The Federal Deposit Insurance Corp. board on Thursday proposed changes aimed at speeding up bank merger reviews and modernizing the framework for assessing applications. Among other changes, the rule would establish review timelines for various types of merger applications, including a “rapid processing” framework for acquisitions of “extremely small targets or certain types of operating subsidiaries” that would be processed in as few as five days, FDIC Chair Travis Hill said in a statement.
The proposed rule would also revamp analysis of competitive factors, accounting for credit unions, thrifts and centrally booked deposits in the FDIC’s review. Hill said merger reviews have “often taken far too long,” adding that a long process creates uncertainty for employees and customers, constrains long-term planning and investment, and makes post-merger integration more challenging and costly. During Hill’s tenure, the FDIC has shortened the average application review time from 107 days in 2023 and 2024 to 64 days so far this year.
The proposal is encouraging for the industry and addresses things bankers have repeatedly requested, such as “a realistic look at who actually competes with banks in local markets,” said Randy Benjenk, a Washington, D.C.-based partner at law firm Covington and Burling. However, the FDIC is just one regulator involved in merger reviews. Most bank-to-bank mergers also need Federal Reserve approval, and that review usually takes the longest, particularly when the application goes to the Board in Washington. Unless the Fed adopts parallel reforms, the FDIC's changes will not shorten transaction times by that much.
On Thursday, the FDIC also issued a proposed rule related to parity between state-chartered and national banks. Under the proposal, when a state’s laws don’t apply to a national bank, those laws also wouldn’t apply to an out-of-state bank offering services in the state in question, regardless of whether the state-chartered bank has a physical retail presence there. The FDIC will accept comments on the proposals for 60 days after publication. What remains unknown is whether the Federal Reserve will adopt similar merger review reforms, and how final rules may differ after the comment period.