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Proposed Rule2026-19308

Merger Transactions

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Published

September 22, 2026

Issuing agencies

Federal Deposit Insurance Corporation

Abstract

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it to reflect the full range of merger transactions subject to FDIC review along with reforming or eliminating outdated provisions.

Full Text

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<title>Federal Register, Volume 91 Issue 182 (Tuesday, September 22, 2026)</title>
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[Federal Register Volume 91, Number 182 (Tuesday, September 22, 2026)]
[Proposed Rules]
[Pages 60196-60235]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19308]

[[Page 60195]]

Vol. 91

Tuesday,

No. 182

September 22, 2026

Part II

Federal Deposit Insurance Corporation

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12 CFR Parts 303, 314, and 333

Merger Transactions; Proposed Rule

Federal Register / Vol. 91 , No. 182 / Tuesday, September 22, 2026 /
Proposed Rules

[[Page 60196]]

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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.

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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:
<bullet> Agency website: <a href="https://www.fdic.gov/resources/regulations/federal-register">https://www.fdic.gov/resources/regulations/federal-register</a>-publications. Follow instructions for
submitting comments on the FDIC's website.
<bullet> 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.
<bullet> 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.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#a2c1cdcfcfc7ccd6d1e2c4c6cbc18cc5cdd4">[email&#160;protected]</a>. Include RIN 3064-AG18 on the
subject line of the message.
<bullet> Public Inspection: Comments received, including any
personal information provided, may be posted without change to <a href="https://www.fdic.gov/resources/regulations/federal-register">https://www.fdic.gov/resources/regulations/federal-register</a> 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, <a href="/cdn-cgi/l/email-protection#cbb8a6aaa8a2aab88badafa2a8e5aca4bd">[email&#160;protected]</a>, Division of Risk Management
Supervision; Tara Oxley, Associate Director, (202) 898-6722,
<a href="/cdn-cgi/l/email-protection#9beff4e3f7fee2dbfdfff2f8b5fcf4ed">[email&#160;protected]</a>; David Sharp, Senior Examination Specialist, (202) 898-
3997, <a href="/cdn-cgi/l/email-protection#c4a0a5b7aca5b6b484a2a0ada7eaa3abb2">[email&#160;protected]</a>, Division of Depositor and Consumer Protection;
Annmarie Boyd, Assistant General Counsel, (202) 898-3714,
<a href="/cdn-cgi/l/email-protection#573635382e331731333e3479303821">[email&#160;protected]</a>; Kali Fleming, Senior Attorney, (571) 637-1896,
<a href="/cdn-cgi/l/email-protection#5239343e373f3b3c351234363b317c353d24">[email&#160;protected]</a>, 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,\2\ 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.
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\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.
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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

[[Page 60197]]

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,'' \3\ and an
undefined scope for transactions considered mergers in substance--is
(at times) an undisciplined and unnecessarily long and inconsistent
process.
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\3\ See 12 CFR 303.11(c)(2).
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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.\4\ 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.\5\
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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).
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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 \6\ 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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\6\ 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).
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II. Background

The BMA, codified at section 18(c) of the Federal Deposit Insurance
Act (FDI Act),\7\ 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

[[Page 60198]]

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.\8\ 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; \9\ 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).\10\
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\7\ 12 U.S.C. 1828(c).
\8\ 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).
\9\ The FDIC considers each of these elements separately as part
of a single statutory factor.
\10\ 12 U.S.C. 1828(c)(5), (11).
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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 Sec. 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 Sec. 303.61(c)(1); (2) in
which all institutions involved in the transaction satisfy each of the
criteria in Sec. 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 Sec. 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),\11\
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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\11\ 15 U.S.C. 18a(a)(2)(B)(i).
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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

[[Page 60199]]

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 Sec. 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 Sec. 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

[[Page 60200]]

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 Sec. 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 (Sec. 303.60)

The proposed rule would revise Sec. 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 Sec. 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 (Sec. 303.61)

1. Centrally Booked Deposits (Sec. 303.61(a))
The proposed rule would define ``centrally booked deposits'' at
Sec. 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 Sec. 333.5(c). In new Sec. 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 (Sec. 303.61(b))
The proposed rule would refine the definition of ``corporate
reorganization'' at Sec. 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.\12\ It
would also align with the definition of ``affiliate'' under the Bank
Holding Company Act.\13\
---------------------------------------------------------------------------

\12\ See 12 U.S.C. 1828(c)(4)(C)(ii).
\13\ 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 Sec. Sec. 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.\14\
---------------------------------------------------------------------------

\14\ 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

[[Page 60201]]

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 (Sec. 303.61(c))
The proposed rule would establish a new subcategory of merger
transactions called ``de minimis merger transactions'' at Sec.
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,\15\ 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.
---------------------------------------------------------------------------

\15\ 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 Sec. 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 Sec. 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

[[Page 60202]]

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 (Sec. 303.61(d))
The proposed rule would establish a new defined term, ``interim
institution,'' at Sec. 303.61(d), consistent with the definition of
``interim institution'' at Sec. 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 (Sec. 303.61(e))
The proposed rule would revise the definition of ``interim merger
transaction'' at current Sec. 303.61(c) and move the term to new Sec.
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 (Sec. 303.61(f))
The proposed rule would establish a new defined term, ``interstate
merger transaction,'' at Sec. 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 Sec. 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 (Sec. 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); <a href="http://MyLocker.com">MyLocker.com</a>, 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).

