Proposed Revisions to the Statement of Policy on Bank Merger Transactions

This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules

Federal Register

18740

Vol. 87, No. 62

Thursday, March 31, 2022

1 Bank Merger Act, Public Law 86–463, 72 Stat.

129 (1960); Bank Merger Act Amendments of 1966,

Public Law 89–356, 80 Stat. 7 (codified as amended

at 12 U.S.C. 1828(c)(2018)), available at fdic.gov/

regulations/laws/rules/1000-2000.html#

1000sec.18c.

2 Prior to the Riegle-Neal Interstate Banking and

Branching Efficiency Act of 1994, Public Law 103–

328 (the Riegle-Neal Act of 1994), many states did

not permit intra-state branching and interstate

branch branching was not permitted. Following the

passage of the Riegle-Neal Act of 1994, many bank

holding companies chose to consolidate existing

bank charters.

3 See Financial Stability Board, 2020 list of global

systemic important banks, available at https://

www.fsb.org/wp-content/uploads/P111120.pdf.

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 303

RIN 3064–ZA31

Request for Information and Comment

on Rules, Regulations, Guidance, and

Statements of Policy Regarding Bank

Merger Transactions

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Request for information and

comment.

SUMMARY: The FDIC is soliciting

comments from interested parties

regarding the application of the laws,

practices, rules, regulations, guidance,

and statements of policy (together,

regulatory framework) that apply to

merger transactions involving one or

more insured depository institution,

including the merger between an

insured depository institution and a

noninsured institution. The FDIC is

interested in receiving comments

regarding the effectiveness of the

existing framework in meeting the

requirements of section 18(c) of the

Federal Deposit Insurance Act (known

as the Bank Merger Act)

t apply to

merger transactions involving one or

more insured depository institution,

including the merger between an

insured depository institution and a

noninsured institution. The FDIC is

interested in receiving comments

regarding the effectiveness of the

existing framework in meeting the

requirements of section 18(c) of the

Federal Deposit Insurance Act (known

as the Bank Merger Act).

DATES: Comments must be received by

May 31, 2022.

ADDRESSES: Commenters are encouraged

to use the title ‘‘Request for Comment

on Rules, Regulations, Guidance, and

Statement of Policy on Bank Merger

Transactions (RIN 3064–ZA31)’’ and to

identify the number of the specific

question(s) for comment to which they

are responding. Please send comments

by one method only directed to:

• Agency Website: https://

www.fdic.gov/resources/regulations/

federal-register-publications/. Follow

the instructions for submitting

comments on the agency’s website.

• Email: Comments@fdic.gov. Include

RIN 3064–ZA31 in the subject line of

the message.

• Mail: James P. Sheesley, Assistant

Executive Secretary, Attention:

Comments—RIN 3064–ZA31, Federal

Deposit Insurance Corporation, 550 17th

Street NW, Washington, DC 20429.

• Hand Delivery/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 7:00 a.m. and

5:00 p.m. ET.

Public Inspection: All comments

received will be posted without change

to https://www.fdic.gov/resources/

regulations/federal-register-

publications/—including any personal

information provided—for public

inspection. Paper copies of public

comments may be ordered from the

FDIC Public Information Center, 3501

North Fairfax Drive, Room E–1002,

Arlington, VA 22226, or by telephone at

877–275–3342 or 703–562–2200

comments

received will be posted without change

to https://www.fdic.gov/resources/

regulations/federal-register-

publications/—including any personal

information provided—for public

inspection. Paper copies of public

comments may be ordered from the

FDIC Public Information Center, 3501

North Fairfax Drive, Room E–1002,

Arlington, VA 22226, or by telephone at

877–275–3342 or 703–562–2200.

FOR FURTHER INFORMATION CONTACT: Rae-

Ann Miller, Senior Deputy Director,

Supervisory Examinations and Policy,

Division of Risk Management

Supervision, 202–898–3898, rmiller@

fdic.gov; or Ashby G. Hilsman, Assistant

General Counsel, Bank Activities and

Regional Affairs Section, Supervision,

Legislation and Enforcement Branch,

Legal Division, 202–898–6636,

ahilsman@fdic.gov.

SUPPLEMENTARY INFORMATION:

Background Information

Significant changes over the past

several decades in the banking industry

and financial system necessitate a

review of the regulatory framework that

applies to bank merger transactions

involving one or more insured

depository institutions pursuant to the

Bank Merger Act.1 First, more than three

decades of consolidation and growth in

the banking industry have significantly

reduced the number of smaller banking

organizations and increased the number

of large and systemically-important

banking organizations. Second, the FDIC

has a responsibility to promote public

confidence in the banking system,

maintain financial stability, review

proposed mergers, and resolve failing

large insured depository institutions.

Third, the Dodd-Frank Wall Street

Reform and Consumer Protection Act

(Dodd-Frank Act) amended the Bank

Merger Act to include, for the first time,

a financial stability factor. Fourth, and

finally, a recent Executive Order

instructed U.S. agencies to consider the

impact that consolidation may have on

maintaining a competitive marketplace

olve failing

large insured depository institutions.

