[Federal Register Volume 89, Number 30 (Tuesday, February 13, 2024)]
[Proposed Rules]
[Pages 10010-10018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02663]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / 
Proposed Rules

[[Page 10010]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 5

[Docket ID OCC-2023-0017]
RIN 1557-AF24


Business Combinations Under the Bank Merger Act

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The OCC is inviting comment on a proposed rule to increase the 
transparency of the standards that apply to the agency's review of 
business combinations involving national banks and Federal savings 
associations. In particular, the proposed rule would amend the 
procedures and would add, as an appendix, a policy statement that 
summarizes the principles the OCC uses when it reviews proposed bank 
merger transactions under the Bank Merger Act.

DATES: Comments must be received by April 15, 2024.

ADDRESSES: Commenters are encouraged to submit comments through the 
Federal eRulemaking Portal. Please use the title ``Business 
Combinations under the Bank Merger Act'' to facilitate the organization 
and distribution of the comments. You may submit comments by any of the 
following methods:
    <bullet> Federal eRulemaking Portal--``Regulations.gov'':
    Go to https://regulations.gov/. Enter ``Docket ID OCC-2023-0017'' 
in the Search Box and click ``Search.'' Public comments can be 
submitted via the ``Comment'' box below the displayed document 
information or by clicking on the document title and then clicking the 
``Comment'' box on the top-left side of the screen. For help with 
submitting effective comments, please click on ``Commenter's 
Checklist.'' For assistance with the Regulations.gov site, please call 
1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, or email 
<a href="/cdn-cgi/l/email-protection#04766163716865706d6b6a776c6168746061776f446377652a636b72"><span class="__cf_email__" data-cfemail="dfadbab8aab3beabb6b0b1acb7bab3afbbbaacb49fb8acbef1b8b0a9">[email protected]</span></a>.
    <bullet> Mail: Chief Counsel's Office, Attention: Comment 
Processing, Office of the Comptroller of the Currency, 400 7th Street 
SW, Suite 3E-218, Washington, DC 20219.
    <bullet> Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2023-0017'' in your comment. In general, the OCC will 
enter all comments received into the docket and publish the comments on 
the Regulations.gov website without change, including any business or 
personal information provided such as name and address information, 
email addresses, or phone numbers. Comments received, including 
attachments and other supporting materials, are part of the public 
record and subject to public disclosure. Do not include any information 
in your comment or supporting materials that you consider confidential 
or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this action by any of the following methods:
    <bullet> Viewing Comments Electronically--Regulations.gov:
    Go to https://regulations.gov/. Enter ``Docket ID OCC-2023-0017'' 
in the Search box and click ``Search''. Click on the ``Dockets'' tab 
and then the document's title. After clicking the document's title, 
click the ``Browse All Comments'' tab. Comments can be viewed and 
filtered by clicking on the ``Sort By'' drop-down on the right side of 
the screen or the ``Refine Comments Results'' options on the left side 
of the screen. Supporting materials can be viewed by clicking on the 
``Browse Documents'' tab. Click on the ``Sort By'' drop-down on the 
right side of the screen or the ``Refine Results'' options on the left 
side of the screen checking the ``Supporting & Related Material'' 
checkbox. For assistance with the Regulations.gov site, please call 1-
866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, or email 
<a href="/cdn-cgi/l/email-protection#92e0f7f5e7fef3e6fbfdfce1faf7fee2f6f7e1f9d2f5e1f3bcf5fde4"><span class="__cf_email__" data-cfemail="2b594e4c5e474a5f42444558434e475b4f4e58406b4c584a054c445d">[email protected]</span></a>.
    The docket may be viewed after the close of the comment period in 
the same manner as during the comment period.

FOR FURTHER INFORMATION CONTACT: Valerie Song, Assistant Director, 
Christopher Crawford, Special Counsel, Elizabeth Small, Counsel, Chief 
Counsel's Office 202-649-5490; or Yoo Jin Na, Director for Licensing 
Activities 202-649-6260, Office of the Comptroller of the Currency, 400 
7th Street SW, Washington, DC 20219. If you are deaf, hard of hearing, 
or have a speech disability, please dial 7-1-1 to access 
telecommunications relay services.

SUPPLEMENTARY INFORMATION:

I. Background

    The Bank Merger Act (BMA), section 18(c) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(c)), and the OCC's implementing 
regulation, 12 CFR 5.33, govern the OCC's review of business 
combinations of national banks and Federal savings associations with 
other insured depository institutions (institutions) that result in a 
national bank or Federal savings association.\1\ Under the BMA, the OCC 
must consider the following factors: competition, the financial and 
managerial resources and future prospects of the existing and proposed 
institutions, the convenience and needs of the community to be served, 
the risk to the stability of the United States banking or financial 
system, and the effectiveness of any insured depository institution 
involved in combatting money laundering activities, including in 
overseas branches.\2\ The BMA generally requires public notice of the 
transaction to be published for 30 days.\3\ OCC regulations require the 
public notice include essential details about the transaction and 
instructions for public comment. The regulations incorporate the 
statutory 30-day public notice period and provide a 30-day public 
comment period, which the OCC may extend.\4\ The OCC may also hold a 
public hearing, public meeting, or private meeting on an 
application.\5\
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    \1\ A business combination for these purposes includes 
assumption of deposits in addition to mergers or consolidations.
    \2\ 12 U.S.C. 1828(c)(5), (11).
    \3\ 12 U.S.C. 1828(c)(4).
    \4\ 12 CFR 5.8(b), 5.10(b)(1).
    \5\ 12 CFR 5.11.
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    The OCC has issued several publications that provide additional 
information about the procedures that the OCC follows in reviewing and 
acting on proposed business combinations. For example, the ``Business 
Combinations''

[[Page 10011]]

booklet of the Comptroller's Licensing Manual details the OCC's review 
of applications under the BMA. The ``Public Notice and Comments'' 
booklet of the Comptroller's Licensing Manual sets forth policies and 
requirements related to the public notice and comment process, 
including hearings and meetings. The Comptroller's Licensing Manual 
provides OCC staff, institutions, and the public with information about 
the procedures applicable to corporate applications filed with the OCC.
    After completing a review of these materials, the OCC has 
determined that additional transparency regarding the standards and 
procedures that the agency applies to its review of bank business 
combinations may be helpful to institutions and to the public. For 
example, the Comptroller's Licensing Manual does not describe all of 
the OCC's considerations regarding the BMA statutory factors and its 
related processes such as the considerations for holding public 
meetings.
    To better reflect the OCC's view that a business combination is a 
significant corporate transaction, the OCC is proposing amendments to 
12 CFR 5.33 to remove provisions related to expedited review and the 
use of streamlined applications. Additionally, to provide additional 
clarity and guidance to national banks, Federal savings associations, 
other institutions, and the public, the OCC is proposing to add a 
policy statement as appendix A to 12 CFR part 5, subpart C, that would 
discuss general principles the OCC uses in its review of applications 
under the BMA and discuss the OCC's consideration of the financial 
stability, financial and managerial resources and future prospects, and 
convenience and needs factors. Proposed appendix A would also discuss 
the criteria informing the OCC's decision on whether to hold a public 
meeting on an application subject to the BMA.

