FDIC Proposes Changes to its Statement of Policy on Bank Merger Transactions and Provides Guidance on its Review Process

On March 21, 2024, the Federal Deposit Insurance Corporation (FDIC) proposed changes to its Statement of Policy on Bank Merger Transactions (Proposed SOP), which provides additional FDIC perspective on the FDIC’s process for evaluating merger applications, as well as the principles the FDIC will consider in reviewing the applicable statutory factors as set forth in the Bank Merger Act (BMA). 

If the Proposed SOP is implemented as proposed by the FDIC, the most significant impact for community banks will be longer processing times for acquisitions, additional competitive effects analysis that will be required with any such application, and potential for more uncertainty and new requests from the FDIC given the broad “principle-based” approach of the Proposed SOP.  

The Proposed SOP is open for comment until May 31, 2024.

Related Developments

On January 29, 2024, the Office of the Comptroller of the Currency (OCC) also proposed amendments to its rules for business combinations under 12 CFR §5.33 involving national banks and federal savings associations, including a new policy statement, titled “Policy Statement Regarding Statutory Factors Under the Bank Merger Act,” that summarizes the principles the OCC uses when it reviews proposed transactions under the BMA (OCC Proposal). Comments on the OCC Proposal were initially due April 15, 2024, but the deadline has been extended to June 15, 2024. See our client alert regarding the OCC Proposal for more information.

Although the approaches of the OCC and the FDIC to the statutory factors are somewhat similar, there are notable differences in emphasis on certain factors as discussed below. Perhaps the clearest difference is that among the indicators identified by the OCC of the features of applications that are viewed as consistent with approval, the OCC proposes a threshold of less than $50 billion in asset size for the resulting institution, while the FDIC utilizes a threshold of $100 billion to describe where financial stability problems may arise.

Rationale for the Proposed SOP

The concern with growth and consolidation as well as systemic risk are consistent themes in the Proposed SOP. The FDIC states that given the growth and consolidation in the industry, there has been an increase in the number of large and systematically important banking organizations, which has contributed to the need for a review of the regulatory framework that applies to bank merger transactions subject to the BMA. Accordingly, given the increased number, size, and complexity of large banks, greater attention to the financial stability risks that could arise from a merger involving a large bank is warranted.

The concern with size is abundantly clear. The Proposed SOP states quite frankly that the size of an insured depository institution (IDI) as a practical matter may limit bank failure resolution options available to the FDIC and present greater challenges, which can present significant risk to the Deposit Insurance Fund (DIF). The Proposed SOP demonstrates the FDIC’s concern with contagion in the banking industry and notes the systemic risk associated with the failure of large regional IDIs, such as Silicon Valley Bank (SVB) and Signature Bank, and that as of December 2023, the failures of SVB and Signature Bank have resulted in an estimated cost of $21.8 billion and $1.8 billion, respectively, to the DIF.

In addition to the growth and consolidation concerns highlighted in the Proposed SOP, the FDIC’s concern with the anti-competitive impact of consolidation is also clear. The Proposed SOP notes that the executive order of President Biden on July 9, 2021, addressed the impact that consolidation may have on maintaining a fair, open, and competitive marketplace, and the impact on the welfare of workers, farmers, small businesses, startups and consumers.

The Proposed SOP

The Proposed SOP includes new content to make it more principles-based, communicates the FDIC’s expectations regarding the evaluation of merger applications filed pursuant to the BMA, and describes the types of merger applications for which the FDIC is responsible. The Proposed SOP includes a separate discussion of each statutory factor, including: (i) competitive effects, (ii) financial and managerial resources, (iii) future prospects, (iv) convenience and needs of the community to be served, (v) risk to the stability of the U.S. banking or financial system, and (vi) effectiveness in combating money laundering. In addition, the Proposed SOP includes a declaratory statement for each statutory factor to highlight the FDIC’s expectations. 

FDIC Jurisdiction and Scope

The Proposed SOP is intended to clarify the circumstances under which FDIC approval is required in connection with a proposed merger transaction. The Proposed SOP takes an expansive view and states that FDIC has jurisdiction over transactions that are “mergers in substance,” even if the transaction is not legally structured as a merger. The Proposed SOP states that the FDIC interprets the term “merge” in the BMA to encompass all transactions that result in an IDI substantively and effectively combining with a non-insured entity, regardless of whether the transaction is structured as a merger or asset acquisition. The Proposed SOP states that the intent of the BMA is to include all transactions that could affect the safety and soundness of an IDI and could increase the risk to the DIF. The FDIC takes the view that any expansion of an IDI’s deposit base via acquisition would be subject to approval under the BMA.

