Fed Approves Capital One's Acquisition Of ING Direct

Update 2/17/2012: Capital One announced that it has completed its acquisition of the ING Direct. According to the press release, "ING Direct customers now have the added benefit of an expanded free ATM network where they can make cash withdrawals from both Allpoint and Capital One ATMs."

The Federal Reserve gave its approval on Tuesday for Capital One's acquisition of ING Direct. It has been almost 8 months since Capital One first announced its acquisition of ING Direct. The approval took a little longer than expected due to additional regulatory scrutiny from the concerns of creating another too-big-to-fail bank. The Fed addressed these concerns in its order. The Fed determined that the total deposits after the acquisition will represent about 2.3% of the total deposits in the nation. Even though that will make the bank the 5th largest bank by deposits in the nation, it will be under the "nationwide deposit cap" of 10%.

Yesterday, I received information from Capital One's corporate communications official. Here's an excerpt from the email I received:

We expect to close within the next few days as soon as the details associated with the transaction are finalized. Capital One has no current plans to change ING customer accounts. Customers will still enjoy the competitive rates, no fees and the same online experience they've come to know and love from ING Direct.

I've read that Capital One must relinquish the ING Direct brand within one year of the acquisition. That makes sense since the parent ING wouldn't want a competitor using its name. However, it appears Capital One wants to keep everything else the same at ING Direct. It will be interesting to see what happens to Capital One Direct Banking. It doesn't seem to make sense to have this compete with the new ING Direct.

Future Capital One and ING Direct Deposit Rates?

Perhaps the lower rates that we have recently seen at Capital One Direct Banking is an indication that Capital One isn't wanting to offer rates more competitive than what ING Direct offers.

When the ING Direct acquisition was first announced in June 2011, Capital One's InterestPlus Online Savings Account had a yield of 1.10%. This has fallen to 0.65% APY. That's a 41% decline in 8 months!

There have been fewer rate cuts at ING Direct. ING Direct's Orange Savings Account yield has fallen, but not as much as Capital One's InterestPlus Savings yield. In the last 8 months, the Orange yield has fallen from 1.00% to 0.80%.

On CD rates, Capital One Direct Banking used to offer some competitive rates. The highest used to be 2.50% APY for its 10-year CD. In the last month the 10-year CD yield has fallen to 1.01% which is about the same yield that ING Direct is now offering on its 5-year CD.

ING Direct's savings account rate of 0.80% may be low, but compared to what other internet banks offer, it can be considered fairly competitive in today's awful interest rate environment. However, I can't say the same thing about ING Direct's CD rates. According to the FDIC, the average 24-month and 60-month CD rates are 0.51% and 1.16% as of 2/13/2012. Most of the banks that are included in this national average are brick-and-mortar banks. ING Direct's 24-month and 60-month CD yields are only 0.50% and 1.00%. These rates are not even competitive when compared to brick-and-mortar banks. Let's hope Capital One will want to keep all of its internet products competitive.