II. Description of the Proposed Policy Statement and Regulatory 
Amendments

Regulatory Amendments

    The OCC is proposing two substantive changes to its business 
combination regulation, 12 CFR 5.33. First, the OCC proposes to remove 
the expedited review procedures in Sec.  5.33(i). Paragraph (i) 
currently provides that a filing that qualifies as a business 
reorganization as defined in paragraph (d)(3) or that qualifies as a 
streamlined application under paragraph (j) is deemed approved as of 
the 15th day after the close of the comment period, unless the OCC 
notifies the applicant that the filing is not eligible for expedited 
review, or the expedited review process is extended, under Sec.  
5.13(a)(2).\6\
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    \6\ The provisions in 12 CFR 5.13(a)(2) regarding adverse 
comments would no longer apply to business combination applications 
as these provisions are applicable only to filings qualifying for 
expedited review.
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    The OCC reviews business combination applications to determine 
whether applicable procedural \7\ and substantive \8\ requirements are 
met. The OCC believes that any business combination subject to a filing 
under Sec.  5.33 is a significant corporate transaction requiring OCC 
decisioning, which should not be deemed approved solely due to the 
passage of time. The principles currently articulated by Sec.  5.33(i), 
such as certain transactions possessing indicators that are likely to 
satisfy statutory factors and do not otherwise raise supervisory or 
regulatory concerns, are contained within section II of proposed 
appendix A and will continue to guide OCC processing of business 
combination applications. As the term ``business reorganization'' as 
defined in Sec.  5.33(d)(3) is only used to define a class of 
applications eligible for expedited review under paragraph (i), the OCC 
also proposes to remove paragraph (d)(3).
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    \7\ See, e.g., 12 U.S.C. 215a (procedures for mergers resulting 
in a national bank).
    \8\ See, e.g., 12 U.S.C. 1828(c) (BMA).
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    Second, the OCC proposes to remove Sec.  5.33(j). Paragraph (j) 
currently specifies four situations in which an applicant may use the 
OCC's streamlined business combination application rather than the full 
Interagency Bank Merger Act Application.\9\ The streamlined application 
requests information about similar topics as the Interagency Bank 
Merger Act Application, but it only requires an applicant to provide 
detailed information if the applicant answers yes to one of a series of 
yes or no questions. A transaction eligible for a streamlined 
application also currently qualifies for expedited review, which the 
OCC proposes to remove. Given the nature of review of business 
combinations, the factors for which are discussed in proposed appendix 
A, it appears that the fuller record provided through the Interagency 
Bank Merger Act Application provides the appropriate basis for the OCC 
to review a business combination application. Further, the removal of 
the streamlined business combination form should not significantly 
increase the burden on applicants because information requested in the 
Interagency Bank Merger Act Application may be tailored as appropriate. 
For example, there may be situations where discussion of all items in 
the Interagency Bank Merger Act Application may not be appropriate, 
such as purchase and assumption transactions from an insured depository 
institution in Federal Deposit Insurance Corporation receivership. In 
these circumstances, the OCC can use its discretion to reduce the 
information that the applicant needs to provide to the OCC.\10\ As the 
entirety of paragraph (j) concerns the streamlined application, the OCC 
also proposes removing paragraph (j).
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    \9\ Paragraph (j) authorizes use of a streamlined application 
if: (i) At least one party to the transaction is an eligible bank or 
eligible savings association, and all other parties to the 
transaction are eligible banks, eligible savings associations, or 
eligible depository institutions, the resulting national bank or 
resulting Federal savings association will be well capitalized 
immediately following consummation of the transaction, and the total 
assets of the target institution are no more than 50 percent of the 
total assets of the acquiring bank or Federal savings association, 
as reported in each institution's Consolidated Report of Condition 
and Income filed for the quarter immediately preceding the filing of 
the application; (ii) The acquiring bank or Federal savings 
association is an eligible bank or eligible savings association, the 
target bank or savings association is not an eligible bank, eligible 
savings association, or an eligible depository institution, the 
resulting national bank or resulting Federal savings association 
will be well capitalized immediately following consummation of the 
transaction, and the filers in a prefiling communication request and 
obtain approval from the appropriate OCC licensing office to use the 
streamlined application; (iii) The acquiring bank or Federal savings 
association is an eligible bank or eligible savings association, the 
target bank or savings association is not an eligible bank, eligible 
savings association, or an eligible depository institution, the 
resulting bank or resulting Federal savings association will be well 
capitalized immediately following consummation of the transaction, 
and the total assets acquired do not exceed 10 percent of the total 
assets of the acquiring national bank or acquiring Federal savings 
association, as reported in each institution's Consolidated Report 
of Condition and Income filed for the quarter immediately preceding 
the filing of the application; or (iv) In the case of a transaction 
under Sec.  5.33(g)(4) of this section, the acquiring bank is an 
eligible bank, the resulting national bank will be well capitalized 
immediately following consummation of the transaction, the filers in 
a prefiling communication request and obtain approval from the 
appropriate OCC licensing office to use the streamlined application, 
and the total assets acquired do not exceed 10 percent of the total 
assets of the acquiring national bank, as reported in the bank's 
Consolidated Report of Condition and Income filed for the quarter 
immediately preceding the filing of the application.
    \10\ Under 12 CFR 5.2(b), the OCC may adopt materially different 
procedures for a particular filing, or class of filings as it deems 
necessary, for example, in exceptional circumstances or for unusual 
transactions, after providing notice of the change to the filer and 
to any other party that the OCC determines should receive notice. 
The OCC may use this authority, if appropriate, to reduce 
informational requirements in transactions involving a failing bank 
due to the short time for preparation of applications.

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[[Page 10012]]

