[Federal Register Volume 87, Number 62 (Thursday, March 31, 2022)]
[Proposed Rules]
[Pages 18740-18744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06720]


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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. 87, No. 62 / Thursday, March 31, 2022 / 
Proposed Rules

[[Page 18740]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 303

RIN 3064-ZA31


Request for Information and Comment on Rules, Regulations, 
Guidance, and Statements of Policy Regarding Bank Merger Transactions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Request for information and comment.

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SUMMARY: The FDIC is soliciting comments from interested parties 
regarding the application of the laws, practices, rules, regulations, 
guidance, and statements of policy (together, regulatory framework) 
that apply to merger transactions involving one or more insured 
depository institution, including the merger between an insured 
depository institution and a noninsured institution. The FDIC is 
interested in receiving comments regarding the effectiveness of the 
existing framework in meeting the requirements of section 18(c) of the 
Federal Deposit Insurance Act (known as the Bank Merger Act).

DATES: Comments must be received by May 31, 2022.

ADDRESSES: Commenters are encouraged to use the title ``Request for 
Comment on Rules, Regulations, Guidance, and Statement of Policy on 
Bank Merger Transactions (RIN 3064-ZA31)'' and to identify the number 
of the specific question(s) for comment to which they are responding. 
Please send comments by one method only directed to:
    <bullet> Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for 
submitting comments on the agency's website.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#4e0d2123232b203a3d0e282a272d60292138"><span class="__cf_email__" data-cfemail="bcffd3d1d1d9d2c8cffcdad8d5df92dbd3ca">[email protected]</span></a>. Include RIN 3064-ZA31 in the 
subject line of the message.
    <bullet> Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments--RIN 3064-ZA31, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
    <bullet> Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street NW building 
(located on F Street NW) on business days between 7:00 a.m. and 5:00 
p.m. ET.
    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/resources/regulations/federal-register-publications/--including any personal information provided--for public 
inspection. Paper copies of public comments may be ordered from the 
FDIC Public Information Center, 3501 North Fairfax Drive, Room E-1002, 
Arlington, VA 22226, or by telephone at 877-275-3342 or 703-562-2200.

FOR FURTHER INFORMATION CONTACT: Rae-Ann Miller, Senior Deputy 
Director, Supervisory Examinations and Policy, Division of Risk 
Management Supervision, 202-898-3898, <a href="/cdn-cgi/l/email-protection#f6849b9f9a9a9384b690929f95d8919980"><span class="__cf_email__" data-cfemail="26544b4f4a4a43546640424f4508414950">[email protected]</span></a>; or Ashby G. 
Hilsman, Assistant General Counsel, Bank Activities and Regional 
Affairs Section, Supervision, Legislation and Enforcement Branch, Legal 
Division, 202-898-6636, <a href="/cdn-cgi/l/email-protection#f3929b9a9f809e929db395979a90dd949c85"><span class="__cf_email__" data-cfemail="88e9e0e1e4fbe5e9e6c8eeece1eba6efe7fe">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

Background Information

    Significant changes over the past several decades in the banking 
industry and financial system necessitate a review of the regulatory 
framework that applies to bank merger transactions involving one or 
more insured depository institutions pursuant to the Bank Merger 
Act.\1\ First, more than three decades of consolidation and growth in 
the banking industry have significantly reduced the number of smaller 
banking organizations and increased the number of large and 
systemically-important banking organizations. Second, the FDIC has a 
responsibility to promote public confidence in the banking system, 
maintain financial stability, review proposed mergers, and resolve 
failing large insured depository institutions. Third, the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended 
the Bank Merger Act to include, for the first time, a financial 
stability factor. Fourth, and finally, a recent Executive Order 
instructed U.S. agencies to consider the impact that consolidation may 
have on maintaining a competitive marketplace. Thus, the FDIC has 
determined that it is both timely and appropriate to review the 
regulatory framework and consider whether updates or other changes are 
warranted.
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    \1\ Bank Merger Act, Public Law 86-463, 72 Stat. 129 (1960); 
Bank Merger Act Amendments of 1966, Public Law 89-356, 80 Stat. 7 
(codified as amended at 12 U.S.C. 1828(c)(2018)), available at 
fdic.gov/regulations/laws/rules/1000-2000.html#1000sec.18c.
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Consolidation in the Banking Sector

