By Lynn Woosley, Managing Director, and Vincent Coe, Director

On September 17, 2024, the Office of the Comptroller of Currency (“OCC”),  the Federal Deposit Insurance Corporation (“FDIC”), and Department of Justice Antitrust Division (“DOJ”) issued  new antitrust guidance pertaining to bank merger transactions.

The OCC issued final rule RIN 1557-AF24 (“AF24”) to amend its procedures for reviewing applications under the Bank Merger Act (“BMA”) including a policy statement that summarizes the principles the OCC uses when it reviews proposed bank merger transactions under the BMA.

The FDIC Board of Directors also approved a final Statement of Policy (“SOP”) on bank merger transactions, which supersedes its existing policy statement last revised in 2008. The SOP sets forth the FDIC Board’s expectations for merger transactions subject to FDIC approval not limited to considerations that go into evaluating the relevant statutory issues in a prudential and forward-looking manner.

The Department of Justice Antitrust Division (“DOJ”) issued its 2024 Banking Addendum to 2023 Merger Guidelines to underscore its procedures and enforcement practices that it most often uses to investigate whether mergers violate antitrust laws. Prior to this update, the DOJ had applied different guidance for bank mergers than for other mergers and acquisitions. DOJ has traditionally worked in concert with bank regulators during the merger review process for the benefit of consistent and complementary application of laws within the purview of each regulatory agency’s domain.

Side by Side – OCC and FDIC Guidance on Bank Merger Transactions

The following side-by-side analysis highlights key comparisons between the OCC and FDIC recently issued guidance:

Regulatory Authority

Financial Stability and Risk Assessment

CRA and Public Interest

Note: Undoubtedly, the OCC and FDIC policies include CRA as a core consideration such that banks continue meeting the credit needs of their communities.

Antitrust and Competition

Modernization and Innovation

Updated Notice Requirements: Credit Unions, Thrifts, and Farm Credit Lenders

The FDIC’s new merger guidance also requires FDIC-regulated institutions to provide advance notice of a broader range of transactions, including acquisitions of nonbanking assets or entities that did not previously merit a filing. The FDIC will determine whether such transaction constitute a “merger in substance” requiring an application under the Bank Merger Act on a case-by-case basis.

The FDIC will also consider competition provided by credit unions, thrifts, and Farm Credit lenders in its evaluation of mergers. Since the FDIC previously excluded credit unions and Farm Credit lenders and only gave thrifts 50% weight, this has the potential to benefit banks engaging in merger activity where the acquirer and target have overlapping markets. According to the FDIC, they will look at all relevant geographic markets (local, regional, and national) based on where the merging entities operate, consider all relevant market participants and their total deposits, and consider the size and competitive effects of the resulting IDI.

Both the FDIC and OCC clarified that this factor is considered in combination with the convenience and needs of the community. The FDIC elaborated that this balancing may be particularly relevant in rural communities, where the needs of the community may outweigh interests in increased competition. The FDIC also expanded its competition analysis to consider credit unions, thrifts, and Farm Credit System institutions, though it declined industry participants’ requests to include fintechs and other nonbank financial services companies.

Elimination of Streamlined Application and Expedited Reviews

The OCC’s final rule and policy statement eliminated the streamlined application and expedited review provisions under Part 5 of Title 12 of the Code of Federal Regulations. The OCC historically accepted a “streamlined” BMA application under Section 5.33(j).

Overall, both the FDIC and OCC objectively align in promoting safe, sound, and competitive banking markets. AF24 apparently focuses more on the OCC updating its merger evaluation processes in response to modernization challenges. The SOP however reinforces the FDIC’s commitment to protecting the deposit insurance fund, fairness in competition, and access to banking services.

As previously discussed, DOJ released the 2024 Banking Addendum to the DOJ and Federal Trade Commission (“FTC”) 2023 Merger Guidelines and withdrew its 1995 Bank Merger Guidelines. In the 2024 Banking Addendum, the DOJ highlights aspects of the 2023 Merger Guidelines that may be particularly relevant to bank mergers and acquisitions. Of particular note, the DOJ states, “ Nonetheless, competition concerns may impact other factors such as the convenience and needs of the community, and bank regulators may choose to take these competitive considerations under advisement when assessing these other factors.”

The 2024 Banking Addendum notes, “Accordingly, the Antitrust Division considers whether there is appreciable harm to identifiable and distinct groups of customers.” The 2024 Banking Addendum discusses several groups of bank customers that may warrant focused antitrust analyses, including large corporations, small businesses, nonprofits, economically underserved individuals, and individuals with low credit scores.

Taken together, the three recent releases indicate a renewed focus on bank merger and acquisition activity. Institutions considering mergers should carefully evaluate the impact of this guidance.