2nd UPDATE: Fed: To Decide On Capital One Plan To Buy ING 'Soon'

The Federal Reserve Board Monday debated Capital One Financial Corp.'s (COF) $9 billion plan to buy ING Direct USA from ING Groep NV (ING, INGA.AE) but the central bank isn't ready to issue a decision just yet, according to an agency representative.

"The board considered the application at its meeting this afternoon and expects to issue a decision soon," the representative said in a statement late Monday. "No further announcement is expected today."

Consumer groups and community bankers have opposed the plan, arguing that it would create a giant lender that could put the health of the U.S. financial system at risk.

But industry analysts have been expecting the Fed to approve the McLean, Va., bank's proposal to buy the Internet bank, noting that the bank doesn't appear to be engaged in the kind of complex financial markets that led to the recent financial crisis.

Capital One's proposal is a test case of the 2010 Dodd-Frank financial overhaul, which required the Fed to consider whether a bank merger would put the U.S. financial system at risk. Thus, industry observers are closely-watching.

Capital One submitted its proposal to the Fed in July. The Fed, which held three public meetings on the proposal, has made clear that it wants to understand whether the acquisition will produce benefits to the public and that it wants to weigh benefits of the deal against possible adverse effects, such as unsound banking practices or risk to the U.S. financial system. One lawmaker, Rep. Barney Frank (D., Mass.) had urged the Fed to take time to thoroughly examine the controversial deal.

A much-anticipated Fed decision was initially expected last week, but the meeting was postponed until Monday. It's unclear if a serious issue is holding up the proposal or when the Fed will issue a decision.

"This is a thoughtful and deliberate process and we appreciate the thoroughness of the Fed's review," said Capital One in a statement. "We look forward to their final decision and the positive impact the acquisition will have on our customers, associates, shareholders and our communities."

Meanwhile, the National Community Reinvestment Coalition, a lead opponent of the deal, was encouraged by the Fed delay. The group has said Capital One should not be allowed to expand without taking significant steps to improve the underserved communities within its business footprint.

"This is a small sign that perhaps that the era of rubberstamping bank mergers is over," said NCRC President John Taylor. "This should be a welcome sign for taxpayers, considering that it will be their money at risk should Capital One grow to be 'Too-Big-to-Fail.'"

-By Maya Jackson Randall, Dow Jones Newswires; 202-862-6687, maya.jackson-randall@dowjones.com

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