Merger Transactions

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 303, 314, and 333

RIN 3064-AG18

Merger Transactions

AGENCY:

Federal Deposit Insurance Corporation.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Federal Deposit Insurance Corporation (FDIC) is inviting comment on a proposed rule that would fundamentally reform important aspects of the FDIC's approach to processing and evaluating merger transactions subject to the Bank Merger Act (BMA). Notable reforms under the proposed rule would include: accounting for credit unions and centrally booked deposits in the initial competitive effects analysis; establishing a letter filing process with “deemed approval” for “

de minimis

merger transactions;” tailoring other merger filing requirements to reduce burden and processing times based on the size and risk profile of a merger transaction and the attributes of the acquiring and resulting institution; limiting and clarifying the FDIC's discretion to remove a filing from expedited processing; and codifying the FDIC's reformed approach to evaluating the statutory factors under the BMA. Collectively, the revisions under the proposed rule would improve the speed, certainty, and predictability of the FDIC's bank merger framework in a manner consistent with the BMA. In addition, the proposed rule would modernize the framework to better reflect the competitive environment of the U.S. banking industry, including by tailoring it to reflect the full range of merger transactions subject to FDIC review along with reforming or eliminating outdated provisions.

DATES:

Comments must be received on or before November 23, 2026.

ADDRESSES:

The FDIC encourages interested parties to submit written comments. Please include your name, affiliation, address, email address, and telephone number(s) in your comment. You may submit comments to the FDIC, identified by RIN 3064-AG18, by any of the following methods:

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Agency website: https://www.fdic.gov/resources/regulations/federal-register-publications.

Follow instructions for submitting comments on the FDIC's website.

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Mail:

Jennifer M. Jones, Deputy Executive Secretary, Attention: Comments/Legal OES (RIN 3064-AG18), Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

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Hand Delivered/Courier:

Comments may be hand-delivered to the guard station at the rear of the 550 17th Street NW building (located on F Street NW) on business days between 7 a.m. and 5 p.m., eastern time.

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Email: comments@fdic.gov.

Include RIN 3064-AG18 on the subject line of the message.

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Public Inspection:

Comments received, including any personal information provided, may be posted without change to

https://www.fdic.gov/resources/regulations/federal-register publications.

Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of this document will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT:

Sandra Macias, Associate Director, (202) 898-3642,

smacias@fdic.gov,

Division of Risk Management Supervision; Tara Oxley, Associate Director, (202) 898-6722,

toxley@fdic.gov;

David Sharp, Senior Examination Specialist, (202) 898-3997,

dasharp@fdic.gov,

Division of Depositor and Consumer Protection; Annmarie Boyd, Assistant General Counsel, (202) 898-3714,

aboyd@fdic.gov;

Kali Fleming, Senior Attorney, (571) 637-1896,

kfleming@fdic.gov,

Legal Division; Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Policy Objectives

II. Background

III. Overview of the Proposed Rule

IV. Section-by-Section Description of the Proposed Rule

A. Scope

B. Definitions

C. Transactions requiring prior approval

D. Filing procedures

E. Processing

F. Public notice requirements

G. Significant asset transfers

H. Severability

I. BMA transactions

J. Indexing of thresholds

V. Expected Effects

VI. Alternatives Considered

VII. Regulatory Analysis

A. Regulatory Flexibility Act

B. Paperwork Reduction Act

C. Plain Language

D. Reigle Community Development and Regulatory Improvement Act of 1994

E. Executive Order 12866

F. Executive Order 14192

G. Providing Accountability Through Transparency Act of 2023

I. Policy Objectives

The FDIC is issuing this notice of proposed rulemaking (proposed rule) to improve the speed and certainty of, modernize the FDIC's approach related to, and reduce the regulatory burden associated with, the FDIC's review of merger transactions subject to FDIC approval under the BMA. Many aspects of the FDIC's current framework for evaluating merger transactions are outdated, and the proposed rule would align the FDIC's approach with the current market environment. For example, banking and financial services have become far more competitive in the decades since the BMA was enacted,

1

given the significant increase in nonbanks that offer bank-like products or services,

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the dramatic reduction in legal restrictions on interstate banking and branching, and technological innovations such as the internet and mobile phones that allow banks and nonbanks to offer products and services nationwide much more easily than in the past.

1

Public Law 86-463, 74 Stat. 129.

2

This includes credit unions, financial technology companies (fintechs), money market funds, retailers, technology companies, independent mortgage companies, private credit, and various other nonbank financial companies.

Other elements of the current merger review framework are also in need of modernization and reform. For example, for certain merger transactions, supervisory experience has demonstrated that an approval is routine and can be provided expeditiously because the size and nature of such transactions, together with the attributes of the acquiring and resulting institutions, necessarily result in a favorable finding on each of the statutory factors. The current merger filing and processing requirements have not been tailored to reflect these

de minimis

types of merger transactions that, at most, only marginally affect the size and/or risk profile of a well-rated institution, as well as other merger

transactions such as certain corporate reorganizations that routinely result in favorable findings on at least some of the statutory factors.

In addition, aspects of the FDIC's current framework are more stringent than the requirements under the BMA, resulting in an unnecessarily burdensome filing process with few additional public benefits. For example, the public notice requirement under the current framework is more burdensome than required by statute and does not reflect modern information channels and the way most members of the public receive and consume information today. The related public comment period, which is not required under the BMA, similarly has not been modernized to reflect that certain types of merger transactions, such as

de minimis

merger transactions and corporate reorganizations, typically garner little to no meaningful public interest.

The cumulative result of these and other aspects of the current BMA framework—such as the lack of prescribed timelines for FDIC action, the ability of the FDIC to remove a merger filing from expedited processing due to an unsubstantiated Community Reinvestment Act (CRA) protest or at the agency's discretion for “good cause,”

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and an undefined scope for transactions considered mergers in substance—is (at times) an undisciplined and unnecessarily long and inconsistent process.

3

See

12 CFR 303.11(c)(2).

The FDIC's approach to evaluating the statutory factors under the BMA also has revealed several shortcomings, including the undue weight placed on supervisory ratings. For example, in considering the adequacy of management of the acquiring institution, the FDIC considers the management component rating without always conducting a deeper review of the supervisory history to determine (1) management's ability to efficiently remediate identified concerns, and (2) whether and to what extent such concerns bear on the ability of management to successfully acquire and integrate the institution to be acquired.

Currently, information regarding the FDIC's evaluation of the statutory factors is available in the agency's SOP on Bank Merger Transactions and publicly-available filing processing materials; however, other important elements reflect unpublished internal practice. For example, the FDIC has, on occasion, taken qualitative elements into account when evaluating the competition factor, such as commuting patterns, that have not been disclosed in public-facing materials. The legacy approach to providing information regarding the FDIC's evaluation of the statutory factors has served to magnify concerns regarding transparency and predictability.

In recognition of these shortcomings, in 2025 the FDIC commenced a comprehensive review of the agency's BMA framework, which began in earnest with a March 2025 proposal to rescind the FDIC's 2024 SOP on Bank Merger Transactions (2024 SOP) and reinstate the prior SOP (2025 proposal), which was initially adopted in 1998 and amended most recently in 2008.

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The 2025 proposal was intended to bring relatively more certainty and predictability to the industry and stakeholders while the FDIC conducted a broader review of the agency's BMA framework.

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4

See

63 FR 44761 (Aug. 20, 1998); 67 FR 48178 (Jul. 23, 2002); 67 FR 79278 (Dec. 27, 2002); and 73 FR 8870 (Feb. 15, 2008).

5

See

90 FR 11679 (Mar. 11, 2025).

The FDIC received 13 comments on the 2025 proposal. Commenters opposing the 2025 proposal expressed general support for the 2024 SOP, particularly with respect to the approaches to evaluating the financial stability and convenience and needs factors. Other commenters supported reinstatement of the prior SOP as an interim measure while the FDIC considered ways to improve the BMA framework and provided specific recommendations as to how the framework could be improved. Suggestions focused on modernization of the competitive effects analysis, including in highly concentrated rural areas and by more appropriately reflecting nonbank competition in the initial Herfindahl-Hirschman Index (HHI) analysis; placing less emphasis on supervisory findings for purposes of evaluating the statutory factors; improved coordination among the States and sister Federal agencies; enhanced scrutiny of bank-credit union mergers; clarification of the FDIC's analysis of the financial stability factor; a more disciplined approach to processing filings; and relatively closer adherence to the FDIC's statutory authorities under the BMA.

The FDIC is issuing this proposed rule to comprehensively reform the FDIC's framework for processing and evaluating bank merger transactions to address these and other concerns. Specifically, the proposed rule would improve the speed and certainty of the merger filing process by amending the FDIC's existing rules to establish a new framework for how the FDIC would review and process merger filings. The proposed rule would establish clear processing procedures and faster timelines for nearly all merger transaction types that are subject to the FDIC's review under the BMA. The proposed rule also would define new categories of merger transactions, including mergers in substance (an area that has presented considerable confusion for applicants);

de minimis

merger transactions; and significant asset transfers, which would not be treated as merger transactions. Aspects of the proposed rule also are focused on reducing complexity in the merger filing review process. For example, the proposed rule would establish a letter filing requirement and eliminate the public comment period for

de minimis

merger transactions; more broadly reduce public notice requirements; and provide consistency around the process for determining whether a filing is substantially complete. Furthermore, the proposed rule would make long overdue revisions to the competitive effects analysis for purposes of the BMA, including by expressly accounting for credit union shares

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and centrally booked deposits as part of the initial analysis under the HHI. Other aspects of the FDIC's approach to evaluating the statutory factors would be reformed and made transparent. In the aggregate, the proposed rule is intended to result in a substantial and meaningful reduction in regulatory burden and to ensure that going forward, the agency's review of merger transactions is faster, more predictable, and appropriately tailored to reflect the type, size, and complexity of the potential risks of a merger transaction subject to FDIC approval. In addition, the proposed rule would modernize the framework to reflect the competitive environment of the banking industry and reform outdated provisions.

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Credit union shares are equivalent to bank deposits and evidence “money or its equivalent received or held by a credit union in the usual course of business and for which it has given credit or is obligated to give credit to the account of [a] member.” 12 U.S.C. 1752(5).

II. Background

The BMA, codified at section 18(c) of the Federal Deposit Insurance Act (FDI Act),

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prohibits an insured depository institution (IDI) from entering into a merger transaction without regulatory approval and establishes a framework that applies to the review of merger transactions by the FDIC, the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (Federal

Reserve Board) (each, a responsible agency). The BMA requires the prior written approval of the FDIC before an IDI may merge or consolidate with, purchase or otherwise acquire the assets of, or assume any deposit liabilities of, another IDI if the resulting institution is a State nonmember bank or State savings association.

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The BMA also requires the FDIC's prior written approval before any IDI may merge or consolidate with, assume the liability to pay deposits or similar liabilities of, or transfer assets to a noninsured bank or institution. The BMA prohibits the responsible agency from approving a merger transaction that would result in a monopoly and also prohibits approval of other merger transactions that may substantially lessen competition. The BMA further requires the responsible agency to consider the following statutory factors when evaluating a potential merger transaction: the financial and managerial resources and future prospects of the existing and proposed institutions;

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the convenience and needs of the community to be served; the risk to the stability of the U.S. banking or financial system; and the effectiveness of any IDI involved in the merger transaction in combatting money laundering activities, including in overseas branches (collectively, statutory factors).

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12 U.S.C. 1828(c).

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If the acquiring, assuming, or resulting bank is to be a national bank or a Federal savings association, then the OCC is the responsible agency. 12 U.S.C. 1828(c)(2)(A). If the acquiring, assuming, or resulting bank is to be a state member bank, then the Federal Reserve Board is the responsible agency. 12 U.S.C. 1828(c)(2)(B).

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The FDIC considers each of these elements separately as part of a single statutory factor.

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12 U.S.C. 1828(c)(5), (11).

Subpart D of 12 CFR part 303 (subpart D) establishes the FDIC's procedures for reviewing merger filings pursuant to the BMA. The FDIC has previously issued various SOPs intended to provide additional guidance to potential applicants and the public regarding the FDIC's consideration of the statutory factors when reviewing merger filings submitted pursuant to subpart D. The proposed rule would codify the FDIC's standards for evaluating the statutory factors, with certain modifications, to provide greater clarity and consistency for the public. As part of this rulemaking, the FDIC is proposing to rescind its current SOP concurrently with the issuance of a final rule.

III. Overview of the Proposed Rule

A. General Approach

The proposed rule would update many aspects of the FDIC's current merger framework with the goals of improving the FDIC's procedures to provide greater clarity and certainty to applicants, improve discipline around processing timelines, modernize how the agency evaluates the statutory factors, and reduce regulatory burden. The proposed rule would establish a new regulatory framework that encompasses the procedural aspects of merger review under part 303 of the FDIC Rules and Regulations and provides transparency regarding the FDIC's consideration of the statutory factors for various types of merger transactions in new § 335.5.

The FDIC seeks comments on all aspects of the proposed rule.

B. Substantially Complete Determination

The proposed rule would provide that, should an applicant submit an incomplete merger filing, the FDIC would notify the applicant and provide a written explanation regarding the information required to render the merger filing complete within 21 days after receipt of the merger filing. If the applicant does not provide the requested information within 30 days of the FDIC's notification, the proposed rule would permit the FDIC to return the merger filing as incomplete without rendering a decision on the merger filing. If the FDIC does not notify the applicant that a merger filing is incomplete within 21 days of receipt of the merger filing, the proposed rule would provide that the merger filing would be deemed substantially complete as of the date of receipt. The timelines for rapid, expedited, and standard processing (discussed further below) would begin on the date that the FDIC receives a substantially complete merger filing.

C. Rapid Processing and Streamlined Filing Requirements for de Minimis Merger Transactions

The proposed rule would establish a new subcategory of merger transactions called

de minimis

merger transactions that would qualify for rapid processing with deemed approval. Under the proposed rule, a

de minimis

merger transaction would be defined as a transaction (1) that falls within one of the categories in § 303.61(c)(1); (2) in which all institutions involved in the transaction satisfy each of the criteria in § 303.61(c)(2), to the extent applicable; and (3) in which the resulting institution will be “well-capitalized” immediately following the merger transaction.

Section 303.61(c)(1) would identify types of merger transactions, including certain corporate reorganizations, that, based on the FDIC's experience, satisfy the statutory factors when conducted by institutions that also satisfy the criteria in § 303.61(c)(2). The first category would include merger transactions, including certain corporate reorganizations, if the amount of assets being acquired is less than the adjusted lower threshold under section 7A(a)(2)(B)(i) of the Clayton Act, as amended by the Hart-Scott-Rodino Act (HSR Act),

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and 5 percent of the assets of the acquiring IDI. The second category would include corporate reorganizations in which (1) an IDI acquires one or more operating subsidiaries; and (2) the legal and financial risk that the IDI is exposed to is substantially identical before and after the transaction.

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15 U.S.C. 18a(a)(2)(B)(i).