Additionally, the Proposed SOP also provides clarity on the expansive interpretation the FDIC takes on the assumption of “deposits,” which it notes is broadly defined in the Federal Deposit Insurance Act (FDIA). The Proposed SOP states that the assumption of any deposits or other similar liabilities triggers review by the FDIC.

We have seen each of these positions taken by the FDIC with respect to individual applications. Transfers of deposits are often raised in the context of a fintech partner’s ability to arrange a successor partner bank for the fintech. The end-customers of the fintech are also often accountholders with respect to the fintech’s current bank partner. If the fintech seeks to move from the current bank partner to a successor bank partner, that can involve transferring insured deposits from the current bank partner to the successor partner bank on behalf of and at the direction of the fintech’s end-customers, as well as the current bank partner’s rights and obligations in that regard. Similarly, even where customers are given a choice in moving deposits –whether fintech deposits or otherwise – the FDIC has previously concluded that a merger application is required.

Significant Concern Factors

Generally, applications will present significant concerns and will likely result in unfavorable findings with regard to one or more statutory factors if they include the following circumstances:

• non-compliance with applicable federal or state statutes, rules, or regulations (this includes, for example, transactions that would exceed the 10 percent nationwide deposit limit, as well as both issued and pending enforcement actions);
• unsafe or unsound condition relating to the existing IDIs or the resulting IDI;
• less than satisfactory examination ratings, including for any specialty areas (i.e., information technology or trust examinations);
• significant concerns regarding financial performance or condition, risk profile, or future prospects;
• inadequate management, including significant turnover, weak or poor corporate governance, or lax oversight and administration; or
• incomplete, unsustainable, unrealistic or unsupported projections, analyses, and/or assumptions.

Additionally, the FDIC may not be able to find favorably on any given statutory factor (and the application as a whole) if there:

• are unresolved deficiencies, issues, or concerns (including with respect to any public comments);
• is a lack of sustained performance under corrective programs will also be inconsistent with a favorable finding on one or more statutory factors, particularly when the transaction implicates the areas that are the subject of the corrective program; and
• is the inability or unwillingness of the applicant to agree to proposed conditions or execute written agreements, if deemed necessary, will result in unfavorable findings and would require action by the Board of Directors on the application.

Evaluation of Statutory Factors

I. Monopolistic or Anticompetitive Effects

The FDIC strives to ensure that resulting institutions continue as participants in a competitive environment.

The Proposed SOP does not include any bright lines or specific metrics as to when it is presumed that the transaction would be considered anticompetitive as the FDIC desired to maintain flexibility to evaluate the facts and circumstances of each application filed.

The FDIC clarified that it uses deposits as an “initial proxy” for commercial banking products and services, but it will tailor the product market definition to individual products as needed, and will analyze deposit and loan activity or utilize additional analytical methods, data sources, or geographic or product market definitions in order to asses the competitive effects of a proposed transaction and whether consumers retain meaningful choices. In other words, it is a far more wholistic approach to its competitive analysis and the HHI is not a definitive factor in making a determination in its competitive effects analysis of a transaction.

In addition, the FDIC will consider concentrations beyond those based on deposits. As appropriate, the FDIC may consider concentrations in any specific products or customer segments, such as, for example, the volume of small business or residential loan originations or activities requiring specialized expertise.  In particular, the FDIC may consider information on the pricing of products and services to assess the competitive effects of a proposed merger when practicable and relevant.

Unlike the FDIC’s renewed approach, the OCC will continue to rely on the current framework and the 1995 Bank Merger Guidelines in the evaluation of this statutory factor of the BMA. 

II. Financial Resources and Managerial Resource and Future Prospects

Financial Resources

The FDIC expects that the resulting IDI reflect sound financial performance and condition.

Stemming from concerns related to the March 2023 bank failures, the Proposed SOP notes that the FDIC will consider the liquidity risk of the resultant IDI, including the extent of its projected reliance on uninsured deposits and its contingency funding strategies. The Proposed SOP states that an IDI’s overreliance on uninsured deposits or non-core funding sources may not be consistent with a favorable finding on this statutory factor. The Proposed SOP states that overall, the FDIC expects that the resulting IDI will reflect sound financial performance and condition consistent with the IDI’s size, complexity, and risk profile.

