The Federal Reserve has ruled that KeyCorp's purchase of First Niagara Financial Group will not violate laws meant to protect against monopolies, and on Tuesday, the Fed approved the $4.1 billion deal.
KeyCorp, the parent company of KeyBank, announced in October 2015 that it would be purchasing First Niagara.
The announcement was immediately met with backlash from residents and politicians -- notably U.S. Senator Chuck Schumer -- who worried what impact the deal would have on Western New York jobs and the community's access to competitive banking and loan options.
These concerns were addressed by KeyCorps in the following steps:
KeyCorp has agreed to sell 18 of the 55 Buffalo-area First Niagara branches to mediate any anti-competition affects that the deal would create. KeyCorp will also consolidate 22 local KeyBank and First Niagara branches.
According to the Fed's approval report, after the deal, KeyBank will only control 2.5 percent of all of the deposits of all insured depository institutions in New York, but nearly 40 percent of all the deposits in the Buffalo area. The Fed believes the presence of nine local credit unions will help offset any negative impacts on banking competition.
On Monday, Senator Schumer and U.S. Congressman Brian Higgins announced KeyCorp had agreed to limit local job cuts as a result of the deal. KeyCorp will not layoff any branch employees, limit overall layoffs to 250 employees and create 800 new jobs over the next five years.
KeyCorp has also pledged to invest $16.5 billion dollars over the next five years in community plans that would increase small business and community development loans, mortgages, investments, and philanthropic contributions in lower-middle-class communities.
As a result of these steps, the Fed determined KeyCorp did its due diligence in pursing this deal. After the deal closes, the Fed estimates KeyCorp will have nearly $139 billion in consolidated assets, making it the 26th largest depository organization in the United States and the 9th largest depository organization in New York.
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