    The banking sector has experienced a significant amount of 
consolidation over the last 30 years as shown in Tables 1 through 3. 
This period of consolidation, fueled in large part by mergers and 
acquisitions, has contributed to the significant growth of the number 
of large insured depository institutions, especially insured depository 
institutions with total assets of $100 billion or more.
    In 1990, there was only one insured depository institution with 
assets greater than $100 billion; however, that number had increased to 
33 by 2020.\2\ Of these 33 insured depository institutions with assets 
greater than $100 billion, nine were owned by the eight U.S. bank 
holding companies designated as Global Systemically Important Banks 
(U.S. GSIBs), and three were owned by foreign banking organizations 
designated as foreign Global Systemically Important Banks (foreign 
GSIBs).\3\ While insured depository institutions with total assets of 
more than $100 billion comprise less than one percent of the total 
number of insured depository institutions, they hold about 70 percent 
of total industry assets and 66 percent of domestic deposits.
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    \2\ Prior to the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994, Public Law 103-328 (the Riegle-Neal Act of 
1994), many states did not permit intra-state branching and 
interstate branch branching was not permitted. Following the passage 
of the Riegle-Neal Act of 1994, many bank holding companies chose to 
consolidate existing bank charters.
    \3\ See Financial Stability Board, 2020 list of global systemic 
important banks, available at https://www.fsb.org/wp-content/uploads/P111120.pdf.
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    Consolidation also has contributed to the economic landscape of 
insured depository institutions with assets less than $100 billion. 
Over the same 30-year period, the number of institutions with assets 
less than $10 billion has declined from 15,099 in 1990 to 4,851 in 
2020,

[[Page 18741]]

a reduction of approximately 68 percent.\4\ The declining number of 
smaller insured depository institutions may limit access to financial 
services and credit in communities, potentially adversely affecting the 
welfare of the communities' workers, farmers, small businesses, 
startups, and consumers.
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    \4\ Based on Thrift Financial Reports (TFR) and Consolidated 
Reports of Condition and Income (Call Report) between 1990 and 2005, 
the number of institutions with assets less than $10 billion 
declined from 15,099 to 8,715, before falling to 4,851 in 2020. Over 
the same time period, the percentage of industry assets held by 
those banks declined from 66.4 percent in 1990 to 26.1 percent in 
2005, and then to 14.8 percent in 2020. Similarly, the percentage of 
domestic deposits held by those institutions declined from 73.9 
percent in 1990 to 34.2 percent in 2005, and then to 15.4 percent in 
2020.
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    Over this same period, the number of insured depository 
institutions with assets between $10 billion and $100 billion has 
doubled from 59 in 1990 to 118 in 2020. However, the percentage of 
total industry assets held by all insured depository institutions with 
assets less than $100 billion declined by 68 percent and their 
percentage of insured deposits held declined by approximately 70 
percent.
    Several insured depository institutions with assets less than $100 
billion were owned by either a U.S. GSIB or a foreign GSIB. For 
example, 12 insured depository institutions with assets less than $10 
billion were owned by GSIBs, with six owned by U.S. GSIBs, and six 
owned by foreign GSIBs. Further, 11 insured depository institutions 
with assets between $10 billion to $100 billion were owned by GSIBs, 
with four owned by U.S. GSIBs, and seven owned by foreign GSIBs.

    Table 1--Number of Insured Depository Institutions by Asset Size
------------------------------------------------------------------------
                                                           Year
                   Asset size                    -----------------------
                                                   1990    2005    2020
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$10B-$50B.......................................      52      86     102
$50B-$100B......................................       7      21      16
$100B-$250B.....................................       1       5      20
$250B-$500B.....................................       0       3       8
$500B-$700B.....................................       0       0       1
>=$700B.........................................       0       3       4
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Source: TFR and Call Reports.


