OCC and FDIC Revise Policies on Bank Merger Approval Process

The OCC adopted rule amendments and a policy statement on procedures for reviewing applications under the Bank Merger Act ("BMA"). The FDIC approved a policy statement on bank merger transactions.

The OCC final rules concern merges involving (i) national banks, (ii) federal savings associations and (iii) federal branches and agencies of foreign banks. Key revisions include the removal of provisions for expedited reviews and the elimination of streamlined business combination applications. The final rule will take effect on January 1, 2025.

The OCC policy statement provides: (i) general principles the OCC applies when reviewing applications under the BMA, including identifying "indicators" (e.g. financial condition of the acquirer and target, Community Reinvestment Act compliance and potential adverse impacts on competition), that may lead to approval or denial based on regulatory and supervisory concerns; (ii) clarifications on how the OCC considers key factors in its merger reviews, including financial stability, managerial and financial resources and future prospects of the resulting institution; and (iii) explanations on the OCC's process for managing public input, including decisions on extending comment periods and holding public meetings during the review of a merger application.

The FDIC's final Statement of Policy concerns the FDIC's approach to evaluating transactions subject to its approval under the BMA. The new statement introduces several updates: (i) mergers involving institutions with over $50 billion in total assets will now include heightened scrutiny and public meetings, and mergers resulting in entities with over $100 billion in assets will require heightened financial stability analysis; (ii) the agency will evaluate market concentration, particularly in rural markets, and introduces stricter divestiture requirements to mitigate competitive concerns in certain cases; and (iii) institutions will be expected to demonstrate how a merger will improve access to banking services, particularly for underserved populations, and the FDIC will weigh this factor heavily in its decision-making process.

The FDIC said it has discontinued the use of expedited reviews for merger applications, aligning with the OCC's considerations to eliminate streamlined business combination applications.

Statements

• FDIC Chair Martin J. Gruenberg emphasized the importance of public input, particularly for mergers involving large institutions. He reiterated that the FDIC remains committed to ensuring that bank mergers promote competition, serve community needs and protect the stability of the U.S. financial system.
• Acting Comptroller of the Currency Michael J. Hsu expressed his support for the FDIC's Statement of Policy on Bank Merger Transactions, noting that it aligns with the OCC's policy statement. He highlighted the importance of transparency, stating that the policies "should help promote a diverse and dynamic U.S. banking system – one that is safe and sound, pro-community, pro-competition, and pro-financial stability." Mr. Hsu said regulators must "remain vigilant and reject mergers that would weaken competition, hurt communities, or threaten financial stability," while approving those where strong banks can improve weaker ones.