OCC, FDIC Issue Policy Statements on Bank Mergers

09/18/24

The FDIC board voted 3-2 in favor of a final statement on bank merger policy. Among the changes, the policy states that when reviewing a proposed merger's competitive effects, the agency can consider concentrations on products and services beyond those based on deposits, such as the volume of small business or residential loan originations. It applies additional scrutiny to proposed mergers resulting in an institution with $100 billion or more in total assets and requires public hearings for mergers resulting in an institution with more than $50 billion in total assets. It also establishes a policy against banks entering into or enforcing noncompete agreements with any employee of the divested entity.

One modification from the proposal issued in March is that the final document no longer states that the FDIC will penalize applications if the merger results in a weaker institution from a financial perspective as long as the resulting institution would be financially sound. However, it stresses that a proposed merger must "better meet the convenience and needs of the community to be served than would occur absent the merger in order for FDIC staff to find favorably on this factor."

The two Republican board members voted against the statement, saying it would make the merger application longer and more difficult.

The OCC final rule focused on separating mergers that can be quickly approved from those that require more scrutiny. The rule ends the practice of automatically approving merger applications on the 15th day after the close of the comment period unless the agency takes action to remove the filing for expedited processing. It also amends how the OCC considers financial stability, financial and managerial resources, future prospects, and convenience and needs factors.