Third, the Dodd-Frank Wall Street

Reform and Consumer Protection Act

(Dodd-Frank Act) amended the Bank

Merger Act to include, for the first time,

a financial stability factor. Fourth, and

finally, a recent Executive Order

instructed U.S. agencies to consider the

impact that consolidation may have on

maintaining a competitive marketplace.

Thus, the FDIC has determined that it is

both timely and appropriate to review

the regulatory framework and consider

whether updates or other changes are

warranted.

Consolidation in the Banking Sector

The banking sector has experienced a

significant amount of consolidation over

the last 30 years as shown in Tables 1

through 3. This period of consolidation,

fueled in large part by mergers and

acquisitions, has contributed to the

significant growth of the number of

large insured depository institutions,

especially insured depository

institutions with total assets of $100

billion or more.

In 1990, there was only one insured

depository institution with assets

greater than $100 billion; however, that

number had increased to 33 by 2020.2

Of these 33 insured depository

institutions with assets greater than

$100 billion, nine were owned by the

eight U.S. bank holding companies

designated as Global Systemically

Important Banks (U.S. GSIBs), and three

were owned by foreign banking

organizations designated as foreign

Global Systemically Important Banks

(foreign GSIBs).3 While insured

depository institutions with total assets

of more than $100 billion comprise less

than one percent of the total number of

insured depository institutions, they

hold about 70 percent of total industry

assets and 66 percent of domestic

deposits.

Consolidation also has contributed to

the economic landscape of insured

depository institutions with assets less

than $100 billion

While insured

depository institutions with total assets

of more than $100 billion comprise less

than one percent of the total number of

insured depository institutions, they

hold about 70 percent of total industry

assets and 66 percent of domestic

deposits.

Consolidation also has contributed to

the economic landscape of insured

depository institutions with assets less

than $100 billion. Over the same 30-year

period, the number of institutions with

assets less than $10 billion has declined

from 15,099 in 1990 to 4,851 in 2020,

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4 Based on Thrift Financial Reports (TFR) and

Consolidated Reports of Condition and Income (Call

Report) between 1990 and 2005, the number of

institutions with assets less than $10 billion

declined from 15,099 to 8,715, before falling to

4,851 in 2020. Over the same time period, the

percentage of industry assets held by those banks

declined from 66.4 percent in 1990 to 26.1 percent

in 2005, and then to 14.8 percent in 2020. Similarly,

the percentage of domestic deposits held by those

institutions declined from 73.9 percent in 1990 to

34.2 percent in 2005, and then to 15.4 percent in

2020.

5 Dodd-Frank Wall Street Reform and Consumer

Protection Act, Public Law 111–203, section 604(f),

124 Stat. 1376, 1602 (2010) (codified as 12 U.S.C.

1828(c)(5) (2018)), available at https://

www.govinfo.gov/app/details/PLAW-111publ203.

6 See Federal Reserve Board and FDIC joint final

rules: Resolution Plans Required, 76 FR 67323,

(Nov. 1, 2011), available at https://

www.govinfo.gov/content/pkg/FR-2011-11-01/pdf/

2011-27377.pdf, and Tailored Resolution Plan

Requirements, 80 FR 59194, (Nov. 1, 2019),

available at https://www.govinfo.gov/content/pkg/

FR-2019-11-01/pdf/2019-23967.pdf

.govinfo.gov/app/details/PLAW-111publ203.

6 See Federal Reserve Board and FDIC joint final

rules: Resolution Plans Required, 76 FR 67323,

(Nov. 1, 2011), available at https://

www.govinfo.gov/content/pkg/FR-2011-11-01/pdf/

2011-27377.pdf, and Tailored Resolution Plan

Requirements, 80 FR 59194, (Nov. 1, 2019),

available at https://www.govinfo.gov/content/pkg/

FR-2019-11-01/pdf/2019-23967.pdf. See also, FDIC

final rule, Certain Orderly Liquidation Authority

Provisions under Title II of the Dodd Frank Wall

Street Reform and Consumer Protection Act, 76 FR

41626, (July 15, 2011), available at https://

www.govinfo.gov/content/pkg/FR-2011-07-15/pdf/

2011-17397.pdf.

7 Although the FDIC has developed a framework

of systemic resolution regulations, strategies, and

policies and procedures to operationalize its

authority to handle the orderly failure of a GSIB or

other systemically important financial company

under Title II of the Dodd-Frank Act, such a failure

would present additional risks for the FDIC and

could, depending on the circumstances, also

involve failure of a large insured depository

institution.

a reduction of approximately 68

percent.4 The declining number of

smaller insured depository institutions

may limit access to financial services

and credit in communities, potentially

adversely affecting the welfare of the

communities’ workers, farmers, small

businesses, startups, and consumers.

Over this same period, the number of

insured depository institutions with

assets between $10 billion and $100

billion has doubled from 59 in 1990 to

118 in 2020. However, the percentage of

total industry assets held by all insured

depository institutions with assets less

than $100 billion declined by 68 percent

and their percentage of insured deposits

held declined by approximately 70

percent.

Several insured depository

institutions with assets less than $100

billion were owned by either a U.S.

GSIB or a foreign GSIB

m 59 in 1990 to

118 in 2020. However, the percentage of

total industry assets held by all insured

depository institutions with assets less

than $100 billion declined by 68 percent

and their percentage of insured deposits

held declined by approximately 70

percent.

Several insured depository

institutions with assets less than $100

billion were owned by either a U.S.

GSIB or a foreign GSIB. For example, 12

insured depository institutions with

assets less than $10 billion were owned

by GSIBs, with six owned by U.S.

GSIBs, and six owned by foreign GSIBs.

Further, 11 insured depository

institutions with assets between $10

billion to $100 billion were owned by

GSIBs, with four owned by U.S. GSIBs,

and seven owned by foreign GSIBs.

TABLE 1—NUMBER OF INSURED DE-

POSITORY INSTITUTIONS

BY ASSET

SIZE

Asset size

Year

1990

2005

2020

$10B–$50B .............

52

86

102

$50B–$100B ...........

7

21

16

$100B–$250B .........

1

5

20

$250B–$500B .........

0

3

8

$500B–$700B .........

0

0

1

≥$700B ...................

0

3

4

Source: TFR and Call Reports.

TABLE 2—PERCENTAGE OF INDUSTRY

ASSETS HELD BY INSURED DEPOSI-

TORY INSTITUTIONS BY ASSET SIZE

Asset size

Year

1990

(%)

2005

(%)

2020

(%)

$10B–$50B .............

20.2

16.7

10.5

$50B–$100B ...........

10.0

13.1

5.3

$100B–$250B .........

3.4

7.2

13.3

$250B–$500B .........

0.0

11.1

13.9

$500B–$700B .........

0.0

0.0

2.5

≥$700B ...................

0.0

25.8

39.8

Source: TFR and Call Report.

TABLE 3—PERCENTAGE OF DOMESTIC

DEPOSITS HELD BY INSURED DEPOS-

ITORY INSTITUTIONS BY ASSET SIZE

Asset size

Year

1990

(%)

2005

(%)

2020

(%)

$10B–$50B .............

18.5

16.6

11.4

$50B–$100B ...........

6.4

12.2

5.9

$100B–$250B .........

1.2

6.4

13.9

$250B–$500B .........

0.0

12.8

14.3

$500B–$700B .........

0.0

0.0

2.6

≥$700B ...................

0.0

17.8

35.5

Source: TFR and Call Report

AGE OF DOMESTIC

DEPOSITS HELD BY INSURED DEPOS-

ITORY INSTITUTIONS BY ASSET SIZE

Asset size

Year

1990

(%)

2005

(%)

2020

(%)

$10B–$50B .............

18.5

16.6

11.4

$50B–$100B ...........

6.4

12.2

5.9

$100B–$250B .........

1.2

6.4

13.9

$250B–$500B .........

0.0

12.8

14.3

$500B–$700B .........

0.0

0.0

2.6

≥$700B ...................

0.0

17.8

35.5

Source: TFR and Call Report.

The Financial Stability Factor in the

Bank Merger Act and Large Bank

Resolution

The Dodd-Frank Act made a number

of statutory changes aimed at addressing

the risks posed by the largest banks,

including an amendment to the Bank

Merger Act requiring consideration of

the risk posed to the stability of the

United States banking or financial

system of a proposed bank merger.5 To

date, from a financial stability

perspective, efforts to improve the

resolvability of large banks have focused

on GSIBs.6 As shown above, given the

increased number, size, and complexity

of non-GSIB large banks, however, a

reconsideration by the FDIC of the

framework for assessing the financial

stability prong of the BMA and focused

attention on the financial stability risks

that could arise from a merger involving

a large bank is warranted.

In particular, the failure of a large

insured depository institution would

present significant challenges to the

FDIC’s resolutions and receivership

functions and could present a threat to

the financial stability of the United

States. Insured depository institutions

are resolved under the Federal Deposit

Insurance Act. For various reasons,

including their size, sources of funding,

and other organizational complexities,

the resolution of large insured

depository institutions can present great

risk to the Deposit Insurance Fund, as

well as extraordinary operational risk

for the FDIC

ncial stability of the United

States. Insured depository institutions

are resolved under the Federal Deposit

Insurance Act. For various reasons,

including their size, sources of funding,

and other organizational complexities,

the resolution of large insured

depository institutions can present great

risk to the Deposit Insurance Fund, as

well as extraordinary operational risk

for the FDIC. In addition, as a practical

matter, the size of an insured depository

institution may limit the resolution

options available to the FDIC in the

event of failure.7

In recent history, including the global

financial crisis that began in 2008, the

most common resolution transactions

have involved a purchase and

assumption transaction where an

acquiring institution takes all or a

substantial part of the failed insured

depository institution. For example,

between 2008 and 2013, there were a

total of 489 bank failures, of which 463,

or approximately 95 percent, were

resolved by the FDIC through purchase

and assumption transactions.