    Table 2--Percentage of Industry Assets Held by Insured Depository
                       Institutions by Asset Size
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                                                           Year
                                                 -----------------------
                   Asset size                      1990    2005    2020
                                                    (%)     (%)     (%)
------------------------------------------------------------------------
$10B-$50B.......................................    20.2    16.7    10.5
$50B-$100B......................................    10.0    13.1     5.3
$100B-$250B.....................................     3.4     7.2    13.3
$250B-$500B.....................................     0.0    11.1    13.9
$500B-$700B.....................................     0.0     0.0     2.5
>=$700B.........................................     0.0    25.8    39.8
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Source: TFR and Call Report.


   Table 3--Percentage of Domestic Deposits Held by Insured Depository
                       Institutions by Asset Size
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                                                           Year
                                                 -----------------------
                   Asset size                      1990    2005    2020
                                                    (%)     (%)     (%)
------------------------------------------------------------------------
$10B-$50B.......................................    18.5    16.6    11.4
$50B-$100B......................................     6.4    12.2     5.9
$100B-$250B.....................................     1.2     6.4    13.9
$250B-$500B.....................................     0.0    12.8    14.3
$500B-$700B.....................................     0.0     0.0     2.6
>=$700B.........................................     0.0    17.8    35.5
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Source: TFR and Call Report.

The Financial Stability Factor in the Bank Merger Act and Large Bank 
Resolution

    The Dodd-Frank Act made a number of statutory changes aimed at 
addressing the risks posed by the largest banks, including an amendment 
to the Bank Merger Act requiring consideration of the risk posed to the 
stability of the United States banking or financial system of a 
proposed bank merger.\5\ To date, from a financial stability 
perspective, efforts to improve the resolvability of large banks have 
focused on GSIBs.\6\ As shown above, given the increased number, size, 
and complexity of non-GSIB large banks, however, a reconsideration by 
the FDIC of the framework for assessing the financial stability prong 
of the BMA and focused attention on the financial stability risks that 
could arise from a merger involving a large bank is warranted.
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    \5\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, section 604(f), 124 Stat. 1376, 1602 (2010) 
(codified as 12 U.S.C. 1828(c)(5) (2018)), available at https://www.govinfo.gov/app/details/PLAW-111publ203.
    \6\ See Federal Reserve Board and FDIC joint final rules: 
Resolution Plans Required, 76 FR 67323, (Nov. 1, 2011), available at 
https://www.govinfo.gov/content/pkg/FR-2011-11-01/pdf/2011-27377.pdf, and Tailored Resolution Plan Requirements, 80 FR 59194, 
(Nov. 1, 2019), available at https://www.govinfo.gov/content/pkg/FR-2019-11-01/pdf/2019-23967.pdf. See also, FDIC final rule, Certain 
Orderly Liquidation Authority Provisions under Title II of the Dodd 
Frank Wall Street Reform and Consumer Protection Act, 76 FR 41626, 
(July 15, 2011), available at https://www.govinfo.gov/content/pkg/FR-2011-07-15/pdf/2011-17397.pdf.
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    In particular, the failure of a large insured depository 
institution would present significant challenges to the FDIC's 
resolutions and receivership functions and could present a threat to 
the financial stability of the United States. Insured depository 
institutions are resolved under the Federal Deposit Insurance Act. For 
various reasons, including their size, sources of funding, and other 
organizational complexities, the resolution of large insured depository 
institutions can present great risk to the Deposit Insurance Fund, as 
well as extraordinary operational risk for the FDIC. In addition, as a 
practical matter, the size of an insured depository institution may 
limit the resolution options available to the FDIC in the event of 
failure.\7\
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    \7\ Although the FDIC has developed a framework of systemic 
resolution regulations, strategies, and policies and procedures to 
operationalize its authority to handle the orderly failure of a GSIB 
or other systemically important financial company under Title II of 
the Dodd-Frank Act, such a failure would present additional risks 
for the FDIC and could, depending on the circumstances, also involve 
failure of a large insured depository institution.
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    In recent history, including the global financial crisis that began 
in 2008, the most common resolution transactions have involved a 
purchase and assumption transaction where an acquiring institution 
takes all or a substantial part of the failed insured depository 
institution. For example, between 2008 and 2013, there were a total of 
489 bank failures, of which 463, or approximately 95 percent, were 
resolved by the FDIC through purchase and assumption transactions.
    While most of these purchase and assumption resolution transactions 
were for insured depository institutions with assets under $10 billion, 
the largest purchase and assumption transaction completed by the FDIC 
was that of Washington Mutual Bank, which failed on September 25, 2008, 
with assets of approximately $307 billion. However, that transaction 
resulted in a larger and more complex acquirer (JPMorgan Chase & Co.), 
and the need for the resolution heightened financial turmoil and 
contributed to concerns about the safety of the financial system. As a 
result of the systemic concerns arising from the resolution of 
Washington Mutual Bank, when Wachovia Bank required resolution days 
later, the FDIC, the Board of Governors of the Federal Reserve System 
(Board), and the Secretary of the Treasury invoked the systemic risk 
exception (SRE) to allow the acquisition of Wachovia by another