Section 303.61(c)(2) would require all institutions involved in the

de minimis

merger transaction to satisfy the following criteria, as applicable: each institution (1) received an FDIC-assigned composite rating of 3 or better under the Uniform Financial Institutions Rating System (UFIRS) as a result of its most recent examination; (2) received a satisfactory or better CRA rating at its most recent examination (provided it is examined for CRA); (3) received a compliance rating of 1, 2, or 3 from its primary Federal regulator at its most recent examination; (4) is well-capitalized; and (5) is not subject to certain orders, directives, or written agreements with the primary Federal regulator or chartering authority. Section 303.61(c)(3) would require that the resulting institution will be well-capitalized immediately following the merger transaction.

De minimis

merger transactions would be subject to a streamlined letter filing requirement and would be eligible for “rapid processing” in which the transaction would, unless the U.S. Attorney General objects to the transaction on competition grounds, be deemed approved five business days after the latest of (1) the FDIC's receipt of a substantially complete filing; or (2) if the transaction is not a corporate reorganization, five business days after (A) receipt of a competitive factors report (if applicable) indicating the Attorney General does not object to the transaction on competition grounds; (B) the expiration of the 30-day time period for the Attorney General to provide a competitive factors report under the BMA if no competitive factors report has been received; or (c) the end of the time period set forth in a request by the Attorney General for additional time to analyze competitive concerns. If the

Attorney General issues an adverse competitive factors report for a merger transaction subject to the FDIC's review under the BMA, it would not qualify for rapid processing as a

de minimis

merger transaction under the proposed rule.

The proposed rule would also eliminate the public comment period for all

de minimis

merger transactions.

D. Expedited Processing for Corporate Reorganizations That Are Not de Minimis Transactions

The proposed rule would refine the definition of “corporate reorganization” to clarify that a corporate reorganization is a merger transaction involving solely an IDI and one or more affiliated institutions that are affiliates as of the time of filing to provide certainty to applicants regarding the point in time when the FDIC evaluates whether a merger transaction constitutes a corporate reorganization.

To qualify for this category of expedited processing, either: (1) all parties to the merger transaction would have received a composite rating of 3 or better under UFIRS as a result of their most recent Federal or State examination; or (2) the acquiring party would be an eligible depository institution (as defined in § 303.2(r)) and the amount of the total assets to be acquired would not exceed an amount equal to 25 percent of the acquiring institution's total assets as reported in its consolidated report of condition and income (Call Report) for the immediately preceding quarter.

For qualifying corporate reorganizations that are not a

de minimis

merger transaction, the FDIC would take action by the latest of (1) 30 days after receipt of a substantially complete filing, or (2) for an interstate merger transaction subject to the provisions of section 44 of the FDI Act, five business days after the FDIC receives confirmation from the host State (as defined in § 303.41(e)) that the applicant has both complied with the filing requirements of the host State and submitted a copy of the filing to the host State bank's supervisor. Such transactions would be authorized for immediate consummation upon approval.

The proposed rule would also reduce the public comment period to 15 days for corporate reorganizations that are eligible for this category of expedited processing and are not

de minimis

merger transactions.

E. Expedited Processing for Eligible Depository Institutions Engaging in Merger Transactions That Are Not Corporate Reorganizations or de Minimis Merger Transactions

Subpart D currently provides expedited processing for eligible depository institutions so long as (1) the resulting institution will be “well-capitalized;” and (2) either (a) all parties to the merger transaction are eligible depository institutions, or (b) the acquiring institution is an eligible depository institution and the amount of the total assets to be transferred does not exceed an amount equal to 10 percent of the acquiring institution's total assets. The proposed rule would retain expedited processing for eligible depository institutions, but update the asset threshold to reflect that the amount of the total assets to be acquired could not exceed an amount equal to 25 percent (as opposed to the current 10 percent) of the acquiring institution's total assets as reported in its Call Report for the immediately preceding quarter.

F. Standard Processing

The proposed rule would establish new tailored timeframes for standard processing of merger filings. Under the proposed rule, an applicant submitting a merger filing that does not qualify for rapid or expedited processing would receive a written determination by the FDIC within 90 days after submitting a substantially complete filing if (1) the resulting institution would have less than $50 billion in assets, (2) authority to act on the filing is not reserved to the FDIC's Board of Directors, and (3) consummation of the merger transaction is not dependent upon action by another Federal regulator. All other merger filings not qualifying for expedited processing or the 90-day timeline would be acted upon within 150 days after the FDIC's receipt of a substantially complete filing. The FDIC would have discretion to extend the 90-day or 150-day processing timelines based on extenuating circumstances, for a maximum of 180 days or 270 days, respectively.

G. Mergers in Substance

The proposed rule would replace the FDIC's current qualitative, facts and circumstances-based approach for identifying a merger in substance with an approach that uses a transparent and predictable asset-based threshold. Specifically, the proposed rule would define a merger in substance as any merger transaction or series of merger transactions over a rolling 12-month period in which an IDI directly or indirectly acquires all or substantially all, meaning 80 percent or more, of the assets of another institution.

H. Significant Asset Transfers

The proposed rule would establish a new notice and non-objection process for significant asset transfers to provide the FDIC with supervisory visibility into asset transfers that may affect the safety and soundness of an FDIC-supervised institution without requiring a more complex filing process. A significant asset transfer would be defined as a transaction that is not a merger transaction but that is a single transaction or a part of a series of transactions with the same counterparty or one or more affiliates of the same counterparty that would increase the size of the acquiring FDIC-supervised institution's assets by 25 percent or more over a rolling 12-month period. The proposed rule would exempt from the notice and non-objection framework transactions that are otherwise subject to FDIC approval or filing requirements.

Under the proposed rule, an institution must provide advance notice of the significant asset transfer. The FDIC would issue a decision within 30 days of receipt of the notice unless it notified the applicant that an extension was necessary due to extenuating circumstances. The FDIC could extend the processing timeline one time by a maximum of 60 days, for a total processing timeline of 90 days. The proposed rule specifies factors the FDIC will consider when reviewing the notice, including the capital level of the resulting institution, conformity with applicable law, the purpose(s) for the significant asset transfer, and the impact on safety and soundness.

I. Adverse Public Comments and CRA Protests

The proposed rule would clarify that the FDIC expects to use its discretion to remove a filing from expedited processing sparingly, particularly in the case of adverse public comments or CRA protests. Specifically, in the circumstance where an adverse comment or CRA protest can be resolved within the filing processing timeframe, the FDIC expects that a filing qualifying for expedited processing would not be removed from expedited processing simply due to the FDIC's receipt of an adverse comment or CRA protest. Additionally, the proposed rule provides that the FDIC would only remove an otherwise qualifying filing from expedited processing based on an adverse comment or CRA protest if certain criteria are met. These changes would apply to all filings submitted to

the FDIC under part 303 of the FDIC Rules and Regulations—not just merger filings.

J. Statutory Factors

The proposed rule would codify the FDIC's approach to evaluating the statutory factors. By codifying the FDIC's approach, the proposed rule would provide for a more durable and transparent framework regarding the agency's review and adjudication of merger filings submitted pursuant to the BMA, particularly when compared to the existing SOP. Notably, the proposed rule would specify that the FDIC would conduct a tailored review of a merger filing according to the facts and circumstances of the merger transaction, including taking into account the structure, scale, and materiality of the merger transaction.

The FDIC would also consider the applicant's plans to timely remediate any previously unresolved deficiencies identified in the supervisory record of the applicant or institution being acquired. The FDIC would place heightened focus on the resulting institution and the cumulative benefits and impact of the merger transaction in its review of the statutory factors.

The proposed rule would clarify and significantly reform the FDIC's approach to evaluating competition in the context of a merger transaction. The FDIC uses the HHI as an initial screen to evaluate the competitive effects of a merger transaction in a relevant geographic market, as defined at new § 303.61(l). The proposed rule would update how the FDIC calculates the initial HHI screen to more accurately reflect competition in a relevant geographic market today. Specifically, the FDIC's initial HHI screen would incorporate the deposits of all banks and thrift institutions, as well as centrally booked deposits of banks and thrift institutions, and shares of credit unions.

The proposed rule would establish a safe harbor for applicants using the results of the initial HHI screen. Under the proposed rule, absent objection from the Attorney General, the FDIC would not deny a merger filing on competition grounds where: (1) the initial HHI screen in a relevant geographic market is 1,800 points or less after consummation of the merger transaction; (2) if the initial HHI screen is more than 1,800 after consummation of the merger transaction, the increase is less than 200 points from the HHI in a relevant geographic market prior to the merger transaction; or (3) the transaction is a corporate reorganization.

The proposed rule also describes how the FDIC would analyze transactions that exceed the safe harbor thresholds. To the extent the initial HHI screen exceeds the safe harbor thresholds described above, the FDIC would consider other factors, such as alternative geographic market definitions or other procompetitive effects, including the public interest, as part of its consideration of the impact of a merger transaction on competition.

The proposed rule would also codify a revised approach to analyzing the financial stability factor, which would include a safe harbor that specifies the types of merger transactions that would conclusively result in a favorable finding.

IV. Section-by-Section Description of the Proposed Rule

A. Scope (§ 303.60)

The proposed rule would revise § 303.60 to eliminate a reference to the FDIC's SOP, which the FDIC expects to rescind upon finalizing changes to subpart D. Section 303.60 would also be updated to reference additional considerations the FDIC takes into account when evaluating the statutory factors under the BMA, which would be codified at new § 333.5.

Question 1: Should the FDIC revise the current SOP to serve as supplementary information in addition to a final rule and, if so, what areas of the proposed rule would benefit from further explanation or discussion in a revised SOP?

B. Definitions (§ 303.61)

1. Centrally Booked Deposits (§ 303.61(a))

The proposed rule would define “centrally booked deposits” at § 303.61(a) to clarify that the term “centrally booked deposits” refers to deposits recorded at an institution's central office. Central booking occurs when an institution records deposits at a central office and does not attribute the deposits to a branch based on the location of the depositor. The FDIC seeks comment on whether additional specificity, or an alternative definition, would best capture the universe of deposits that are part of a nationwide platform, rather than local branches.

This clarification would correspond to changes in the methodology used by the FDIC to determine the competitive effects of a merger transaction in new § 333.5(c). In new § 333.5(c), the FDIC would consider a representative portion of the centrally booked deposits of a bank or thrift institution with one or more branches in a relevant geographic market in its initial HHI screen.

Question 2: Should the FDIC provide additional specificity regarding how to apply the proposed definition of centrally booked deposits? If so, what additional specificity would be appropriate?

Question 3: Should the FDIC adopt a different definition of centrally booked deposits? Why or why not?

2. Corporate Reorganization (§ 303.61(b))

The proposed rule would refine the definition of “corporate reorganization” at § 303.61(b) to clarify that a corporate reorganization is a merger transaction that involves solely an IDI and one or more institutions that are affiliated with the IDI at the time of filing. The proposed definition is consistent with the BMA's statutory exception to the requirement to request a competitive factors report from the Attorney General for a corporate reorganization.

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It would also align with the definition of “affiliate” under the Bank Holding Company Act.

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12

See

12 U.S.C. 1828(c)(4)(C)(ii).

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See

12 U.S.C. 1841(k) (defining “affiliate” as “any company that controls, is controlled by, or is under common control with another company”).

This change would clarify and provide certainty on the point in time at which the FDIC evaluates affiliation for purposes of determining whether a merger transaction is a corporate reorganization. Under the proposed rule, certain corporate reorganizations would be eligible for new categories of rapid and expedited processing. Moreover, as discussed in more detail in §§ 303.64 and 333.5, the FDIC's tailored approach to reviewing corporate reorganizations under the proposed rule would result in more streamlined processing. For example, through this rulemaking, the FDIC would conclude that corporate reorganizations generally do not present anticompetitive concerns, and the FDIC would similarly not request a competitive factors report as a result.

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This is consistent with the BMA's statutory exception in 12 U.S.C. 1828(c)(4)(C)(ii).

The proposed revisions to the definition of “corporate reorganization” would also clarify that a merger between an IDI and another institution would not be a “corporate reorganization” in the context of a contemporaneous holding company merger. Although the FDIC would not typically request a duplicative competitive factors report if the Federal Reserve Board also requested one in connection with the holding company merger, narrowing the definition as proposed would ensure the FDIC continues to observe the necessary BMA procedural requirements and

timeframes applicable to merger transactions involving nonaffiliates.

This change would address a question frequently asked by applicants by codifying the FDIC's current and longstanding approach to determining whether an entity is an affiliate for purposes of a merger transaction.

Question 4: Should the proposed definition of “corporate reorganization” be revised to provide additional clarity? If yes, please explain.

Question 5: Should the FDIC adopt a different definition of “corporate reorganization?” If yes, please explain.

3. De Minimis Merger Transaction (§ 303.61(c))

The proposed rule would establish a new subcategory of merger transactions called “

de minimis

merger transactions” at § 303.61(c). The proposed rule would define “

de minimis

merger transaction” as a transaction that falls within one of the categories in paragraph (c)(1) for which all institutions involved in the transaction satisfy each of the criteria in paragraph (c)(2), to the extent applicable, and where the resulting institution would be “well-capitalized” immediately following the merger transaction.

New paragraph (c)(1) would include two categories of transactions that do not warrant the same level of regulatory scrutiny as other merger transactions when conducted by institutions that also satisfy the criteria in paragraph (c)(2). The first category in paragraph (c)(1)(i) would capture smaller merger transactions. Specifically, the category would apply to merger transactions where the amount of assets acquired by the IDI would be less than the adjusted lower threshold under the Clayton Act, as amended by the HSR Act, and the amount of assets acquired would be less than 5 percent of the acquiring IDI's assets. The first criterion would ensure that

de minimis

merger transactions remain limited to transactions that conform to thresholds established under Federal law for determining that a merger transaction is presumptively competitive and do not typically require pre-notification under other competition and antitrust statutes. Consistent with the BMA's requirements that the FDIC consider the competitive effects of a merger transaction, the FDIC views the adjusted thresholds set forth in the HSR Act, together with a finding by the Attorney General that a merger transaction is unlikely to have a significantly adverse effect on competition, to provide a meaningful proxy for a determination that a merger transaction is presumptively competitive,

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particularly when coupled with the second criterion, which is intended to ensure that a

de minimis

merger transaction allows only for marginal growth of the acquiring IDI.

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The purposes of the HSR Act are to help prevent monopolies, protect customers, and ensure a fair competitive marketplace.

See

Public Law 94-435, 90 Stat. 1391. The HSR Act amended the Clayton Antitrust Act to require companies planning a merger to notify the Federal Trade Commission (FTC) and the Department of Justice (DOJ) prior to consummation of the transaction.

The second category of

de minimis

merger transaction in paragraph (c)(1)(ii) would capture a corporate reorganization in which (1) an IDI acquires one or more operating subsidiaries; and (2) the legal and financial risk that the IDI is exposed to is substantially identical before and after the transaction. In practice, corporate reorganizations between an IDI and one or more of its operating subsidiaries are often referred to as “roll-up” transactions. The FDIC has found that routine roll-up transactions are less complex in structure because the acquiring institution and resulting institution tend to be effectively the same entity. For example, the managerial resources analysis for a routine roll-up transaction typically involves the same management rating for all entities involved in the transaction. The same typically also holds true when examining the financial resources of all entities involved in the transaction.