While most of these purchase and

assumption resolution transactions were

for insured depository institutions with

assets under $10 billion, the largest

purchase and assumption transaction

completed by the FDIC was that of

Washington Mutual Bank, which failed

on September 25, 2008, with assets of

approximately $307 billion. However,

that transaction resulted in a larger and

more complex acquirer (JPMorgan Chase

& Co.), and the need for the resolution

heightened financial turmoil and

contributed to concerns about the safety

of the financial system

and assumption transaction

completed by the FDIC was that of

Washington Mutual Bank, which failed

on September 25, 2008, with assets of

approximately $307 billion. However,

that transaction resulted in a larger and

more complex acquirer (JPMorgan Chase

& Co.), and the need for the resolution

heightened financial turmoil and

contributed to concerns about the safety

of the financial system. As a result of

the systemic concerns arising from the

resolution of Washington Mutual Bank,

when Wachovia Bank required

resolution days later, the FDIC, the

Board of Governors of the Federal

Reserve System (Board), and the

Secretary of the Treasury invoked the

systemic risk exception (SRE) to allow

the acquisition of Wachovia by another

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8 While the systemic risk exception was

approved, Wachovia Corporation was ultimately

acquired by Wells Fargo & Company on an open-

institution basis without FDIC assistance. See FDIC,

Crisis and Response: An FDIC History, 2008–2013,

available at http://www.fdic.gov/bank/historical/

crisis/.

9 See https://www.whitehouse.gov/briefing-room/

presidential-actions/2021/07/09/executive-order-

on-promoting-competition-in-the-american-

economy/and https://whitehouse.gov/briefing-

room/statements-releases/2021/07/09/fact-sheet-

executive-order-on-promoting-competition-in-the-

american-economy/.

10 Bank Merger Act, Public Law 86–463, 72 Stat.

129 (1960); Bank Merger Act Amendments of 1966,

Public Law 89–356, 80 Stat. 7 (codified as amended

at 12 U.S.C. 1828(c)(2018)), available at fdic.gov/

regulations/laws/rules/1000-2000.html#

1000sec.18c

//whitehouse.gov/briefing-

room/statements-releases/2021/07/09/fact-sheet-

executive-order-on-promoting-competition-in-the-

american-economy/.

10 Bank Merger Act, Public Law 86–463, 72 Stat.

129 (1960); Bank Merger Act Amendments of 1966,

Public Law 89–356, 80 Stat. 7 (codified as amended

at 12 U.S.C. 1828(c)(2018)), available at fdic.gov/

regulations/laws/rules/1000-2000.html#

1000sec.18c.

11 Pursuant to Title III of the Dodd–Frank Act, all

functions of Office of Thrift Supervision relating to

federal savings associations were transferred to the

OCC, and all functions of the OTS relating to state

savings associations were transferred to the FDIC.

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

national bank, OCC approval of the bank’s

application under 12 CFR 5.33 is also required.

13 12 U.S.C. 1828(c)(3)–(5) and 1828(c)(11).

14 All things being equal, the number of

competitors in the market for banking products and

services can be affected by two different types of

transactions: Unaffiliated depository institutions

can merge with each other; or depository

institutions can be acquired by unaffiliated

companies that already own one or more depository

institutions. Companies that own or and control

depository institutions are commonly known as

depository institution holding companies and may

either be bank holding companies or savings and

loan holding companies. Depository institution

holding companies are regulated by the Board. Bank

holding companies are subject to the BHCA (for

companies owning state and national banks, see 12

U.S.C. 1841 et. seq.), and savings and loan holding

companies are subject to the HOLA (for companies

owning savings associations, see 12 U.S.C. 1461 et.

seq.). It has been through the acquisition of

depository institutions by existing depository

institution holding companies, or the merger of

these holding companies, that a number of

depository institutions have come under the

common control. The Board, in consultation with

the U.S

holding

companies are subject to the HOLA (for companies

owning savings associations, see 12 U.S.C. 1461 et.

seq.). It has been through the acquisition of

depository institutions by existing depository

institution holding companies, or the merger of

these holding companies, that a number of

depository institutions have come under the

common control. The Board, in consultation with

the U.S. Department of Justice (DOJ), analyzes the

competitive impact of these acquisitions under

standards similar to those applicable under the

Bank Merger Act. For example, when depository

institutions under common control merge, the DOJ

and the federal banking agencies have determined

that these mergers of affiliates are competitively

neutral. Competitive analysis under the Bank

Merger Act takes place when unaffiliated

depository institutions merge and is performed by

the responsible agency.

15 12 U.S.C. 1828(c)(5)(B).

16 12 U.S.C. 1828(c)(13)(A).

17 Id.

18 Dodd-Frank Wall Street Reform and Consumer

Protection Act, Public Law 111–203, sec. 604(f), 124

Stat. 1376, 1602 (2010) (codified as 12 U.S.C.

