just be swayed by what the next Fed chair says. Claire Jones is the U.S. economics editor for the FT. Thanks, Claire. Cheers.

11:36Millions of savers in the UK are about to get more access to investment advice. Regulators have decided to loosen rules on the services that companies can offer. The Financial Conduct Authority will soon allow firms like Vanguard to give retail investors generic suggestions on how to maximize their returns. Companies will be able to tell groups of people things like, hey, you're sitting on too much cash. Why not buy some shares? It's one of the biggest shakeups in the advice market for more than a decade. The old rules were supposed to drive up standards, but instead they priced a lot of people out.

12:10Regulators hope that the new system will make it cheaper and easier for Brits to find financial tips. You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

12:39Israel at AWS joins me. Digital borders shall not become digital worlds which are not interconnected. As does Catherine DiLorenzo at A &O Sherman. It looked like a race to write the rulebook and not just a race to build the most powerful technology. And Ali Usten at McKinsey. Sovereignty, bankers, data centers, engineering and AI talent in the country. Listen to The Next Five wherever you get your podcasts. Enjoy. Capital raising is being redefined in real time from macro disruptions and shifting investor expectations to AI-driven demand and the rise of private credit. When headlines can tilt markets overnight, how can companies stay on course?

13:19Strategic Alternatives, the RBC Capital Markets podcast, explores how corporates and investors are navigating new pathways to raise capital, create value, and drive growth. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts.