WASHINGTON – The Federal Reserve has approved the proposed merger between monoline card issuer MBNA and banking giant Bank of America, finding that the combined deposits that would be controlled by Bank of America after the merger is 30 basis points under a regulatory cap which could have blocked the agreement. Under federal law, two banks cannot merge if after doing so the merged entity would control more than 10% of funds deposited in insured depository institutions in the U.S. The Fed's analysis found that Bank of America would control 9.7% of the country's insured deposits after the merger and thus remain under the cap. The Federal Reserve also found that the merger would not have a negative impact on credit card issuing competition in the U.S. "The Board notes that the submarket for credit card issuance is only moderately concentrated and would remain so after consummation of the proposal (whether evaluated by number of accounts, dollar balances outstanding, or dollar volume year-to-date)," the Fed said in the analysis that accompanied the decision. "In addition, issuing credit cards is an activity that is conducted on a national or global scale, with relatively low barriers to entry and with numerous other large financial organizations providing these services." But the insured deposit standard really doesn't address the details of the card market, and there are suggestions of different marketing dynamics which did not appear in the Fed's analysis. Now the fifth-largest U.S. credit card issuer, Bank of America's market share will jump from 8.6% to 20.3% after it absorbs MBNA, according to statistics from The Nilson Report, a credit card industry newsletter that were quoted in The News Journal, a paper which covers the Wilmington Delaware market where Bank of America will have a significant card operation after the merger. That market share will put it slightly ahead of the current number one issuer, JPMorgan Chase & Co. The top 10 credit card issuers collectively represent more than 85% of the U.S. market and, once Bank of America has finished absorbing MBNA, the top three alone – Bank of America, JPMorgan Chase and Citigroup – will control roughly 55% of he overall U.S. card market, The News Journal said. The news of the Bank of America/MBNA merger has not been met by consumer groups with the same degree of confidence expressed by the Federal Reserve. Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, a Washington, D.C.-based consumer advocacy group, said he believes regulators got it wrong in approving the deal.Mierzwinski and other consumer advocates say the increasing power of banking behemoths has translated into higher fees and rates for cardholders. The average late fee, for example, jumped to $33.57 this year, up about 40% since 1999, according to CardWeb.com, a Web site which collects information on card trends. On top of late fees, card issuers can impose penalty interest rates on customers who pay late. A study earlier this year conducted by Consumer Action, a San Francisco-based consumer advocacy group, found that the average penalty rate this year was 24.23% up from 21.91% in 2004. "This buyout by Bank of America means fewer choices for consumers," Mierzwinski said. – [email protected]