1828(c)(5) (2018)), available at https://

www.govinfo.gov/app/details/PLAW-111publ203.

large insured depository institution. At

the time that the SRE was granted—the

first-ever use of the SRE—Wachovia had

total holding company assets of

approximately $800 billion.8

Recent Executive Order

Additionally, on July 9, 2021, the

President signed an Executive Order on

Promoting Competition in the American

Economy (Executive Order).9 This

Executive Order, in part, instructs U.S.

agencies to consider the impact that

consolidation may have on maintaining

a fair, open, and competitive

marketplace, and on the welfare of

workers, farmers, small businesses,

startups, and consumers

der

Additionally, on July 9, 2021, the

President signed an Executive Order on

Promoting Competition in the American

Economy (Executive Order).9 This

Executive Order, in part, instructs U.S.

agencies to consider the impact that

consolidation may have on maintaining

a fair, open, and competitive

marketplace, and on the welfare of

workers, farmers, small businesses,

startups, and consumers. With respect

to the banking sector specifically, the

Executive Order directs the Attorney

General, in consultation with the

Chairman of the Board of Governors of

the Federal Reserve System, the

Chairperson of the Board of Directors of

the Federal Deposit Insurance

Corporation, and the Comptroller of the

Currency, to adopt a plan for the

revitalization of merger oversight under

the Bank Merger Act and the Bank

Holding Company Act (BHCA).

Conclusion

In light of the significant

consolidation in the banking industry

over the past three decades, the federal

banking agencies requirement to

consider financial stability risk under

the BMA, the FDIC’s responsibilities for

the resolution of large insured

depository institutions, and the

Executive Order, the FDIC is soliciting

comments from interested parties

regarding the rules, regulations,

guidance, and statements of policy

(together, regulatory framework) that

apply to bank merger transactions

involving one or more insured

depository institutions. The FDIC is

interested in receiving comments

regarding the effectiveness of the

existing regulatory framework in

meeting the requirements of the Bank

Merger Act

comments from interested parties

regarding the rules, regulations,

guidance, and statements of policy

(together, regulatory framework) that

apply to bank merger transactions

involving one or more insured

depository institutions. The FDIC is

interested in receiving comments

regarding the effectiveness of the

existing regulatory framework in

meeting the requirements of the Bank

Merger Act.

Bank Merger Act Overview

The Bank Merger Act established a

framework that required, in general,

consent of the responsible agency prior

to a merger.10 With respect to merger

transactions solely involving insured

depository institutions, the responsible

agency is the FDIC if the resulting

institution is a state nonmember bank or

state savings association, the Federal

Reserve Board if the resulting institution

is a state member bank, and the Office

of the Comptroller of the Currency

(OCC) if the resulting institution is a

national bank or federal savings

association.11 With respect to any

merger transaction involving an insured

depository institution and a noninsured

institution, the FDIC is the responsible

agency notwithstanding the charter of

the insured depository institution.12

In addition, the Bank Merger Act

generally requires that, prior to

approving any merger, the responsible

agency must (a) ensure that notice of a

proposed transaction be published; (b)

request a report on competitive factors

from the Attorney General of the United

States for merger transactions involving

nonaffiliates; (c) not approve any

proposed merger that would result in a

monopoly or produce substantial

anticompetitive effects; and (d) consider

certain additional factors, including 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

United States banking or financial

system, and the effectiveness of any

insured depository institution involved

in the merger at

tive effects; and (d) consider

certain additional factors, including 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

United States banking or financial

system, and the effectiveness of any

insured depository institution involved

in the merger at combatting money

laundering.13

When assessing the potential

anticompetitive effects of the proposed

merger, the responsible agency is

required to consider whether the merger

would substantially lessen competition,

tend to create a monopoly, or otherwise

be in restraint of trade.14 In no case may

the responsible agency approve a merger

transaction that would result in a

monopoly, and the responsible agency

may not approve any merger that

exhibits anticompetitive effects unless

the responsible agency determines ‘‘that

the anticompetitive effects of the

proposed 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.’’ 15 Further,

the responsible agency may not approve

an application for an interstate merger

transaction if the resulting insured

depository institution would control

more than 10 percent of the total

amount of deposits of insured

depository institutions in the United

States.16

In addition to consideration of

anticompetitive effects, the Bank Merger

Act requires that: ‘‘In every case,

[emphasis added] the responsible

agency shall take into consideration the

financial and managerial resources and

future prospect of the existing and

proposed institutions, the convenience

and needs of the community to be

served, and the risk to the stability of

the United States banking or financial

system.’’ 17 The latter condition—that

the responsible agency consider

financial stability—was added in 2010

by section 604(f) of the Dodd-Frank

Act.18

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agerial resources and

future prospect of the existing and

proposed institutions, the convenience

and needs of the community to be

served, and the risk to the stability of

the United States banking or financial

system.’’ 17 The latter condition—that

the responsible agency consider

financial stability—was added in 2010

by section 604(f) of the Dodd-Frank

Act.18

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Federal Register / Vol. 87, No. 62 / Thursday, March 31, 2022 / Proposed Rules

19 12 CFR part 303, available at https://

www.fdic.gov/regulations/laws/rules/2000-

250.html.

20 12 CFR 5.33, available at https://www.ecfr.gov/

current/title-12/chapter-I/part-5.

