Bank Watch

Talk of breaking up big banks not going away

Bank of America shareholder Bartlett Naylor, who failed last year to get enough investors to support a break-up plan for the Charlotte bank, is trying again to bring the issue before investors. Only 4.1 percent of voting investors supported Naylor’s proposal at the bank’s annual shareholder meeting last year.
Bank of America shareholder Bartlett Naylor, who failed last year to get enough investors to support a break-up plan for the Charlotte bank, is trying again to bring the issue before investors. Only 4.1 percent of voting investors supported Naylor’s proposal at the bank’s annual shareholder meeting last year. jsimmons@charlotteobserver.com

More than seven years after the financial crisis, big banks can’t seem to escape criticism that their huge size poses a risk to the U.S. economy.

Take Bank of America shareholder Bartlett Naylor, financial policy advocate for Washington, D.C.,-based consumer advocacy group Public Citizen.

Naylor, who believes Bank of America remains too large since the financial crisis, is asking the lender to let shareholders vote on his proposal calling for the bank to consider splitting itself up. Only 4.1 percent of voting investors supported a similar proposal from Naylor at the bank’s annual shareholder meeting last year.

In an interview last week, Naylor said that the bank told him it retained an outside firm, following last year’s meeting, to analyze a breakup. The bank made the disclosure late last year, after Naylor resubmitted his proposal for this year’s meeting, he said.

According to Naylor, the bank told him the study determined the bank would not be more valuable busted up. Naylor said he has asked the bank to let him see the report, but he said the bank has not provided him a copy.

A Bank of America spokesman declined to comment.

It’s not clear whether Naylor’s proposal will be brought to a shareholder vote this year.

Naylor said the bank is seeking the Securities and Exchange Commission’s permission to exclude his resubmitted proposal from the items shareholders will vote on at this year’s meeting. The SEC declined to comment.

Last year, the regulator allowed Naylor’s proposal to appear on Bank of America’s proxy statement despite objections from the bank, which had argued among other things that it divested dozens of non-core businesses since 2010.

New banking regulations since the financial crisis may not go far enough to prevent another catastrophe, Naylor argues. “Our concern too is that a mega-bank may not simply be ‘too big to fail,’ but also ‘too big to manage,’” his latest proposal says.

Naylor isn’t the only one bringing up the issue.

Last week, Federal Reserve Board Chair Janet Yellen faced questions from Senate Banking Committee members on the Fed’s oversight of “living wills” – plans for how big banks could navigate through a failure of the company without taxpayer help. Under the 2010 Dodd-Frank financial overhaul law, regulators can break up banks if they deem the wills not credible.

And during Thursday’s Democratic presidential debate in Milwaukee, Vermont Sen. Bernie Sanders and former Secretary of State Hillary Clinton both mentioned bank breakups.

“When you have three out of the four largest financial institutions in this country bigger today than they were when we bailed them out because they were too big to fail ... I think if Teddy Roosevelt were alive today, that great trust-buster would have said break them up. I think he would have been right,” Sanders said.

Clinton, whose ties to Wall Street have been criticized, noted the mechanism Dodd-Frank provides: “We can use it to break up the banks, if that’s appropriate,” she said.

While Bank of America has resisted the idea of a breakup, other financial institutions are grappling with issues around their own size and scope.

MetLife said last month it plans to split off its Charlotte-based retail segment. The company is looking to shrink after a 2014 designation by a U.S. panel as a non-bank systemically important financial institution – a label that brings added costs and heightened regulatory oversight.

Another insurer, American International Group, on Thursday gave board seats to two activist investors calling for the company to break itself apart. Those investors had pressured the company to split apart to escape its 2013 designation as a non-bank systemically important financial institution.

If Naylor gets his way, the issue will get some attention again this spring at Bank of America’s annual meeting – even if shareholders aren’t willing to go along.

Deon Roberts: 704-358-5248, @DeonERoberts

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