Scholars reinterpret existing banking regulations to emphasize their role in preventing financial monopolies.
Amid the intensifying debates on corporate monopolies, an unexpected silence surrounds one of the largest concentrations of economic power in the U.S. financial system—the banking industry. While technology companies such as Amazon, Google, and Meta face increasing antitrust scrutiny, America’s banking industry continues to consolidate.
U.S. banks are getting larger and consolidating power with little public debate, as the focus of financial regulation seems more concerned with the risks of “too big to fail” than with addressing the rising concentration of power in the banking sector.
In a recent article, Saule Omarova of University of Pennsylvania Carey Law School and Graham Steele, an academic fellow at Stanford Law School, frame U.S. banking law as an existing anti-monopoly framework. They argue that banking regulations, rather than a mere set of rules for financial stability, serve a critical role in safeguarding excessive concentration of private power over the industry.
Omarova and Steele note that it is surprising that antitrust issues at big banks are often overlooked, considering that financial institutions are subject to competition policy, including regulations administered by agencies in coordination with the Department of Justice. The authors argue that “too big to fail” are nonetheless shielded from market discipline due to their size and perceived importance to economic stability.
They argue that, for the past fifty years, regulators have prioritized the stability of the banking system and the safety of financial institutions, relegating competition concerns to a secondary position. They contend that large banks are primarily managed through macroprudential regulation—a set of policies and tools designed to protect the stable functioning of the financial system. They note that regulators generally do not view concentration and consolidation as problematic as long as banks meet prudential requirements.
Omarova and Steele challenge the prevailing view that antitrust and banking law are separate and disconnected fields. They suggest that antitrust laws such as the Sherman Act of 1890 and the Clayton Act of 1914 were developed in response to growing monopolies threatening economic and political democracy. Building on this, Omarova and Steele argue that banking laws share the same origin as antitrust laws and can be understood as a sector-specific antitrust regime.
Despite the antimonopoly foundations of U.S. banking law, Omarova and Steele explain that the banking sector has undergone decades of deregulation following the Gramm-Leach-Bliley Act of 1999, which allowed the formation of large, diversified financial conglomerates. They argue that deregulation was justified as a way to encourage innovation and competition, yet Congress failed to put in place rules to manage new risks—an oversight that became evident during the 2008 financial crisis.
Omarova and Steele emphasize that the unique nature of banks’ activities shields them from the effects of free-market competition, creating perverse incentives for excessive risk-taking. In this context, they highlight the dual roles of bank supervision—to prevent banks from abusing their government-granted monopoly powers and to ensure stability.
Omarova and Steele assert that reexamining banking law through the lens of antitrust reveals that many of the core regulatory mechanisms within the banking sector serve a structural role of preventing monopolistic practices. They explain that several banking regulations directly apply antitrust principles: regulations governing bank mergers and acquisitions help prevent excessive concentration of power; restrictions on interlocking managers stop the same individuals from controlling multiple banks; and anti-tying provisions prevent banks from forcing customers to buy one product in order to get another, promoting fair competition.
In addition, tools such as liability and loan concentration limits, rate regulation, and the authority to break up large banking organizations serve as antitrust mechanisms, even if they are not labeled as such. Other unique banking mechanisms also limit abuses of power: market entry controls prevent unfair gains from public subsidies; activity and affiliation restrictions reduce conflicts of interest; and regulations of inter-affiliate transactions ensure related banks do not unfairly favor each other or take excessive risks.
Omarova and Steele challenge policymakers to rethink how they approach financial regulation. They suggest that embracing the antimonopoly principles inherent in banking regulation could help reset priorities and expand their regulatory tools, especially when addressing pressing issues such as the continued growth of digital finance and “too big to fail” banks.
Omarova and Steele propose a stricter merger review process, increased scrutiny of the integration of banking with other commercial activities, and greater authority to enforce corporate breakups and asset divestments. They also suggest that the existing regulatory framework, particularly the constraints on banking institutions’ activities and affiliations, could be used both to prevent banks from engaging in crypto speculation and to stop financial technology firms from exploiting government-backed subsidies.
As Omarova and Steele argue, U.S. banking regulators already have at their disposal a toolkit capable of containing the growth of concentrated financial conglomerates. Utilizing banking law would require no legislative changes, only a renewed embrace of the antimonopoly tradition.
