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With a wave of mergers and acquisitions inevitable, a new set of regulatory hurdles have evolved for large financial entities and community banks alike.
August 21 -
Umpqua Holdings and Sterling Financial are paying Banner $7 million to take the branches. Though negative bids are uncommon in healthy bank deals, it seems like a small price to get regulators to bless a $2 billion merger.
February 20
The Federal Reserve Board has published an
The guide, structured as a series of frequently asked questions, focuses on how the Fed and the Justice Department's antitrust division analyze a deal's competitive elements.
"Given the increase in applications to acquire or merge following the recent recession and changes to the application process resulting from passage of the
It is unclear what prompted the agencies to release the guide, given that most recent acquisitions have involved smaller banks and have seldom triggered competitive or antitrust issues.
Nonetheless, much of the document is devoted to explaining the differences between how the agencies evaluate bigger deals. Ultimately, the Fed has the authority to deny applications, while the Justice Department can challenge applications that raise competitive concerns in court.
The guide explains the often nuanced difference between how the Fed and the Justice Department approach applications. For instance, both rely on summary of deposit data from the Federal Deposit Insurance Corp. and the Herfindahl-Hirschman index, which measures the market concentration. However, the Justice Department does not have predefined geographic markets for screening applications. Rather, it reviews each transaction on a case-by-case basis.
The document also discusses how credit unions and thrifts factor into the competitive landscape. For instance, thrifts are often given a 50% risk weighting.
Ultimately, the Fed and Justice Department view branch divestures as an effective way to address competitive issues, the guide said. Umpqua Holdings in Portland, Ore.,
