Fed OKs Capital One's Buyout Of ING Direct

February 15, 2012

Feb. 15--After several unexplained delays, the Federal Reserve on Tuesday approved a $9 billion acquisition by Capital One of ING Direct USA, paving the way for creation of the fifth-largest bank in the United States. The move also puts into question the future of about 550 ING Direct workers in Central Minnesota.

Brian Myres, head of sales for ING Direct with offices in downtown St. Cloud, would not comment on the deal late Tuesday and referred inquiries to Capital One.

In response to a message left by the Times, Capital One spokeswoman Tatiana Stead said via email: "We are very pleased that the Federal Reserve has approved our acquisition of ING Direct. ... We expect to close within the next few days as soon as the details associated with the transaction are finalized."

The Federal Reserve, which regulates bank holding companies, announced the unanimous vote after a closed-door meeting in Washington.

In a brief statement, the Fed said it had given its approval after directing Capital One to "upgrade its risk-management functions to reflect the bank's new size and complexity."

The move came despite concern from some community banks and consumer advocates that the merger would create another financial institution that would be "too big to fail," putting the U.S. economy at risk.

The approval by the Fed was the first using new governmental authority under a provision of the Dodd-Frank Act to oversee bank mergers. The powers were given in the wake of the Great Recession.

The Fed held public hearings in advance of making a decision but twice postponed plans to announce the ruling -- perhaps giving rise to the idea there was discontent among the voting members.

Capital One Financial Corp., based in McLean, Va., had announced in June that it planned to buy the U.S. digital unit of Netherlands-based ING Groep. The deal is aimed at expanding Capital One as a national bank without adding to its roughly 1,000 branches. ING Direct has about 7.5 million customers.

Capital One doesn't rank among the nation's 10 largest banks on its own; post-acquisition, it's expected to assume the No. 5 rank.

Critics argued the acquisition relied too heavily on credit cards, which are a riskier business than general consumer banking.

About 65 percent of Capital One's revenue comes from its credit card business. The bank also plans to buy HSBC's U.S. credit card business.

ING Direct, which has U.S. headquarters in Delaware and does about 85 percent of its business online, employs about 550 people locally in its processing and call center in the building connected to the familiar orange ING Direct cafe, where the operation moved in 2008. Last August, Myres said ING Direct had experienced no layoffs -- even through the difficult times of the economic downturn.

At that time, Myres said he expected the deal to go through and that he didn't see redundancies between Capital One and ING Direct's presence in St. Cloud.

"I never look at change as a negative," Myres said in August. "I'm too busy looking for the opportunity it brings. It's like, 'You acquired us. Here's what we can do for you.' I think that means something when you're working with new people and you put it on the line like that ... With Capital One, we're going from the 15th-largest bank in the United States to the fifth-largest. They've indicated they love our business model and what we do."

At the time of the original merger announcement, Capital One said it expects to save $90 million by consolidating systems and corporate staff functions. The company also expects to achieve savings of $200 million annually from consolidating management of the combined deposit portfolio.

ING Direct was launched in the United States in 2000 and is the largest online bank in the country.

The Associated Press contributed to this report.

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