[[Page 18742]]

large insured depository institution. At the time that the SRE was 
granted--the first-ever use of the SRE--Wachovia had total holding 
company assets of approximately $800 billion.\8\
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    \8\ While the systemic risk exception was approved, Wachovia 
Corporation was ultimately acquired by Wells Fargo & Company on an 
open-institution basis without FDIC assistance. See FDIC, Crisis and 
Response: An FDIC History, 2008-2013, available at http://www.fdic.gov/bank/historical/crisis/.
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Recent Executive Order

    Additionally, on July 9, 2021, the President signed an Executive 
Order on Promoting Competition in the American Economy (Executive 
Order).\9\ This Executive Order, in part, instructs U.S. agencies to 
consider the impact that consolidation may have on maintaining a fair, 
open, and competitive marketplace, and on the welfare of workers, 
farmers, small businesses, startups, and consumers. With respect to the 
banking sector specifically, the Executive Order directs the Attorney 
General, in consultation with the Chairman of the Board of Governors of 
the Federal Reserve System, the Chairperson of the Board of Directors 
of the Federal Deposit Insurance Corporation, and the Comptroller of 
the Currency, to adopt a plan for the revitalization of merger 
oversight under the Bank Merger Act and the Bank Holding Company Act 
(BHCA).
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    \9\ See https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/and https://whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.
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Conclusion

    In light of the significant consolidation in the banking industry 
over the past three decades, the federal banking agencies requirement 
to consider financial stability risk under the BMA, the FDIC's 
responsibilities for the resolution of large insured depository 
institutions, and the Executive Order, the FDIC is soliciting comments 
from interested parties regarding the rules, regulations, guidance, and 
statements of policy (together, regulatory framework) that apply to 
bank merger transactions involving one or more insured depository 
institutions. The FDIC is interested in receiving comments regarding 
the effectiveness of the existing regulatory framework in meeting the 
requirements of the Bank Merger Act.

