A bank merger review program put in place last fall was rescinded Tuesday by the federal bank deposit insurance agency which asserted that the program was “less transparent and less predictable” leading to confusion among banks.
The board of the Federal Deposit Insurance Corporation (FDIC), at its board meeting, also reinstated the previous process – and vowed to “conduct a broader reevaluation of its bank merger review process.” The reinstated Bank Merger Statement of Policy is effective 30 days from the date of publication in the Federal Register, the agency said.
“The (reinstated) Bank Merger Statement of Policy will remain in effect pending the FDIC’s review of all aspects of the regulatory framework governing the evaluation of merger transactions,” the agency said in a release. “The FDIC will consider comments received in connection with the proposal, and expects to seek additional public comment, in connection with its future review of bank merger policy.”
The bank merger policy adopted last September (now rescinded) was created under the Bank Merger Act (BMA), which prohibits an insured depository institution (IDI) from engaging in a bank merger transaction except with the prior approval of the responsible federal banking agency.
That policy said the FDIC would act on merger transactions involving IDIs in which the acquiring, assuming, or resulting institution is FDIC-supervised; and those that involve an IDI – federally chartered or not – and any non-insured entity.
The bank merger policy statement preceding the September revision was last updated in 2008. It did not, the agency noted, directly address an evaluation factor added to the BMA under the 2010 Dodd-Frank Act related to the risk to the stability of the U.S. banking or financial system, but the agency said it has articulated the approach to evaluating that factor in the context of merger transactions in its Applications Procedures Manual.
In other action Tuesday, the FDIC Board heard a report that the reserve ratio for the deposit insurance fund (DIF) remains on track to reach the statutory minimum of 1.35% ahead of the statutory deadline of Sept. 30, 2028. As of Dec. 31, the report noted, the DIF reserve ratio reached 1.28%, up from mid-year 2024 of 1.22%, “due to growth in the DIF balance and slower-than-average insured deposit growth.”
Statement of Policy on Bank Merger Transactions: Rescission and Reinstatement
FDIC Board of Directors Releases Semiannual Update on Deposit Insurance Fund Restoration Plan
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