Merger Milestone: Capital One and Discover Set to Reshape Banking Sector

The Federal Reserve and OCC have greenlit the merger of Capital One and Discover, forming the eighth-largest U.S. bank. The deal, set to finalize in May 2025, positions the new entity as the leading credit card issuer and includes a $100 million fine for Discover due to past overcharging.

The Federal Reserve and the Office of the Comptroller of the Currency have given the green light for the merger between Capital One and Discover, effectively creating the eighth-largest bank entity in the United States. This merger, finalized after an extensive review of the banks' 2024 application, will establish the largest U.S. credit card issuer by balances and grant Capital One control over Discover's expansive card payment network.

Financial analysts have been closely monitoring this development, viewing it as a precedent-setting instance for bank mergers under the Trump administration, which is perceived to favor consolidation in the financial sector. With regulatory approvals in place, both companies plan to complete the merger by May 18, 2025. Discover's interim CEO, Michael Shepherd, lauded the deal for enhancing competition, expanding product offerings, boosting innovation, and providing community benefits.

The OCC's approval includes stipulations for Discover to address prior enforcement actions. Meanwhile, the Federal Reserve has levied a $100 million fine against Discover for historical overcharging practices. Nonetheless, the Department of Justice found no competitive concerns significant enough to obstruct the merger.

(With inputs from agencies.)