Statement of Policy on Bank Merger Transactions

FEDERAL DEPOSIT INSURANCE CORPORATION <CFR>12 CFR Part 303</CFR> <RIN>RIN 3064-ZA45</RIN> <SUBJECT>Statement of Policy on Bank Merger Transactions</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Deposit Insurance Corporation (FDIC). <HD SOURCE="HED">ACTION:</HD> Proposed rescission and reinstatement of statement of policy; request for comment. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The FDIC is requesting public comment on a proposal to rescind the Statement of Policy on Bank Merger Transactions published in 2024 and reinstate its prior Statement of Policy on Bank Merger Transactions. The FDIC expects to request comment on all aspects of the regulatory framework governing the FDIC's review of bank merger transactions in connection with a future proposal to comprehensively revise its merger policy. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before April 10, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit comments to the FDIC, identified by RIN 3064-ZA45, by any of the following methods: • <E T="03">Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications.</E> Follow instructions for submitting comments on the FDIC's website. • <E T="03">Email: comments@FDIC.gov.</E> Include the RIN 3064-ZA45 in the subject line of the message. • <E T="03">Mail:</E> Jennifer Jones, Deputy Executive Secretary, Attention: Comments/Legal OES (RIN 3064-ZA45), Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. • <E T="03">Hand Delivered/Courier:</E> Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street NW) on business days between 7 a.m. and 5 p.m. <E T="03">Public Inspection:</E> Comments received, including any personal information provided, may be posted without change to <E T="03">https://www.fdic.gov/resources/regulations/federal-registerpublications/.</E> Commenters should submit only information they wish to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this notice will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Division of Risk Management Supervision: Thomas F. Lyons, Associate Director of Risk Management Policy, (202) 898-6850, <E T="03">tlyons@fdic.gov;</E> George Small, Senior Examination Specialist, (347) 267-2453, <E T="03">gsmall@fdic.gov.</E> Legal Division: Annmarie Boyd, Assistant General Counsel, (202) 898-3714, <E T="03">aboyd@fdic.gov;</E> Benjamin Klein, Senior Counsel, (202) 898-7027, <E T="03">bklein@fdic.gov;</E> Amanda Ledig, Counsel, (972) 761-5895, <E T="03">aledig@fdic.gov;</E> Nicholas Simons, Counsel, (202) 898-6785, <E T="03">nsimons@fdic.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> Section 18(c) of the Federal Deposit Insurance Act (FDI Act), which codifies the Bank Merger Act (BMA), prohibits an insured depository institution (IDI) from engaging in a bank merger transaction except with the prior approval of the responsible Federal banking agency. <SU>1</SU> <FTREF/> The FDIC has jurisdiction to act on merger transactions that solely involve IDIs in which the acquiring, assuming, or resulting institution is an FDIC-supervised institution. <SU>2</SU> <FTREF/> The FDIC also has jurisdiction to act on merger transactions that involve an IDI and any non-insured entity, notwithstanding the IDI's charter. <SU>3</SU> <FTREF/> <FTNT> <SU>1</SU>  12 U.S.C. 1828(c). </FTNT> <FTNT> <SU>2</SU>  12 U.S.C. 1828(c)(2). </FTNT> <FTNT> <SU>3</SU>  12 U.S.C. 1828(c)(1). </FTNT> The FDIC published a request for comment on a proposed Statement of Policy on Bank Merger Transactions in the <E T="04">Federal Register</E> on April 19, 2024, <SU>4</SU> <FTREF/> and subsequently issued it as final on September 27, 2024 (the 2024 Statement). <SU>5</SU> <FTREF/> The 2024 Statement superseded the FDIC's prior Statement of Policy on Bank Merger Transactions (Merger Policy Statement), which was initially adopted in 1998 and amended most recently in 2008. <SU>6</SU> <FTREF/> <FTNT> <SU>4</SU>  89 FR 29222 (April 19, 2024). </FTNT> <FTNT> <SU>5</SU>  89 FR 79125 (Sep. 27, 2024). </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> 63 FR 44761 (Aug. 20, 1998), 67 FR 48178 (Jul. 23, 2002), 67 FR 79278 (Dec. 27, 2002), and 73 FR 8870 (Feb. 15, 2008). </FTNT> <HD SOURCE="HD1">II. Overview of the Notice</HD> <HD SOURCE="HD2">A. Purpose</HD> The FDIC is pursuing this action in light of concerns that implementation of the 2024 Statement has added considerable uncertainty to the merger application