US Bank Merger Deals Poised To Face Tougher Scrutiny By FDIC
Deals that lead to a firm with more than $100 billion in assets would face a tougher process as the agency assesses potential risks to the financial system.
(Bloomberg) -- US bank mergers would face steeper regulatory hurdles under new guidelines that the Federal Deposit Insurance Corp. is set to adopt.
The FDIC’s plan, the latest in the Biden administration’s effort to clamp down on consolidation by financial firms, would add layers of scrutiny that more directly take into account the effects on financial stability, competition, communities and customers. The agency’s board scheduled a meeting Tuesday to vote on the new guidance.
For a deal to win approval, the FDIC would expect the resulting firm to “better meet the convenience and needs of the community to be served than would occur absent the merger,” according to a statement from the agency. Deals that lead to a firm with more than $100 billion in assets would face a tougher process as the agency assesses potential risks to the financial system.
The result would be a balancing act, with officials getting authority to evaluate and perhaps reject any merger transaction that fails on one or more of the criteria. For instance, the FDIC will evaluate whether the applicant has demonstrated that the benefits generated by the convenience and needs of the community will clearly outweigh the anti-competitive effects.
Competitive Concerns
It’s part of a years-long campaign by the administration to tap the brakes on bank deals, which have been criticized for hurting competition, particularly in regions where rival firms merge. President Joe Biden signed an executive order in 2021 that called on the Justice Department and banking regulators to toughen scrutiny of bank combinations. The concern about stability was heightened last year during the industry turmoil that felled some of the nation’s biggest regional lenders.
The FDIC would measure concentrations based on local deposit shares and take into account any data sources and analytical approaches that might shed light on the transaction. The possible benefits from a deal might also include allowing the merged bank to increase its lending limits. The agency could also more closely monitor whether the promises about benefits were upheld.
The new guidance was also adopted by the Office of the Comptroller of the Currency, the agency said in a separate statement.
The OCC had proposed a related measure in January that removes a decades-old requirement that certain merger applications get automatic approval on the 15th day after the close of the public comment period if the OCC fails to act by that deadline, among other things.
“The diversity of the banking system is critical to the nation’s communities, consumers and economy,” said Michael Hsu, the acting head of the OCC, who also sits on the FDIC Board.
