USA Trends and Developments Contributed by: David Sewell, Alison Hashmall and Nariné Atamian, Freshfields
January 2025. The documents identify and describe 13 features that, when present in com - bination, would weigh in favour of approving a merger application. They also highlight six fea - tures that raise “supervisory or regulatory con - cerns” and would create a presumption of denial (absent remediation of the condition) for applica - tions containing them. Together, the proposed changes would mark noteworthy departures from prior practice, including by: • creating an uncertain framework for any merger that would result in an institution with over USD50 billion in assets – well below the size at which the OCC has historically applied enhanced scrutiny to proposed transactions; • establishing a formal presumption that pro - posed acquisitions by the largest banks (or their subsidiaries) will be denied (though the OCC commits to evaluating all applications from foreign and domestic GSIBs on their individual merits and undertaking a fulsome analysis under the BMA and other applicable law); • applying enhanced scrutiny to a proposed merger’s effects on the community, especially when the transaction could result in reduc - tions in services or layoffs for bank employ - ees, and to community investment or devel - opment initiatives proposed in connection with an application; • eliminating the expedited merger review pro - cess; and • simplifying its business combination applica - tion. FDIC merger statement of policy The FDIC’s merger statement of policy (the “FDIC Statement of Policy”) represents an expansion of, and update to, the prior version,
issued in 2008. The final FDIC Statement of Policy, applicable to transactions in which the agency is the primary federal regulator for the surviving insured, state-chartered, non-member bank, largely tracks with the proposed statement
from earlier this year. Key elements include:
• Convenience and needs expectations: The Statement retains the proposal’s convenience and needs statutory factor, which has been dramatically expanded from the prior state - ment with respect to the FDIC’s expectation that the IDI “better meet the convenience and needs of the community to be served than would occur absent the merger”. Historically, the FDIC and other federal banking agencies have focused primarily on the records of the merging parties under the Community Rein - vestment Act. • Divestiture expectations: The FDIC Statement of Policy would require merging parties to complete divestitures before consummating a transaction and waive or decline to enter non-compete agreements for employees of divested entities, which may extend process - ing deadlines and increase the risk of com - petitive challenges to bank mergers. • Financial stability: The FDIC adopts from its proposal the existing financial stability frame - work employed in public orders by the FRB and OCC, but is stricter in certain key areas. For example, it would formally apply added scrutiny to mergers resulting in an institution with over USD100 billion in assets, whereas the FRB and OCC presume that transactions resulting in an institution with under USD100 billion in assets would not adversely affect financial stability. • Public hearings: The FDIC “generally expects” to hold hearings for any application
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