For the FDIC, it will not find favorably if the merger would result in a weaker IDI from an overall financial perspective. On the other hand, the OCC Proposal emphasizes that it will scrutinize transactions that increase risk to the resulting institution’s condition and resilience and discusses management’s ability to manage such increased risk.

Managerial Resources

The FDIC expects that the directors, officers, and as appropriate, principal shareholders (collectively, management) possess the capabilities to administer the resultant IDI’s affairs in a safe and sound manner, and effectively implement post-merger integration plans and strategies.

The background and experience of each member of the proposed management team will be reviewed relative to the size, complexity, and risk profile of the resulting IDI. Additional managerial resource considerations include:

• the supervisory history of each entity involved in the proposed merger, including the management rating for any IDI involved in the transaction;
• the breadth and depth of management, and adequacy of succession planning;
• management’s responsiveness to issues or supervisory recommendations raised by regulators or auditors;
• any existing or pending enforcement actions;
• any issues or concerns with regard to specialty areas including information technology, trust, consumer compliance, CRA or Anti-Money Laundering (AML)/countering the financing of terrorist activities (CFT);
• the reasonableness of fees, expenses and other payments made to insiders; and
• recent rapid growth and the record of management in overseeing and controlling risks associated with such growth.

Future Prospects

The FDIC expects that the resulting IDI will operate in a safe and sound manner on a sustained basis following consummation of the merger.

The Proposed SOP states that the FDIC will consider the future prospects of the existing and proposed entities involved in a merger transaction, which assessment includes a number of factors, including the economic environment, the competitive landscape, acquiring IDI’s history in integrating merger targets and managing growth, anticipated scope of the resulting IDI’s operations, the quality of its supporting infrastructure, among other factors. Any significant planned changes to the resulting IDI’s strategies, operations, products or services, activities, income or expense levels, or other key element of its business will be closely assessed. 

On this factor, the OCC’s assessment is of the resulting institution as a single unit, plan or strategy, with an overall assessment of the resulting institution’s financial and managerial resources and proposed operations as a single unit, while the FDIC’s approach is a more granular review of the any significant planned changes to the existing institution’s strategies, operations, products or services, activities, income and expense levels, and other key elements of business.

III. Convenience and Needs of the Community to Be Served

The FDIC expects that a merger between IDIs will enable the resulting IDI to better meet the convenience and the needs of the community to be served than would occur absent the merger.

The Proposed SOP does not establish specific CRA rating benchmarks or bright lines in order to maintain flexibility in its analysis and to ensure each proposed transaction is evaluated on its merits, facts, and circumstances. However, the Proposed SOP notes that a less than Satisfactory rating or significant deterioration in CRA performance may present significant concerns in resolving this factor. The Proposed SOP clarifies that the FDIC’s review is not limited to the CRA record of institutions and will encompass a broad review of the institutions’ existing products and services and whether the products and services proposed by the applicants will meet the convenience and needs of the community to be served.

The Proposed SOP advises applicants to be prepared to make commitments regarding future retail banking services in the community to be served for at least three years following consummation of the merger, and places an affirmative expectation on applicants to provide specific and forward-looking information to enable the FDIC to evaluate the expected impact of the merger on conveniences and needs of the community to be served.

Of note, the FDIC expects that a merger between IDIs will enable the resulting IDI to better meet the convenience and the needs of the community to be served than would occur absent the merger. The OCC Proposal, on the other hand, does not expressly state that it requires an improvement, but does note that it will consider a number of factors, including the probable effects related to branching services and availability, credit availability, job losses or reduced job opportunities, community investment or development initiatives, and other efforts to support affordable housing and small businesses.

IV. Risk to the Stability of the United States Banking or Financial System

The FDIC expects that the resulting IDI will not materially increase the risk to the stability of the U.S. banking or financial system.

The Proposed SOP largely builds upon the financial stability criteria previously employed in practice by the FDIC, FRB, and OCC, and clarifies the FDIC’s perspective when conducting its analysis. The Proposed SOP details the considerations that the FDIC uses to determine whether a resulting IDI’s systemic footprint would be such that its financial distress or failure could compromise the stability of the U.S. banking or financial system. The Proposed SOP states that it considers financial stability influences primarily from the perspective of the resulting IDI.

In evaluating the risk to the stability of the U.S. banking or financial system, the Proposed SOP identifies the following factors: (i) the size of the entities involved in the transaction, (ii) the availability of substitute providers for any critical products and services to be offered by the resulting IDI, (iii) the resulting IDI’s degree of interconnectedness with the U.S. banking or financial system, (iv) the extent to which the resulting IDI contributes to the U.S. banking or financial system’s complexity, and (v) the extent of the resulting IDI’s cross-border activities.

