FDIC Finalizes Merger Policy Statement With Few Changes

S&P Capital IQ
Tuesday, September 17, 2024
  • Final guidance maintains enhanced scrutiny for:
    • Transactions involving nonbanks.
    • Pro forma institutions with over $100 billion in assets.
    • Institutions with adverse Community Reinvestment Act (CRA) ratings.
  • Changes from the proposal include:
    • Removal of a statement under the financial resources factor to prevent misinterpretation that a strong IDI would be unable to absorb a weaker one.
    • New language clarifying that a merger must reduce financial risk to receive a favorable assessment.
  • Slight modifications were made to the convenience and needs factor:
    • The final guidance emphasizes that a merger should enable the resulting IDI to better serve the community.
  • Clarification on public statements about withdrawn applications:
    • FDIC Board retains the discretion to issue public statements on withdrawn applications to promote transparency, but such statements are rare and will comply with confidentiality laws.
  • Opposition from FDIC Board members:
    • Vice Chairman Travis Hill and Director Jonathan McKernan voted against the final policy, with Hill expressing concerns that the proposal went in the wrong direction.
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