Bank Merger Act Overview

    The Bank Merger Act established a framework that required, in 
general, consent of the responsible agency prior to a merger.\10\ With 
respect to merger transactions solely involving insured depository 
institutions, the responsible agency is the FDIC if the resulting 
institution is a state nonmember bank or state savings association, the 
Federal Reserve Board if the resulting institution is a state member 
bank, and the Office of the Comptroller of the Currency (OCC) if the 
resulting institution is a national bank or federal savings 
association.\11\ With respect to any merger transaction involving an 
insured depository institution and a noninsured institution, the FDIC 
is the responsible agency notwithstanding the charter of the insured 
depository institution.\12\
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    \10\ Bank Merger Act, Public Law 86-463, 72 Stat. 129 (1960); 
Bank Merger Act Amendments of 1966, Public Law 89-356, 80 Stat. 7 
(codified as amended at 12 U.S.C. 1828(c)(2018)), available at 
fdic.gov/regulations/laws/rules/1000-2000.html#1000sec.18c.
    \11\ Pursuant to Title III of the Dodd-Frank Act, all functions 
of Office of Thrift Supervision relating to federal savings 
associations were transferred to the OCC, and all functions of the 
OTS relating to state savings associations were transferred to the 
FDIC.
    \12\ 12 U.S.C. 1828(c)(1) and (2). For an uninsured national 
bank, OCC approval of the bank's application under 12 CFR 5.33 is 
also required.
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    In addition, the Bank Merger Act generally requires that, prior to 
approving any merger, the responsible agency must (a) ensure that 
notice of a proposed transaction be published; (b) request a report on 
competitive factors from the Attorney General of the United States for 
merger transactions involving nonaffiliates; (c) not approve any 
proposed merger that would result in a monopoly or produce substantial 
anticompetitive effects; and (d) consider certain additional factors, 
including 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 the merger at combatting 
money laundering.\13\
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    \13\ 12 U.S.C. 1828(c)(3)-(5) and 1828(c)(11).
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    When assessing the potential anticompetitive effects of the 
proposed merger, the responsible agency is required to consider whether 
the merger would substantially lessen competition, tend to create a 
monopoly, or otherwise be in restraint of trade.\14\ In no case may the 
responsible agency approve a merger transaction that would result in a 
monopoly, and the responsible agency may not approve any merger that 
exhibits anticompetitive effects unless the responsible agency 
determines ``that the anticompetitive effects of the proposed 
transaction are clearly outweighed in the public interest by the 
probable effect of the transaction in meeting the convenience and needs 
of the community to be served.'' \15\ Further, the responsible agency 
may not approve an application for an interstate merger transaction if 
the resulting insured depository institution would control more than 10 
percent of the total amount of deposits of insured depository 
institutions in the United States.\16\
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    \14\ All things being equal, the number of competitors in the 
market for banking products and services can be affected by two 
different types of transactions: Unaffiliated depository 
institutions can merge with each other; or depository institutions 
can be acquired by unaffiliated companies that already own one or 
more depository institutions. Companies that own or and control 
depository institutions are commonly known as depository institution 
holding companies and may either be bank holding companies or 
savings and loan holding companies. Depository institution holding 
companies are regulated by the Board. Bank holding companies are 
subject to the BHCA (for companies owning state and national banks, 
see 12 U.S.C. 1841 et. seq.), and savings and loan holding companies 
are subject to the HOLA (for companies owning savings associations, 
see 12 U.S.C. 1461 et. seq.). It has been through the acquisition of 
depository institutions by existing depository institution holding 
companies, or the merger of these holding companies, that a number 
of depository institutions have come under the common control. The 
Board, in consultation with the U.S. Department of Justice (DOJ), 
analyzes the competitive impact of these acquisitions under 
standards similar to those applicable under the Bank Merger Act. For 
example, when depository institutions under common control merge, 
the DOJ and the federal banking agencies have determined that these 
mergers of affiliates are competitively neutral. Competitive 
analysis under the Bank Merger Act takes place when unaffiliated 
depository institutions merge and is performed by the responsible 
agency.
    \15\ 12 U.S.C. 1828(c)(5)(B).
    \16\ 12 U.S.C. 1828(c)(13)(A).
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    In addition to consideration of anticompetitive effects, the Bank 
Merger Act requires that: ``In every case, [emphasis added] the 
responsible agency shall take into consideration the financial and 
managerial resources and future prospect of the existing and proposed 
institutions, the convenience and needs of the community to be served, 
and the risk to the stability of the United States banking or financial 
system.'' \17\ The latter condition--that the responsible agency 
consider financial stability--was added in 2010 by section 604(f) of 
the Dodd-Frank Act.\18\
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    \17\ Id.
    \18\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, sec. 604(f), 124 Stat. 1376, 1602 (2010) 
(codified as 12 U.S.C. 1828(c)(5) (2018)), available at https://www.govinfo.gov/app/details/PLAW-111publ203.