21 See 12 CFR 303.1–303.19.

22 See 12 CFR 303.60–303.65.

23 63 FR 44762, August 20, 1998, effective

October 1, 1998; amended at 67 FR 48178, July 23,

2002; 67 FR 79278, December 27, 2002; and 73 FR

8871, February 15, 2008, available at https://

www.fdic.gov/regulations/laws/rules/5000-

1200.html.

24 The FDIC’s Application Procedures Manual

provides a non-exhaustive list of quantitative

metrics, as well as qualitative factors, to be

considered when evaluating the financial stability

factor. FDIC Application Procedures Manual:

Mergers, available at https://www.fdic.gov/

regulations/applications/resources/apps-proc-

manual/section-04-mergers.pdf.

25 See, e.g., OCC Conditional Approval No. 1031

(April 6, 2012). See also the ‘‘Business

Combinations’’ booklet of the Comptroller’s

Licensing Manual, available at https://occ.gov/

publications-and-resources/publications/

comptrollers-licensing-manual/files/bizcombo.pdf.

26 In September 2020, DOJ sought comment on

whether to revise the Guidelines or its competitive

analysis of bank mergers. See https://

www.justice.gov/opa/pr/antitrust-division-seeks-

public-comments-updating-bank-merger-review-

analysis

e Comptroller’s

Licensing Manual, available at https://occ.gov/

publications-and-resources/publications/

comptrollers-licensing-manual/files/bizcombo.pdf.

26 In September 2020, DOJ sought comment on

whether to revise the Guidelines or its competitive

analysis of bank mergers. See https://

www.justice.gov/opa/pr/antitrust-division-seeks-

public-comments-updating-bank-merger-review-

analysis.

27 Available at http://justice.gov/atr/bank-merger-

competitive-review-introduction-and-overview-

1995.

28 The HHI is a statistical measure of market

concentration and is also used as the principal

measure of market concentration in the Department

of Justice’s Merger Guidelines. The HHI for a given

market is calculated by squaring each individual

competitor’s share of total deposits within the

market and then summing the squared market share

products. For example, the HHI for a market with

a single competitor would be: 1002 = 10,000: for a

market with five equal competitors with equal

market shares, the HHI would be: 202 + 202 + 202

+ 202 + 202 = 2,000.

29 Section 2 of the Interagency Guidelines,

available at www.justice.gov/atr/bank-merger-

competitive-review-introduction-and-overview-

1995.

FDIC and OCC Regulations and

Statement of Policy Regarding Bank

Mergers

The requirements of the Bank Merger

Act are incorporated into 12 CFR part

303 of the FDIC’s regulations 19 and into

the OCC’s regulations at 12 CFR 5.33.20

In the FDIC’s regulations, subpart A of

12 CFR part 303 provides regulations

that are generally applicable for all

filings and includes general filing

procedures, computation of time, the

effect of Community Reinvestment Act

(CRA) performance on filing, and the

administrative procedures associated

with a filing.21 Subpart D of 12 CFR part

303 provides regulations specifically

pertaining to mergers involving an

insured depository institution and

includes definitions, transactions

requiring prior approval, filing

procedures, expedited and standard

processing procedure

the

effect of Community Reinvestment Act

(CRA) performance on filing, and the

administrative procedures associated

with a filing.21 Subpart D of 12 CFR part

303 provides regulations specifically

pertaining to mergers involving an

insured depository institution and

includes definitions, transactions

requiring prior approval, filing

procedures, expedited and standard

processing procedures, and public

notice requirements.22 Additional

guidance on the FDIC’s processing of

merger transactions is set forth in the

FDIC Statement of Policy on Bank

Merger Transactions (FDIC Policy

Statement).23

For those transactions requiring FDIC

approval, the FDIC Statement of Policy

describes the four factors that the FDIC

will consider in its review: Competitive

factors, prudential factors, convenience

and needs factor, and anti-money

laundering record. The FDIC Policy

Statement also describes related

considerations such as those related to

interstate bank merger transactions,

interim merger transactions, branch

closings, legal fees and other expenses,

and trade names. The FDIC Policy

Statement, however, does not address

the financial stability provisions added

to the Bank Merger Act under section

604(f) of the Dodd-Frank Act.24

The OCC’s regulation, at 12 CFR 5.33,

provides a framework for evaluating

mergers, which includes the

consideration of the risk to financial

stability. 12 CFR 5.33 generally

addresses business combinations

involving a national bank or federal

savings association. Section 5.33(c)

covers the licensing requirements for

business combinations. The factors the

OCC considers in all business

combinations, including business

combinations under the BMA, are set

forth in § 5.33(e)(1)(i), and

§§ 5.33(e)(1)(ii) & (iii) provide the

additional factors that the OCC

considers for business combinations

under the Bank Merger Act

ank or federal

savings association. Section 5.33(c)

covers the licensing requirements for

business combinations. The factors the

OCC considers in all business

combinations, including business

combinations under the BMA, are set

forth in § 5.33(e)(1)(i), and

§§ 5.33(e)(1)(ii) & (iii) provide the

additional factors that the OCC

considers for business combinations

under the Bank Merger Act.