Additionally, an IDI generally already bears the legal and financial risks associated with an operating subsidiary. The FDIC recognizes that there may be certain instances in which a roll-up transaction presents new or heightened legal and financial risks to the IDI, which may in turn present a risk to the resulting institution and the Deposit Insurance Fund (DIF). Accordingly, the proposed rule would only include in the definition of

de minimis

merger transactions roll-up transactions that would not present new or heightened legal and financial risks to the IDI, and therefore the DIF, upon consummation of the transaction. However, if the IDI does not already bear the legal or financial risks of the operating subsidiary, for example due to accounting reasons, the transaction would not qualify as a

de minimis

merger transaction. For example, a roll-up transaction would not be categorized as a

de minimis

merger transaction if it involved the roll-up of an operating subsidiary involved in substantial, ongoing litigation that the IDI was not already exposed to. In such cases, the roll-up transaction would not be categorized as a

de minimis

merger transaction because the FDIC would have a supervisory interest in reviewing the transaction and the risks presented to the IDI, and therefore the DIF, more closely. However, the transaction would generally still be eligible for expedited processing for corporate reorganizations under § 303.64(d).

New paragraph (c)(2) would require all institutions involved in the merger transaction to satisfy the following criteria, to the extent applicable: each institution (A) received an FDIC-assigned composite rating of 3 or better under the UFIRS as a result of its most recent Federal or State examination; (B) received a satisfactory or better CRA rating from its primary Federal regulator at its most recent examination, if the depository institution is subject to examination under part 345 of the FDIC Rules and Regulations; (C) received a compliance rating of 1, 2, or 3 from its primary Federal regulator at its most recent examination; (D) is well-capitalized as defined in the appropriate capital regulation and guidance of the institution's primary Federal regulator; and (E) is not subject to a cease and desist order, consent order, prompt corrective action directive, written agreement, memorandum of understanding, or other administrative agreement with its primary Federal regulator or chartering authority.

The criteria in new paragraph (c)(2) are consistent with the FDIC's definition of “eligible depository institution” in § 303.2(r), except that the definition would be expanded to include 3-rated institutions. In addition, new paragraph (c)(3) would require that the resulting institution will be “well-capitalized” immediately following the merger transaction. The FDIC has found that, when all institutions involved in a

de minimis

merger transaction receive a composite rating of 3 or higher under the UFIRS, a compliance rating of 3 or better, and satisfy the other criteria in the existing definition of “eligible depository institution,” and the resulting institution will be “well-capitalized,” the qualification criteria can serve as meaningful proxies for full consideration and favorable resolution of the statutory factors within the narrow context of

de minimis

merger transactions.

Question 6: Is the first category of transaction types in the definition of de minimis merger transaction appropriately tailored to the risks presented by such transactions? Why or why not?

Question 7: Is the second category of transaction types, i.e., roll-up transactions, in the definition of de

minimis merger transaction appropriately tailored to the risks presented by certain roll-up corporate reorganizations? Why or why not? Should the FDIC consider alternative criteria to capture merger transactions with an operating subsidiary in which the IDI is already exposed to the legal and financial risk of the subsidiary?

Question 8: Are there other types of merger transactions with subsidiaries that the FDIC should consider including in the definition of “de minimis merger transaction?” If so, please explain.

Question 9: Should the FDIC consider additional criteria for purposes of defining a de minimis merger transaction? If so, which ones and why?

Question 10: Should the FDIC consider including an anti-evasion provision to prevent the structuring of one larger merger transaction into multiple de minimis merger transactions?

Question 11: Would another definition of de minimis merger transaction be more appropriate? If yes, please explain.

4. Interim Institution (§ 303.61(d))

The proposed rule would establish a new defined term, “interim institution,” at § 303.61(d), consistent with the definition of “interim institution” at § 303.21(b). “Interim institution” would be defined as a State- or Federally-chartered depository institution that does not operate independently but exists solely as a vehicle to accomplish a merger transaction. This definition would clarify how the FDIC views interim institutions for purposes of merger filings and, where applicable, associated deposit insurance applications.

Question 12: Would the new definition of “interim institution” provide additional clarity and certainty in subpart D? Why or why not?

Question 13: Would another definition of “interim institution” be more appropriate? Why or why not?

Question 14: Are interim merger transactions used for purposes not described in the proposed definition, and, if so, what are they?

5. Interim Merger Transaction (§ 303.61(e))

The proposed rule would revise the definition of “interim merger transaction” at current § 303.61(c) and move the term to new § 303.61(e). The proposed rule would make technical changes to incorporate the new defined term “interim institution.”

Question 15: Would the revised definition of “interim merger transaction” provide additional clarity and certainty in subpart D? Why or why not?

Question 16: Would another definition of “interim merger transaction” be more appropriate? Why or why not?

6. Interstate Merger Transaction (§ 303.61(f))

The proposed rule would establish a new defined term, “interstate merger transaction,” at § 303.61(f). The proposed rule would define “interstate merger transaction” as any merger transaction that results in a State nonmember bank acquiring a branch in a State that is not its home State or in which it does not currently operate a branch. The introduction of the defined term “interstate merger transaction” is intended to provide additional clarity on the application of section 44 of the FDI Act to the transaction.

16

Under section 44 of the FDI Act, the FDIC may approve a merger transaction involving two IDIs with different home States without regard to whether such transaction is prohibited under the law of any State. Although no State prohibits interstate mergers as of 2026, section 18(d) of the FDI Act nonetheless requires that certain requirements of section 44 of the FDI Act apply in cases where a State nonmember bank is acquiring, establishing, or operating a branch in any State other than the bank's home State or a State in which the bank already has a branch.

17

Additional information regarding the application of section 44 of the FDI Act can be found in § 303.62(b).

16

12 U.S.C. 1831u(g)(6).

17

12 U.S.C. 1828(d)(3).

Question 17: Would the new definition of “interstate merger transaction” provide additional clarity on the application of section 44 of the FDI Act to interstate merger transactions? Why or why not?

Question 18: Would another definition of “interstate merger transaction” be more appropriate? Why or why not?

7. Merger in Substance (§ 303.61(g))

The proposed rule would establish a new defined term for “merger in substance” to clarify the scope of transactions that would be subject to the filing and processing requirements of subpart D and require prior FDIC approval under the BMA. The proposed rule would define a merger in substance as any merger transaction or series of merger transactions over a rolling 12-month period in which an IDI acquires all or substantially all, meaning 80 percent or more, of the assets of another IDI, noninsured bank, or other institution. As a practical matter, mergers in substance typically would be limited to nonbank merger transactions

18

or a series of nonbank merger transactions over a rolling 12-month period because merger transactions with IDI counterparties nearly always involve a transfer of deposit liabilities, which alone triggers application of the BMA.

18

This Supplementary Information uses the term “nonbank merger transaction” to refer to a merger transaction between an IDI and a nonbank entity.

The proposed definition of merger in substance is generally consistent with the FDIC's longstanding practice of applying the BMA to certain transactions that are substantively and economically equivalent to a merger, while at the same time embedding substantially more transparency and predictability into such determinations. The FDIC's current approach is largely qualitative and based on the facts and circumstances of a particular transaction or series of transactions. However, based on the FDIC's experience, mergers in substance have been characterized by a transfer of all or nearly all the assets from the target institution to the acquiring institution. By incorporating a numerical percentage of assets threshold, the proposed rule would move away from the opaque nature of a facts and circumstances-based approach toward a more transparent and predictable asset-based threshold.

The FDIC considered adopting a factors-based approach to assist in its determination of whether a transaction or series of transactions constitutes a merger in substance, similar to the “

de facto

merger” doctrine. The

de facto

merger doctrine is an equitable, judicially-created and applied doctrine that is rooted in States' common laws rather than Federal competition and antitrust statutes and regulations. Courts have generally coalesced around the following factors as relevant to the determination of whether a transaction constitutes a

de facto

merger: (1) continuity of ownership; (2) cessation of the ordinary business and dissolution of the selling entity; (3) assumption by the acquiring entity of liabilities ordinarily necessary for the uninterrupted continuation of the business of the selling entity; and (4) continuity of business operations, including management, personnel, physical location, and general business operations in the acquiring entity.

19

19

See, e.g., Cargo Partner AG

v.

Albatrans, Inc.,

352 F.3d 41 (2d Cir. 2003);

Xie

v.

Sklover & Co., LLC,

260 F. Supp. 3d 30, 49 (D.D.C. 2017);

Taylor

v.

Atlas Safety Equip. Co.,

808 F. Supp. 1246 (E.D. Va. 1992);

Opportunity Fund, LLC

v.

Epitome Sys.,

Inc.,

912 F. Supp. 2d 531 (S.D. Ohio 2012);

U.S. Automatic Sprinkler Co.

v.

Reliable Automatic Sprinkler Co.,

719 F. Supp. 2d 1020 (S.D. Ind. 2010);

MyLocker.com, LLC

v.

S&S Activewear, LLC,

No. 25-CV-10160, 2025 WL 2350653, at *3 (E.D. Mich. Aug. 12, 2025);

Hadassa Inv. Sec. Nigeria Ltd.

v.

Swiftships Shipbuilders LLC,

No. 6:16-CV-01502, 2018 WL 1310104, (W.D. La. Mar. 12, 2018);

Farris

v.

Glen Alden Corp.,

393 Pa. 427, 143 A.2D (1958);

Metropolitan Partners Fund IIIA, LP

v.

GemCap Lending I, LLC,

2023 NY Slip Op. 33042 (Sup. Ct. Sept. 1, 2023);

Hydraulic IP Holdings, LLC

v.

Tan,

2024 N.Y. Slip Op. 32930 (Sup Ct., NY Cty, Aug 16, 2024).

See also

Jan G. Deutsch,

The Form and Substance of a Merger: A Reading of Farris

v.

Glen Alden Corp.,

20 Vill. L. Rev. 80 (1974).

Courts use the

de facto

merger doctrine to fashion equitable remedies in conjunction with shareholders' rights lawsuits and to establish successor liability under State law. State common law forms the basis of the

de facto

merger doctrine and States' common laws diverge on the scope of transactions that qualify as

de facto

mergers. Moreover, judicial interpretations of the types of transactions that constitute

de facto

mergers vary based on the State's common law that is being applied to a particular set of facts and circumstances. Even judicial interpretations applying the same State's common law to similar sets of facts and circumstances occasionally vary, which is a testament to the subjective nature of the doctrine.

Accordingly, the FDIC does not propose to adopt a factors-based approach similar to the

de facto

merger doctrine. Instead, the proposed rule would establish a simple and transparent definition of merger in substance.

The FDIC emphasizes that only a transaction or series of transactions over a rolling 12-month period in which the subject asset transfer is or exceeds 80 percent of an institution's assets would be treated as a merger in substance. The rolling 12-month lookback period for a series of transactions would require an applicant to submit a merger filing for a series of smaller transactions over a consecutive 12-month period, not simply those occurring within the same calendar or fiscal year, that, taken together, satisfy the definition of merger in substance. An acquisition of a business line that does not represent all or substantially all of an institution's assets would not be considered a merger in substance subject to subpart D, unless it also involved an assumption of deposits. An assumption of deposits triggers the applicability of the BMA as a merger transaction, irrespective of the asset size of the transaction.

An IDI would be required to submit a merger filing for the series of transactions prior to completing the transaction that will exceed the 80 percent threshold. The FDIC expects an IDI to submit a merger filing when the IDI becomes aware that it will complete one or more transactions that will ultimately exceed the 80 percent threshold. The merger filing would be required to contain information related to all transactions that are part of the series. For example, in a series of three transactions involving acquisitions of 20 percent, 20 percent, and 40 percent of an entity's assets respectively, the applicant would be required to submit a merger filing containing information related to all three transactions. The FDIC recognizes that an IDI may not always intend to exceed the 80 percent threshold until after it has completed one or more transactions during a 12-month period. The FDIC encourages IDIs to contact the FDIC as soon as possible to discuss associated filing requirements.

Question 19: Does the definition of “merger in substance” provide an appropriate threshold for establishing whether substantially all of another institution has been acquired? Why or why not?

Question 20: Should the FDIC adopt a different framework or incorporate any other considerations for evaluating mergers in substance, such as common law considerations? Why or why not?

Question 21: Should the FDIC consider a lookback period that is longer than 12 months? Why or why not?

Question 22: Should the FDIC adopt an anti-evasion provision? Why or why not? If yes, what should the provision state?

Question 23: Should the FDIC adopt a timing requirement for the filing of a merger in substance-related filing? For example, should the FDIC require a merger filing prior to the first transaction in the series of transactions or prior to the transaction that will result in a merger in substance? Why or why not?

8. Merger Transaction (§ 303.61(h))

The FDIC proposes to revise the definition of “merger transaction” in current § 303.61(a) to more clearly delineate the types of merger transactions that are subject to the FDIC's approval under the BMA, and to move the revised definition to new § 303.61(h). Current § 303.61(a) tracks the statutory language of the BMA,

20

which condenses the types of merger transactions that are subject to the FDIC's approval into two short paragraphs. The proposed definition of “merger transaction” would break these two paragraphs out into six shorter subparagraphs to improve readability and clarity. The definition of merger transaction in the proposed rule would not alter the scope of merger transactions subject to the FDIC's prior approval under the BMA.

20

See

12 U.S.C. 1828(c)(1), (2).

Question 24: Is the proposed definition of merger transaction clear?

Question 25: Would another definition of merger transaction be more appropriate?

9. Operating Subsidiary (§ 303.61(i))

The proposed rule would adopt the definition of “operating subsidiary” in the Federal Reserve Board's Regulation W at new § 303.61(i).

21

Regulation W defines “operating subsidiary” as including any subsidiary of an IDI except for the following: (1) a depository institution; (2) a financial subsidiary; (3) a company directly controlled by: (A) one or more affiliates (other than depository institution affiliates) of a Federal Reserve System member bank, or (B) a shareholder that controls the member bank or a group of shareholders that together control the member bank; (4) an employee stock option plan, trust, or similar organization that exists for the benefit of the shareholders, partners, members, or employees of the member bank or any of its affiliates; or (5) any other company determined to be an affiliate by the Federal Reserve Board.

22

21

See

12 CFR 223.3(aa).

22

See

12 CFR 223.3(aa) (citing 12 CFR 223.2(b)(1)(i) through (v)).

Regulation W implements sections 23A and 23B of the Federal Reserve Act (sections 23A and 23B),

23

which apply with respect to every nonmember insured bank in the same manner and to the same extent as if the nonmember insured bank were a member bank under the FDI Act.

24

Further, under the BMA, any company that would be an affiliate for purposes of sections 23A and 23B of a State nonmember insured bank if the State nonmember insured bank were a State member bank is deemed to be an affiliate of that State nonmember insured bank.

25

The new defined term is used in the proposed rule to provide rapid processing for certain corporate reorganizations. The FDIC proposes to rely on the Regulation W definition for purposes of subpart D to clarify how the FDIC analyzes the concept of affiliation under subpart D and to maintain consistency with its analysis of affiliation for purposes of sections 23A and 23B.