(i) Size

The FDIC states that the asset size of a resulting IDI should not serve as the sole basis for evaluating this statutory factor. Rather, size is only one of several important considerations that need to be evaluated in the context of other criteria. However, transactions that result in a large IDI (e.g., in excess of $100 billion) are more likely to present potential financial stability concerns with respect to substitute providers, interconnectedness, complexity, and cross-border activities, and will be subject to added scrutiny. The FDIC takes the view that the failure of a larger IDI with a traditional community bank business model may pose significantly different resolvability and stability risks than a smaller IDI with one or more complex business lines, large derivative exposures, or extensive cross-border operations. 

As noted, for the FDIC, heightened scrutiny should be expected for resulting institutions with total assets in excess of $100 billion or more. On the other hand, for the OCC, that threshold is reduced to $50 billion or more.

(ii) Availability of Substitute Providers

The Proposed SOP states that the purpose of considering the availability of substitute providers is to understand whether an inability or unwillingness by a resulting IDI to continue providing specific products or services could be disruptive to the U.S. banking or financial system. The FDIC considers whether the resulting IDI provides critical products or services that may be difficult to replace or substitute, or conducts activities that comprise a relatively large share of the relevant activity in the banking or financial system.

(iii) Interconnectedness

The FDIC will consider the degree to which the merging entities are engaged in transactions or relationships with IDIs, affiliates of banking organizations, or other financial service providers. The Proposed SOP states that a resulting IDI may present greater risk from a stability perspective if key aspects of its business (including any on- or off-balance sheet activities) are highly interconnected with other financial system participants.

(iv) Complexity

Under the Proposed SOP, evaluation of the resulting IDI’s contribution to the U.S banking or financial system’s complexity would consider the full scope of the resulting IDI’s operations. This includes the resulting IDI’s business lines, products and services, on- and off-balance sheet activities, delivery channels, and any material affiliate or other third-party relationships. The FDIC considers an important part of the complexity analysis to be the potential financial stability consequences of the resulting IDI failing and being placed into a receivership under Section 11 of the FDIA. Several commenters to the Proposed SOP suggested formal thresholds be developed (such as total asset metrics) for when a resolution plan should be required, however, such thresholds were not incorporated into the Proposed SOP as the FDIC took the position that a prospective resolution presents unique facts and circumstances, and it does not believe a one size fits all approach to the resolution process is appropriate.

(v) Cross-Border Activities

The FDIC will consider whether cross-border activities comprise a material component of the resulting IDI’s operations and present a significant degree of cross-jurisdictional claims or liabilities. The purpose of considering cross-border activities is to assess the degree to which coordination of the resulting IDI’s supervision and resolution could be complicated by different legal requirements, geopolitical events, and competing national interests, leading to increased potential for spillover effects. A resulting IDI’s supervision and resolution could be further complicated by different legal requirements, geopolitical events, and competing national interests, leading to increased potential for spillover effects.

Other Stability Considerations

The FDIC notes that the above list of financial stability considerations is not exhaustive, and that it will evaluate any additional elements that may affect the risk to the U.S. banking or financial system’s stability. Accordingly, this may include other factors, such as the resulting IDI’s regulatory framework, consideration of the merging IDI’s records with respect to cybersecurity and stress-testing results, and the degree to which the resultant IDI’s potential financial distress or rapid liquidation could cause other market participants with similar activities or business profits to experience a loss of market confidence, falling asset values, or decreased funding options.

V. Effectiveness in Combatting Money Laundering Activities

The FDIC expects that approved merger transactions will result in institutions with effective programs to combat money laundering (anti-money laundering or AML) and counter the financing of terrorism (CFT).

The FDIC expects that the resulting IDI will operate under a satisfactory AML/CFT program commensurate with its risk profile and business (or strategic) plan. As part of its evaluation of this factor, the FDIC will undertake a comprehensive analysis of each entity’s record with regard to AML/CFT. 

In all cases, the FDIC will consider whether the resulting IDI has developed an appropriate plan for the integration of the combined operations into a single, comprehensive, and effective program to combat money laundering and terrorist financing. Additionally, the FDIC expects the applicant to demonstrate how the resulting IDI will comply with the BSA and its implementing regulations following consummation of the merger.

