Will OCC plan silence some critics of bank M&A?

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WASHINGTON — Community reinvestment advocates are raising alarm about potential restrictions on their ability to formally protest bank mergers following a recent proposal by the Office of the Comptroller of the Currency.

Earlier this month, the OCC unveiled a sprawling, technical document proposing an array of steps to “eliminate unnecessary requirements” in bank licensing and other forms of business combinations.

Buried within the proposal are more specific standards for when the agency should consider “adverse comments” from groups that want to protest a merger on the grounds that one of the parties in a deal has not done enough lending under the Community Reinvestment Act.

Some advocates said the policy could limit public engagement over pending mergers, yet they and others acknowledged that the proposal may simply reflect procedures the OCC already has in place.

Community groups focus on CRA activities as the basis to submit adverse comments about a pending merger. Last July, the NCRC secured a $60 billion community benefit plan from BB&T and SunTrust Bank before they completed their merger to become Truist.
Community groups focus on CRA activities as the basis to submit adverse comments about a pending merger. Last July, the NCRC secured a $60 billion community benefit plan from BB&T and SunTrust Bank before they completed their merger to become Truist.

“This is going to make it harder for community groups to engage in the process,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition. “These are substantial changes that are being presented as a technical update, with almost none of those changes being advertised. So yeah — it’s sort of a stealth maneuver.”

Under current law, regulators can ignore “adverse comments” in certain circumstances, like if they believe a comment is “frivolous” or a transparent attempt to delay the merger. But the proposed rule would add a new reason to disregard public feedback: if comments are “non-substantive.”

The proposal defines non-substantive as “a generalized opinion that a filing should or should not be approved or ... a conclusory statement, lacking factual or analytical support.”

The proposal also would expand a provision for overlooking a public comment for issues the OCC believes it has addressed in the past.

Under current regulation, an issue raised that is “substantially the same issue in substantially the same assessment area during substantially the same time” from an earlier OCC examination or application could be ignored without investigation. The proposal would expand that list to “other supervisory activity, or a prior filing” by the OCC.

“Ultimately, it seems like this OCC is keen on further greasing the wheels for bank mergers,” said Kevin Stein, deputy director of the California Reinvestment Coalition.

Still, Van Tol and other observers suggested the proposed policy change may simply codify existing processes.

"I don’t know that this procedure hasn’t effectively been carried out already," Van Tol said. "Traditionally, the agencies have not treated every comment equally in the sense of what will have an impact. But at the very least, they should be equal in that these are legitimate opinions."

Others said it makes sense for the OCC to prioritize the comments that are expressed by multiple parties.

“If someone doesn’t have any evidence for a general complaint, why would the OCC take that seriously to begin with?” said one observer who is familiar with the matter. “Now in theory, if you have a lot of comments echoing something, regulators might say: ‘This could be smoke, maybe there’s fire, we should investigate.’”

Ken Thomas, president of Community Development Fund Advisors in Miami, Fl., said that the new language didn't strike him as particularly noteworthy. "I have submitted dozens of comments about corporate activities like M&A and branches, and this has always been the general policy by the agencies," he wrote in an email.

But Stein saw the move as yet another example of the OCC being too kind to the nation’s largest banks.

“By doing this, it will lessen the impact that public comments will have,” Stein said. “We don’t think most Americans believe banks should be subject to less oversight, or that the public should have less input in the process so that mergers can be fast-tracked.”

Bryan Hubbard, a spokesperson for the OCC, rejected the notion that the proposed changes to its adverse comments policy were significant. He noted that in cases where a comment doesn't meet the standard for agency review, the commenter is given the chance to revise and resend it.

“The language [in the proposal] codifies current practice that provides commenters the opportunity to resubmit non-substantive comments. In either case, supervisory staff is informed of the comment and relevant issues shared in the comment,” he said.

Community groups commonly focus on the CRA activities of banks involved in mergers as the basis to submit adverse comments. Organizations such as NCRC and CRC have been able to secure sizable community benefits agreements for their members from banks attempting to merge. Last July, the NCRC secured a $60 billion community benefit plan from BB&T and SunTrust Bank before they completed their merger to become Truist.

Advocates say asking for fact-based feedback has merit, but being too restrictive could lead to huge swaths of public feedback from community groups being ignored.

“When you narrow the framework for acceptable comments into terms of facts or analysis, or data points in retrospective, you run the risk of ignoring broader concerns,” Van Tol said. “A broader concern might not be backed up by a lot of hard data — you might just think something is bad — but where that line is is pretty subjective.”

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