23

See

12 U.S.C. 371c, 371c-1.

24

12 U.S.C. 1828(j)(1)(A).

25

12 U.S.C. 1828(j)(1)(B).

Question 26: Should the proposed rule cross-reference Regulation W for the purpose of defining an operating subsidiary or should the proposed rule provide a standalone definition? Why or why not?

10. Significant Asset Transfer (§ 303.61(j))

The proposed rule would adopt a new defined term for “significant asset transfers” at new § 303.61(j). A “significant asset transfer” would be defined as a transaction or series of transactions with the same counterparty, or one or more affiliated counterparties, that is not a merger transaction but that would increase the size of the acquiring FDIC-supervised institution's assets by 25 percent or more over a rolling 12-month period. As with mergers in substance, use of a rolling 12-month period would require applicants to submit a significant asset transfer notice for a series of smaller transactions with the same counterparty or one or more affiliated counterparties that occur over the course of any consecutive 12-month period. To avoid duplicative filing requirements, the definition of “significant asset transfer” would not include a change in assets of an FDIC-supervised institution that is otherwise subject to FDIC approval or filing requirements. For example, a merger transaction subject to the FDIC's approval under the BMA would not also be subject to the significant asset transfer notice requirement.

11. Substantially Complete (§ 303.61(k))

The proposed rule would define “substantially complete” at new § 303.61(k) as meaning the FDIC has received information sufficient to evaluate and make a determination on the statutory factors in section 18(c) of the FDI Act, as described in new § 333.5, and to confirm the applicant has complied with its statutory obligations. The processing timeline for a merger filing under § 303.64 of the proposed rule would start upon the FDIC's receipt of a “substantially complete” merger filing. The FDIC recognizes that the determination of whether a merger filing is substantially complete can be confusing for applicants and has been applied in an ambiguous and inconsistent way. Accordingly, the FDIC proposes to define this term for purposes of subpart D in the proposed rule to provide additional transparency to applicants regarding when the timeline begins and to promote the consistency and accountability with respect to the proposed filing processing timelines.

Question 27: Should the FDIC define “substantially complete?” Why or why not?

Question 28: Is the proposed definition of “substantially complete” sufficiently clear? If not, please provide an alternative definition with explanation. Should the FDIC adopt a definition with more specificity? If so, how?

12. Relevant Geographic Market (§ 303.61(l))

The proposed rule would define “relevant geographic market” at new § 303.61(l) for purposes of conducting market concentration analysis under new § 333.5(c), as discussed in more detail below. “Relevant geographic market” would be defined as the banking market(s) of the acquiring institution and the institution to be acquired as defined by the Federal Reserve Board at the time a merger filing is submitted. If a banking market has not been defined by the Federal Reserve Board, the relevant geographic market would consist of each county in which both the acquiring institution and the institution to be acquired have branch locations, as adjusted to reflect factors that influence how customers in the market seek and obtain banking products and services. For additional discussion of this definition, see section IV.I.3 of this Supplementary Information.

Question 29: Is the proposed definition of “relevant geographic market” appropriate? Should the FDIC continue to rely primarily on the Federal Reserve Board's definition of a banking market, or should the FDIC provide a different definition? Why or why not?

C. Transactions Requiring Prior Approval (§ 303.62)

The proposed rule would revise § 303.62 to reflect the new defined terms discussed above and to clarify the application of other FDIC Rules and Regulations to merger transactions.

1. Merger Transactions (§ 303.62(a))

Under § 303.62(a), and consistent with the BMA,

26

the FDIC's prior written approval would be required for (1) any merger transaction in which the resulting institution is to be an FDIC-supervised institution;

27

and (2) any merger transaction that involves a bank or institution that is not insured by the FDIC. The proposed rule would make conforming revisions to § 303.62(a) to reflect the new definition of “merger transaction” in § 303.61(h). The proposed rule would clarify that the definition of “merger transaction” includes a merger in substance, as defined in § 303.61(g).

26

See

12 U.S.C. 1828(c)(1) and (2).

27

“FDIC-supervised institution” means any entity for which the FDIC is the appropriate Federal banking agency pursuant to section 3(q) of the FDI Act, 12 U.S.C. 1813(q).

See

12 CFR 303.2(ee). The FDIC is the appropriate Federal banking agency for any State nonmember insured bank, any foreign bank having an insured branch, and any State savings association.

See

12 U.S.C. 1813(g).

As discussed previously, neither the revision of the defined term “merger transaction” in § 303.61(h), nor the conforming changes to § 303.62(a), are intended to alter the scope of transactions subject to FDIC approval under the BMA.

Question 30: Is the FDIC's treatment of “mergers in substance” as subject to the same filing and processing requirements as merger transactions appropriate? Why or why not? Please explain why another approach may be appropriate.

2. Related Regulations (§ 303.62(b))

Section 303.62(b) states that transactions covered by subpart D may be subject to other regulations or application requirements (collectively, related regulations) in addition to those in subpart D. Section 303.62(b) then provides examples of potentially applicable related regulations. The FDIC routinely receives questions regarding the application of the related regulations to merger transactions and proposes to revise § 303.62(b) to provide additional clarity.

Question 31: Should the FDIC adopt a different approach for addressing related regulations? For example, should related regulations be addressed in preamble only, an appendix to 12 CFR part 303, or an SOP instead of in § 303.62(b)? Why or why not?

a. Interstate Merger Transactions (§ 303.62(b)(1))

The proposed rule would revise § 303.62(b)(1) to incorporate the new defined term “interstate merger transaction” and provide that such transactions are subject to the restrictions and requirements of section 44 of the FDI Act. Section 44(a) of the FDI Act provides that a responsible agency may approve a merger transaction under the BMA between insured banks with different home States, without regard to whether such transaction is prohibited under the law of any State, subject to certain limitations.

28

The FDIC encourages potential applicants to consult with the FDIC and the relevant State regulators to confirm whether, and to what extent, State law applies to a merger transaction

prior to submitting a merger filing. Section 44(b) of the FDI Act outlines the filing requirements and applicable modifications to the statutory factor analysis for an interstate merger transaction. Under the proposed rule, an interstate merger transaction would be subject to such provisions.

28

See

12 U.S.C. 1831u(a).

Question 32: Would the proposed revisions to § 303.62(b)(1) with respect to interstate merger transactions provide additional clarity and certainty to the public? Why or why not?

Question 33: Should the FDIC address other elements of interstate merger transactions in subpart D or elsewhere? Why or why not?

b. Deposit Insurance for Interim Institutions (§ 303.62(b)(2))

The proposed rule would divide the content of current § 303.62(b)(2) into two separate subsections to more clearly address the distinctions between Federal deposit insurance for State-chartered interim institutions and Federally-chartered interim institutions. The proposed rule would not change the provision of Federal deposit insurance for certain interim institutions under section 5(a)(2) of the FDI Act or the procedures for applying for deposit insurance for interim institutions in § 303.24.

New § 303.62(b)(2)(i) would specify that State interim institutions are not insured by operation of law. The FDI Act only provides automatic Federal deposit insurance in the case of a Federal interim institution that is chartered by the appropriate Federal banking agency and will not open for business.

29

Therefore, FDIC action is needed to either grant Federal deposit insurance to the State interim institution or to act on the merger filing between a noninsured State interim institution and an IDI under the BMA.

29

See

12 U.S.C. 1815(a)(2).

New § 303.62(b)(2)(ii) would address deposit insurance for Federal interim institutions. The proposed rule would specify that where the resulting institution is FDIC-supervised and FDIC action is required under the BMA, an additional deposit insurance application is unnecessary. Further, the proposed rule would specify that Federal interim institutions that do not open for business are insured by operation of law pursuant to section 5(a)(2) of the FDI Act. Consequently, the merger of a Federal interim institution with another IDI is not subject to FDIC approval if the Federal interim institution has not been, and will not be, open for business.

Question 34: Would the proposed revisions to § 303.62(b)(2) provide additional clarity and certainty to the public? Why or why not?

Question 35: Should the FDIC address other elements of deposit insurance for interim institutions in subpart D or elsewhere? Why or why not?

c. Other Related Regulations (§ 303.62(b)(3) and (4))

The proposed rule would revise the substance of current § 303.62(b)(3) and (4) to replace the term “application” with “filing” for consistency with the remainder of the proposed rule. The proposed rule would also strike the reference to the “Interagency Policy Statement Concerning Branch Closing Notices and Policies” (1 FDIC Law, Regulations, Related Acts (FDIC) 5391) in current § 303.62(b)(3) as part of the agency's initiative to streamline the FDIC Rules and Regulations; however, this would not change the force of the statement. The FDIC notes that this joint policy statement specifically addresses merger transactions, and the FDIC encourages potential applicants to review this resource.

30

The proposed rule would retain current § 303.62(b)(5).

30

See

64 FR 34844, 34845 (June 29, 1999).

Question 36: Are there other elements of the related regulations that the FDIC should address in subpart D or elsewhere? Why or why not?

D. Filing Procedures (§ 303.63)

1. General (§ 303.63(a))

The proposed rule would revise § 303.63(a) to provide that forms and instructions may be obtained upon request from any FDIC regional office or the FDIC website. The proposed rule would also permit an IDI contemplating a

de minimis

merger transaction to submit a letter filing. This aspect of the proposed rule is consistent with the approach adopted in OCC regulations.

31

31

See

12 CFR 5.33(j).

2. Submission Requirements (§ 303.63(b))

The proposed rule would revise § 303.63(b) to provide that merger filings shall be accompanied by copies of all agreements or proposed agreements related to the merger transaction. The proposed rule would clarify that the FDIC may request additional information as necessary to reach a decision on the merger filing, and that an applicant may voluntarily submit additional information for consideration under the provisions of new § 333.5. These changes are consistent with longstanding practice that the FDIC may request additional information regarding agreements and proposed agreements related to the merger transaction if necessary to evaluate the statutory factors.

Section 303.63(b) is not intended to establish a new compliance obligation. Submission of additional information for consideration under new § 333.5 is voluntary. If an applicant would like the FDIC to consider mitigating factors, as described in new § 333.5, then the applicant should submit supporting materials for the agency's review.

Question 37: Should the FDIC permit applicants to voluntarily submit supplementary information? Why or why not?

Question 38: Should the FDIC permit or require applicants to submit information not otherwise addressed in § 303.63(b)? Why or why not?

3. Interim Merger Transactions (§ 303.63(c))

The proposed rule would retain much of the substance of § 303.63(c) with conforming changes to reflect the new definitions in the proposed rule.

Question 39: Should the FDIC adopt substantive changes to § 303.63(c)? Why or why not?

E. Processing (§ 303.64)

1. Filing Decisions (§ 303.64(a))

a. Timeliness (§ 303.64(a)(1))

The proposed rule would establish a new procedural framework for processing merger filings to implement more consistency, timeliness, and discipline regarding the FDIC's review of and decisions concerning merger filings. Under new § 303.64(a)(1), the FDIC would be required to render a decision on a substantially complete merger filing within the new processing timelines in the proposed rule for the applicable merger transaction type. The BMA requires the FDIC to issue prior written approval of merger transactions and to inform the Attorney General of such approval,

32

and, in its implementation of the proposed rule, the FDIC would issue written approval of its decision and copy the Attorney General on the associated notification to ensure compliance with the requirements of the BMA.

32

See

12 U.S.C. 1828(c)(1), (2), and (6).

The FDIC recognizes that in recent years, the merger filing review process has been too lengthy and overly burdensome for applicants. The proposed rule is intended to address these concerns by requiring agency action within specified time frames that are appropriately tailored to the typical complexity of specific transaction categories.

Question 40: Should the FDIC adopt mandatory processing timelines? Why or why not?

b. Immediate Consummation (§ 303.64(a)(2))

The proposed rule would provide that corporate reorganizations will be authorized for immediate consummation on receipt of the FDIC's written approval at new § 303.64(a)(2). Before acting on a merger filing, the BMA generally requires the responsible agency to (i) request a report on the competitive factors involved from the Attorney General; and (ii) provide a copy of the request to the FDIC when the FDIC is not the responsible agency.

33

However, the responsible agency is not required to request a competitive factors report if the merger transaction involves solely an IDI and one or more of the IDI's affiliates.

34

Congress established this exception in the Financial Services Regulatory Relief Act of 2006 (FSRRA), the purposes of which included providing regulatory relief and improving productivity for IDIs.

35

Eliminating the competitive factors report requirement for merger transactions involving solely an IDI and one or more of its affiliates suggests that Congress did not view such transactions as presenting a risk to competition in the market. This aligns with the FDIC's supervisory experience in reviewing such transactions and observation that affiliates generally do not compete against each other. Accordingly, the FDIC concludes that corporate reorganizations do not present a risk of violating the BMA's prohibition against approving a merger transaction that would result in a monopoly, be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking, or otherwise have the effect in any section of the country to substantially lessen competition, or tend to create a monopoly, or which in any other manner would be in restraint of trade.

36

For this reason, the FDIC does not typically request a competitive factors report from the Attorney General for a corporate reorganization, and would not do so under the proposed rule.

33

12 U.S.C. 1828(c)(4)(A).

34

12 U.S.C. 1828(c)(4)(C)(ii).

35

Public Law 109-351, 120 Stat. 1966.

36

See

12 U.S.C. 1828(c)(5).

The BMA generally imposes a waiting period before the parties may consummate an approved merger transaction.

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However, if the merger transaction is solely between an IDI and one or more of its affiliates and the responsible agency has not requested a competitive factors report, then the transaction may be consummated immediately upon approval by the agency.

38

Because the FDIC has concluded corporate reorganizations do not present a risk to competition and will not request a competitive factors report for a corporate reorganization, the proposed rule would state that corporate reorganizations would be authorized for immediate consummation upon the applicant's receipt of the FDIC's written approval. The proposed rule would provide certainty to applicants regarding the FDIC's processing of corporate reorganizations, consistent with the purposes of FSRRA.

37

12 U.S.C. 1828(c)(6).

38

12 U.S.C. 1828(c)(6).

2. Substantially Complete Filings (§ 303.64(b))

The proposed rule would address the FDIC's disposition of incomplete merger filings at new § 303.64(b). The proposed rule would provide that, for incomplete merger filings, the FDIC would notify the applicant within 21 days after receipt of the submission and provide a written explanation regarding the information or materials that would be needed to render the merger filing substantially complete. This reflects the FDIC's current practice of issuing an initial Additional Information Request to seek additional materials to render a merger filing complete but imposes a timeline on the FDIC to ensure that merger filings are processed in a timely manner. The proposed rule would provide that, if the FDIC does not provide notice within 21 days after receipt that a merger filing is incomplete, the merger filing would be deemed substantially complete as of the date of receipt. This provision would further ensure that merger filings are processed in a timely manner.

If the FDIC issued a notice under this subpart, the proposed rule would require an applicant to provide the information or materials requested by the FDIC within 30 days of the applicant's receipt of the notice. Additionally, the proposed rule would allow the FDIC to return a merger filing as incomplete without rendering a decision on the merger filing if the applicant failed to produce the requested information within the 30-day timeframe. This framework would impose substantially more rigor and discipline around timeframes for determining that a merger filing is substantially complete compared to the FDIC's historical approach.