Key Takeaways

The following are key takeaways of the Proposed SOP (leading with takeaways that will impact community banks the most):

• More Robust BMA Applications. The Proposed SOP will result in even more information provided by applicant institutions in the bank merger application process. The additional information to support the expectations set forth in the Proposed SOP ranges from “specific and forward-looking information” on the benefits to the community to three-year projections for branch expansions, closing, or consolidations to detailed integration strategies that may include mapping of products and services between the transaction parties. The FDIC’s questions soliciting feedback even ask what additional information should be required with respect to certain factors. Suffice it to say that in the current data driven environment, the FDIC will be looking for detailed support on the various statutory factors, as well as confirmation that the applicant’s internal documentation –

including strategic plans and CRA efforts – support the statements made by the applicant.

• Size Matters. If adopted as proposed, the Proposed SOP would make the M&A market more challenging for resulting IDIs with $50 billion in assets given the FDIC’s public hearing expectations noted below, and for larger IDIs, g., those resulting in excess of $100 billion in assets. While the FDIC states that the asset size of a resulting IDI should not serve as the sole basis for evaluation, it notes that it is an important consideration in the context of other criteria. The Proposed SOP states that larger IDIs “are more likely to present potential financial stability concerns with respect to substitute providers, interconnectedness, complexity, and cross-border activities, and will be subject to added scrutiny.” There is some hope, however, for a larger IDI with a traditional community bank business model as the Proposed SOP states such an IDI may pose significantly different resolvability and stability risks than a smaller IDI with one or more complex business lines, large derivative exposures, or extensive cross-border operations. Realistically, however, the impact on existing large IDIs is likely limited given that of the 29 insured U.S. commercial banks with assets over $100 billion, only 3 are state nonmember banks; the remaining are national banks or state member banks. Of the 12 additional banks with between $50 billion and $100 billion in assets, only 2 are state nonmember banks. Accordingly, the direct application of the Proposed SOP to existing large IDIs would likely be limited.
• Expansive Competitive Effects Analysis. The Proposed SOP indicates a clear intention on the part of the FDIC to take a broad approach to assessing the competitive effects of any bank merger transaction. The Proposed SOP states that the deposit share analysis is what the FDIC uses as an initial proxy only. The competitive effects analysis that the Proposed SOP incorporates is far more granular and detailed than the HHI deposit share analysis that is customarily conducted in connection with BMA As noted in the Proposed SOP, multiple RFI commenters stated that the HHI threshold for prospective competitive effects concerns should be increased from its current limit, and there should be a small bank de minimis exception whereby small bank mergers would be presumed not to create monopolies or have anticompetitive effects if they meet certain prudential thresholds that can only be overturned based on other criteria such as the results of the competitive effects analysis. If finalized as proposed, the Proposed SOP would require applicants to provide a far more robust competitive effects analysis of its products and services extending beyond deposit analysis. The Proposed SOP notes that the FDIC would: evaluate “both geographic and product markets”; “may consider concentrations in any specific products or customer segments”; and may consider “additional methods of assessing the competitive nature of markets,” such as “information on the pricing of products and services to assess the competitive effects of a proposed merger when practicable and relevant.”
• Emphasis on a “Better” Ability to Meet Community Needs. The FDIC expects that a merger between IDIs will enable the resulting IDI to better meet the convenience and the needs of the community to be served than would occur absent the merger. Accordingly, it may not be sufficient for applicants to demonstrate how the IDIs currently meet such needs and that they will continue to do so in the same manner after the consummation of the proposed transaction. The applicant will need to further demonstrate an improvement in meeting such needs, which adds an additional burden on M&A applicants when there may not be any negative impact or reduction in meeting the needs of the community. This statement in the Proposed SOP indicates the FDIC’s potential disfavor of growth and consolidation in the banking industry and to only support such transactions that improve a community’s ability to access products and services. There is no guidance provided on the weight attached to this betterment requirement.
• Additional Commitments Related to Products and Services. The Proposed SOP advises applicants to be prepared to make commitments regarding future retail banking services in the community to be served for at least three years following consummation of the merger, and places an affirmative expectation on applicants to provide specific and forward-looking information to enable the FDIC to evaluate the expected impact of the merger on conveniences and needs of the community to be served. Such criteria are problematic and could make the resulting IDI less nimble in its ability to adapt to market forces and evolving community needs. The Proposed SOP does not provide any guidance on parameters surrounding this commitment.
