On split vote along party lines, FDIC Board issues proposed statement on its application of Bank Merger Act

A “principles-based” overview of the federal bank deposit insurance agency’s administration of its responsibilities under the Bank Merger Act (BMA) is proposed in a new policy statement issued for comment on a split vote Thursday.

The proposed Statement of Policy (SOP) on bank merger transactions was issued for a 60-day comment period by the Federal Deposit Insurance Corp. (FDIC) Board. The vote was 3-2, with the Republican appointees to the board opposing the proposed statement.

According to a summary issued by the FDIC, the proposal offers a “principles-based” overview that describes the agency’s duties under the BMA. The FDIC said the proposal focuses on the scope of merger transactions subject to FDIC approval. The agency said the proposal also addresses the FDIC’s process for evaluating merger applications and the principles that guide the agency’s consideration of the applicable statutory factors under the BMA.

In a statement, FDIC Board Chairman Martin Gruenberg indicated that the recent pace of bank mergers made it imperative that the board issue the statement. “It is vital that the FDIC provide guidance on how it would apply the critical statutory factors under the Bank Merger Act relating to competition, financial resources, the convenience and needs of communities, financial stability, and money laundering,” he said.

In support of issuing the proposal for comment, Gruenberg was joined by the two members of the FDIC Board who serve by way of their positions heading up bank regulatory agencies: Acting Comptroller of the Currency Michael Hsu and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra. All three are Democratic appointees.

In voting against issuing the proposal, FDIC Board Vice Chairman Travis Hill asserted that it “moves in the wrong direction, potentially making the (merger) process longer, more difficult, and less predictable.”

FDIC Appointed Board Member Jonathon McKernan said he was unable to support the proposal “because it reflects and would implement a bias against bank mergers that is bad policy and contrary to law.”

However, Hsu, who heads the Office of the Comptroller of the Currency (OCC), in a separate statement, contended that the proposal “is broadly consistent with the proposed policy statement issued by the OCC in January.” That proposal had two key provisions that remove:

  • Provisions related to expedited review; any merger (or “business combination” under OCC nomenclature) subject to a filing is a significant corporate transaction requiring OCC decisioning, which should not be deemed approved solely due to the passage of time.
  • The OCC’s streamlined business combination application because, the agency contends, the Interagency Bank Merger Act Application (IBMA) provides the appropriate basis for the OCC to review a business combination application.

“Merger applications that would diminish competition, hurt communities, or present systemic risks should be withdrawn or rejected,” Hsu said. “Today’s proposed Statement of Policy, like the OCC’s, aims to offer further clarity into how the statutory factors will be weighed to achieve these outcomes.”

FDIC Seeks Public Comment on Proposed Revisions to its Statement of Policy on Bank Merger Transactions