Policy Statement

    As discussed in Section I, Introduction, of proposed appendix A, 
the proposed policy statement would provide institutions and the public 
with a better understanding of how the OCC reviews applications subject 
to the BMA and thus provide greater transparency, facilitate 
interagency coordination, and enhance public engagement. To this end, 
proposed appendix A would expand upon the information currently 
included in the Comptroller's Licensing Manual. Specifically, proposed 
appendix A would outline general principles the OCC applies when 
reviewing applications and provide information about how the OCC 
considers the BMA statutory factors of financial stability, financial 
and managerial resources, and convenience and needs of the 
community.\11\ Additionally, proposed appendix A would provide 
transparency regarding the public comment period and the factors the 
OCC considers in determining whether to hold public meetings.
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    \11\ Proposed appendix A would not address the BMA statutory 
factors of competition and the effectiveness of any insured 
depository institution involved in combatting money laundering 
activities, including in overseas branches. 12 U.S.C. 1828(c)(5), 
(11). The OCC's review of the competition factor is guided by the 
process described in the interagency document, Bank Merger 
Competitive Review--Introduction and Overview (1995), Department of 
Justice, Antitrust Division. See https://www.justice.gov/sites/default/files/atr/legacy/2007/08/14/6472.pdf. The Federal Financial 
Institution Examination Council's Bank Secrecy Act/Anti-Money 
Laundering Examination Manual details the OCC's examination of 
institutions' anti-money laundering activities. See https://bsaaml.ffiec.gov/manual.
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    Section II, General Principles of OCC Review, of proposed appendix 
A would discuss the OCC's review of an action on applications. Overall, 
the OCC aims to act promptly on all applications. This section of 
proposed appendix A would indicate that potential actions by the OCC 
include approval, denial, or requesting that an applicant withdraw the 
application because any shortcomings are unlikely to be resolved in a 
timely manner. Proposed appendix A identifies certain indicators that, 
in the OCC's experience, applications that are consistent with approval 
generally feature. These indicators include: (i) attributes regarding 
the acquirer's financial condition, size, Uniform Financial Institution 
Ratings System (UFIRS) \12\ or risk management, operational controls, 
compliance, and asset quality (ROCA) \13\ ratings, Uniform Interagency 
Consumer Compliance Rating System (CC Rating System) rating, Community 
Reinvestment Act (CRA) rating, the effectiveness of the Bank Secrecy 
Act/anti-money laundering program, and the absence of fair lending 
concerns; (ii) the attributes regarding target's size and status as a 
eligible depository institution, as defined in Sec.  5.3; (iii) the 
transaction clearly not having a significant adverse effect on 
competition; and (iv) the absence of significant CRA or consumer 
compliance concerns, as indicated in any comments or supervisory 
information.
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    \12\ UFIRS is also known as the CAMELS system.
    \13\ The ROCA System is the interagency uniform supervisory 
rating system for U.S. branches and agencies of foreign banking 
organizations.
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    The General Principles of OCC Review section of proposed appendix A 
would also recognize that there are indicators that raise supervisory 
or regulatory concerns. Based on the OCC's experience, if any of these 
indicators are present, the OCC is unlikely to find the statutory 
factors under the BMA to be consistent with approval unless and until 
the applicant has adequately addressed or remediated the concern. 
Proposed appendix A would state that these indicators include: (i) the 
acquirer has a CRA rating of Needs to Improve or Substantial 
Noncompliance; (ii) the acquirer has a UFIRS or ROCA composite or 
management rating of 3 worse; (iii) a consumer compliance rating of 3 
or worse; (iv) the acquirer is a global systemically important banking 
organization, or subsidiary thereof; \14\ (v) the acquirer has an open 
or pending Bank Secrecy Act/Anti-money Laundering enforcement or fair 
lending action, including referrals or notification to other agencies; 
\15\ (v) failure by the acquirer to adopt, implement, and adhere to all 
the corrective actions required by a formal enforcement action in a 
timely manner; or (vi) multiple enforcement actions against the 
acquirer executed or outstanding during a three-year period.
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    \14\ The Basel Committee on Bank Supervision annually identifies 
banking organizations as global systemically important.
    \15\ For example, the OCC is required to institute an 
enforcement action or make a referral if it makes certain 
supervisory findings with respect to the Bank Secrecy Act or fair 
lending laws. See, e.g., 12 U.S.C. 1818(s)(3); 15 U.S.C. 1691e(g).
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    Section III, Financial Stability, of proposed appendix A would 
provide additional information about how the OCC considers ``the risk 
to the stability of the United States banking or financial system'' as 
required by the BMA, including (i) the factors the OCC considers, which 
are currently described in the ``Business Combinations'' booklet of the 
Comptroller's Licensing Manual; (ii) the balancing test the OCC 
applies; and (iii) the OCC's ability to consider imposing conditions on 
the approval of any such transaction. The OCC's approach to considering 
the risk to the stability of the financial system that would be set 
forth in proposed appendix A is consistent with longstanding OCC 
practice and principles.\16\ Specifically, the OCC considers (i) 
whether the size of the combined institutions would result in material 
increases in risk to financial stability; (ii) any potential reduction 
in the availability of substitute providers for the services offered by 
the combining institutions; (iii) whether the resulting institution 
would engage in any business activities or participate in markets in a 
manner that, in the event of financial distress of the resulting 
institution, would cause significant risks to other institutions; (iv) 
the extent to which the combining institutions contribute to the 
complexity of the financial system; (v) the extent of cross-border 
activities of the combining institutions; (vi) whether the proposed 
transaction would increase the relative degree of difficulty of 
resolving or winding up the resulting institution's business in the 
event of failure or insolvency; and (vii) any other factors that could 
indicate that the transaction poses a risk to the U.S. banking or 
financial system.
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    \16\ See, e.g., OCC Conditional Approval #1298 (November 2022); 
OCC Corporate Decision #2012-05 (April 2012).
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    Section III, Financial Stability, of proposed appendix A would 
clarify that the OCC applies a balancing test when considering the 
financial stability factor and weighs the financial stability risk of 
approving the proposed transaction against the financial stability risk 
of denying the proposed transaction, particularly if the proposed 
transaction involves a troubled target. Specifically, the OCC would 
consider each factor individually and in combination. Even if only a 
single factor indicates a risk to the stability of the U.S. banking or 
financial system, the OCC may determine that the proposal would have an 
adverse effect on the stability of the U.S. banking or financial 
system.\17\ The OCC would also consider whether the proposed 
transaction would provide any stability benefits and whether enhanced 
prudential standards applicable as a result of the proposed transaction 
would offset any potential risks.\18\
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    \17\ See, e.g., FRB Order No. 2012-2 at 30
    \18\ See, e.g., FRB Order No. 2021-04 (May 14, 2021) at 24.
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    Section III also would note that, consistent with current OCC 
practice,\19\ the OCC's review of the financial

[[Page 10013]]

