The OCC policy statement also eliminates the ability of applicants to use the streamlined BMA application process, which had been most helpful for small, plain vanilla transactions.
On September 17, 2024, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) separately finalized previously proposed policy statements on their review of bank mergers under the Bank Merger Act (BMA) and its implementing regulations. Noticeably missing in action was the Board of Governors of the Federal Reserve System, who has not issued any policy statement that would update or amend its review of bank mergers. Also on September 17, 2024, the Department of Justice (DOJ) formally withdrew from the 1995 joint Bank Merger Guidelines and issued commentary on its plans to transition to the 2023 Merger Guidelines for its review of bank mergers.
The final OCC Policy Statement Regarding Statutory Factors Under the Bank Merger Act indicates a material level of consistency with its existing bank merger review process. It continues to include the 13 characteristics of an application that the OCC will consider to be consistent with approval of a bank merger application and continues to include six characteristics that could raise supervisory concerns and could result in an adverse finding with respect to one or more of the statutory factors under the BMA. The OCC policy statement also eliminates the ability of applicants to use the streamlined BMA application process, which had been most helpful for small, plain vanilla transactions.
The final FDIC Statement of Policy on Bank Merger Transactions is also similar in execution to the FDIC’s historical review of bank mergers, with some updates. First, mergers with a resulting bank with assets over $100 billion will receive enhanced scrutiny on their impact on the stability of the U.S. financial system, a statutory factor added under the Dodd-Frank Act. Second, applicants will need to affirmatively demonstrate how the transaction results in better meeting the convenience and needs of the communities in which the resulting bank will operate. Third, the FDIC will continue to require a detailed three-year plan for any projected branch actions (e.g., closings, expansions, etc.). Unlike the OCC policy statement, the FDIC policy statement does address review of the competitive factor under the BMA. While the FDIC will continue look to branch deposit data and the Herfindahl-Hirschman Index (HHI) calculations (for which it did not discuss specific HHI thresholds) in its review, it may also consider a range of products and geographic markets as well as other competition in the relevant markets.
The DOJ statement on its withdrawal from the 1995 Bank Merger Guidelines creates a material disconnect in how the DOJ will review bank merger transactions for antitrust and competition concerns and how the OCC, FDIC and the Federal Reserve will do so. For example, the DOJ and FTC’s 2023 Merger Guidelines include new, lower HHI thresholds (1800/100) for establishing a rebuttable presumption of anticompetitive harm in the market.
There is certainly more to come, but bank acquirers need to be up to speed on these updated policy statements and merger guidelines before considering strategic transactions.
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