The proposed rule would make corresponding changes to § 303.11(e) to permit the FDIC to return an incomplete filing to an applicant if the filing does not contain all information set forth in the applicable subpart, or if information requested by the FDIC is not provided within the time specified by the FDIC. This change would apply to all filings submitted to the FDIC and is intended to provide additional clarity and certainty to applicants by establishing a process for the FDIC to clearly notify the applicant that a filing does not contain sufficient information for the FDIC to render a decision. Under the proposed rule, the FDIC would notify the applicant and any interested parties that submitted comments to the FDIC that the filing has been returned and that the FDIC has not rendered a decision on the filing.

Question 41: Should the FDIC codify the process and timelines for determining whether a filing is substantially complete? Why or why not?

Question 42: Are the proposed steps and timeframes for determining whether a filing is substantially complete appropriate? Why or why not?

Question 43: Should the FDIC adopt a process for returning an incomplete filing? Why or why not? Should a different process be adopted? Why or why not?

Question 44: Should the FDIC adopt an explicit provision that would enable an applicant to request, and the FDIC to grant, additional time to submit information? Why or why not?

Question 45: Should the FDIC apply the same timelines and process for all filings, or are there reasons different types of filings should be subject to different approaches?

3. Rapid Processing for de Minimis Merger Transactions (§ 303.64(c))

The proposed rule would establish a new category of rapid processing for

de minimis

merger transactions at § 303.64(c). Such transactions would, unless the Attorney General objects to the transaction on competitive grounds within the statutory timeframe, be deemed approved by the date that is the latest of: (1) five business days after the date of the FDIC's receipt of a substantially complete letter filing; or (2) if the transaction is not also a corporate reorganization, 5 days after (A) receipt of a BMA competitive factors report confirming that the Attorney General does not object to the transaction on competition grounds; (B) the expiration of the timeframe permitted in section 18(c)(4) of the FDI Act if no competitive factors report has been received; or (c) the end of the time period set forth in a request by the

Attorney General for additional time to analyze competitive concerns.

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Based on the FDIC's supervisory experience, it is appropriate to provide “deemed approval” for

de minimis

merger transactions because the definition of

de minimis

merger transaction in § 303.61(c) includes only transactions that necessarily satisfy the statutory factors by virtue of the size and/or structure of the transaction and the attributes of the institutions involved.

39

If the Attorney General issues an adverse competitive factors report regarding a merger transaction, it would not qualify for rapid processing as a

de minimis

merger transaction under the proposal.

The definition of

de minimis

merger transactions has been constructed to ensure such transactions would result in a favorable finding on each of the statutory factors and therefore warrant a letter filing and deemed approval approach. Merger transactions below the HSR thresholds that are less than 5 percent of the assets of the acquiring institution and that do not result in an adverse competitive factors report from the Attorney General, and corporate reorganizations involving the consolidation of an operating subsidiary that do not change the IDI's legal and financial risks, each will always satisfy the competition and financial stability statutory factors due to the type of transaction. The other statutory factors are conclusively satisfied based on the eligibility criteria for the merging institutions and the criteria that the resulting institution must be well-capitalized.

Moreover, as discussed, the categories of transactions in § 303.61(c)(1) are limited to transactions that do not pose a risk to the safety and soundness of the acquiring IDI or the U.S. banking or financial system based on their structure or structure and size, particularly when engaged in by IDIs that satisfy the eligibility criteria in § 303.61(c)(2).

The deemed approval construct for

de minimis

merger transactions would ensure routine, nearly automated approval of transactions that the FDIC has determined can be processed in a rapid fashion without in-depth supervisory review and potential delay. The proposed rule would also reduce regulatory burden for such transactions by establishing streamlined letter filing requirements for

de minimis

merger transactions in § 303.64(c)(2). These streamlined letter filing requirements reflect the information needed to review a

de minimis

merger transaction and ensure that the transaction qualifies as a

de minimis

merger transaction. A letter filing for a

de minimis

merger transaction that contains all the required information would be considered substantially complete. The processing timeline would begin upon receipt of a substantially complete filing, and approval would follow based on the aforementioned timelines as a matter of course.

Question 46: What are the advantages and disadvantages of the filing and processing requirements for de minimis merger transactions? What changes, if any, should the FDIC consider for purposes of a final rule?

Question 47: What are the advantages and disadvantages of a letter filing for de minimis merger transactions?

Question 48: Are the content requirements for the letter filing appropriate? Why or why not? Are any of the proposed letter filing content requirements unnecessary? Are there additional content requirements that would be appropriate? If so, what are they, and what would be the advantages and disadvantages of including them for purposes of a final rule?

Question 49: Are the proposed timeframes for deemed approval of de minimis merger transactions reasonable? Why or why not? If not, what timeframe(s) would be reasonable, and why?

Question 50: Should the FDIC adopt flexibility to remove a de minimis merger transaction from rapid processing under § 303.64(c)? Why or why not? If yes, please explain under what circumstances.

Question 51: Given the limited risk presented by transactions qualifying for rapid processing under § 303.64(c), should the FDIC adopt a deemed approval framework for such transactions? Why or why not?

4. Removal From Expedited Processing (§ 303.11(c))

The proposed rule would provide that merger filings subject to expedited processing in new §§ 303.64(d) and (e) could be removed from expedited processing for any of the reasons set forth in revised § 303.11(c)(2).

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Section 303.11(c)(2) currently provides that the FDIC may remove a merger filing from expedited processing if an adverse comment or CRA protest is received that warrants additional investigation or review, or if the appropriate Regional Director determines that the merger filing presents a significant CRA or compliance concern, a significant supervisory concern or significant legal or policy issue, or that other good cause exists for removal. Based on supervisory experience, the FDIC has found that adverse comments and CRA protests typically do not warrant extensive additional investigation or review and can frequently be resolved within the expedited processing timeline. In a circumstance where an adverse comment or CRA protest can be resolved within this timeframe based on the supervisory record and other available information, the FDIC expects that a merger filing qualifying for expedited processing would not be removed from expedited processing simply due to the filing of an adverse comment or CRA protest. Additionally, under the proposed rule, the FDIC would not remove an otherwise qualifying merger filing from expedited processing based on an adverse comment or CRA protest unless the supervisory record or other available information supports the conclusion that the merger filing presents a significant CRA concern, a significant compliance or supervisory concern, a significant legal or policy issue, or that other good cause exists for removal. This is intended to ensure that a merger filing would only be delayed due to adverse comments or CRA protests if there is evidence to suggest that the adverse comments or CRA protests warranted additional investigation or review and the allegations were sufficiently severe such that they would impact the FDIC's analysis of the statutory factors.

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The proposed rule would not permit the FDIC to remove a transaction from rapid processing under § 303.64(c).

While the additional time required to hold a hearing would constitute good cause for removing a merger filing from expedited processing, hearings have been exceptionally rare because, under § 303.10(c), “[t]he FDIC generally grants a hearing request only if it determines that written submissions would be insufficient or that a hearing otherwise would be in the public interest.” Because, as discussed above, concerns raised in written submissions can generally be addressed based on the supervisory record and other available information, the FDIC expects that hearings will continue to be exceptionally rare. The public interest is generally not served by expending resources on hearings that do not produce information relevant to the statutory factors beyond that already in the written record. The determination as to whether a hearing is appropriate is within the sole discretion of the FDIC. As set forth in § 303.10(d), “[a] decision to deny a hearing request shall be a final agency determination and is not appealable.”

The FDIC proposes to make corresponding changes to § 303.11(c) to reflect these expectations as applied not

only to merger filings but also to other filings subject to removal under § 303.11(c) because the FDIC has determined that themes are consistent across filing types. Specifically, the proposed rule would refine the reasons for removal from expedited processing listed in § 303.11(c)(2). Under the proposed rule, the FDIC would be permitted to remove a filing from expedited processing at any time prior to final disposition if: (i) for filings subject to public notice under § 303.7, an adverse comment is received that is supported by the supervisory record or other available information and warrants additional investigation or review; and (ii) for filings subject to evaluation of CRA performance under § 303.5, a CRA protest is received that raises a significant CRA concern, is supported by the supervisory record or other available information, and warrants additional investigation or review.

Additionally, the proposed rule would add a new § 303.11(c)(5) to codify the FDIC's expectation that the removal of a filing from expedited processing would be rare. The proposed rule would provide that filing of an adverse comment or CRA protest would not automatically remove a filing from expedited processing, and that, rather, the FDIC would determine if it was necessary to remove a filing because the allegations were sufficiently severe to impact the FDIC's analysis of the statutory factors. This provision is intended to enhance the predictability of timelines for the FDIC's processing of merger filings.

Question 52: Are the proposed modifications to removal from expedited processing appropriate? Should the FDIC provide more or less specificity? Why or why not?

Question 53: Should the FDIC include a maximum number of days for the extension of the processing timeframe for filings that are removed from expedited processing due to the FDIC's receipt of an adverse comment or CRA protest in § 303.11(c)? If so, why, and what would be an appropriate number of days?

5. Expedited Processing for Corporate Reorganizations That Are Not de Minimis Merger Transactions (§ 303.64(d))

The proposed rule would establish new expedited processing procedures for corporate reorganizations that are not

de minimis

merger transactions at new § 303.64(d). Expedited processing would be available if: (1) immediately following the transaction, the resulting institution would be “well-capitalized;” and (2) (A) all parties to the transaction received an FDIC-assigned composite rating of 3 or better under the UFIRS as a result of the most recent Federal or State examination, to the extent applicable; or (B) the acquiring party is an eligible depository institution and the amount of the total assets to be acquired does not exceed an amount equal to 25 percent of the acquiring institution's total assets as reported in its Call Report for the quarter immediately preceding the filing. This two-prong test is a change from the FDIC's existing criteria to qualify for expedited processing under current § 303.64(a). Under the first prong, the FDIC currently requires all parties to be eligible depository institutions; under the proposed approach, the parties would need to be 3-rated or better to qualify. Furthermore, under the second prong, the proposed rule would raise the asset threshold applicable to eligible depository institutions from the current 10 percent to 25 percent.

The FDIC has found that corporate reorganizations that are not

de minimis

merger transactions but that satisfy the proposed qualifying criteria are also typically less complex in structure and scale than other types of merger transactions and accordingly also warrant a relatively less intensive review of the statutory factors. However, such corporate reorganizations tend to be more complex than those qualifying for rapid processing as

de minimis

merger transactions.

For most corporate reorganizations that are not

de minimis

merger transactions, and particularly those that do not involve affiliate IDIs, review under the BMA involves only the ratings of the acquiring institution and an analysis of how the transaction would impact the resulting institution. For corporate reorganizations involving affiliate IDIs, both IDIs' ratings would be relevant to the analysis under the BMA. As discussed above, the FDIC has concluded corporate reorganizations do not present a risk of violating the BMA's competition-related prohibitions.

The FDIC would have the discretion to remove a corporate reorganization that is not a

de minimis

merger transaction from expedited processing for any of the reasons set forth in § 303.11(c)(2). However, given the reduced risks associated with a corporate reorganization eligible for expedited processing and the applicant's interest in timely consummation of a corporate reorganization, and for the other reasons discussed, the FDIC expects removal of such transactions from expedited processing to be rare.

Under the proposed rule, the FDIC would take action on a merger filing for a corporate reorganization that is not a

de minimis

merger transaction and qualifies for expedited processing by the date that is the latest of: (1) 30 days after the date of the FDIC's receipt of a substantially complete merger filing; or (2) for an interstate merger transaction subject to the provisions of section 44 of the FDI Act, five business days after the FDIC receives confirmation from the host State that the applicant has both complied with the filing requirements of the host State and submitted a copy of the filing to the host State's bank supervisor. Because the FDIC can conduct a meaningful review of the statutory factors for corporate reorganizations in a shorter timeframe than other types of merger transactions, other than those that qualify for rapid processing as

de minimis

merger transactions, the FDIC believes it is appropriate to establish a relatively shorter timeframe for processing such transactions. Indeed, experience has demonstrated that the FDIC can conduct a meaningful review of the BMA statutory factors within the proposed timeframes under this section regardless of the type of corporate reorganization, for example, whether the transaction involves affiliate IDIs or an IDI and a nonbank affiliate.

Question 54: Are the proposed timeframes for approval of a corporate reorganization that is eligible for expedited processing under § 303.64(d) and not a de minimis merger transaction appropriate? Why or why not? If not, what timeframes would be appropriate, and why?

Question 55: Should the FDIC adopt specific reasons for removing a corporate reorganization from expedited processing under § 303.64(d)? Why or why not? If yes, please explain.

Question 56: Are the eligibility criteria for expedited processing under § 303.64(d) appropriate? If not, please explain.

Question 57: Should the FDIC adopt presumptions or safe harbors that specific factors, for example, managerial resources, under § 333.5 will be resolved favorably for a corporate reorganization eligible for expedited processing under § 303.64(d) absent existing supervisory concerns? Why or why not?

Question 58: Given the limited risk presented by transactions qualifying for expedited processing under § 303.64(d), should the FDIC adopt a deemed approval framework for such transactions or otherwise process them pursuant to rapid processing under new § 303.64(c)? Why or why not?

Question 59: Are there additional criteria or requirements the FDIC could apply to such corporate reorganizations that would make a deemed approval framework appropriate?

Question 60: Should the FDIC expressly address requirements for merger transactions involving an acquisition of a subsidiary that is a permitted payment stablecoin issuer (PPSI), as that term is defined in the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act at 12 U.S.C. 5901(23)? Under the GENIUS Act, an IDI that seeks to issue payment stablecoins must do so through a subsidiary that has been approved to issue payment stablecoins. However, an IDI with a subsidiary that issues payment stablecoins may seek to exit that business and wind up the subsidiary, in which case the subsidiary could be merged into the IDI. In addition, there may be cases in which an IDI with a subsidiary that issues payment stablecoins enters into a merger transaction with another IDI with a subsidiary that issues payment stablecoins. Should the FDIC expressly address such transactions? If so, what provisions would be appropriate?

6. Expedited Processing for Eligible Depository Institutions Engaging in Merger Transactions That Are Not Corporate Reorganizations Eligible for Expedited Processing Under § 303.64(d) or de Minimis Merger Transactions (§ 303.64(e))

The proposed rule would revise current § 303.64(a) to address expedited processing for other merger transaction types when engaged in by eligible depository institutions, and relocate the revised § 303.64(a) to new § 303.64(e). The proposed rule would retain expedited processing for eligible depository institutions that satisfy the revised criteria in new § 303.64(e)(3). The proposed rule would update the expedited processing criteria in current § 303.64(a)(4)(ii)(B) to increase the transaction size threshold. Under the proposed rule, the maximum amount of the total assets to be transferred in the transaction would increase from 10 percent to 25 percent of the acquiring institution's total assets as reported in its Call Report for the quarter immediately preceding the filing.

The proposed rule would retain the timing provisions in current § 303.64(a)(2), with certain modifications to reflect the FDIC's practice with respect to the competitive factors report in § 303.64(a)(2)(iii) consistent with the language used in new § 303.64(c), along with the FDIC's discretion to remove a filing from expedited processing for the reasons set forth in § 303.11(c)(2), as revised under the proposed rule. As discussed, the FDIC would expect removal from expedited processing to be rare.