stability factors may result in a decision to approve a proposed 
transaction, subject to conditions that are enforceable under 12 U.S.C. 
1818. These conditions, which may include asset divestitures or higher 
minimum capital requirements, are intended to address and mitigate 
financial stability risk concerns.
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    \19\ See, e.g., OCC Conditional Approval #1298 (November 2022).
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    Further, the OCC's review of the financial stability factors 
considers the impact of the proposed transaction in the context of the 
recovery planning standards applicable to the resulting institution 
pursuant to 12 CFR 30, appendix D, ``OCC Guidelines Establishing 
Heightened Standards for Certain Large Insured National Banks, Insured 
Federal Savings Associations, and Insured Federal Branches'' and any 
heightened standards requirements applicable to the resulting 
institution pursuant to 12 CFR 30, appendix E, ``OCC Guidelines 
Establishing Standards for Recovery Planning by Certain Large Insured 
National Banks, Insured Federal Savings Associations, and Insured 
Federal Branches.'' Section III also would state that the OCC may 
consider the facts, circumstances, and representations of concurrent 
applications for related transactions, including considering the impact 
of the related transactions to the proposed transaction under review by 
the OCC.\20\
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    \20\ For example, many business combinations under the BMA are 
part of a larger transaction requiring a filing with the Board under 
the Bank Holding Company Act.
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    Section IV, Financial and Managerial Resources and Future Prospects 
of proposed appendix A would discuss the BMA's requirement that the OCC 
consider the managerial resources, financial resources, and future 
prospects of any proposed transaction. Under the BMA, the OCC must 
consider each of these factors independently for both the combining and 
resulting institutions.\21\ However, because these factors are directly 
related to one another, the OCC also considers these factors 
holistically. This section of proposed appendix A would describe the 
overarching considerations of the OCC's review of these factors and 
provide additional details about what the OCC considers while reviewing 
these factors. The overarching considerations of this proposed section 
would note that the OCC will consider the size, complexity, and risk 
profile of the combining and resulting institutions.
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    \21\ 12 U.S.C. 1828(c)(5).
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    Further, proposed appendix A expands on the discussion in the 
Comptroller's Licensing Manual about the types of transactions the OCC 
would normally not approve by providing additional details about 
acquirer characteristics with respect to financial and managerial 
resources and future prospects that are less likely to result in an 
approval. Specifically, the OCC is less likely to approve an 
application when the acquirer (i) has a less than satisfactory 
supervisory record, including its financial and managerial resources; 
(ii) has experienced rapid growth; (iii) has engaged in multiple 
acquisitions with overlapping integration periods; (iv) has failed to 
comply with conditions imposed in prior OCC licensing decisions; or (v) 
is functionally the target in the transaction.\22\ The OCC also 
normally does not approve a combination that would result in a 
depository institution with less than adequate capital, less than 
satisfactory management, or poor earnings prospects.
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    \22\ For example, in a reverse triangular merger, a holding 
company may acquire an institution and merge its existing subsidiary 
into the newly acquired institution, which survives as a subsidiary 
of the holding company. See Comptroller's Licensing Manual, 
``Business Combinations'' at 23 (January 2021).
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    Finally, this subsection would confirm the OCC's practice of 
considering all comments on proposed transactions, including those on 
financial and managerial resources and future prospects. To the extent 
public comments address issues involving confidential supervisory 
information, however, the OCC generally would not discuss or otherwise 
disclose confidential supervisory information in public decision 
letters.
    Section IV of proposed appendix A would next discuss the OCC's 
consideration of the individual financial resources, managerial 
resources, and future prospects factors. With respect to financial 
resources, proposed appendix A would discuss the OCC's review of pro 
forma capital levels. Additionally, the OCC is generally prohibited by 
statute from approving business combination applications filed by an 
institution that is undercapitalized as defined in 12 CFR 6.4.\23\ 
Proposed Appendix A also would specify that the OCC closely scrutinizes 
transactions that increase the risk to the bank's financial condition 
and resilience, including risk to bank capital, liquidity, and earnings 
that can arise from any of the eight categories of risk included in the 
OCC's Risk Assessment System.\24\ Further, with respect to the 
financial resources factor, the OCC considers the ability of management 
to address increased risks that would result from the transaction. 
Finally, proposed appendix A would clarify that a transaction involving 
an acquirer with a strong supervisory record is more likely to satisfy 
the review factors. By contrast, a transaction involving an acquirer 
with a recent less than satisfactory supervisory record is less likely 
to satisfy this factor.
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    \23\ 12 U.S.C. 1831o(e)(4). The OCC may only approve a 
combination application by an undercapitalized institution if the 
agency has accepted the institution's capital restoration plan and 
determines that the proposed combination is consistent with and will 
further the achievement of the plan or if the Board of Directors of 
the Federal Deposit Insurance Corporation determines that the 
proposed combination will further the purposes of 12 U.S.C.1831o. 12 
U.S.C. 1831o(e)(4)(A)-(B).
    \24\ These are credit, interest rate, liquidity, price, 
operational, compliance, strategic, and reputation risks. See 
Comptroller's Handbook, ``Bank Supervision Process'' at 26-28 
(Version 1.1, September 2019).
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    Section IV of proposed appendix A would discuss the OCC's approach 
to considering the managerial resources standard. The OCC would 
consider the supervisory record and current condition of both the 
acquirer and target to determine if the resulting institutions will 
have sufficient managerial resources. For example, a significant number 
of matters requiring attention (MRA), or lack thereof, may impact the 
determination as to whether there are sufficient managerial resources. 
The OCC also reviews (i) both institutions' management ratings under 
the UFIRS or ROCA system, and component ratings under the CC Rating 
System, Uniform Rating System for Information Technology, and Uniform 
Interagency Trust Rating System, as applicable; and (ii) relevant the 
Risk Assessment System (RAS) conclusions for the applicant as well as 
the RAS conclusions for an OCC-supervised target. The OCC would 
consider the context in which the rating or RAS element was assigned 
and any additional information resulting from ongoing supervision. 
Finally, proposed appendix A would note that less than satisfactory 
ratings at the target do not preclude the approval of a transaction, 
provided that the acquirer can employ sufficiently robust risk 
management and financial resources to correct the weaknesses.
    Proposed appendix A would state that the OCC considers whether the 
acquirer has conducted sufficient due diligence of the target 
depository institution to understand the business model, systems 
compatibility, and weaknesses of the target. This includes the 
acquirer's plans and ability to address its previously identified 
weaknesses, remediate the target's weaknesses, and exercise appropriate 
risk management for the size, complexity, and risk profile of the 
resulting institution. Similarly, the OCC considers the acquirer's 
plans for and

[[Page 10014]]

history of integrating combining institutions' operations, including 
systems and information security processes, products, services, 
employees, and cultures.
    Proposed appendix A next would discuss the OCC's consideration of 
the acquirer's plans to identify and manage systems compatibility and 
integration issues, such as information technology compatibility and 
implications for business continuity resilience. A critical component 
of these plans includes the identification of overreliance on manual 
controls, strategies for automating critical processes, and capacity 
and modernization of aging and legacy information technology systems. 
Additional OCC review may be required where there are concerns with 
systems integration, and, in some cases, the OCC may impose conditions, 
enforceable pursuant to 12 U.S.C. 1818, to address those concerns. The 
OCC may deny an application if the integration issues or other issues 
present significant supervisory concerns, and the issues cannot be 
resolved through appropriate conditions or otherwise.\25\
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    \25\ See 12 CFR 5.13(b).
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    Finally, with regard to managerial resources, proposed appendix A 
would describe the OCC's consideration of the proposed governance 
structure of the resulting institution. This includes consideration of 
(i) governance in decision-making processes, the board management 
oversight structure, and the risk management system, including change 
management; and (ii) the expansion of existing activities, introduction 
of new or more complex products or lines of business, and implications 
for managing existing and acquired subsidiaries and equity investments. 
When applicable, the resulting institution's governance is also 
considered in the context of the institution's relationship with its 
holding company and the scope of the holding company's activities.
    Section IV of proposed appendix A also would discuss how the OCC 
considers the future prospects factor. The OCC would consider this 
factor in light of its assessment of the institutions' financial and 
managerial resources. The OCC also would consider the proposed 
operations of the resulting institutions and the acquirer's record of 
integrating acquisitions. Specifically, the OCC would consider whether 
the integrated institution will be able to function effectively as a 
single entity. The OCC also would consider the resulting institution's 
business plan or strategy and management's ability to implement it in a 
safe and sound manner. Finally, the OCC would consider the 
combination's potential impacts on the resulting institution's 
continuity planning and operational resilience.
    Section V, Convenience and Needs of proposed appendix A would 
expand on the discussion in the Comptroller's Licensing Handbook of the 
OCC's consideration of the probable effects of the proposed business 
combination on the community to be served. Specifically, this section 
would clarify that the OCC's consideration of the impacts of any 
proposed combination on the convenience and needs of the community is 
prospective and considers the likely impact on the community of the 
resulting institution after the transaction is consummated.\26\ For 
this factor, the OCC considers, among other things (i) the proposed 
changes to branch locations, branching services, banking services or 
products, or credit availability offered by the target and acquirer, 
including in low- or moderate-income (LMI) communities, (ii) any job 
losses or lost job opportunities from branching changes, and (iii) any 
community investment or development initiatives, including particularly 
those that support affordable housing and small businesses. With 
respect to (i) above, the OCC is also considering, and welcomes comment 
on, whether to specify communities in addition to LMI communities as 
part of these considerations.
---------------------------------------------------------------------------