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[[Page 18743]]

FDIC and OCC Regulations and Statement of Policy Regarding Bank Mergers

    The requirements of the Bank Merger Act are incorporated into 12 
CFR part 303 of the FDIC's regulations \19\ and into the OCC's 
regulations at 12 CFR 5.33.\20\
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    \19\ 12 CFR part 303, available at https://www.fdic.gov/regulations/laws/rules/2000-250.html.
    \20\ 12 CFR 5.33, available at https://www.ecfr.gov/current/title-12/chapter-I/part-5.
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    In the FDIC's regulations, subpart A of 12 CFR part 303 provides 
regulations that are generally applicable for all filings and includes 
general filing procedures, computation of time, the effect of Community 
Reinvestment Act (CRA) performance on filing, and the administrative 
procedures associated with a filing.\21\ Subpart D of 12 CFR part 303 
provides regulations specifically pertaining to mergers involving an 
insured depository institution and includes definitions, transactions 
requiring prior approval, filing procedures, expedited and standard 
processing procedures, and public notice requirements.\22\ Additional 
guidance on the FDIC's processing of merger transactions is set forth 
in the FDIC Statement of Policy on Bank Merger Transactions (FDIC 
Policy Statement).\23\
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    \21\ See 12 CFR 303.1-303.19.
    \22\ See 12 CFR 303.60-303.65.
    \23\ 63 FR 44762, August 20, 1998, effective October 1, 1998; 
amended at 67 FR 48178, July 23, 2002; 67 FR 79278, December 27, 
2002; and 73 FR 8871, February 15, 2008, available at https://www.fdic.gov/regulations/laws/rules/5000-1200.html.
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    For those transactions requiring FDIC approval, the FDIC Statement 
of Policy describes the four factors that the FDIC will consider in its 
review: Competitive factors, prudential factors, convenience and needs 
factor, and anti-money laundering record. The FDIC Policy Statement 
also describes related considerations such as those related to 
interstate bank merger transactions, interim merger transactions, 
branch closings, legal fees and other expenses, and trade names. The 
FDIC Policy Statement, however, does not address the financial 
stability provisions added to the Bank Merger Act under section 604(f) 
of the Dodd-Frank Act.\24\
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    \24\ The FDIC's Application Procedures Manual provides a non-
exhaustive list of quantitative metrics, as well as qualitative 
factors, to be considered when evaluating the financial stability 
factor. FDIC Application Procedures Manual: Mergers, available at 
https://www.fdic.gov/regulations/applications/resources/apps-proc-manual/section-04-mergers.pdf.
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    The OCC's regulation, at 12 CFR 5.33, provides a framework for 
evaluating mergers, which includes the consideration of the risk to 
financial stability. 12 CFR 5.33 generally addresses business 
combinations involving a national bank or federal savings association. 
Section 5.33(c) covers the licensing requirements for business 
combinations. The factors the OCC considers in all business 
combinations, including business combinations under the BMA, are set 
forth in Sec.  5.33(e)(1)(i), and Sec. Sec.  5.33(e)(1)(ii) & (iii) 
provide the additional factors that the OCC considers for business 
combinations under the Bank Merger Act.
    When considering the risk to the stability of the banking or 
financial system pursuant to a BMA application, the OCC considers six 
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 
transaction would result in a reduction in the availability of 
substitute providers for the services offered by the combining 
institutions; (3) whether the combined institution would engage in any 
business activities or participate in markets in a manner that, in the 
event of financial distress of the combined institution, would cause 
significant risks to other institutions; (4) whether the transaction 
would materially increase the extent to which the combining 