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[[Page 60203]]

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 (Sec. 303.61(h))
The FDIC proposes to revise the definition of ``merger
transaction'' in current Sec. 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 Sec.
303.61(h). Current Sec. 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 (Sec. 303.61(i))
The proposed rule would adopt the definition of ``operating
subsidiary'' in the Federal Reserve Board's Regulation W at new Sec.
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.
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\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).

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[[Page 60204]]

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 (Sec. 303.61(j))
The proposed rule would adopt a new defined term for ``significant
asset transfers'' at new Sec. 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 (Sec. 303.61(k))
The proposed rule would define ``substantially complete'' at new
Sec. 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 Sec. 333.5, and to
confirm the applicant has complied with its statutory obligations. The
processing timeline for a merger filing under Sec. 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 (Sec. 303.61(l))
The proposed rule would define ``relevant geographic market'' at
new Sec. 303.61(l) for purposes of conducting market concentration
analysis under new Sec. 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 (Sec. 303.62)

The proposed rule would revise Sec. 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 (Sec. 303.62(a))
Under Sec. 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 Sec. 303.62(a) to reflect the new
definition of ``merger transaction'' in Sec. 303.61(h). The proposed
rule would clarify that the definition of ``merger transaction''
includes a merger in substance, as defined in Sec. 303.61(g).
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\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).
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As discussed previously, neither the revision of the defined term
``merger transaction'' in Sec. 303.61(h), nor the conforming changes
to Sec. 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 (Sec. 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 Sec. 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 Sec. 303.62(b)? Why or why not?
a. Interstate Merger Transactions (Sec. 303.62(b)(1))
The proposed rule would revise Sec. 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

[[Page 60205]]

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.
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\28\ See 12 U.S.C. 1831u(a).
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Question 32: Would the proposed revisions to Sec. 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 (Sec. 303.62(b)(2))
The proposed rule would divide the content of current Sec.
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 Sec. 303.24.
New Sec. 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).
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New Sec. 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 Sec. 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 (Sec. 303.62(b)(3) and (4))
The proposed rule would revise the substance of current Sec.
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 Sec.
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 Sec. 303.62(b)(5).
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\30\ See 64 FR 34844, 34845 (June 29, 1999).
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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 (Sec. 303.63)

1. General (Sec. 303.63(a))
The proposed rule would revise Sec. 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\
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\31\ See 12 CFR 5.33(j).
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2. Submission Requirements (Sec. 303.63(b))
The proposed rule would revise Sec. 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 Sec. 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 Sec. 333.5 is voluntary. If an applicant would like the FDIC
to consider mitigating factors, as described in new Sec. 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 Sec. 303.63(b)? Why or why not?
3. Interim Merger Transactions (Sec. 303.63(c))
The proposed rule would retain much of the substance of Sec.
303.63(c) with conforming changes to reflect the new definitions in the
proposed rule.
Question 39: Should the FDIC adopt substantive changes to Sec.
303.63(c)? Why or why not?

E. Processing (Sec. 303.64)

1. Filing Decisions (Sec. 303.64(a))
a. Timeliness (Sec. 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 Sec. 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.
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\32\ See 12 U.S.C. 1828(c)(1), (2), and (6).
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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.

[[Page 60206]]

Question 40: Should the FDIC adopt mandatory processing timelines?
Why or why not?
b. Immediate Consummation (Sec. 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 Sec. 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.
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\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).
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The BMA generally imposes a waiting period before the parties may
consummate an approved merger transaction.\37\ 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.
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\37\ 12 U.S.C. 1828(c)(6).
\38\ 12 U.S.C. 1828(c)(6).
---------------------------------------------------------------------------

2. Substantially Complete Filings (Sec. 303.64(b))
The proposed rule would address the FDIC's disposition of
incomplete merger filings at new Sec. 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 Sec.
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 (Sec.
303.64(c))
The proposed rule would establish a new category of rapid
processing for de minimis merger transactions at Sec. 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

[[Page 60207]]