    \26\ As the OCC's review of this factor is with respect to the 
resulting institution, it necessarily includes review of the record, 
products, and services of both the acquirer and target.
---------------------------------------------------------------------------

    Finally, Section V of proposed appendix A would clarify that the 
OCC's forward-looking consideration of the convenience and needs factor 
under the BMA is separate and distinct from its consideration of the 
CRA record of performance of an applicant in helping to meet the credit 
needs of the relevant community, including LMI neighborhoods.
    Section VI, Public Comments and Meetings, of proposed appendix A 
would provide additional details about the process and procedures 
relating to the OCC's receipt of public comments and the OCC's 
considerations related to public meetings and clarifies the information 
contained within 12 CFR part 5 and the ``Public Notice and Comments'' 
booklet of the Comptroller's Licensing Manual.\27\ Specifically, the 
public comments subsection would articulate the circumstances under 
which the OCC may extend the comment period from the usual 30-day 
comment period \28\ pursuant to Sec.  5.10(b)(2).\29\ It also would 
provide additional clarity by noting that the OCC may find that 
additional time is necessary to develop factual information, and thus 
warrant extending the comment period, if a filer's response to a 
comment does not fully address the matters raised in the comment, and 
the commenter requests an opportunity to respond. This subsection also 
would provide examples of extenuating circumstances when the OCC may 
determine that an extension is needed, including, for example, if a 
public meeting is held, the transaction is novel or complex, or a 
natural disaster has occurred affecting the public's ability to timely 
submit comment.
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    \27\ While the BMA does not require the OCC to hold meetings or 
hearings, 12 CFR 5.11 describes the consideration and procedures for 
public hearings and notes the availability of several other types of 
meetings. The OCC considers three options for seeking oral input: 
(1) public hearing, (2) public meeting, and (3) private meeting.
    \28\ See 12 CFR 5.10(b)(1).
    \29\ Specifically, part 5 notes that the OCC may extend the 
comment period when: (1) a filer fails to file all required publicly 
available information on a timely basis or makes a request for 
confidential treatment not granted by the OCC; (2) a person 
requesting an extension demonstrates to the OCC that additional time 
is necessary to develop factual information the OCC determines is 
necessary to consider the filing; and (3) the OCC determines that 
other extenuating circumstances exist.
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    The public meetings subsection of Section VI would state that when 
determining whether to hold a public meeting, the OCC balances the 
public's interest in the transaction with the value or harm of a public 
meeting to the decision-making process. Proposed appendix A would also 
clarify criteria informing the OCC's decision on whether to hold a 
public meeting. The criteria include (i) the public's interest in the 
transaction; (ii) the appropriateness of a public meeting to document 
or clarify issues raised during the public comment process; (iii) the 
significance of the transaction to the banking industry; (iv) the 
significance of the transaction to the communities affected; (v) the 
potential value of any information that could be gathered and 
documented during a public meeting; and (vi) the acquirer's and 
target's CRA, consumer compliance, and fair lending, or other pertinent 
supervisory records, as applicable.

III. Request for Comments

    The OCC encourages comment on any aspect of this proposal and 
especially on the specific issues discussed in this Supplementary 
Information section.

[[Page 10015]]

IV. Regulatory Analysis

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\30\ the OCC may 
not conduct or sponsor, and a respondent is not required to respond to, 
an information collection unless it displays a currently valid Office 
of Management and Budget (OMB) control number. The information 
collection requirements in this proposed rule have been submitted to 
OMB under OMB control number 1557-0014 (Licensing Manual).
---------------------------------------------------------------------------

    \30\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

    The proposal would amend 12 CFR 5.33, by removing the expedited 
review procedures in section 5.33(i), which currently allow an 
application to be deemed approved by the OCC as of the 15th day after 
the close of the comment period, unless the OCC notifies the filer that 
the filing is not eligible for expedited review, or the expedited 
review process is extended. The proposal also removes the streamlined 
application in section 5.33(j), which would remove the ability of 
eligible institutions to file for certain types of business 
combinations using a streamlined application form.
    Title: Licensing Manual.
    OMB control number: 1557-0014.
    Frequency of Response: Occasional.
    Affected Public: National banks and Federal savings associations.
    The changes to the burden of the Licensing Manual are de minis and 
continue to be:
    Estimated Number of Respondents: 3,694.
    Estimated Total Annual Burden: 12,481.15.
    Comments are invited on:
    (a) Whether the collections of information are necessary for the 
proper performance of the agency functions, including whether the 
information has practical utility;
    (b) The accuracy of the agency estimates of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires an agency, in connection with a proposed rule, to prepare an 
Initial Regulatory Flexibility Analysis describing the impact of the 
rule on small entities (defined by the Small Business Administration 
(SBA) for purposes of the RFA to include commercial banks and savings 
institutions with total assets of $850 million or less and trust 
companies with total assets of $47 million or less) or to certify that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities. However, under section 605(b) of 
the RFA, this analysis is not required if an agency certifies that the 
rule would not have a significant economic impact on a substantial 
number of small entities and publishes its certification and a short 
explanatory statement in the Federal Register along with its rule.
    The OCC currently supervises 1,057 institutions (commercial banks, 
trust companies, federal savings associations, and branches or agencies 
of foreign banks) of which approximately 661 are small entities.\31\ 
The OCC estimates that on average, 38 OCC-supervised institutions could 
be impacted by the rule in a given year. This is based on a five-year 
average of the number of business combination applications submitted to 
the OCC from 2019 through 2023.\32\
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    \31\ The OCC's estimate of the number of small entities is based 
on the Small Business Administration's size thresholds for 
commercial banks and savings institutions, and trust companies, 
which are $850 million and $47 million, respectively. Consistent 
with the General Principles of Affiliation 13 CFR 121.103(a), the 
OCC counts the assets of affiliated financial institutions when 
determining if we should classify an OCC-supervised institution as a 
small entity. The OCC used December 31, 2022, to determine size 
because a ``financial institution's assets are determined by 
averaging the assets reported on its four quarterly financial 
statements for the preceding year.'' See footnote 8 of the U.S. 
Small Business Administration's Table of Size Standards.
    \32\ The OCC received 51 merger applications in 2019, 36 in 
2020, 46 in 2021, 36 in 2022, and 18 in 2023. For further details, 
see https://www.occ.gov/publications-and-resources/publications/annual-report/files/2023-annual-report.pdf, https://www.occ.gov/publications-and-resources/publications/annual-report/files/2022-annual-report.pdf, https://www.occ.gov/publications-and-resources/publications/annual-report/files/2021-annual-report.pdf, https://www.occ.gov/publications-and-resources/publications/annual-report/files/2020-annual-report.pdf, and https://www.occ.gov/publications-and-resources/publications/annual-report/files/2019-annual-report.pdf.
---------------------------------------------------------------------------

