BPI Comments on FDIC’s Bank Merger Proposal

Ladies and Gentlemen:

The Bank Policy Institute[1] is filing this comment in response to the Statement of Policy on Bank Merger Transactions issued by the Federal Deposit Insurance Corporation entitled Request for Comment on Proposed Statement of Policy on Bank Merger Transactions[2] and the accompanying notice and request for comment entitled Agency Information Collection Activities: Proposed Collection Renewal; Comment Request.[3]

Executive Summary

Policy Statement

We recommend that the FDIC withdraw the proposal for the following reasons:

  • Many parts of the proposed policy statement contradict sound policy, and certain parts exceed the FDIC’s statutory authority. The effect would be significant, as neither potential acquirers nor targets would begin the costly and risky process of announcing a transaction and applying for regulatory approval if a regulator with approval authority has issued a policy statement indicating that disapproval was likely or even a meaningful possibility. As such, the policy statement constitutes a final rule in substance that effectively precludes (or, at a minimum, discourages) many meritorious bank merger and asset acquisition transactions.
  • The policy statement includes a broad description of transactions subject to FDIC approval under the BMA, including certain asset acquisition and internal reorganization transactions that are not mergers in substance,[4] which is inconsistent with the statutory text and Congressional intent.
  • The FDIC introduces a novel demand that applicants show that a transaction “better serve” a community’s needs, which departs from the statutory mandate for agencies to “consider[] … the convenience and needs of the community to be served” and ignores the convenience and needs factor that is part of the competition analysis.[5] The policy statement also effectively threatens to prohibit transactions that result in an insured depository institution in excess of $100 billion in assets, when the BMA has no such proscription and Congress has established a much higher proscription (approximately 20 times greater).[6] In the FDIC’s condemnation of transactions involving large institutions, the FDIC focuses only on size without recognizing the many other factors that could determine whether such a transaction meets the statutory factors.
  • The FDIC now expresses a hostility to using conventional non-standard conditions as a way to facilitate the bank merger application process, which may lead to the FDIC rejecting or applicants withdrawing otherwise viable applications. Those rejections or withdrawals would result in significant amounts of wasted time and effort on the part of both the reviewing agency and the parties to a proposed transaction, with no discernible benefit to the broader financial system.
  • Finally, the proposed publication of rejections or withdrawals could generate adverse reputational and economic consequences for both the acquirer and the target.

To read the full comment letter, please click here, or click on the download button below.

[1] BPI is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

[2] FDIC, Request for Comment on Proposed Statement of Policy on Bank Merger Transactions, 89 Fed. Reg. 29222 (Apr. 19, 2024).

[3] FDIC, Agency Information Collection Activities: Proposed Collection Renewal; Comment Request, 89 Fed. Reg. 29245 (Apr. 19, 2024).

[4] See infra Section I.A.

[5] 12 U.S.C. § 1828(c)(5)(B) (“The responsible agency shall not approve . . . any [] proposed transaction whose effect may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served…………………………………………………………………. In every case, the responsible agency shall take into consideration the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the community to be served, and the risk to the stability of the United States banking or financial system.”).

[6] See infra notes 81 and 82 and the accompanying text.