The FDIC, OCC and Department of Justice earlier this month issued updated standards for bank mergers. The three organizations worked separately, although the authorities noted that they worked with other relevant organizations.
“Continuing cooperation with our fellow regulators is critical, especially as it relates to assessing the competitive effects of mergers,” said FDIC Chairman Martin Gruenberg. “Federal banking agencies are coordinating with the Department of Justice in evaluating the impact of bank mergers on competition, and the FDIC looks forward to continuing to work with our other agencies as we review banking transactions.”
The FDIC adopted a final Policy Statement on Bank-to-Bank Transactions on September 17. FDIC officials said that the new statement deals with the scope of transactions that will be reviewed, the process of that review and whether the proposed agreement follows the Bank’s established standards. The act of combining.
New strategy:
- It asserts that analysis of the competitive effects of the merger may focus on more than deposits, including small business loans and mortgages.
- It clarifies that the proposed merger should cause less financial risk than the risk posed by separate entities.
- It provides additional information about the FDIC’s expectation that the combined agency will meet the welfare and needs of the public to be served.
- It applies additional scrutiny to the financial stability analysis for transactions that would result in the institution having $100 billion or more in total assets.
- It states that the FDIC is willing to hold public hearings for transactions that would result in a financial institution with more than $50 billion in assets.
Acting Governor Michael Hsu, a member of the FDIC’s board, expressed his approval of the FDIC’s reforms.
“While regulators must remain vigilant and reject mergers that could weaken competition, harm the public, or threaten financial stability, we must be open to accepting and accepting mergers where strong banks are which made their public trust and their managers who want to get less and have reliable plans and ability to improve them,” he said at the FDIC board meeting.
The OCC has issued its updated merger guidelines. Those guidelines describe transactions that may withstand scrutiny and may be readily accepted. They also provide indications for a proposed merger that may raise regulatory concerns that must be resolved before the merger is approved. The guidelines also describe the OCC’s “measure of financial stability; administrative and financial resources and future prospects; and simplifying and requiring legal details under the Bank Consolidation Act. Finally, the guidelines describe the OCC’s process for extending a comment period or deciding to hold a public meeting.
The DOJ said it moved away from the 1995 bank merger guidelines and said it will use its 2023 merger guidelines. The department said it has met with the OCC and the FDIC to update its merger process.
Although we do not believe that the changes to the analysis of the effects of competition will have a significant negative impact on public bank mergers and acquisitions, large financial institutions may find the effects of competition on mergers to be more scrutinized. In addition, all applicants for financial institutions may be required to address the financial risks of any proposed combination in any application and the FDIC’s requirement that the proposed combination should pose a risk that less financial risk than separate entities would do. integration with a troubled institution more challenging.
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