    In terms of the potential impact of the proposed changes on 
affected institutions, the OCC does not expect that the changes would: 
(1) result in a different decision outcome for the merger application 
by the OCC or (2) result in a burden on affected institutions. First, 
proposed appendix A would seek to provide transparency with respect to 
the OCC's BMA review process including the OCC's consideration of 
certain statutory factors under the BMA, which should provide regulated 
institutions with additional clarity and transparency about the OCC's 
decision-making process. Second, the removal of the expedited review 
process would potentially affect OCC staff, but not affect banks, as 
the scope of information to be submitted by banks would not change. And 
third, the OCC expects that the removal of the streamlined application 
process would not result in a substantive impact on affected 
institutions or on the information collected, as the streamlined 
application and the interagency BMA application requests substantively 
the same information.\33\ Therefore, the OCC expects the impact to 
affected OCC-supervised institutions would likely be de minimis. For 
these reasons, the OCC certifies that the proposed rule would not have 
a significant economic impact on a substantial number of small 
entities.\34\
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    \33\ The same information is collected through both the 
streamlined and regular merger application review processes. The 
streamlined application generally asks yes or no questions about the 
same type of information requested on the interagency application, 
and if an applicant answers yes, then the applicant needs to provide 
additional detail.
    \34\ In general, the OCC classifies the economic impact on an 
individual small entity as significant if the total estimated impact 
in one year is greater than 5 percent of the small entity's total 
annual salaries and benefits or greater than 2.5 percent of the 
small entity's total non-interest expense.
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C. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) (2 U.S.C. 1532) requires that the OCC prepare a budgetary 
impact statement before promulgating a rule that includes any Federal 
mandate that may result in the expenditure by state, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation, currently $182 
million) in any one year. If a budgetary impact statement is required, 
section 205 of the Unfunded Mandates Act (2 U.S.C. 1535) also requires 
the OCC to identify and consider a reasonable number of regulatory 
alternatives before promulgating a rule.
    The OCC estimates that the annual aggregate cost of the proposal 
once fully phased in would de minimis. Furthermore, the proposed 
changes are

[[Page 10016]]

not new requirements for OCC-supervised institutions, but rather 
describe considerations and principles that guide the OCC's review of 
applications under the BMA. Therefore, the OCC concludes that the 
proposed rule would not result in an expenditure of $182 million or 
more annually by state, local, and tribal governments, or by the 
private sector.

D. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act of 1994 (RCDRIA),\35\ in determining the 
effective date and administrative compliance requirements for new 
regulations that impose additional reporting, disclosure, or other 
requirements on insured depository institutions, the OCC must consider, 
consistent with the principle of safety and soundness and the public 
interest, any administrative burdens that such regulations would place 
on depository institutions, including small depository institutions, 
and customers of depository institutions, as well as the benefits of 
such regulations. In addition, section 302(b) of RCDRIA, requires new 
regulations and amendments to regulations that impose additional 
reporting, disclosures, or other new requirements on insured depository 
institutions generally to take effect on the first day of a calendar 
quarter that begins on or after the date on which the regulations are 
published in final form, with certain exceptions, including for good 
cause.\36\
---------------------------------------------------------------------------

    \35\ 12 U.S.C. 4802(a).
    \36\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

    The OCC requests comment on any administrative burdens that the 
proposed rule would place on depository institutions, including small 
depository institutions, and their customers, and the benefits of the 
proposed rule that the OCC should consider in determining the effective 
date and administrative compliance requirements for a final rule.

List of Subjects in 12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Savings associations, Securities.

    For the reasons set forth in the preamble, OCC proposes to amend 
chapter I of title 12 of the Code of Federal Regulations as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

0
1. The authority citation for part 5 continues to read as follows:

    Authority:  12 U.S.C. 1 et seq., 24a, 35, 93a, 214a, 215, 215a, 
215a-1, 215a-2, 215a-3, 215c, 371d, 481, 1462a, 1463, 1464, 1817(j), 
1831i, 1831u, 2901 et seq., 3101 et seq., 3907, and 5412(b)(2)(B).


Sec.  5.33  [Amended]

0
2. Section 5.33 is amended by removing and reserving paragraphs (d)(3), 
(i), and (j).
0
3. Add appendix A to part 5, subpart C to read as follows:

Appendix A: Policy Statement Regarding Statutory Factors Under the Bank 
Merger Act

I. Introduction

    The purpose of this policy statement is to provide insured 
depository institutions (institutions) and the public with a better 
understanding of the Office of the Comptroller of the Currency's 
(OCC's) consideration of certain statutory factors under the Bank 
Merger Act (BMA), 12 U.S.C. 1828(c). The matters discussed in this 
statement are intended to provide greater transparency, facilitate 
interagency coordination, and enhance public engagement.

II. General Principles of OCC Review

    The OCC aims to act promptly on all applications. The agency's 
range of potential actions on applications include approval, denial, 
and requesting that an applicant withdraw the application because 
any shortcomings are unlikely to be resolved in a timely manner. 
Applications that are consistent with approval generally feature all 
of the following indicators:
    1. The acquirer is well capitalized under Sec.  5.3 of this part 
and the resulting institution will be well capitalized;
    2. The resulting institution will have total assets less than 
$50 billion;
    3. The acquirer has a Community Reinvestment Act (CRA) rating of 
Outstanding or Satisfactory;
    4. The acquirer has composite and management ratings of 1 or 2 
under the Uniform Financial Institution Ratings System (UFIRS) or 
ROCA rating system;
    5. The acquirer has a consumer compliance rating of 1 or 2 under 
the Uniform Interagency Consumer Compliance Rating System (CC Rating 
System), if applicable;
    6. The acquirer has no open formal or informal enforcement 
actions;
    7. The acquirer has no open or pending fair lending actions, 
including referrals or notifications to other agencies;
    8. The acquirer is effective in combatting money laundering 
activities;
    9. The target's combined total assets are less than or equal to 
50% of acquirer's total assets;
    10. The target is an eligible depository institution as defined 
in Sec.  5.3 of this part;
    11. The proposed transaction clearly would not have a 
significant adverse effect on competition;
    12. The OCC has not identified a significant legal or policy 
issue; and
    13. No adverse comment has raised a significant CRA or consumer 
compliance concern.
    If certain indicators that raise supervisory or regulatory 
concerns are present, the OCC is unlikely to find that the statutory 
factors under the BMA are consistent with approval unless and until 
the applicant has adequately addressed or remediated the concern. 
The following are examples of indicators that raise supervisory or 
regulatory concerns:
    1. The acquirer has a CRA rating of Needs to Improve or 
Substantial Noncompliance.
    2. The acquirer has a consumer compliance rating of 3 or worse.
    3. The acquirer has UFIRS or ROCA composite or management 
ratings of 3 or worse or the most recent report of examination 
otherwise indicates that the acquirer is not financially sound or 
well managed.
    4. The acquirer is a global systemically important banking 
organization, or subsidiary thereof.
    5. The acquirer has open or pending Bank Secrecy Act/Anti-money 
Laundering enforcement or fair lending actions, including referrals 
or notifications to other agencies.
    6. Failure by the acquirer to adopt, implement, and adhere to 
all the corrective actions required by a formal enforcement action 
in a timely manner; or multiple enforcement actions against the 
acquirer executed or outstanding during a three-year period.

