FDIC final Statement of Policy on Bank Merger Transactions

Yesterday, the FDIC's Board of Directors approved a final Statement of Policy on Bank Merger Transactions (Final SOP). The Final SOP addresses the scope of transactions subject to FDIC approval, the FDIC’s process for evaluating merger applications, and the principles that guide the FDIC’s consideration of the applicable statutory factors as set forth in the Bank Merger Act.

With respect to the statutory factors, the Final SOP:

• Confirms that the FDIC’s evaluation of a merger’s competitive effects may take into account concentrations beyond deposits, including small business or residential loan originations;
• Clarifies that the proposed merger should result in less financial risk than the risk posed by the institutions on a standalone basis;
• Elaborates on the FDIC’s expectation that a merger will enable the resulting institution to better meet the convenience and needs of the community to be served;
• Applies additional scrutiny to the evaluation of financial stability for transactions resulting in an institution with $100 billion or more in total assets; and
• Communicates the FDIC’s expectation to hold public hearings for mergers resulting in an institution with over $50 billion in total assets.

The Final SOP supersedes the existing Statement of Policy, which was last updated in 2008. The updates approved by the FDIC Board yesterday account for the significant changes that have occurred in the banking industry and financial system over the last several decades. The Final SOP refines, and in some cases, broadens the description of the analytical considerations for each statutory factor.