Capital One – ING Deal Being Investigated By Fed

According to WSJ, the Federal Reserve is investigating Capital One on whether its acquisition with ING will make it so large that a potential bankruptcy could threaten the whole financial system.

In June, Capital One Financial Group agreed to buy ING Direct, ING Groep NV’s US business, at $9 billion in cash and stocks. If the acquisition goes through, Capital One will become the fifth largest savings bank in the US, with $300 billion in assets.

In Fed’s letter to Capital One on August 29th, the company was required to supply the details about the financial business of Capital One and ING, including the nature and the dollar volume of the activities. The Fed also asked for information about activities that had troubles during the financial crisis, such as commercial paper, mortgage backed securities, foreign exchange swaps and derivatives.

WSJ pointed out that according to the Dodd-Frank Financial Reform Bill, passed last year, the Fed should consider whether certain acquisition deals would increase the total risk of the American financial system. Capital One responded by saying they had replied to the Fed’s letter last Friday and they were not involved in the financial activities that would increase the systematic risk. The company claimed itself to be a traditional bank and only holds 1.5% of the total US savings.

WSJ said the Federal Reserve declined to offer comment on this issue.