process. As an example, the 2024 Statement has led to a number of questions regarding when merger applications are required. <SU>7</SU> <FTREF/> The 2024 Statement also deemphasizes the use of the Herfindahl-Hirschman Index (HHI) thresholds in the competitive effects analysis, which have long served as a predictable proxy for determining whether a proposed transaction is anticompetitive, <SU>8</SU> <FTREF/> and replaces it with more subjective criteria. In addition, the 2024 Statement places an affirmative burden on applicants to demonstrate that a merger transaction will enable the resulting institution to better meet the convenience and needs of the community to be served than would otherwise occur in the absence of the merger without offering any objective or quantifiable criteria regarding how the FDIC will evaluate this factor. <SU>9</SU> <FTREF/> The combined effect of these and several other provisions of the 2024 Statement is that the FDIC's bank merger review process has become less transparent and less predictable, leaving prospective applicants unclear about their prospects for approval and the resources and time they will need to allocate to the merger application process. Accordingly, in the interim, the FDIC is proposing to return to the historical approach, which is well-understood by the public and market participants, while the agency develops future policy. <FTNT> <SU>7</SU>   <E T="03">See e.g., supra</E> n. 5 at 89 FR 79134 (“The applicability of the BMA will depend on the facts and circumstances of the proposed transaction. In addition to transactions that combine institutions into a single legal entity through merger or consolidation, the scope of merger transactions subject to approval under the BMA encompasses transactions that take other forms, including purchase and assumption transactions or other transactions that are mergers in substance, and assumptions of deposits or other similar liabilities.”). </FTNT> <FTNT> <SU>8</SU>   <E T="03">See id.</E> at 89 FR 79136. </FTNT> <FTNT> <SU>9</SU>   <E T="03">See id.</E> at 89 FR 79138. </FTNT> <HD SOURCE="HD2">B. Summary of the Merger Policy Statement</HD> The Merger Policy Statement was first published in 1998 and was subsequently amended several times, <SU>10</SU> <FTREF/> most recently in 2008. The Merger Policy Statement is essentially  <SU>11</SU> <FTREF/> identical to the 2008 document. It includes a general introduction, followed by an overview of application procedures, a discussion of the FDIC's evaluation of merger applications based on the statutory factors required for consideration under the BMA, <SU>12</SU> <FTREF/> and concludes with a list of related considerations. The discussion of the BMA statutory factors addresses the competitive factors, the prudential considerations related to financial and managerial resources and future prospects, the convenience and needs of the community to be served, and the effectiveness of each insured depository institution involved in the proposed merger transaction in combatting money-laundering activities. <FTNT> <SU>10</SU>   <E T="03">See supra</E> n. 6. </FTNT> <FTNT> <SU>11</SU>  The only changes are technical edits updating a room number and a citation. </FTNT> <FTNT> <SU>12</SU>   <E T="03">Supra</E> n. 1. </FTNT> Although the Merger Policy Statement does not directly address the BMA's statutory factor related to the risk to the stability of the United States banking or financial system, which was added to the BMA by the Dodd-Frank Act in 2010, <SU>13</SU> <FTREF/> the FDIC has articulated its approach to evaluating this factor in the context of merger transactions in the FDIC's Applications Procedures Manual. <SU>14</SU> <FTREF/> <FTNT> <SU>13</SU>  12 U.S.C. 1828(c)(5), as amended by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 111-203, 604(f), 124 Stat. 1376, 1602 (2010). </FTNT> <FTNT> <SU>14</SU>   <E T="03">See</E> FDIC Applications Procedures Manual, pp. 4-22—4-23, available at: <E T="03">https://www.fdic.gov/sites/default/files/2024-03/pr19111a.pdf.</E> (“In evaluating a merger application, the FDIC must consider the risk to the stability of the United States banking or financial system (Section 18(c)(5) of the FDI Act). [The FDIC] consider[s] both quantitative and qualitative metrics when evaluating a transaction's impact on financial stability. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 32k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━