III. Financial Stability

A. Factors Considered

    The BMA requires the OCC to consider ``the risk to the stability 
of the United States banking or financial system'' when reviewing 
transactions subject to the Act. In reviewing a BMA application 
under this factor, the OCC considers the following factors:
    1. Whether the proposed transaction would result in a material 
increase in risks to financial system stability due to an increase 
in size of the combining institutions.
    2. Whether the proposed transaction would result in a reduction 
in the availability of substitute providers for the services offered 
by the combining institutions.
    3. Whether the resulting institution would engage in any 
business activities or participate in markets in a manner that, in 
the event of financial distress of the resulting institution, would 
cause significant risks to other institutions.
    4. Whether the proposed transaction would materially increase 
the extent to which the combining institutions contribute to the 
complexity of the financial system.
    5. Whether the proposed transaction would materially increase 
the extent of cross-border activities of the combining institutions.
    6. Whether the proposed transaction would increase the relative 
degree of difficulty of resolving or winding up the resulting 
institution's business in the event of failure or insolvency.

[[Page 10017]]

    7. Any other factors that could indicate that the transaction 
poses a risk to the U.S. banking or financial system.

B. Balancing Test

    1. In general: The OCC applies a balancing test when considering 
the factors in section III(A) of this appendix in light of all the 
facts and circumstances available regarding the proposed 
transaction, including weighing the financial stability risk posed 
by the proposed transaction against the financial stability risk 
posed by denial of the proposed transaction, particularly if the 
proposed transaction involves a troubled target. The OCC considers 
each factor both individually and in combination with others. Even 
if only a single factor indicates that the proposed transaction 
would pose a risk to the stability of the U.S. banking or financial 
system, the OCC may determine that there would be an adverse effect 
of the proposal on the stability of the U.S. banking or financial 
system. Finally, the OCC also considers whether the proposed 
transaction would provide any stability benefits and whether 
enhanced prudential standards applicable as a result of the proposed 
transaction would offset any potential risks.
    2. Conditions: The OCC's review of the financial stability 
factors will include, as appropriate, whether to impose conditions 
on approval of the transaction. The OCC may impose conditions, 
enforceable under 12 U.S.C. 1818, to address and mitigate financial 
stability risk concerns, such as requiring asset divestitures by the 
resulting institution, imposing higher minimum capital requirements, 
or imposing other financial stability related conditions.
    3. Recovery planning and heightened standards: The OCC's review 
of the financial stability factors will consider the impact of the 
proposed transaction in light of:
    b. Standards applicable to the resulting institution pursuant to 
12 CFR 30, appendix D, ``OCC Guidelines Establishing Heightened 
Standards for Certain Large Insured National Banks, Insured Federal 
Savings Associations, and Insured Federal Branches''; and
    c. Standards requirements applicable to the resulting 
institution's recovery planning pursuant to 12 CFR 30, appendix E, 
``OCC Guidelines Establishing Standards for Recovery Planning by 
Certain Large Insured National Banks, Insured Federal Savings 
Associations, and Insured Federal Branches''.
    4. Concurrent filings: the OCC's review of the financial 
stability factors may consider the facts, circumstances, and 
representations of concurrent filings for related transactions, 
including the impact of the related transactions to the proposed 
transaction under review by the OCC.

IV. Financial and Managerial Resources and Future Prospects

    The OCC is required by the BMA to consider the managerial 
resources, financial resources, and future prospects of the 
combining and the resulting institutions. The OCC considers each of 
these factors independently for both the combining and resulting 
institutions. However, because these factors are directly related to 
one another, the OCC also considers these factors holistically.

A. Overarching Considerations

    1. The OCC tailors its consideration of the financial and 
managerial resources and future prospects of the combining and 
resulting institutions, to their size, complexity, and risk profile.
    2. The OCC is more likely to approve combinations where the 
acquirer has sufficient financial and managerial resources to ensure 
safe and sound operations of the resulting institution than when:
    a. The acquirer has a less than satisfactory supervisory record, 
including its financial and managerial resources;
    b. The acquirer has experienced rapid growth;
    c. The acquirer has engaged in multiple acquisitions with 
overlapping integration periods;
    d. The acquirer has failed to comply with conditions imposed in 
prior OCC licensing decisions; or
    e. The acquirer is functionally the target in the transaction.
    3. The OCC normally does not approve a combination that would 
result in a depository institution with less than adequate capital 
or liquidity, less than satisfactory management, or poor earnings 
prospects.
    4. The OCC considers all comments received on proposed business 
combinations. However, the OCC's consideration of an institution's 
financial and managerial resources and future prospects are 
necessarily based on confidential supervisory information. While the 
OCC will provide an appropriate discussion of comments pertaining to 
the financial resources, managerial resources, and future prospects 
factors, it will generally not discuss or otherwise disclose 
confidential supervisory information in public decision letters.

B. Individual Factors

    1. Financial Resources:
    a. The OCC reviews the existing and proposed institutions' 
current and pro forma capital levels.
    i. The OCC reviews for compliance with the applicable capital 
ratios required by 12 CFR part 3 and the Prompt Corrective Action 
capital categories established by 12 CFR 6.4.
    ii. The OCC may not approve a combination application filed by 
an insured depository institution that is undercapitalized as 
defined in 12 CFR 6.4 unless it has approved the institution's 
capital restoration plan or the Board of Directors of the Federal 
Deposit Insurance Corporation has determined that the transaction 
would fulfill the purposes of 12 U.S.C. 1831o.
    b. The OCC closely scrutinizes transactions that increase the 
risk to the bank's financial condition and resilience, including 
bank capital, liquidity, and earnings that can arise from any of the 
eight categories of risk included in the OCC's Risk Assessment 
System: credit, interest rate, liquidity, price, operational, 
compliance, strategic, and reputation.
    c. In relation to the financial resources factor, the OCC 
considers management's ability to address increased risks that would 
result from the transaction.
    d. A transaction involving an acquirer with a strong supervisory 
record relative to capital, liquidity, and earnings is more likely 
to satisfy the review factors. By contrast, a transaction involving 
an acquirer with a recent less than satisfactory financial or 
supervisory record is less likely to satisfy this factor.
    2. Managerial Resources: The OCC considers several factors when 
considering the managerial resources of the institutions.
    a. The OCC considers the supervisory record and current 
condition of both the acquirer and target to determine if the 
resulting institutions will have sufficient managerial resources to 
manage the resulting institution.
    i. A significant number of MRAs suggests there may be 
insufficient managerial resources. Additionally, the OCC considers 
both institutions' management ratings under the UFIRS or ROCA system 
and component ratings under the CC Rating System, Uniform Rating 
System for Information Technology, and Uniform Interagency Trust 
Rating System, as applicable.
    ii. When applicable, the OCC also considers the relevant Risk 
Assessment System (RAS) conclusions for the combining institutions.
    iii. The OCC considers the context in which a rating or RAS 
element was assigned and any additional information resulting from 
ongoing supervision.
    iv. Less than satisfactory ratings at the target do not preclude 
the approval of a transaction, provided that the acquirer can employ 
sufficiently robust risk management and financial resources to 
correct the weaknesses at the target.
    b. The OCC considers whether the acquirer has conducted 
sufficient due diligence of the target depository institution to 
understand the business model, systems compatibility, and weaknesses 
of the target. To facilitate the OCC's review, the acquirer's 
management team should demonstrate its plans and ability to address 
the acquirer's previously identified weaknesses, remediate the 
target's weaknesses, and exercise appropriate risk management for 
the size, complexity, and risk profile of the resulting institution.
    c. The OCC also considers the acquirer's analysis and plans to 
integrate the combining institutions' operations, including systems 
and information security processes, products, services, employees, 
and cultures. The OCC's consideration and degree of scrutiny 
reflects the applicant's track record with information technology 
governance, business continuity resilience, and, as applicable, 
integrating acquisitions.
    d. The OCC considers the acquirer's plans to identify and manage 
systems compatibility and integration issues, such as information 
technology compatibility and the implications for business 
continuity resilience. Any combination in which the OCC identifies 
systems integration concerns may lead to additional review.
    i. A critical component of these plans includes the acquirer's 
identification and assessment of overreliance on manual controls, 
strategies for automating critical processes, and the strategies and 
capacity for modernization of aging and legacy information 
technology systems.

