FDIC proposed revisions to its Statement of policy (SOP) on bank merger transactions.
SOP updates, strengthens, and clarifies the FDIC’s policies related to the evaluation of bank merger applications subject to FDIC approval under the Bank merger act (BMA).
FDIC Board met, issued meeting memo to approve federal register notice of proposal.
Also, FDIC Chair Gruenberg, Vice Char Hill, Director McKernan, Acting Comptroller Hsu issued statements; and FDIC issued a financial institution letter(FIL) on the proposal.
Revised SOP reflects consideration of comments received in response to FDIC Mar. 2022 request for information on bank merger regulatory framework, see #133123.
Overview of Revised SOP
Reflects legislative, other developments that occurred since last amended in 2008.
Revised SOP is principles based, describes application types subject to FDIC approval.
Focuses on FDIC process for evaluating merger applications; addresses each statutory factor separately, including risk to the stability of the US banking or financial system.
Highlights other relevant matters, related statutes on interstate mergers; applications from non-banks, non-traditional community banks, and operating non-insured entities.
In a separate federal register notice, FDIC invited comment on the renewal of the existing information collection supplement to the interagency BMA application form.
Key Changes
A new section titled jurisdiction and scope was added to describe the FDIC’s role.
Also addresses broad applicability of BMA to variety of different transaction structures.
These structures include purchase and assumption transactions that constitute mergers in substance, any assumptions of deposits, as broadly defined in the FDIA.
Proposed SOP reframes the applications procedures section of the current SOP.
Procedures to address, among other matters, the importance of pre-filing meetings, submission of a comprehensive application, public feedback, imposition of conditions.
Additionally, each statutory factor is separately addressed in a forward-looking manner.
Refines, in some cases broadens, description of analytical considerations for factors.
Addresses divestitures as potential means to mitigate competitive effects concerns; clarifies policy against non-compete agreements with employees as to divestitures.
Clarifies expectation that a merger will enable resulting institution to better meet the convenience and needs of community to be served than would occur absent merger.
Transactions that result in a large institution (in excess of $100bn) are more likely to present potential financial stability concerns and will be subject to added scrutiny.
Consultation
Comments must be received on or before 60 days after publication in federal register.
Apr. 2024 FDIC Federal Register
On Apr. 19, 2024, FDIC published comment request in fed register, by Jun. 18, 2024.
Also requested, under separate cover, merger supplement revision, see rule #209075.
In Jun. 2024, CSBS and BPI filed comment letters on the FDIC proposal, see #216266.
Sep. 17, 2024 FDIC Final Policy Approval
On Sep. 17, 2024, FDIC reported board approved final Statement of policy on bank merger transactions (Final SOP); reflect changes made in consideration of comments.
FDIC also published Financial Institution Letter FIL-63-2024, memo re the Final SOP.
Final SOP confirmed evaluation of merger’s competitive effects may take into account concentrations beyond deposits, including small business, residential loan originations.
Clarified proposed merger result in less financial risk than posed on standalone basis.
Merger enable resulting institution better meet convenience, needs of the community.
Additional scrutiny to evaluation of financial stability for institution $100bn or more.
Hold public hearings for mergers resulting in institution with over $50bn total assets.
Final SOP superseded existing Statement of policy, which was last updated in 2008.
Chair Martin Gruenberg issued statement in support of the final statement of policy.
Vice Chair Hill issued statement indicating voted against proposal; moved in wrong direction, potentially making the process longer, more difficult, and less predictable.
Director McKernan issued statement, cannot support Final SOP; does not address concerns he provided in proposal, reflected bias against bank mergers that bad policy.
Additionally, OCC Acting Comptroller Hsu issued a statement supporting Final SOP.
Sep. 17, 2024 CFPB Chopra Statement
On Sep. 17, 2024, CFPB issued statement by CFPB Director Rohit Chopra re SOP.
Now that review of bank merger framework complete, provided transparency how to evaluate applications against statutory factors, critical to put these words to practice.
Sep. 27, 2024 Fed Register Final Policy
On Sep. 27, 2024, FDIC issued final policy statement on bank merger, in fed register.
Final statement of policy supersedes prior FDIC statement of policy on Oct. 28, 2024.