• Broad FDIC Assertion of Its Jurisdiction. The Proposed SOP highlights the FDIC’s very broad interpretation of its authority to review transactions between an IDI and a non-insured entity under the BMA. The Proposed SOP states that “[t]he broad scope of transactions expressly subject to FDIC approval under the BMA evinces a clear congressional intent for the FDIC to review a wide array of transactions between IDIs and non-insured entities that have the potential to affect the safety and soundness of a resultant IDI or increase the potential liability of the Deposit Insurance Fund.” Applicants should expect increased FDIC involvement on transactions that historically FDIC review may not have been expected, including asset acquisitions by another IDI.
• Additional Scrutiny for Non-Traditional Community Banking Models. As noted above, traditional community banking models are likely to result in less scrutiny even if the IDI is a large IDI. By the same token, the Proposed SOP states that if an IDI has complex business lines, large derivative exposures, or extensive cross-border operations, e., less like a traditional community banking model, it is likely to result in additional scrutiny by the FDIC. A more rigorous review should be expected by any IDI that departs from a traditional community banking model irrespective of size.
• Non-Compete Ban Incorporated. The Proposed SOP states that as part of its competitive effects analysis, the FDIC may consider proposed divestitures of business lines, branches, or portions thereof to mitigate anticompetitive effects, and that the FDIC will generally expect such divestitures to be completed before allowing the merger to be consummated. Additionally, to promote the ongoing competitiveness of the divested business lines, branches, or portions thereof, the FDIC will generally require that the selling institution will neither enter into non-compete agreements with any employee of the divested entity nor enforce any existing non-compete agreements with any of those entities. See our client alert on the non-compete ban for more information.
• Fragmented Approach to the BMA Statutory Factors and Potential Forum Shopping: The Proposed SOP is the FDIC’s version of its BMA guidelines, and the OCC Proposal is the OCC’s version of its BMA guidelines. FDIC Chairman Martin J. Gruenberg states, “This proposed Statement of Policy would update, strengthen, and clarify the FDIC’s approach to evaluating mergers under the Bank Merger Act,” and Acting Comptroller of the Currency Michael J. Hsu states that, “ The proposed Statement of Policy aims to improve bank merger application outcomes and is broadly consistent with the proposed policy statement issued by the OCC in January. Both are intended to provide additional transparency around the agencies’ reviews of applications under the Bank Merger Act.” Despite each of the agency’s statements regarding additional clarity and Comptroller Hsu’s statement that they are “broadly consistent,” there are enough differences in emphasis as noted in this article that can lead to a lack of clarity for institutions. Instead of providing a coordinated, interagency approach to a federal statute (the BMA) for the same statutory factors, the OCC and now the FDIC have provided guidance on their respective interpretation of the statutory factors based on their regulatory mandates. A single set of standards and criteria for acting on a bank merger application would be helpful. Instead, there is now a fragmented approach, which will likely contribute to the continued uncertain outlook for bank M&A transactions and may also lead to an increased focus on choices of acquisition structures and bank charters in order to avoid a certain regulator given its express evaluation criteria.
• More Hearings: The Proposed SOP states that the FDIC will generally consider it is in the public interest to hold a hearing for merger applications resulting in an IDI with greater than $50 billion in assets or for which a significant number of CRA protests are received. The decision to hold such meetings depends on issues raised during the comment period and the significance of the merger transaction to the public interest, the banking industry, and communities affected. There is no additional detail provided on what constitutes a “significant” number of CRA protests or what would be “significant” to the public interest, banking industry, or the communities affected. A more protracted regulatory approval timeline should be expected for transactions involving resulting IDIs with assets of $50 billion or more.
• Resolution Planning Uncertainty. The Proposed SOP does not set any thresholds or a blueprint on resolution planning requirements for applicants. The Proposed SOP does not include any thresholds as the FDIC states that each prospective resolution presents unique facts and circumstances, and the FDIC does not believe a one size fits all approach to the resolution process is appropriate. This may lead to uncertainty for applicants.

Given the “principle-based” approach to evaluating statutory factors under the BMA, it does not provide any color on the weight attached to various factors as part of the FDIC’s evaluation of applications, other than emphasizing that the FDIC is taking a principle-based approach, there is no one-size fits all, and that the FDIC must “retain flexibility to review and evaluate the facts and circumstances” relevant to each application. However, such a broad stroke approach to guidance provides little direction to participants in the M&A market when determining which factor is more determinative than another and where to expend their acquisition energy in connection with a proposed transaction.

Delays in processing of regulatory applications already impact deal certainty. Acquirers and their counsel will need to continue to anticipate issues raised in the BMA application process, and the potential for delay will need to be addressed with targets at the bidding stage and in the negotiation of definitive agreements.