Maryland Legal Alert for Financial Services
FDIC Proposes Modernized Framework for Bank Merger Reviews
The Federal Deposit Insurance Corporation (FDIC) has proposed a substantial overhaul of its Bank Merger Act review framework (the “Proposal”). If finalized, the Proposal would establish faster processing timelines under the bank merger framework, modernize the agency’s competitive effects analysis, and expand the financial stability safe harbor. The changes could improve certainty and predictability for applicants and reduce regulatory burdens.
The Proposal would establish a new subcategory of merger transactions, called de minimis merger transactions, with a five-business-day processing period for qualifying transactions. The Proposal also includes a 30-day expedited process for qualifying corporate reorganizations and a 45-day process for certain mergers involving eligible depository institutions.
The Proposal also addresses “Substantially Complete Determinations,” which establish when an applicant submits an incomplete merger filing. The FDIC would generally have 21 days after the filing to notify an applicant that its submission is incomplete. Absent such notice, the application would be deemed substantially complete, triggering the applicable processing period.
Further, the Proposal would revise the FDIC’s competitive effects analysis to include full thrift weighting, credit union inclusion, and the reallocation of centrally booked deposits. The Herfindahl-Hirschman Index (HHI) is an economic and statistical tool used to measure market concentration. Under the Proposal, the FDIC’s HHI calculation would account for deposits held by banks and thrift institutions, centrally booked deposits, and credit union shares.
These revisions could reduce measured concentration in markets where credit unions or institutions with substantial centrally booked deposits compete with traditional banks. As a result, some transactions that present concentration concerns under the existing methodology could fall within a regulatory safe harbor under the proposed approach.
The Proposal would establish a four-prong financial stability safe harbor covering certain resulting institutions below specified risk-based categories, acquisitions of insured depository institutions with less than $20 billion in total consolidated assets, qualifying corporate reorganizations, and de minimis merger transactions. The proposed asset threshold is double the threshold historically applied by the federal banking agencies.
In addition, the Proposal would provide clearer boundaries for transactions structured as asset acquisitions. An insured depository institution’s acquisition of at least 80% of another institution’s assets during a 12-month period would be treated as a “merger in substance” requiring a full application.
The FDIC’s Proposal represents a more structured approach to bank merger review. Faster processing categories, clearer completeness deadlines, updated competition metrics, and a broader safe harbor could materially improve predictability for many transactions. However, the Proposal would not bind the Department of Justice, Federal Reserve Board, or Office of the Comptroller of the Currency, leaving open the possibility of parallel reviews that produce different competitive assessments.
The Proposal remains subject to public comment.
For more information about this topic, please contact Christopher R. Rahl, Peri L. Schuster.