Ladies and Gentlemen:
The Bank Policy Institute[1] submits this letter in response to the Federal Deposit Insurance Corporation’s proposed (i) rescission of the Statement of Policy on Bank Merger Transactions that was issued on September 17, 2024 (the “2024 Policy Statement”) and (ii) plan to reinstate the prior Statement of Policy on Bank Merger Transactions that was issued on August 20, 1998 (as amended, the “Prior Policy Statement”), pending the FDIC’s development of comprehensive revisions to its merger policy at a later date.[2]
Consistent with the recommendations in our comment letter relating to the 2024 Policy Statement,[3] BPI strongly supports rescinding the 2024 Policy Statement and reinstating the Prior Policy Statement as an interim measure. We also strongly support the FDIC’s plans to reexamine its approach to bank merger review, and we welcome the prospect of modernized bank merger guidance. As the FDIC determines how “to comprehensively revise its merger policy,”[4] BPI recommends four guiding principles for the FDIC to consider:
1. Adhere to statutory criteria.
- The Bank Merger Act of 1960 (as amended, the “BMA”) clearly specifies the types of merger transactions that require prior approval from the appropriate federal banking agency and the criteria for approval.[5] The FDIC’s updated merger policy should adhere to the specific requirements and factors set forth in the statute. This approach will ensure that the FDIC acts within its statutory authority and will provide for fair and consistent treatment of bank merger transactions, enabling banks to better assess which transactions would likely be approved and disapproved.
- As we have cautioned before, unpredictable and unduly restrictive merger review discourages beneficial transactions.[6] If the FDIC follows to the text of the BMA, we believe that the resulting predictability would encourage meritorious transactions, which would enhance the stability and resilience of the U.S. banking system.
2. End supervisory gating.
- Adhering to the BMA would also help to end supervisory gating whereby a less-than- satisfactory rating for an acquirer effectively bars the approval of a proposed transaction, despite the BMA containing no such restriction. The BMA provides that the managerial and financial resources and prospects of the existing and proposed institutions shall be taken into “consideration” in connection with the regulatory assessment of merger applications.[7] The FDIC’s approach regarding supervisory issues, however, goes far beyond the statutory standard and effectively creates an absolute barrier to approval. For example, for an applicant that is subject to the CAMELS rating system, a “3” rating for management, which often has little to do with the actual quality of management, creates this barrier even if all the financial resources and prospects of the applicant are consistent with approval. Likewise, for holding companies subject to the Large Financial Institution rating system, a Deficient-1 rating for governance and controls, a category that is both sweeping and vague, is also treated as preclusive irrespective of any other factor.
- As long as a proposed transaction would not materially exacerbate the supervisory issue that gave rise to the less-than-satisfactory rating, a banking organization should not be prevented from proceeding with beneficial transactions, including ordinary course internal reorganizations, and growth initiatives. Any future FDIC action should make this framework clear.
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, Statement of Policy on Bank Merger Transactions, 90 Fed. Reg. 11679 (Mar. 11, 2025) (the “2025 Proposal”).
[3] BPI, Letter re: Request for Comment on Proposed Statement of Policy on Bank Merger Transactions (RIN 3064-ZA31) (June 14, 2024) (the “2024 BPI Comment Letter”), https://bpi.com/bpi-comments-on-fdics- bank-merger-proposal/.
[4] 2025 Proposal at 11679.
[5] See 12 U.S.C. § 1828(c)(1), (c)(5).
[6] See 2024 BPI Comment Letter at 4–5, 15.
[7] 12 U.S.C. § 1828(c)(5)(B).