institutions contribute to the complexity of the financial system; (5) 
whether the transaction would materially increase the extent of cross-
border activities of the combining institutions; and (6) whether the 
transaction would increase the relative degree of difficulty of 
resolving or winding up the combined institution.\25\
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    \25\ See, e.g., OCC Conditional Approval No. 1031 (April 6, 
2012). See also the ``Business Combinations'' booklet of the 
Comptroller's Licensing Manual, available at https://occ.gov/publications-and-resources/publications/comptrollers-licensing-manual/files/bizcombo.pdf.
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1995 Bank Merger Competitive Review Guidelines <SUP>26</SUP>
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    \26\ In September 2020, DOJ sought comment on whether to revise 
the Guidelines or its competitive analysis of bank mergers. See 
https://www.justice.gov/opa/pr/antitrust-division-seeks-public-comments-updating-bank-merger-review-analysis.
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    In order to expedite the competitive review process required by the 
BHCA, Home Owners Loan Act (HOLA), and the Bank Merger Act, and to 
reduce regulatory burden, the DOJ, in consultation with the federal 
banking agencies, developed the 1995 Bank Merger Competitive Review 
Guidelines (Guidelines).\27\ The Guidelines state that merger review 
will rely primarily on the effects of competition in predefined markets 
determined by the Board. To the extent that the post-merger Herfindahl-
Hirschman Index (HHI) does not exceed 1800 or increase by more than 
200, the federal banking agencies generally are unlikely to review 
further the competitive effects of the merger.\28\
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    \27\ Available at http://justice.gov/atr/bank-merger-competitive-review-introduction-and-overview-1995.
    \28\ The HHI is a statistical measure of market concentration 
and is also used as the principal measure of market concentration in 
the Department of Justice's Merger Guidelines. The HHI for a given 
market is calculated by squaring each individual competitor's share 
of total deposits within the market and then summing the squared 
market share products. For example, the HHI for a market with a 
single competitor would be: 100\2\ = 10,000: for a market with five 
equal competitors with equal market shares, the HHI would be: 20\2\ 
+ 20\2\ + 20\2\ + 20\2\ + 20\2\ = 2,000.
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    However, the Guidelines provide that the federal banking agencies 
may examine a merger transaction in greater detail if the federal 
banking agencies believe additional scrutiny is necessary. As part of 
this further examination under the Guidelines, the federal banking 
agencies may consider, among other things, whether there is evidence 
that (a) the merging parties do not significantly compete with one 
another; (b) rapid economic change has resulted in an outdated 
geographic market definition and an alternate market is more 
appropriate; (c) market shares are not an adequate indicator of the 
extent of competition in the market; (d) a thrift institution is 
actively engaged in providing services to commercial customers, 
particularly loans for business startup or working capital purposes and 
cash management services; (e) a credit union has such membership 
restrictions, or lack of restrictions, and offers such services to 
commercial customers that it should be considered to be in the market; 
(f) there is actual competition by out-of-market institutions for 
commercial customers, particularly competition for loans for business 
startup or working capital purposes; and (g) there is actual 
competition by non-bank institutions for commercial customers, 
particularly competition for loans for business startup or working 
capital purposes.\29\
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    \29\ Section 2 of the Interagency Guidelines, available at 
www.justice.gov/atr/bank-merger-competitive-review-introduction-and-overview-1995.
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Request for Comment

