Washington, D.C. — Bank Policy Institute President and CEO Greg Baer issued a statement in response to the OCC’s and FDIC’s policy changes on bank mergers and acquisitions (M&A), which were finalized today.
“The bank M&A market is already mired in regulatory uncertainty, and today’s agency policy changes exacerbate it. Merger policy should ensure that applications are processed on a timely and predictable basis consistent with standards established by statute. Rather than sticking to the law, the FDIC and OCC chose to improvise new, subjective standards to evaluate bank mergers. The agencies’ merger approval process needs a shot clock; instead they give us the Four Corners, extends the time for the game and creates strange new rules."
Baer further commented on the implications of these policies: "The FDIC and OCC policies start with a presumption against timely approval for many mergers that would drive banks to avoid pro-competitive, healthy deals: mergers and acquisitions entail a high-cost, high-risk process that would not be worthwhile if the chances of approval are remote or if the process is a black box. Banks and consumers alike would suffer from an opaque and uncertain process. Unfortunately, the final policy measures entrench that uncertainty.”
At an open board meeting today, the FDIC finalized a policy statement on bank M&A that would make the bank merger review process more complex, slow, and subjective. The OCC also finalized a similar rule today. These measures introduce new standards for merger evaluation and set an unreasonably high bar for transaction approval.
In previous comments on the FDIC proposal, BPI urged its withdrawal or substantial revision to align with statutory standards and sound merger policy, including avoiding artificial constraints in the review process. BPI expressed similar concerns about the OCC proposal's prescriptive approach.
BPI emphasized tangible costs of delayed merger reviews such as departing employees and customers.
Baer highlighted what is at stake: “Banks’ ability to shoulder overlapping regulatory requirements, maintain costly cyber defenses, meet customer demand for innovative technology, and compete with less regulated fintechs depends on scale. Policy measures such as those taken by the FDIC and OCC ignore this reality and put necessary scale out of reach. Instead of making rational business decisions to pursue M&A, banks may choose to avoid the convoluted process and forgo deals that would benefit their customers and the economy.”
In conclusion, Baer stated: “These policies depart from the law and set a concerning precedent of presuming that all bank combinations are bad. It would pose harmful consequences for consumers and the vitality of the banking system.”
The Bank Policy Institute is a nonpartisan public policy research group representing universal banks, regional banks, and major foreign banks operating in the United States. The Institute produces academic research on regulatory topics, analyzes proposed regulations, and represents financial services regarding cybersecurity issues.
Tara Payne
Bank Policy Institute
tara.payne@bpi.com