Question 61: Should the FDIC adopt specific reasons for removing a merger transaction from expedited processing under § 303.64(e)? Why or why not? If yes, please explain.

Question 62: Are the eligibility criteria for expedited processing under new § 303.64(e) appropriately tailored? Should any of the criteria be modified? Please explain.

Question 63: Are there other categories of expedited processing that the FDIC should adopt? Why or why not?

Question 64: Given the limited risk presented by transactions qualifying for expedited processing under § 303.64(e), should the FDIC adopt a deemed approval framework for such transactions or otherwise subject them to rapid processing under new § 303.64(c)? Why or why not? If not, are there additional criteria or requirements the FDIC could apply to such transactions that would make a deemed approval framework appropriate?

Question 65: Should expedited processing under § 303.64(e) be limited to merger transactions where the resulting institution would not exceed a certain asset size threshold, e.g., $50 billion? Why or why not?

7. Standard Processing for Qualifying Merger Transactions (§ 303.64(f))

The proposed rule would address standard processing procedures for certain qualifying merger filings that do not qualify for expedited or rapid processing at new § 303.64(f) and (g). In the FDIC's experience, merger transactions subject to standard processing procedures are often more complex and present more involved supervisory, regulatory, and legal considerations than merger transactions subject to expedited or rapid processing. As such, merger transactions subject to standard processing procedures require additional time and FDIC resources to process and evaluate against the statutory factors as compared to merger transactions qualifying for expedited or rapid processing. The additional required time and resources may vary based on the specific transaction, such as where action may be reserved to the FDIC Board of Directors (FDIC Board) or require interagency coordination. Accordingly, the proposed rule would adopt two separate standard processing timelines to account for processing complexities associated with certain merger transactions in § 303.64(f) and (g). The proposed changes are intended to provide applicants with greater transparency and clarity and to enhance FDIC accountability with respect to timeframes while also allowing sufficient time to manage and resolve any complexities presented by a merger filing.

41

41

See

General Application Processing Timeframes for Regional Offices, FDIC,

available at https://www.fdic.gov/regulations/applications/application-processing-timeframes.pdf.

Under new § 303.64(f), the FDIC would take action on certain qualifying merger filings within 90 days after receipt of a substantially complete merger filing. Standard processing under new § 303.64(f) would apply to merger filings in which the resulting institution would have less than $50 billion in assets, authority to act on the merger filing is not reserved to the FDIC Board, and consummation of the transaction is not dependent upon action by another Federal regulator. A concurrent merger between two bank holding companies related to the merger of two banks would not prevent the FDIC from processing the bank merger transaction pursuant to this section. The FDIC would be able to extend the 90-day timeframe by a maximum of 90 additional days, for a total maximum processing time of 180 days, due to extenuating circumstances. The FDIC would be required to notify an applicant of any extension to the processing timeline and include a specific reason for the extension. Under the proposed rule, the FDIC would take action on a merger filing that is subject to an extended standard processing timeline within a maximum of 180 days.

For all merger filings subject to standard processing procedures in § 303.64(f) and (g), the FDIC expects that extensions of the initial processing timeline would be based on extenuating circumstances, such as significant credit or liquidity issues due to accounting errors affecting one of the institutions involved in the merger transaction. The initial processing timeline would not be extended due to internal delays within the FDIC's control; for example, due to the FDIC's workload.

8. Standard Processing for All Other Merger Transactions (§ 303.64(g))

For all other merger filings, the proposed rule would include new standard processing procedures in § 303.64(g). Based on the FDIC's experience, as compared to the standard processing option for qualifying merger transactions in § 303.64(f), merger transactions under § 303.64(g) often require additional processing time due

to the size of the transaction and certain processing considerations, including where authority to act on the merger filing is reserved to the FDIC Board or consummation of the transaction is dependent upon action by another Federal regulator. New § 303.64(g) would provide that the FDIC would take action on a merger filing under § 303.64(g) within 150 days of the FDIC's receipt of a substantially complete merger filing. The FDIC would be able to extend the 150-day timeframe by a maximum of 120 additional days, for a total maximum processing time of 270 days, due to extenuating circumstances as described above. The FDIC would be required to notify an applicant of any extension to the processing timeline and include a specific reason for the extension. As discussed, for all merger filings subject to standard processing procedures in § 303.64(f) and (g), the FDIC expects that extensions of the initial 90- or 150-day processing timeline would be based on extenuating circumstances.

Question 66: Should the FDIC adopt different processes and time limits for standard processing? Why or why not?

Question 67: Are there other categories of merger transaction subject to standard processing that the FDIC should address in subpart D? If yes, please explain.

Question 68: Should the FDIC adopt any exceptions to standard processing that may warrant the use of shorter or longer processing deadlines? If yes, please explain.

9. Standard Processing for State Savings Associations (§ 303.64(h))

The proposed rule would revise existing § 303.64(c) and move it to new § 303.64(h). The proposed rule would include technical changes to conform to terminology used in other sections of subpart D, such as removing references to automatic or default approval, but would not change the substance of this section, which requires the FDIC to approve or disapprove a merger filing filed by a State savings association before the end of 60 days of the FDIC's receipt of a substantially complete filing, consistent with the Home Owners' Loan Act.

42

The 60 day time period is an outer limit, however, and a qualifying merger filing by a State savings association may receive rapid or expedited processing within a shorter time period if eligible.

42

12 U.S.C. 1467a(s)(2).

F. Public Notice Requirements (§ 303.65)

1. General (§ 303.65(a))

The proposed rule would continue to address public notice requirements for merger transactions with modifications at § 303.65(a). Public notice is a statutory requirement of the BMA.

43

The BMA requires publication prior to the FDIC's approval of a merger transaction, in a form approved by the FDIC, at appropriate intervals during a period at least as long as the period allowed for furnishing a report of competitive factors, in a newspaper of general circulation in the community or communities where the main offices of the banks or savings associations are located, or, if there is no such newspaper in any such community, then in the newspaper of general circulation published nearest thereto. The FDIC is proposing to modify the publication cadence, and is considering modifying the definition of “newspaper of general circulation,” in subpart D to reduce regulatory burden for applicants while ensuring compliance with the requirements of the BMA.

43

12 U.S.C. 1828(c)(3).

Under the current rule, an applicant for approval of a merger transaction must publish notice of the merger transaction on at least three occasions at approximately equal intervals in the community or communities where the main offices of the merging institutions are located. The proposed rule would decrease the number of requisite publications, so that an applicant for approval of a merger transaction that is not also a corporate reorganization would be required to publish notice of the merger transaction on at least two occasions instead of three.

For merger transactions that are not corporate reorganizations, the BMA requires publication at appropriate intervals during a period at least as long as the 30-day period for the Attorney General to furnish the competitive factors report. Two publications at appropriate intervals throughout the 30-day period satisfies that requirement. The FDIC does not believe that the third publication provides a material public benefit in the context of merger transactions today, particularly because once information is published, it generally remains available in the public domain throughout the required 30-day period.

Additionally, under new § 303.65(e)(1), comments for such merger transactions must be received by the appropriate FDIC office within 30 days after the first publication of the merger transaction notice, and under new § 303.65, the last publication must be made 20 days after the first publication. The FDIC believes that two publications, structured in this manner at appropriate intervals, would provide the public with sufficient notice and opportunity to comment within that 30-day period.

Publication would only be required in the communities where the main offices of the banks or savings associations are located. Publication would not be required in the communities where the main offices of a merging entity that is not a bank or a saving association is located, consistent with the language of the BMA. By its terms, the BMA only requires publication in the community or communities where the main offices of the banks or savings associations involved are located, and not any other nonbank institution involved in the transaction.

44

44

12 U.S.C. 1828(c)(3)(D).

Question 69: Would two rounds of publication provide sufficient notice to the public of a merger transaction? If not, why not?

Question 70: Should the FDIC codify other public notice requirements related to specific types of merger transactions, such as when Federal deposit insurance will terminate due to acquisition by a credit union? Why or why not?

Question 71: Should the FDIC codify procedures for satisfying the public notice requirement of the BMA? Why or why not? If yes, what would be the most appropriate procedure?

The FDIC considered, and seeks comment on, an alternative to the newspaper publication requirement that would involve defining “newspaper of general circulation” to reflect modern information channels and the means through which information is shared today. Specifically, the FDIC considered defining “newspaper of general circulation” to mean “a publicly available medium of communication reasonably calculated to provide notice to members of the community.” This definition could be codified in § 303.2(ff) such that it would apply to all FDIC filings that require publication in a newspaper of general circulation.

Under this alternative, the FDIC also could allow an applicant to publish the notice only once, provided that the notice remains available to the public throughout the applicable newspaper publication period, or the applicable public comment period if there is no applicable newspaper publication period, as set forth in part 303 of the FDIC Rules and Regulations.

This alternative would recognize that the BMA and other similar statutes were

drafted at a point in time when traditional print newspapers served as the primary source for sharing news and information. Modern communication channels such as online sources have drastically changed how news and information are shared today, making reliance on traditional print newspapers as the sole means by which an applicant can satisfy the public notice requirement outdated. Moreover, the requirement to publish notice in a traditional newspaper often imposes unnecessary regulatory burden on an applicant, for example, by requiring an applicant to locate a newspaper and pay the newspaper to publish notice. Under such an alternative, requiring publication more than once may be unnecessary because modern mediums for sharing information and news are generally available 24 hours a day, seven days a week during the applicable notice period.

Question 72: What are the advantages and disadvantages of the alternative public notice requirements discussed above? Are the other alternatives the FDIC should consider? If so, please explain.

Question 73: Should the FDIC define “newspaper of general circulation” for purposes of a final rule? Why or why not?

Question 74: Should the FDIC consider a different definition of “newspaper of general circulation” than the one discussed above? Would the definition under consideration benefit from more specificity? If so, how?

2. Corporate Reorganizations (§ 303.65(b))

The proposed rule would establish reduced publication requirements for corporate reorganizations at new § 303.65(b), consistent with the requirements of the BMA. As noted above, the BMA generally requires public notice to be published during a period at least as long as the period allowed for furnishing a report of competitive factors. However, the BMA does not require a responsible agency to request a competitive factors report for corporate reorganizations, and the FDIC will not request a competitive factors report for a corporate reorganization under the proposed rule.

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The requirement that an applicant publish notice at appropriate intervals during a period at least as long as the period allowed for furnishing a report of competitive factors does not, practically speaking, apply to such transactions. Thus, the proposed rule would require an applicant for a corporate reorganization to publish only once in a newspaper of general circulation in the community or communities where the main office of the bank or savings association is located instead of three times.

45

12 U.S.C. 1828(c)(4)(C)(ii).

Question 75: Would one round of publication in a newspaper in the community or communities where the main office of the merging institutions are located provide sufficient notice to the public of a corporate reorganization? Why or why not?

3. Exceptions (§ 303.65(c))

The proposed rule would revise existing § 303.65(b) and move it to a new § 303.65(c). The proposed rule would reduce the number of newspaper publications for a merger transaction when the FDIC determines that an emergency exists requiring expeditious action. Under new § 303.65(c)(1), if the FDIC determines that an emergency exists requiring expeditious action, publication would only be required once. This clarification would also be consistent with the modernization efforts proposed in other parts of proposed § 303.65, including reducing the number of publications required for corporate reorganizations in § 303.65(b). The proposed rule would retain the current exception for merger transactions involving probable failures at new § 303.65(c)(2).

Question 76: Should the FDIC adopt other exceptions to the public notice requirements? Why or why not?

4. Content of Notice (§ 303.65(d))

The proposed rule would revise existing § 303.65(c) and move the provision to new § 303.65(d). The proposed rule would not change the notice content requirements; however, it would make clarifying changes to indicate that the public notice should make clear when branches will remain in operation and when they will be closed. Additionally, the proposed rule would delete existing § 303.65(c), which refers to an emergency requiring expeditious action, because this circumstance would be addressed in new § 303.65(c)(1).

Question 77: Should the FDIC make further revisions to the content of notice requirements? Why or why not?

5. Public Comments (§ 303.65(e))

The proposed rule would move existing § 303.65(d) to new § 303.65(e) with revisions. The proposed rule would retain the 30-day comment period for merger filings submitted pursuant to §§ 303.64(e) through (h). Under new § 303.65(e)(1), comments for such merger filings must be received by the appropriate FDIC office within 30 days after the first publication of the merger transaction notice, unless the comment period has been extended or reopened in accordance with § 303.9(b)(2). However, if the FDIC has determined that an emergency exists requiring expeditious action, comments must be received by the appropriate FDIC office within 10 days after the publication under new § 303.65(e)(2). This time period is consistent with the existing comment period for such merger transactions at existing § 303.65(d) and the amount of time the BMA permits the Attorney General to respond to a request for a competitive factors report when the responsible agency advises the Attorney General that an emergency exists requiring expeditious action.

46

46

See

18 U.S.C. 1828(c)(4)(B)(ii).

The proposed rule would shorten the public comment period for corporate reorganizations that are not also

de minimis

merger transactions to 15 days instead of 30 days at new § 303.65(e)(3). In the FDIC's experience, such transactions garner little, if any, public comment, and the public comment period unnecessarily delays consummation of corporate reorganizations, which are not subject to a statutory waiting period under the BMA. Accordingly, the FDIC proposes to shorten the public comment period for corporate reorganizations that are not also

de minimis

merger transactions.

The proposed rule would also eliminate the public comment period for

de minimis

merger transactions. In the FDIC's experience, such transactions garner little, if any, public comment. Indeed, corporate reorganizations between an IDI and its operating subsidiary present little interest to the community because they are a matter of corporate structure that do not impact services available to the community. For example, in the past five years, the FDIC has received one CRA protest for a corporate reorganization involving an IDI and its subsidiaries. In this case, the FDIC found that due to the nature of the merger transaction, the corporate reorganization had no impact on the IDI's ability to meet the convenience and needs of its communities. Similarly, the FDIC expects other

de minimis

merger transactions to have minimal impact on the communities served. In the FDIC's experience, public comments on these types of transactions generally do not raise concerns that the FDIC is not already aware of through the supervisory process. For these reasons, the FDIC proposes to eliminate the

public comment period for

de minimis

merger transactions.

The proposed rule would also make corresponding changes to § 303.7(a) to reflect the updated public comment periods for merger filings and remove reference to publication in a newspaper of general circulation for other types of filings. Publication in a newspaper of general circulation is required by the BMA but not by other statutory authorities.

Question 78: Should the FDIC implement a shortened public comment period for all corporate reorganizations? Why or why not?

Question 79: Should the FDIC retain the public comment period for de minimis merger transactions? Why or why not? Would a shortened public comment for such transactions be more appropriate? Why

or why not?

Question 80: Should the FDIC codify the removal of the comment period for

de minimis

merger transactions in the regulation? Why or why not?

6. Public Access to Filings (§ 303.8(a))

Under § 303.8(a), any person may inspect or request a copy of the non-confidential portions of a filing subject to a public notice requirement (the public file) until 180 days following final disposition of a filing. The FDIC has an obligation under the Freedom of Information Act to redact certain confidential information from the public file. Depending on the complexity of a particular filing, the redaction process can be time consuming and labor intensive. Accordingly, the FDIC requires time to prepare the public file before producing it for review. The FDIC proposes to update § 303.8(a) to provide that a public file would be provided to a requestor not more than one business day after preparation of the file is complete.

