BB&T-SunTrust seek FDIC as primary federal regulator

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The Federal Deposit Insurance Corp. appears to have won BB&T-SunTrust’s regulatory sweepstakes.

The combined bank would be chartered in North Carolina and be a state nonmember, North Carolina Banking Commissioner Ray Grace said Tuesday at a bank directors conference in Greensboro, N.C., hosted by the North Carolina Bankers Association. That would mean Grace’s office and the FDIC (not the Federal Reserve) would share supervisory authority. However, the Fed would oversee the holding company.

A spokesman for BB&T, based in Winston-Salem, N.C., declined to comment except to say "we're in ongoing discussions on that matter." An FDIC spokesman said the agency does not comment on pending matters.

Federal merger applications filed by BB&T and SunTrust in recent days do not explicitly say that the companies are seeking the FDIC as their lead federal regulator, but they do say SunTrust’s charter would be merged into BB&T’s, and BB&T is currently a state nonmember bank. BB&T used similar language in a proxy statement filed on Monday.

BB&T has filed nothing to suggest it wants to change its nonmember status.

The merging banks (which are based in different states) could have gone several directions — including switching to a national bank overseen by the Office of the Comptroller of the Currency. Such decisions tend to be the subject of intense speculation because of competition among chartering agencies for the prestige and exam fees that come along with (or can be lost) when large banks merge or change charters.

Industry observers had immediately started wondering what BB&T’s decision would be after it agreed in early February to buy SunTrust for $28 billion in a deal that would create a $442 billion-asset bank. The companies plan to move their headquarters to Charlotte, N.C, when the merger is completed.

The FDIC had a lot at stake. BB&T, at $226 billion of assets, was the largest bank supervised by the agency. Some observers have debated whether the FDIC, which primarily supervises community banks, could handle an institution nearly twice that size.

Still, some observers had predicted that BB&T would select the FDIC because of the company's experience in dealing with its longtime federal regulator.

The FDIC gave the bank an "outstanding" Community Reinvestment Act rating in 2017 and, along with the North Carolina commissioner, terminated an anti-money-laundering enforcement action in June. The Fed has yet to terminate a similar order against BB&T's holding company.

The banks could have chosen the Fed, which has had more experience supervising the nation’s biggest banks. The OCC also has a longer track record supervising bigger banks than the FDIC, and the added benefit of preemption authority for nationally chartered banks that allows them to bypass state laws.

BB&T, by a wide margin, is the biggest bank supervised by the North Carolina Office of the Commissioner of Banks.

There are advantages to remaining state-chartered, industry observers said. State regulators tend to have cheaper chartering costs than a national charter with the OCC.

SunTrust, based in Atlanta, is a state member bank, which in its case meant Georgia banking regulators and the Fed shared bank supervisory duties. The Georgia banking commissioner’s office would be a big loser if the merger is completed because SunTrust is its largest charter.

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