By Pete Schroeder

WASHINGTON The head of the U.S. Justice Department's antitrust division on Tuesday urged the government to update bank merger guidelines to reflect "current market realities," in a sign authorities are likely to cast a wider net in scrutinizing deals in the sector.

Jonathan Kanter, the DOJ's assistant attorney general for antitrust, said the guidelines, which were last updated in 1995, may be overly narrow given the technology-driven reach of financial services now.

“There are good reasons ... to question whether the 1995 guidance sufficiently reflects current market realities," he said in a speech at the Brookings Institution, a think tank.

The comments indicate the Justice Department is likely to go further in scrutinizing potential bank mergers, and undercuts industry hopes that the Biden administration would be more open to allowing deals after a spate of bank failures since March.

Kanter's remarks were watched closely by the banking industry for an indication of how the Biden administration might approach potential bank mergers, as consumer advocates and critics argue against allowing large banks to grow larger.

He added that healthy bank competition is important for all Americans, underlining a need for robust review of any consolidation efforts.

"Bank competition affects the interest you earn on your savings account, the monthly payment on your mortgage or your car loan, or the fees you pay to withdraw cash from an ATM," he said.

Specifically, Kanter said any merger review for antitrust purposes must go beyond traditional factors like the impact on local depositors and branches, and consider a broader set of issues. For example, he noted that customers now have access to several types of banks that cater to different needs and clientele, and that customers must retain "meaningful choice."

"The law hasn't changed," he said. "What we're saying is market realities have shifted, and when we apply the law, we have an obligation to ensure we are addressing the world as it exists today."

President Joe Biden signed an executive order in 2021 directing the Justice Department to work with bank regulators to update merger guidelines and heighten scrutiny of deals.

But turmoil in the banking sector, set off by the failure of Silicon Valley Bank in March, spurred hope within the industry that the administration may soften its skeptical stance and take a more accommodative approach to shore up lenders.

In his remarks, Kanter said he was focused on the antitrust implications of any bank mergers, and that broader factors were best left to the primary bank regulators to consider.

(Reporting by Pete Schroeder, editing by Deepa Babington)