When considering the risk to the

stability of the banking or financial

system pursuant to a BMA application,

the OCC considers six factors: (1)

Whether the proposed transaction

would result in a material increase in

risks to financial system stability due to

an increase in size of the combining

institutions; (2) whether the transaction

would result in a reduction in the

availability of substitute providers for

the services offered by the combining

institutions; (3) whether the combined

institution would engage in any

business activities or participate in

markets in a manner that, in the event

of financial distress of the combined

institution, would cause significant

risks to other institutions; (4) whether

the transaction would materially

increase the extent to which the

combining institutions contribute to the

complexity of the financial system; (5)

whether the transaction would

materially increase the extent of cross-

border activities of the combining

institutions; and (6) whether the

transaction would increase the relative

degree of difficulty of resolving or

winding up the combined institution.25

1995 Bank Merger Competitive Review

Guidelines 26

In order to expedite the competitive

review process required by the BHCA,

Home Owners Loan Act (HOLA), and

the Bank Merger Act, and to reduce

regulatory burden, the DOJ, in

consultation with the federal banking

agencies, developed the 1995 Bank

Merger Competitive Review Guidelines

(Guidelines).27 The Guidelines state that

merger review will rely primarily on the

effects of competition in predefined

markets determined by the Board

process required by the BHCA,

Home Owners Loan Act (HOLA), and

the Bank Merger Act, and to reduce

regulatory burden, the DOJ, in

consultation with the federal banking

agencies, developed the 1995 Bank

Merger Competitive Review Guidelines

(Guidelines).27 The Guidelines state that

merger review will rely primarily on the

effects of competition in predefined

markets determined by the Board. To

the extent that the post-merger

Herfindahl-Hirschman Index (HHI) does

not exceed 1800 or increase by more

than 200, the federal banking agencies

generally are unlikely to review further

the competitive effects of the merger.28

However, the Guidelines provide that

the federal banking agencies may

examine a merger transaction in greater

detail if the federal banking agencies

believe additional scrutiny is necessary.

As part of this further examination

under the Guidelines, the federal

banking agencies may consider, among

other things, whether there is evidence

that (a) the merging parties do not

significantly compete with one another;

(b) rapid economic change has resulted

in an outdated geographic market

definition and an alternate market is

more appropriate; (c) market shares are

not an adequate indicator of the extent

of competition in the market; (d) a thrift

institution is actively engaged in

providing services to commercial

customers, particularly loans for

business startup or working capital

purposes and cash management

services; (e) a credit union has such

membership restrictions, or lack of

restrictions, and offers such services to

commercial customers that it should be

considered to be in the market; (f) there

is actual competition by out-of-market

institutions for commercial customers,

particularly competition for loans for

business startup or working capital

purposes; and (g) there is actual

competition by non-bank institutions for

commercial customers, particularly

competition for loans for business

startup or working capital purposes.29

Request for Comment

The

be in the market; (f) there

is actual competition by out-of-market

institutions for commercial customers,

particularly competition for loans for

business startup or working capital

purposes; and (g) there is actual

competition by non-bank institutions for

commercial customers, particularly

competition for loans for business

startup or working capital purposes.29

Request for Comment

The FDIC is seeking comment on all

aspects of the existing regulatory

framework that applies to bank merger

transactions. In responding to the

following questions, the FDIC asks that

commenters please include quantitative

as well as qualitative support for their

responses, as applicable.

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Federal Register / Vol. 87, No. 62 / Thursday, March 31, 2022 / Proposed Rules

Question 1. Does the existing

regulatory framework properly consider

all aspects of the Bank Merger Act as

currently codified in Section 18(c) of the

Federal Deposit Insurance Act?

Question 2. What, if any, additional

requirements or criteria should be

included in the existing regulatory

framework to address the financial

stability risk factor included by the

Dodd-Frank Act? Are there specific

quantitative or qualitative measures that

should be used to address financial

stability risk that may arise from bank

mergers? If so, are there specific

quantitative measures that would also

ensure greater clarity and

administrability? Should the FDIC

presume that any merger transaction

that results in a financial institution that

exceeds a predetermined asset size

threshold, for example $100 billion in

total consolidated assets, poses a

systemic risk concern?

Question 3

y risk that may arise from bank

mergers? If so, are there specific

quantitative measures that would also

ensure greater clarity and

administrability? Should the FDIC

presume that any merger transaction

that results in a financial institution that

exceeds a predetermined asset size

threshold, for example $100 billion in

total consolidated assets, poses a

systemic risk concern?

Question 3. To what extent should

prudential factors (for example, capital

levels, management quality, earnings,

etc.) be considered in acting on a merger

application? Should bright line

minimum standards for prudential

factors be established? If so, what

minimum standard(s) should be

established and for which prudential

factor(s)?

