US FDIC draft proposal: bank mergers above $100 billion get extra scrutiny

By Thomson Reuters Mar 21, 2024 | 9:41 AM

(Reuters) – Mergers that could result in banks with more than $100 billion in assets should expect heightened scrutiny from the U.S. Federal Deposit Insurance Corporation, according to draft guidance the agency released Thursday.

The FDIC’s board of directors is poised to vote on the proposal on Thursday. If adopted, the proposal would update the agency’s merger guidance for the first time in 16 years and put special emphasis on maintaining the stability of the banking sector, agency staff said Thursday ahead of the vote.

Bank mergers and industry consolidation have come under intense scrutiny since last year, when three of the largest-ever U.S. bank failures resulted in mergers.

The draft proposal, which offers a statement of principles rather than set procedures, says officials would also focus on other financial stability concerns, such as whether the resulting merged bank would cause the financial system to become more complex and the extent of its cross-border activities.

After three of the largest-ever U.S. bank failures last year, lawmakers from both major parties have lambasted the FDIC’s handling of subsequent mergers.

Financial reform advocates such as Democratic Senator Elizabeth Warren have expressed outrage that regulators allowed Wall Street giant JPMorgan Chase & CO, already the nation’s largest bank, to acquire the failed First Republic Bank last year.

In the wake of the 2023 bank failures, FDIC Board Member Rohit Chopra, a Warren ally who heads the U.S. Consumer Financial Protection Bureau, pledged tougher scrutiny of merger applications.

Bank executives on the other hand have complained that regulators’ foot-dragging has helped depress merger activity among healthy banks to historic lows.

(Reporting by Douglas Gillison; Editing by Chizu Nomiyama)