Question 81: Should the FDIC adopt a different timeframe for providing access to the public file? Why or why not?

G. Significant Asset Transfers (§ 303.66)

The proposed rule would adopt a new notice and prior non-objection framework for significant asset transfers under new § 303.66. The framework would be similar in purpose to the OCC's regulations regarding substantial asset changes by national banks and Federal savings associations.

47

Adoption of a parallel approach in the FDIC Rules and Regulations would provide the FDIC with supervisory visibility into significant asset transfers that would substantially increase the size of the IDI, but that do not meet the asset thresholds associated with a merger in substance. Based on the FDIC's supervisory experience, asset transfers of this magnitude can have the potential to affect the safety and soundness of an IDI. Adoption of this approach would allow the FDIC to address any supervisory, regulatory, or legal concerns associated with such transfers.

47

12 CFR 5.53.

In addition, the proposed definition of merger in substance may have the effect of limiting the scope of transactions subject to merger filing and processing requirements under § 303.62 and § 303.64, relative to prior practice. Adoption of a notice and non-objection framework for substantial asset transfers would subject such transactions to a framework that is materially less burdensome and time-consuming when compared to merger filing and processing requirements under § 303.62 and § 303.64.

48

48

To the extent an acquisition of assets would not constitute a merger in substance subject to the BMA and its competitive review framework, institutions undertaking such transactions should be mindful of the pre-merger notification requirements under the HSR Act. Under FTC Formal Interpretation Number 17, applicants planning nonbank merger transactions and certain corporate reorganizations involving a nonbank affiliate or subsidiary are required to report information about the merger transaction to the FTC and DOJ to enable the FTC and DOJ to conduct a premerger review of the transaction in accordance with the requirements of the HSR Act.

See Formal Interpretation No. 17,

FTC (Apr. 3, 2000). The HSR Act exempts from FTC and DOJ premerger review transactions that are already subject to specialized regulatory agency review, including bank merger transactions. However, the FTC and DOJ treat the nonbank portion of a nonbank merger transaction or a corporate reorganization as subject to the reporting requirements of the HSR Act, regardless of whether the nonbank entity is an affiliate of the bank entity or a subsidiary of the bank entity.

The proposed rule would require an FDIC-supervised institution to provide the FDIC with written notice of a significant asset transfer. The FDIC would issue a written decision on a significant asset transfer notice within 30 days of receipt of any such notice or alternatively notify the applicant of an extension to the processing timeframe within that same period. The FDIC could extend the 30-day timeframe by a maximum of 60 days, if necessary, due to extenuating circumstances. The FDIC would notify the applicant of any such extension and describe in the notification the underlying extenuating circumstances with specificity. If the FDIC does not issue a written decision or notify the applicant of an extension within the initial 30-day period, the significant asset transfer notice would be deemed approved at the expiration of the 30-day period. If the FDIC extended the processing timeframe and did not issue a written decision on the significant asset transfer notice before the expiration of the extended period, which would be a maximum of 60 days for a total processing timeframe of 90 days, the notice would be deemed approved upon expiration of the extended period.

In practice, the FDIC expects an FDIC-supervised institution to submit a notice when it becomes aware that it will exceed the 25 percent threshold. The notice should include information related to all transactions that are part of the series. For example, in a series of three transactions involving an acquisition that increases the institution's asset size by 10 percent, 10 percent, and 5 percent respectively, the institution should submit a notice containing information related to all three transactions. The FDIC emphasizes, as with mergers in substance, however, that asset transfers that do not meet the definition of significant asset transfer, including those that result in the entry or exit of a single business line but do not increase the FDIC-supervised institution's asset size by 25 percent or more over a rolling 12-month period, would not be subject to notice or filing requirements under subpart D.

The proposed rule would exempt from the notice requirements in subpart D a change in the assets of an FDIC-supervised institution that results from activity that is otherwise subject to FDIC approval or other FDIC filing requirements. For example, the FDIC would not require an institution to submit a notice under this subpart if a transaction was already subject to filing and approval requirements as a merger transaction under § 303.62 or if an institution acquired assets from a failed or failing institution as part of an FDIC-supervised resolution process.

The proposed rule would require the FDIC to consider the following factors in connection with the approval or non-objection to a significant asset transfer: (1) the capital level of the resulting institution; (2) the conformity of the transaction(s) to applicable law, regulation, and supervisory policy; (3) the purpose(s) of the transaction(s); and (4) the impact of the transaction(s) on the safety and soundness of the institution(s) involved in the transaction(s). The factors, which are consistent with the OCC's regulations regarding substantial asset changes by national banks and Federal savings associations, are intended to ensure the transaction or series of transactions fits within the non-objection framework and is not subject to approval under the

BMA. The factors are intended to appropriately mitigate risk associated with potential growth resulting from the significant asset transfer. When evaluating the purpose(s) of the transaction(s), the FDIC would consider whether the applicant has structured the transaction(s) to evade compliance with the BMA.

The FDIC would have discretion to object to a notice of a significant asset transfer if the transaction(s) would have a negative impact on one or more of these factors that could not be appropriately mitigated by the institution(s) involved in the transaction(s). Significant asset transfers would not be subject to the FDIC's regulations in subpart A of part 303 concerning public notice, public comment, or the opportunity for a public hearing.

Question 82: What are the advantages and disadvantages of the proposed framework for significant asset transfers?

Question 83: Is the 25 percent threshold appropriate for defining significant asset transfers? Why or why not?

Question 84: Should the FDIC consider a lookback period that is longer than 12 months? Why or why not?

Question 85: What changes to the significant asset transfer framework could the FDIC consider to better tailor it to the size and risk profile of FDIC-supervised institutions?

Question 86: Should this type of notice and non-objection framework apply to additional types of transactions? If yes, please explain why, and under what applicability threshold(s)?

Question 87: Should the FDIC include other exceptions to the definition of significant asset transfer? If yes, for what type(s) of asset transfers and why?

Question 88: Should the FDIC consider other factors in determining whether to issue a non-objection? If yes, please explain such factor(s) and why it would be relevant to the issuance of a non-objection.

Question 89: Is there an alternative framework the FDIC should consider to provide supervisory visibility into and an opportunity to object to such transactions? If yes, please explain.

H. Severability (§ 303.67)

The proposed rule would include a severability provision at new § 303.67. The proposed rule would provide that if any provision of subpart D or its application to any person or to certain circumstances were held to be invalid, the remainder of subpart D and its application would remain in force. Each provision of the proposed rule is designed to function sensibly without the others, and the FDIC intends for them to be severable so that each can operate independently.

Question 90: Should the FDIC adopt a severability provision in subpart D? Why or why not?

I. BMA Transactions (§ 333.5)

1. Scope (§ 333.5(a))

The proposed rule would codify the FDIC's evaluation of the statutory factors at new § 333.5. Section 333.5(a) would explain that § 333.5 would apply to merger transactions subject to FDIC approval under the BMA, and that the definitions in § 303.61 apply to § 333.5. Historically, the FDIC has provided supplements to the procedural and other requirements for such transactions in an SOP. New § 333.5 would provide for more durability and transparency by codifying all aspects of the FDIC's BMA review framework in regulation. New § 333.5 would also better enable applicants to supply additional information including mitigating factors or other pertinent details relevant to the FDIC's consideration of a merger transaction and the statutory factors. The proposed rule is not intended to impose additional burden or new compliance obligations on applicants.

2. General (§ 333.5(b))

a. Statutory Factors (§ 333.5(b)(1))

New § 333.5(b)(1) would reflect the statutory factors that the FDIC must consider under the BMA. In addition to considering the competitive impact of a merger transaction, as discussed in § 333.5(c), the BMA requires the responsible agency to consider the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the community to be served, the risk to the stability of the U.S. banking or financial system, and the effectiveness of the parties in combatting money laundering activities.

49

49

12 U.S.C. 1828(c)(5) and (11).

Question 91: What are the advantages and disadvantages of codifying how the FDIC would review the BMA statutory factors under the proposed rule, instead of revising its current SOP on Bank Merger Transactions? Does codifying how the FDIC reviews the statutory factors improve the transparency and certainty of the FDIC's BMA framework? Why or why not?

b. Tailored Review (§ 333.5(b)(2))

New § 333.5(b)(2) would specify that the FDIC would conduct a tailored review of a merger filing as appropriate to the facts and circumstances of the merger transaction, including taking into account the structure, scale, and materiality of the merger transaction. The BMA applies to a large spectrum of transaction types—from those involving the largest banks to a corporate reorganization involving a community bank and a small operating subsidiary. The FDIC's expectations regarding the statutory factors are not the same for all transactions falling across this spectrum. For example, when evaluating the financial, managerial, and future prospects statutory factor as applied to a corporate reorganization involving an IDI and a subsidiary, the FDIC will generally not conduct a resource-intensive review because the financial, managerial, and future prospects of the acquiring institution and resulting institution will typically either not change as a result of the corporate reorganization, or they may improve as a result of a simplification of the corporate structure.

More generally, the FDIC recognizes the fundamental differences between corporate reorganizations and merger transactions involving unaffiliated parties in evaluating the statutory factors. As discussed above and below, corporate reorganizations will always satisfy the statutory requirements with respect to competition. Furthermore, in the FDIC's experience, it is very rare that a corporate reorganization would result in an unfavorable conclusion with respect to the convenience and needs of the community factor, as such transactions rarely impact the products and services provided to customers. As noted, the FDIC will tailor its review of the statutory factors to the specific type of transaction.

Question 92: Should the FDIC provide additional guidance regarding the tailoring of its evaluation of merger transactions according to transaction structure? If so, please explain.

Question 93: Should the FDIC consider presumptions that certain statutory factors will be resolved favorably for merger transactions that meet certain criteria? If so, in what circumstances?

c. Remediation Plans (§ 333.5(b)(3))

New § 333.5(b)(3) would specify that the FDIC would consider the applicant's plans to timely remediate any previously unresolved deficiencies identified in the supervisory record of the acquiring institution, institution

being acquired, or resulting institution in its evaluation of the statutory factors. Under the proposed rule, effective remediation plans may result in a favorable finding on a statutory factor despite identified weaknesses. In the FDIC's supervisory experience, supervisory weaknesses can often be remedied by an acquiring institution with a thoughtful, tailored plan based on reasoned metrics and realistic timelines. The FDIC would rely upon its supervisory expertise to determine the reasonableness of the proposed remedial plans and to evaluate the relevant statutory factor as to the resulting institution in light of such remediation plans.

New § 333.5(b)(3) is not intended to change the FDIC's obligations under the BMA to consider certain statutory factors within the context of each institution involved in the merger transaction. The FDIC would retain discretion to deny a merger filing for weaknesses at the institution being acquired, particularly when the parties have not presented a reasonable remediation plan.

Question 94: Should the FDIC consider a different approach to considering the relationship between the acquiring IDI, the IDI being acquired, and the resulting institution? If yes, please explain and suggest an alternative approach.

Question 95: Should the FDIC adopt a provision regarding remediation plans? Why or why not?

Question 96: Would new § 333.5(b)(3) provide clarity and certainty to the public? Why or why not?

d. Focus on the Resulting Institution (§ 333.5(b)(4))

The proposed rule would also clarify that the FDIC would emphasize the resulting institution and the cumulative benefits and impact of the merger transaction in its review of the statutory factors at new § 333.5(b)(4). Consistent with the BMA, the FDIC would continue to take into account the acquiring institution, institution being acquired, and resulting institution in its review of the statutory factors. However, to emphasize the resulting institution, the FDIC would also take into account the applicant's plans to timely remediate any previously unresolved deficiencies identified in the supervisory record of the acquiring institution, institution being acquired, or resulting institution in its evaluation of the statutory factors, consistent with new § 333.5(b)(3), and the cumulative benefits and impact of the merger transaction consistent with new § 333.5(c)(4).

3. Competition (§ 333.5(c))

New § 333.5(c) would outline and reform how the FDIC considers and evaluates the competitive effects of a merger transaction (competition statutory factor), including by incorporating credit union shares and centrally booked deposits in the initial HHI screen. The FDIC believes codifying the standards used by the FDIC to evaluate the competition statutory factor would provide applicants and the public with greater transparency and certainty than has been previously provided through the agency's SOPs.

a. Generally (§ 333.5(c)(1))

The BMA generally requires the responsible agency to consider the impact a merger transaction may have on competition in the U.S. banking market. As part of this consideration, the responsible agency must request a report on the competitive factors involved from the Attorney General (competitive factors report) before acting on the transaction.

50

If the FDIC is not the responsible agency, then a copy of the competitive factors report must also be provided to the FDIC.

51

The responsible agency is not required to request a competitive factors report if: (1) the responsible agency finds that it must act immediately in order to prevent the probable failure of one of the IDIs involved in the merger transaction; or (2) the merger transaction involves solely an IDI and one or more of the IDI's affiliates (

i.e.,

a corporate reorganization).

52

50

12 U.S.C. 1828(c)(4)(A)(i).

51

12 U.S.C. 1828(c)(4)(A)(ii).

52

12 U.S.C. 1828(c)(4)(C).

The Attorney General must provide the competitive factors report to the responsible agency not later than 30 calendar days after receipt of the request.

53

If the requesting agency advises the Attorney General that an emergency exists requiring expeditious action, the competitive factors report must be provided not later than 10 calendar days after receipt of the request.

54

53

12 U.S.C. 1828(c)(4)(B)(i).

54

12 U.S.C. 1828(c)(4)(B)(ii).

The BMA prohibits the responsible agency from approving merger transactions under two scenarios. First, the responsible agency may not approve a merger transaction that would result in a monopoly, or that would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States.

55

Second, the responsible agency may not approve a merger transaction whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless the responsible agency finds that the anticompetitive effects of the transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

56

The proposed rule would codify these statutory restrictions, as applied to the FDIC, at new § 333.5(c)(1).

55

12 U.S.C. 1828(c)(5)(A).

56

12 U.S.C. 1828(c)(5)(B).

b. Initial Herfindahl-Hirschman Index (HHI) Screen (§ 333.5(c)(2))

The HHI is a broadly used measure for analyzing market concentration.

57

It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (30

2

+ 30

2

+ 20

2

+ 20

2

= 2,600). The HHI accounts for the relative size and distribution of the firms in a market and decreases as the number of firms in a market increases, provided they are of a relatively similar size. By contrast the HHI increases both as the number of firms in the market decreases and as the disparity in size between those firms increases. Markets in which the HHI is between 1,000 and 1,800 points are considered to be moderately concentrated and those in which the HHI is in excess of 1,800 points are considered to be concentrated.

57

See, e.g.,

FDIC, Applications Procedures Manual, p. 4-19 (June 2019),

available at https://www.fdic.gov/regulations/applications/resources/apps-proc-manual/section-04-mergers.pdf; see also

DOJ, “Herfindahl-Hirschman Index” (last updated Jan. 17, 2024),

available at https://www.justice.gov/atr/herfindahl-hirschman-index.