[[Page 10018]]

    ii. The OCC may impose conditions, enforceable pursuant to 12 
U.S.C. 1818, if it determines that information technology systems 
compatibility and integration represent a supervisory significant 
concern. These conditions may include requirements and time frames 
for specific remedial actions and specific measures for assessing 
and evaluating the depository institution's systems integration 
progress.
    iii. The OCC may deny the application if the integration issues 
or other issues present significant supervisory concerns, and the 
issues cannot be resolved through appropriate conditions or 
otherwise.
    e. The OCC also considers the proposed governance structure of 
the resulting institution. This includes governance in decision-
making processes, the board management oversight structure, and the 
risk management system, including change management. This also 
includes expansion of existing activities, introduction of new or 
more complex products or lines of business, and implications for 
managing existing and acquired subsidiaries and equity investments. 
When applicable, the resulting institution's governance is also 
considered in the context of the institution's relationship with its 
holding company and the scope of the holding company's activities.
    3. Future Prospects:
    a. The OCC considers the resulting institution's future 
prospects in light of its assessment of the institutions' financial 
and managerial resources.
    b. The OCC also considers the proposed operations of the 
resulting institution. The OCC's consideration and degree of 
scrutiny reflects the acquirer's record of integrating acquisitions.
    i. The OCC considers whether the integration of the combining 
institutions would allow it to function effectively as a single 
unit.
    ii. The OCC considers the resulting institution's business plan 
or strategy and management's ability to implement it in a safe and 
sound manner.
    iii. The OCC also considers the combination's potential impact 
on the resulting institution's continuity planning and operational 
resilience.

V. Convenience and Needs

    A. The OCC considers the probable effects of the proposed 
business combination on the community to be served. Review of the 
convenience and needs factor is prospective and considers the likely 
impact on the community of the resulting institution after the 
transaction is consummated, including but not limited to:
    1. any plans to close, expand, consolidate, or limit branches or 
branching services, including in low- or moderate-income (LMI) 
areas;
    2. any plans to reduce the availability or increase the cost of 
banking services or products, or plans to provide expanded or less 
costly banking services or products to the community;
    3. credit availability throughout the community, including, for 
example, home mortgage, consumer, small business, and small farm 
loans;
    4. job losses or reduced job opportunities from branch staffing 
changes, including branch closures or consolidations;
    5. community investment or development initiatives, including, 
for example, community reinvestment, community development 
investment, and community outreach and engagement strategies; and
    6. efforts to support affordable housing initiatives and small 
businesses.
    B. The OCC considers comments received during the comment period 
and information provided during any public hearing or meeting for 
proposed business combinations. To the extent public comments or 
discussions address issues involving confidential supervisory 
information, however, the OCC generally will not discuss or 
otherwise disclose that confidential supervisory information in 
public decision letters and forums.
    C. The OCC considers the CRA record of performance of an 
applicant in evaluating a business combination application. The 
OCC's forward-looking evaluation of the convenience and needs factor 
under the BMA is separate and distinct from its consideration of the 
CRA record of performance of an applicant in helping to meet the 
credit needs of the relevant community, including LMI neighborhoods.

VI. Public Comments and Meetings

A. Public Comments

    1. Unless an exception applies, a combination under the BMA is 
subject to a 30-day comment period following publication of the 
notice of the proposed combination. The OCC may extend the comment 
period in certain instances:
    a. when a filer fails to file all required publicly available 
information on a timely basis or makes a request for confidential 
treatment not granted by the OCC;
    b. when requested and the OCC determines that additional time is 
necessary to develop factual information necessary to consider the 
filing; and
    c. when the OCC determines that other extenuating circumstances 
exist.
    2. The OCC may find that additional time is necessary to develop 
factual information if a filer's response to a comment does not 
fully address the matters raised in the comment, and the commenter 
requests an opportunity to respond.
    3. Examples of extenuating circumstances necessitating an 
extension include:
    a. transactions in which public meetings are held to allow for 
public comment after the meeting;
    b. unusual transactions (e.g., novel or complex transactions); 
and
    c. natural or other disasters occurring in geographic regions 
affecting the public's ability to timely submit comments.

B. Public Meetings

    1. While the BMA does not require the OCC to hold meetings or 
hearings, the OCC has three methods for seeking oral input: (1) 
public hearing, (2) public meeting, and (3) private meeting. Public 
meetings are the most-employed public option.
    2. The OCC will balance the public's interest in the transaction 
with the value or harm of a public meeting to the decision-making 
process (e.g., although there may be increased public interest in a 
transaction, a public meeting will not be held if it would not 
inform the OCC's decision on an application or would otherwise harm 
the decision-making process).
    3. Criteria informing the OCC's decision on whether to hold 
public meetings include:
    a. the extent of public interest in the proposed transaction.
    b. whether a public meeting is appropriate in order to document 
or clarify issues presented by a particular transaction based on 
issues the public raises during the public comment process.
    c. whether a public meeting would provide useful information 
that the OCC would not otherwise be able to obtain in writing.
    d. the significance of the transaction to the banking industry. 
Relevant considerations may include the asset sizes of the 
institutions involved (e.g., resulting institution will have $50 
billion or more in total assets), and concentration of the resulting 
institution in one or more markets.
    e. the significance of the transaction to the communities 
affected. Relevant considerations may include the effects of the 
transaction on the convenience and needs of the community to be 
served, including a consideration of a bank's CRA strategy and the 
extent to which the acquirer and target are currently serving the 
convenience and needs of their communities.
    f. the acquirer's and target's CRA, consumer compliance, fair 
lending, and other pertinent supervisory records, as applicable.

Michael J. Hsu,
Acting Comptroller of the Currency.

[FR Doc. 2024-02663 Filed 2-12-24; 8:45 am]
BILLING CODE 4810-33-P


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