Question 4. To what extent should the

convenience and needs factor be

considered in acting on a merger

application? Is the convenience and

needs factor appropriately defined in

the existing framework? Is the reliance

on an insured depository institution’s

successful Community Reinvestment

Act performance evaluation record

sufficient? Are the convenience and

needs of all stakeholders appropriately

addressed in the existing regulatory

framework? To what extent and how

should the convenience and needs

factor take into consideration the impact

that branch closings and consolidations

may have on affected communities? To

what extent should the FDIC

differentiate its consideration of the

convenience and needs factor when

considering merger transactions

involving a large insured depository

institution and merger transactions

involving a small insured depository

institution? To what extent should the

CFPB be consulted by the FDIC when

considering the convenience and needs

factor and should that consultation be

formalized?

Question 5

differentiate its consideration of the

convenience and needs factor when

considering merger transactions

involving a large insured depository

institution and merger transactions

involving a small insured depository

institution? To what extent should the

CFPB be consulted by the FDIC when

considering the convenience and needs

factor and should that consultation be

formalized?

Question 5. In addition to the HHI, are

there other quantitative measures that

the federal banking agencies should

consider when reviewing a merger

application? If so, please describe the

measures and how such measures

should be considered in conjunction

with the HHI. To what extent should

such quantitative measures be

differentiated when considering mergers

involving a large insured depository

institution and mergers involving only

small insured depository institutions?

Question 6. How and to what extent

should the following factors be

considered in determining whether a

particular merger transaction creates a

monopoly or is otherwise

anticompetitive?

Please address the following factors:

(a) The merging parties do not

significantly compete with one another;

(b) Rapid economic change has

resulted in an outdated geographic

market definition and an alternate

market is more appropriate;

(c) Market shares are not an adequate

indicator of the extent of competition in

the market;

(d) A thrift institution is actively

engaged in providing services to

commercial customers, particularly

loans for business startup or working

capital purposes and cash management

services;

(e) A credit union has such

membership restrictions, or lack of

restrictions, and offers such services to

commercial customers that it should be

considered to be in the market;

(f) There is actual competition by out-

of-market institutions for commercial

customers, particularly competition for

loans for business startup or working

capital purposes; and

ses and cash management

services;

(e) A credit union has such

membership restrictions, or lack of

restrictions, and offers such services to

commercial customers that it should be

considered to be in the market;

(f) There is actual competition by out-

of-market institutions for commercial

customers, particularly competition for

loans for business startup or working

capital purposes; and

(g) There is actual competition by

non-bank institutions for commercial

customers, particularly competition for

loans for business startup or working

capital purposes. With respect to the

preceding factors, how and to what

extent should the activity of current

branches or pending branch

applications be considered?

Question 7. Does the existing

regulatory framework create an implicit

presumption of approval? If so, what

actions should the FDIC take to address

this implicit presumption?

Question 8. Does the existing

regulatory framework require an

appropriate burden of proof from the

merger applicant that the criteria of the

Bank Merger Act have been met? If not,

what modifications to the framework

would be appropriate with respect to

the burden of proof?

Question 9. The Bank Merger Act

provides an exception to its

requirements if the responsible agency

finds that it must act immediately in

order to prevent the probable failure of

one of the insured depository

institutions involved in the merger

transaction

Bank Merger Act have been met? If not,

what modifications to the framework

would be appropriate with respect to

the burden of proof?

Question 9. The Bank Merger Act

provides an exception to its

requirements if the responsible agency

finds that it must act immediately in

order to prevent the probable failure of

one of the insured depository

institutions involved in the merger

transaction. To what extent has this

exception proven beneficial or

detrimental to the bank resolution

process and to financial stability?

Should any requirements or controls be

put into place regarding the use of this

exemption, for example when

considering purchase and assumption

transactions in a large bank resolution?

Are there attributes of GSIB

resolvability, such as a Total Loss-

Absorbing Capacity (TLAC)

requirement, that could be put into

place that would facilitate the resolution

of a large insured depository institution

without resorting to a merger with

another large institution or a purchase

and assumption transaction with

another large institutions?

Question 10. To what extent would

responses to Questions 1–9 differ for the

consideration of merger transactions

involving a small insured depository

institution? Should the regulations and

policies of the FDIC be updated to

differentiate between merger

transactions involving a large insured

depository institution and those

involving a small insured depository

institution? If yes, please explain. How

should the FDIC define large insured

depository institutions for these

purposes?

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, on December 6,

2021.

Harrel M. Pettway,

Executive Secretary.

Editorial note: This document was

received for publication by the Office of the

Federal Register on March 25, 2022.

[FR Doc. 2022–06720 Filed 3–30–22; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No

rder of the Board of Directors.

Dated at Washington, DC, on December 6,

2021.

Harrel M. Pettway,

Executive Secretary.

Editorial note: This document was

received for publication by the Office of the

Federal Register on March 25, 2022.

[FR Doc. 2022–06720 Filed 3–30–22; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. FAA–2022–0382; Project

Identifier MCAI–2021–01452–T]

RIN 2120–AA64

Airworthiness Directives; Airbus SAS

Airplanes

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: The FAA proposes to adopt a

new airworthiness directive (AD) for all

Airbus SAS Model A350–941 and –1041

airplanes. This proposed AD was

prompted by reports that passenger door

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