Large Firms Seeking Mergers Face Long Odds Under Proposed FDIC policy

Large Firms Seeking Mergers Face Long Odds Under Proposed FDIC policy

March 22, 2024, American Banker

Randy Benjenk’s commentary was included an American Banker article covering a new regulation from the Federal Deposit Insurance Corporation (FDIC) that would place new restrictions on bank mergers. Randy argues the updated policy statement entrenches the current FDIC's widely understood skepticism of mergers by creating additional hooks for transacting parties to be caught on.

“The policy statement would create new ways for transactions to fall short of the FDIC's standards of approvability, which means that banks may enter into fewer M&A transactions,” Randy said. “The FDIC will take longer to review the transactions that do get signed, and the FDIC may deny more applications than in the past.”

During the comment process on the proposal, Randy said the banking industry is sure to target several aspects of the policy statement that depart from existing practices. FDIC Vice Chair Hill opened the door to many of these objections in remarks accompanying his vote on the proposal.

Randy also commented on how proposed public hearings on merger transactions could hold up the application process, arguing that "the FDIC is saying that it will generally hold hearings whenever the resulting bank would be $50 billion or more in assets or whenever a significant number of CRA protests have been filed. Hearings on an application [can] be a distraction for management teams that are focusing on integration planning and generally do not change the information available to regulators.”

He also observes that the FDIC seems to be exceeding its explicit statutory mandate in certain areas like considering the impact on employment of mergers. “The FDIC is saying it will consider job losses and lost job opportunity from changes to branch networks, the 'reasonableness of fees, expenses, and other payments made to insiders' — which seems to be a new concern the FDIC doesn't explain anywhere in the proposal — and the use of non-compete agreements when acquirers must divest branches," Randy said.