    The FDIC is seeking comment on all aspects of the existing 
regulatory framework that applies to bank merger transactions. In 
responding to the following questions, the FDIC asks that commenters 
please include quantitative as well as qualitative support for their 
responses, as applicable.

[[Page 18744]]

    Question 1. Does the existing regulatory framework properly 
consider all aspects of the Bank Merger Act as currently codified in 
Section 18(c) of the Federal Deposit Insurance Act?
    Question 2. What, if any, additional requirements or criteria 
should be included in the existing regulatory framework to address the 
financial stability risk factor included by the Dodd-Frank Act? Are 
there specific quantitative or qualitative measures that should be used 
to address financial stability risk that may arise from bank mergers? 
If so, are there specific quantitative measures that would also ensure 
greater clarity and administrability? Should the FDIC presume that any 
merger transaction that results in a financial institution that exceeds 
a predetermined asset size threshold, for example $100 billion in total 
consolidated assets, poses a systemic risk concern?
    Question 3. To what extent should prudential factors (for example, 
capital levels, management quality, earnings, etc.) be considered in 
acting on a merger application? Should bright line minimum standards 
for prudential factors be established? If so, what minimum standard(s) 
should be established and for which prudential factor(s)?
    Question 4. To what extent should the convenience and needs factor 
be considered in acting on a merger application? Is the convenience and 
needs factor appropriately defined in the existing framework? Is the 
reliance on an insured depository institution's successful Community 
Reinvestment Act performance evaluation record sufficient? Are the 
convenience and needs of all stakeholders appropriately addressed in 
the existing regulatory framework? To what extent and how should the 
convenience and needs factor take into consideration the impact that 
branch closings and consolidations may have on affected communities? To 
what extent should the FDIC differentiate its consideration of the 
convenience and needs factor when considering merger transactions 
involving a large insured depository institution and merger 
transactions involving a small insured depository institution? To what 
extent should the CFPB be consulted by the FDIC when considering the 
convenience and needs factor and should that consultation be 
formalized?
    Question 5. In addition to the HHI, are there other quantitative 
measures that the federal banking agencies should consider when 
reviewing a merger application? If so, please describe the measures and 
how such measures should be considered in conjunction with the HHI. To 
what extent should such quantitative measures be differentiated when 
considering mergers involving a large insured depository institution 
and mergers involving only small insured depository institutions?
    Question 6. How and to what extent should the following factors be 
considered in determining whether a particular merger transaction 
creates a monopoly or is otherwise anticompetitive?
    Please address the following factors:
    (a) The merging parties do not significantly compete with one 
another;
    (b) Rapid economic change has resulted in an outdated geographic 
market definition and an alternate market is more appropriate;
    (c) Market shares are not an adequate indicator of the extent of 
competition in the market;
    (d) A thrift institution is actively engaged in providing services 
to commercial customers, particularly loans for business startup or 
working capital purposes and cash management services;
    (e) A credit union has such membership restrictions, or lack of 
restrictions, and offers such services to commercial customers that it 
should be considered to be in the market;
    (f) There is actual competition by out-of-market institutions for 
commercial customers, particularly competition for loans for business 
startup or working capital purposes; and
    (g) There is actual competition by non-bank institutions for 
commercial customers, particularly competition for loans for business 
startup or working capital purposes. With respect to the preceding 
factors, how and to what extent should the activity of current branches 
or pending branch applications be considered?
    Question 7. Does the existing regulatory framework create an 
implicit presumption of approval? If so, what actions should the FDIC 
take to address this implicit presumption?
    Question 8. Does the existing regulatory framework require an 
appropriate burden of proof from the merger applicant that the criteria 
of the Bank Merger Act have been met? If not, what modifications to the 
framework would be appropriate with respect to the burden of proof?
    Question 9. The Bank Merger Act provides an exception to its 
requirements if the responsible agency finds that it must act 
immediately in order to prevent the probable failure of one of the 
insured depository institutions involved in the merger transaction. To 
what extent has this exception proven beneficial or detrimental to the 
bank resolution process and to financial stability? Should any 
requirements or controls be put into place regarding the use of this 
exemption, for example when considering purchase and assumption 
transactions in a large bank resolution? Are there attributes of GSIB 
resolvability, such as a Total Loss-Absorbing Capacity (TLAC) 
requirement, that could be put into place that would facilitate the 
resolution of a large insured depository institution without resorting 
to a merger with another large institution or a purchase and assumption 
transaction with another large institutions?
    Question 10. To what extent would responses to Questions 1-9 differ 
for the consideration of merger transactions involving a small insured 
depository institution? Should the regulations and policies of the FDIC 
be updated to differentiate between merger transactions involving a 
large insured depository institution and those involving a small 
insured depository institution? If yes, please explain. How should the 
FDIC define large insured depository institutions for these purposes?

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on December 6, 2021.
Harrel M. Pettway,
Executive Secretary.

    Editorial note: This document was received for publication by 
the Office of the Federal Register on March 25, 2022.

[FR Doc. 2022-06720 Filed 3-30-22; 8:45 am]
BILLING CODE 6714-01-P


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