- Key insight: The Federal Deposit Insurance Corp. Thursday proposed changes to its bank merger review process and rules governing state-chartered banks that operate across state lines.
- Supporting data: The merger proposal would create several processing categories, including a de minimis pipeline with processing in as little as five business days, and would set 90- or 180-day timelines for certain standard applications, subject to a 270-day maximum.
- Expert quote: "I'm particularly interested in whether there are opportunities for further reforms by the FDIC or on an interagency basis that are consistent with the requirements of the Bank Merger Act." — Comptroller of the Currency Jonathan Gould
The Federal Deposit Insurance Corp. on Thursday proposed approving de minimis bank mergers in as little as five days and allowing state-chartered banks providing services across state lines to enjoy federal preemption..Both proposals will be open for 60-day public comment periods.
The merger proposal was approved unanimously by the three participating members of the FDIC board: FDIC Chairman Travis Hill, Comptroller of the Currency Jonathan Gould and acting Consumer Financial Protection Bureau Director Jonathan Paoletta. Gould recused himself from the state-bank parity proposal and did not participate in that vote, which Hill and Paoletta approved.
Under the merger proposal, the FDIC would establish several categories of transactions with different filing requirements and processing timelines. Certain de minimis transactions could qualify for rapid processing in as little as five business days and would no longer require a public comment period. Public comment periods for "most corporate reorganizations" would also be reduced, even if they are not deemed de minimis.
The proposal also would expand the FDIC's existing expedited processing framework and establish standard processing periods of 90 or 180 days depending on the size of the resulting institution.
The proposal would also change how the agency analyzes whether a merger is anti-competitive, measured by the Herfindahl-Hirschman
"The new approach for calculating the HHI would continue to incorporate the deposits of all banks, but would now include a representative share of deposits of thrifts, shares of credit unions and banks and thrifts centrally booked deposits to more holistically consider the financial services market," FDIC staff noted at the board meeting. "Absent an objection from the Attorney General, the proposed rule would provide a safe harbor for transactions with certain HHI thresholds and transactions that are corporate reorganizations."
"If a transaction did not qualify for the safe harbor, then the FDIC would consider other pro-competitive factors, particularly for transactions in rural areas."
Hill has argued that the changes account for the way consumers access financial products through digital channels and from nonbank providers.
"The Bank Merger Act and the Supreme Court decisions interpreting the Bank Merger Act were written decades ago in a very different era, when banking was truly a local business, banks were subject to heavy legal restrictions regarding their ability to operate across the country or even across counties, and technology limited banks' ability to offer products outside of their branch network," said Hill at the meeting. "Not all banks operate nationwide, but all banks compete with banks and non-banks who do."
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The proposal is a reversal of an earlier bank merger policy drafted by the agency in 2024, a measure that Hill, then serving as vice chair of the FDIC,
Gould's comments in touting the proposal floated the possibility of extending these changes beyond the FDIC.
"Mergers are critical to a healthy, functioning banking system," Gould said. "I'm particularly interested in whether there are opportunities for further reforms by the FDIC or on an interagency basis that are consistent with the requirements of the Bank Merger Act."
The second proposal issued at the meeting deals with the treatment of state-chartered banks that provide services outside their home states.
In general would not apply to an out-of-state state-chartered bank providing the same services in that state, whether or not the bank has a branch there. The bank's home state laws would apply instead. The proposed rule would not affect the interest rates state banks are permitted to charge with respect to any of their loans,
The FDIC's proposal comes amid broader litigation over the applicability of state laws after a growing number of states moved to block interchange on
"Recent state legislation and related litigation, however, has created uncertainty as to the applicability of state laws to out-of-state banks, creating a potential competitive imbalance between state-chartered and national banks," Hill said. "The proposal would reinforce parity between state-chartered banks and national banks and is one of several rulemakings the FDIC is undertaking to modernize our regulatory framework to reflect the realities of modern banking."
