Today, both the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) finalized new guidelines regarding bank mergers. According to the agencies, these updates aim to enhance transparency and provide clearer guidance on the evaluation of merger applications under the Bank Merger Act (BMA).

OCC Final Rule and Policy Statement

The OCC’s final rule updates its regulations for business combinations involving national banks and federal savings associations. The OCC also issued a policy statement as an appendix to the final rule clarifying its review of applications under the BMA.

The policy statement discusses:

• General principles for the OCC’s review of applications under the BMA, including indicators for applications that are more likely to withstand scrutiny and be approved expeditiously, and those that raise supervisory or regulatory concerns.
• The OCC’s consideration of financial stability, managerial and financial resources, future prospects, and convenience and needs statutory factors under the BMA.
• The OCC’s decision-making process for extending the public comment period or holding a public meeting.

In his statement, Acting Comptroller of the Currency Michael J. Hsu emphasized the importance of these updates, stating, “This transparency should help promote a diverse and dynamic U.S. banking system — one that is safe and sound, pro-community, pro-competition, and pro-financial stability.” He further noted that the policy statements serve as “yardsticks and roadmaps” for banks to gauge and improve their chances of receiving regulatory approval for prospective mergers.

FDIC Final Statement of Policy

The FDIC’s Final Statement of Policy on Bank Merger Transactions  (Final SOP) updates the FDIC’s approach to evaluating transactions subject to its approval under the BMA.

Key updates include:

• Confirming that the FDIC’s evaluation of a merger’s competitive effects may take into account concentrations beyond deposits, including small business or residential loan originations.
• Clarifying that the proposed merger should result in less financial risk than the risk posed by the institutions on a standalone basis.
• Elaborating on the FDIC’s expectation that a merger will enable the resulting institution to better meet the convenience and needs of the community to be served.
• Applying additional scrutiny to the evaluation of financial stability for transactions resulting in an institution with $100 billion or more in total assets.
• Communicating the FDIC’s expectation to hold public hearings for mergers resulting in an institution with over $50 billion in total assets.
• Confirming the FDIC’s expectation that an institution that is required to divest operations in connection with a merger approval would not seek to obtain or enforce non-competition restrictions from employees of the divested operations.

FDIC Chairman Martin J. Gruenberg highlighted the significance of these updates, stating, “The Final Statement is a significant milestone in the FDIC’s efforts to update, strengthen, and clarify its approach to bank mergers.”

Earlier this year, we discussed the FDIC’s proposed guidelines here. In that post, we highlighted the FDIC’s intention to increase scrutiny on bank mergers, particularly those involving institutions with more than $100 billion in assets. The finalized guidelines reflect many of the considerations and public comments received during the proposal stage.

For any questions about the FDIC’s or OCC’s new guidelines or their implications for your institution, please reach out to a member of your Troutman Pepper Financial Services team.