The proposed rule would clarify that the FDIC uses an initial HHI screen to evaluate the competitive effects of a merger transaction. The FDIC currently includes all the deposits of banks and thrift institutions with branches in a relevant geographic market(s) in its initial HHI screen. Deposits of thrift institutions are generally given a 50 percent weighting in the FDIC's initial HHI analysis today, but deposits of certain thrift institutions that are significantly engaged in commercial and industrial lending are given a 100 percent weighting.

58

The proposed rule

would expand the FDIC's initial HHI screen to include the deposits of banks and thrift institutions and shares of credit unions with branches in a relevant geographic market(s), with certain credit unions' shares calculated as a representative portion, as discussed below. Also as discussed further below, the relevant geographic market(s) would be the banking market(s) assigned by the Federal Reserve Board, or, if not defined by the Federal Reserve Board, the relevant geographic market would be all counties in which both the acquiring institution and the institution to be acquired have branch locations, as adjusted to reflect factors that influence how customers in the market seek and obtain banking products and services.

58

To determine whether a thrift institution is significantly engaged in commercial lending, the FDIC looks at the thrift institution's total commercial and industrial lending as a percentage of assets. In general, if the commercial and industrial loans of a thrift institution constitute less

than two percent of its total assets, the thrift institution's deposits will not be weighted at 100 percent.

The Federal Reserve Board has divided the United States and U.S. territories into more than 1,400 local banking markets.

59

Various information is used by the Federal Reserve Board to determine the scope of a banking market, such as commuting patterns, shopping patterns, interviews with local government and business leaders, and surveys of local households or small businesses.

60

The Federal Reserve Bank of St. Louis operates the Competitive Analysis and Structure Source Instrument for Depository Institutions (CASSIDI), which enables regulators and the public to perform HHI analyses for each banking market, as defined by the Federal Reserve Board.

61

Banking markets are updated from time to time in CASSIDI. The proposed rule would define “relevant geographic market” as the banking market(s) of the acquiring institution and the institution to be acquired, as defined by the Federal Reserve Board at the time of a merger filing. If a relevant banking market has not been defined by the Federal Reserve Board, the relevant geographic market would consist of all counties in which both the acquiring institution and the institution to be acquired have branch locations, as adjusted to reflect factors that influence how customers in the market seek and obtain banking products and services.

59

See

Governor Michelle Bowman, “The New Landscape for Banking Competition” at the 2022 Community Banking Research Conference (Sept. 28, 2022), p. 4,

available at: https://www.federalreserve.gov/newsevents/speech/files/bowman20220928a.pdf

[hereinafter, “Gov. Bowman Speech”].

60

See

Federal Reserve Board,

How do the Federal Reserve and the U.S. Department of Justice, Antitrust Division, analyze the competitive effects of mergers and acquisitions under the Bank Holding Company Act, the Bank Merger Act and the Home Owners Loan Act?,

Q. 14,

available at https://www.federalreserve.gov/bankinforeg/competitive-effects-mergers-acquisitions-faqs.htm

(last accessed Aug. 19, 2026).

61

See https://cassidi.stlouisfed.org.

The FDIC recognizes that the U.S. banking sector and the financial services industry more broadly are highly competitive. Decades ago, when the BMA was first passed, banks were heavily restricted in their ability to compete in different geographic regions due to branching, interstate banking, and other legal and regulatory restrictions. Furthermore, technology has made it much easier for banks and nonbanks to offer products and services nationwide. Banks also now compete with a wider array of nonbank competitors who offer bank-like products. As such, the FDIC is making certain adjustments to how it calculates its initial HHI screen, and is seeking comment on whether further changes are warranted regarding how the FDIC analyzes the competition statutory factor.

Thrift institutions historically were not viewed as equivalent competitors of banks because they were unable to offer the same range of banking products and services as those provided by commercial banks. Thrift institutions were once focused on savings deposit accounts, and their lending activities were limited by statute to residential lending.

62

Deregulation relaxed many of the original restrictions that were placed on thrift institutions. For example, thrift institutions can now offer a broader range of banking products and services, including commercial lending. However, commercial lending remains limited by statute and regulation.

63

Banks do not have similar restrictions on their commercial lending activities, but banks and thrift institutions still engage in virtually the same activities.

64

62

Public Law 73-43, 48 Stat. 123.

63

12 U.S.C. 1464; 12 CFR part 32.

64

Kwan, S.,

Bank Charters vs. Thrift Charters,

Fed. Res. Bank of San Francisco (Apr. 24, 1998),

available at https://www.frbsf.org/research-and-insights/publications/economic-letter/1998/04/bank-charters-vs-thrift-charters/.

Credit unions also historically have not been viewed as equivalent competitors of banks because they are limited by statutory restrictions on both their customer bases

65

and commercial lending activities.

66

Banks do not have similar restrictions on their customer bases or commercial lending activities and, as such, have historically been able to provide a full range of services to a broader portion of the population in a relevant geographic market. Despite the restrictions placed on credit unions, credit unions and community banks tend to provide similar products and services within a relevant geographic market, including customer accounts and consumer and small business lending.

67

Furthermore, similar to thrifts, legal and regulatory restrictions on credit unions have eased over time, resulting in the differences between banks and credit unions shrinking.

68

In this way, credit unions have evolved into a more equivalent competitor in a similar way to how thrift institutions evolved.

65

12 U.S.C. 1759(b); Gov. Bowman Speech, p. 7.

66

See

12 U.S.C. 1757a.

67

Introduction to Bank Regulation: Credit Unions and Community Banks,

Congressional Research Service (Dec. 14, 2018),

available at congress.gov/crs_external_products/IF/HTML/IF11048.html.

68

See, e.g.,

Public Law 105-219, 112 Stat. 913; Public Law 115-174, 132 Stat. 1296, Sec. 105.

In addition to thrifts and credit unions, other types of nonbank financial institutions have emerged over multiple decades that increasingly compete with banks. This includes fintechs and other nonbank entities that gather deposits from customers and place such deposits at banks. The FDIC is not formally proposing a methodology by which it would incorporate deposits gathered by these types of entities. These deposits are currently included in the HHI calculation on account of the bank with which such deposits are placed. However, the FDIC recognizes that this approach may not optimally reflect the competitive landscape and thus is inviting comment on whether and how to incorporate such considerations into the FDIC's HHI methodology.

Recent updates to CASSIDI make more data readily available to regulators and the public, resulting in additional tools for regulators to leverage when evaluating the competitive effects of a potential merger transaction under new § 333.5(c). This data, if appropriately utilized, enables regulators to more accurately assess competition from other competitors in a relevant geographic market. For example, the regulator-facing version of CASSIDI contains data on credit union shares. The National Credit Union Administration (NCUA) does not collect data at the branch level for credit union shares. Instead, data on total credit union shares is derived from credit unions' Call Reports, which credit unions submit to the NCUA quarterly. Because branch-level shares data is not available for credit unions, for regulators, CASSIDI divides a credit union's total shares equally among its branches as reported in its NCUA Call Reports. Regulators can modify total share amounts to reflect a representative portion of the credit union's shares in the relevant banking market, as discussed further below.

Similarly, the regulator-facing version of CASSIDI accurately reflects the particular branch that any centrally booked deposits are booked at, but these numbers are not representative of the bank or thrift institution's deposit activity within a relevant banking market because deposits from the bank or thrift institution's branches may be booked at a central location. However, regulators can now modify the total deposits of an institution with centrally booked deposits to reflect a representative portion of the institution's data, as discussed further below. Regulators can also add additional institutions to the HHI analysis in a relevant banking market. This could allow regulators to include online-only banks that do not have a physical geographic presence in a relevant banking market or other nonbank competitors, such as fintechs, as discussed further below.

The proposed rule would include an approach that utilizes regulators' new capabilities in CASSIDI to incorporate the shares of credit unions in the FDIC's initial HHI screen, and the FDIC invites comment on potential approaches to incorporate the deposits of other competitors. Under the proposed rule, the FDIC would continue to include in its initial HHI screen all deposits of a bank's branch or branches that are located in a relevant geographic market. The FDIC would apply the same approach for deposits of thrift institutions. The FDIC would also incorporate in its initial HHI screen all shares of a credit union located in a relevant geographic market if all of the credit union's branches are located in the relevant geographic market. Credit unions that serve the same geographic footprint as one or more of the relevant geographic markets, or an area that is smaller than, but entirely within the bounds of one or more of the relevant geographic markets would receive this treatment.

The FDIC would incorporate in its initial HHI screen a representative portion of the shares of a credit union where some but not all of the branches of the credit union are located in one or more of the relevant geographic markets. The FDIC would use a representative portion of the credit union's shares as an estimate for the credit union's share amount in the relevant geographic market(s). The representative portion of shares would be calculated by dividing the credit union's total shares by its total number of branches and multiplying that number by the number of the credit union's branches that are located in a relevant geographic market, as determined by its most recent NCUA Call Report data reflected in the regulator-facing version of CASSIDI. For example, if a credit union had $4,000,000 in total shares and 20 total branches, each branch would be allocated $200,000 in shares. If the credit union had 4 branches in a relevant geographic market, then $800,000 would be assigned to the relevant geographic market as the representative portion of shares.

Similarly, the FDIC would incorporate into its initial HHI screen a representative portion of the centrally booked deposits of banks and thrift institutions. The FDIC would use a representative portion of the institution's centrally booked deposits as an estimate of the institution's deposit share in the relevant geographic market(s). Because centrally booked deposits are associated with depositors who may be living anywhere in the country, the incorporation of centrally booked deposits into the HHI screen does not require the location of a branch in a relevant geographic market in order to be included in the HHI screen. The representative portion of deposits would be calculated by taking the total population of the relevant geographic market(s), as determined by the most recent U.S. Census data, dividing that number by the total U.S. population, as determined by the most recent U.S. Census data, and multiplying that number by the total centrally booked deposits of the bank. For example, as of the 2025 U.S. Census, if the population of a relevant geographic market was 707,600 people, and the total U.S. population was 341,784,857, the relevant geographic market would represent approximately 0.21 percent of the U.S. population. Multiplying that 0.21 percent by the institution's total centrally booked deposits would yield the representative share of deposits for the relevant geographic market. For example, if an institution had $2,000,000,000 in centrally booked deposits multiplied by that 0.21 percent, then $4,130,765 would be assigned to the relevant geographic market as the representative share of centrally booked deposits. As an alternative method, the FDIC could adopt the same approach it is proposing for credit unions and equally apportion centrally booked deposits across all the branches of the institution. In some cases, this may better proxy for the bank's geographic footprint; however, in other cases, such as a bank with a nationwide footprint but very few branches, such an alternative would likely be a far worse proxy for the bank's geographic footprint. The FDIC seeks comment on this alternative.

The FDIC acknowledges that the public-facing version of CASSIDI currently does not offer the same expanded data or other features as the regulator-facing version of CASSIDI. The public-facing version of CASSIDI currently allows an applicant to conduct a pro forma HHI analysis that captures competition from other banks and thrift institutions in the relevant banking market(s). It does not provide data on credit union shares. Nor does it allow applicants to conduct modified analyses, for example, to incorporate only a representative portion of centrally booked deposits or the deposits of other competitors, for example, online-only banks. Applicants should still complete and may rely on a pro forma HHI analysis in CASSIDI as a baseline representation of the competitive effects of a merger transaction in the relevant geographic market(s). However, applicants should view the pro forma HHI analysis as a ceiling because the FDIC's initial HHI screen would have the effect of reducing concentration in a relevant geographic market because it would also incorporate additional categories of deposits, as described above.

To approximate the FDIC's initial HHI screen more closely, an applicant could also obtain data on credit union shares from Call Reports that are publicly available on the NCUA's website and calculate the FDIC's initial HHI screen using the methodology discussed above. The FDIC recognizes that the Summary of Deposits (SOD)

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data is imprecise and often does not reflect the geographic location of customers, particularly with respect to banks with very few or no branches. The FDIC is also aware that not all banks may use the same methodology to assign deposits to particular branches. The FDIC is seeking comment on whether banks should be required to report deposit data based on customer addresses or some other metric so that the SOD data more accurately reflects the geographic locations of customers.

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The SOD is the annual survey of branch office deposits as of June 30 for all FDIC-insured institutions, including insured U.S. branches of foreign banks. All institutions with branch offices are required to submit the survey; institutions with only a main office are exempt.

Additionally, the FDIC recognizes that the competitive landscape varies for different types of deposits. For example, banks may compete in local markets for retail and small business deposits, while brokered certificates of deposit are sold in a national market. The FDIC is seeking comment on whether the HHI

analysis should focus on a subset of deposits, such as retail and small business deposits, to better reflect competition within geographic markets.

Question 97: Is the FDIC's approach to considering the competition statutory factor appropriate? Are there other approaches the FDIC should consider that would better reflect the existing competitive landscape?

Question 98: Is the proposed approach for delineating the relevant geographic market(s) for the FDIC's initial HHI screen appropriate and sufficiently clear? Please explain.

Question 99: Should the FDIC consider other approaches for delineating the relevant geographic market(s) for its initial HHI screen? Please explain.

Question 100: Is the proposed methodology for the FDIC's incorporation of credit union shares in its initial HHI screen appropriately tailored? Why or why not? Should the FDIC consider a credit union's field of membership designation for purposes of incorporating a credit union into the initial HHI analysis? If so, why, and to what extent?

Question 101: Is the proposed methodology for the FDIC's incorporation of thrift institution deposits in its initial HHI screen appropriately tailored? Why or why not?

Question 102: Is the proposed methodology for the FDIC's incorporation of centrally booked deposits in its initial HHI screen appropriately tailored? Why or why not?

Question 103: Would it be appropriate for the FDIC to incorporate deposits gathered by nonbank competitors in its initial HHI screen, separate from the IDIs with whom the deposits are placed? If so, how should the deposits be incorporated?

Question 104: As an alternative approach, should the FDIC consider applying a “scaler” to a relevant geographic market to account for deposits gathered by online banks and fintechs? For example, the FDIC could construct a proxy, hypothetical institution to represent the presence of banks with nationwide online lending platforms, fintechs, and other nonbank competitors, and attribute a portion of the hypothetical institution's deposits to a relevant geographic market. The FDIC would need to develop a methodology to estimate the total deposits in this case. The FDIC seeks comment on these and other alternative approaches for incorporating such deposits into the HHI analysis.

Question 105: Should the FDIC collect different or additional data related to the reporting of deposits? For example, should deposits be reported based on customers' address? Are there other metrics the FDIC should consider?

Question 106: Should the FDIC consider limiting the calculation of deposits of banks and thrift institutions and shares of credit unions in the FDIC's initial HHI screen to retail and small business deposits, premised on an assumption that such deposits are more likely to be local deposits? Why or why not? Alternatively, are there specific types of deposits that the FDIC should consider excluding from the calculation of deposits in the initial HHI screen because they are part of a national market, such as certain types of brokered deposits?

c. Safe Harbor for Transactions Falling Within Specified HHI Thresholds (§ 333.5(c)(3))

The proposed rule would establish a safe harbor for merger transactions that fall within specific HHI thresholds, absent objection from the Attorney General, at new § 333.5(c)(3). As discussed in greater detail below, the safe harbor is intended to enable potential appli

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