Attorney General for additional time to analyze competitive
concerns.\39\ 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
Sec. 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.
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\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 Sec.
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 Sec. 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 Sec. 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 Sec. 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 Sec. 303.64(c), should the FDIC
adopt a deemed approval framework for such transactions? Why or why
not?
4. Removal From Expedited Processing (Sec. 303.11(c))
The proposed rule would provide that merger filings subject to
expedited processing in new Sec. Sec. 303.64(d) and (e) could be
removed from expedited processing for any of the reasons set forth in
revised Sec. 303.11(c)(2).\40\ 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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\40\ The proposed rule would not permit the FDIC to remove a
transaction from rapid processing under Sec. 303.64(c).
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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 Sec.
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 Sec.
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 Sec. 303.11(c)
to reflect these expectations as applied not

[[Page 60208]]

only to merger filings but also to other filings subject to removal
under Sec. 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
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 (Sec. 303.64(d))
The proposed rule would establish new expedited processing
procedures for corporate reorganizations that are not de minimis merger
transactions at new Sec. 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 Sec. 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 Sec.
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 Sec. 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 Sec.
303.64(d)? Why or why not? If yes, please explain.
Question 56: Are the eligibility criteria for expedited processing
under Sec. 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 Sec.
333.5 will be resolved favorably for a corporate reorganization
eligible for expedited processing under Sec. 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 Sec. 303.64(d), should the
FDIC adopt a deemed approval framework for such transactions or
otherwise process them pursuant to rapid processing under new Sec.
303.64(c)? Why or why not?

[[Page 60209]]

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 Sec. 303.64(d) or de Minimis Merger
Transactions (Sec. 303.64(e))
The proposed rule would revise current Sec. 303.64(a) to address
expedited processing for other merger transaction types when engaged in
by eligible depository institutions, and relocate the revised Sec.
303.64(a) to new Sec. 303.64(e). The proposed rule would retain
expedited processing for eligible depository institutions that satisfy
the revised criteria in new Sec. 303.64(e)(3). The proposed rule would
update the expedited processing criteria in current Sec.
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
Sec. 303.64(a)(2), with certain modifications to reflect the FDIC's
practice with respect to the competitive factors report in Sec.
303.64(a)(2)(iii) consistent with the language used in new Sec.
303.64(c), along with the FDIC's discretion to remove a filing from
expedited processing for the reasons set forth in Sec. 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 Sec. 303.64(e)? Why
or why not? If yes, please explain.
Question 62: Are the eligibility criteria for expedited processing
under new Sec. 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 Sec. 303.64(e), should the
FDIC adopt a deemed approval framework for such transactions or
otherwise subject them to rapid processing under new Sec. 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 Sec. 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 (Sec.
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 Sec. 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
Sec. 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\
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\41\ See General Application Processing Timeframes for Regional
Offices, FDIC, available at <a href="https://www.fdic.gov/regulations/applications/application-processing-timeframes.pdf">https://www.fdic.gov/regulations/applications/application-processing-timeframes.pdf</a>.
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Under new Sec. 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
Sec. 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
Sec. 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 (Sec.
303.64(g))
For all other merger filings, the proposed rule would include new
standard processing procedures in Sec. 303.64(g). Based on the FDIC's
experience, as compared to the standard processing option for
qualifying merger transactions in Sec. 303.64(f), merger transactions
under Sec. 303.64(g) often require additional processing time due

[[Page 60210]]

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 Sec. 303.64(g) would provide
that the FDIC would take action on a merger filing under Sec.
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 Sec. 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 (Sec. 303.64(h))
The proposed rule would revise existing Sec. 303.64(c) and move it
to new Sec. 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.
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\42\ 12 U.S.C. 1467a(s)(2).
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F. Public Notice Requirements (Sec. 303.65)

1. General (Sec. 303.65(a))
The proposed rule would continue to address public notice
requirements for merger transactions with modifications at Sec.
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.
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\43\ 12 U.S.C. 1828(c)(3).
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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 Sec. 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 Sec. 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\
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\44\ 12 U.S.C. 1828(c)(3)(D).
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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 Sec. 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

[[Page 60211]]

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 (Sec. 303.65(b))
The proposed rule would establish reduced publication requirements
for corporate reorganizations at new Sec. 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.\45\ 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.
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\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 (Sec. 303.65(c))
The proposed rule would revise existing Sec. 303.65(b) and move it
to a new Sec. 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 Sec. 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 Sec. 303.65, including
reducing the number of publications required for corporate
reorganizations in Sec. 303.65(b). The proposed rule would retain the
current exception for merger transactions involving probable failures
at new Sec. 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 (Sec. 303.65(d))
The proposed rule would revise existing Sec. 303.65(c) and move
the provision to new Sec. 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 Sec. 303.65(c),
which refers to an emergency requiring expeditious action, because this
circumstance would be addressed in new Sec. 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 (Sec. 303.65(e))
The proposed rule would move existing Sec. 303.65(d) to new Sec.
303.65(e) with revisions. The proposed rule would retain the 30-day
comment period for merger filings submitted pursuant to Sec. Sec.
303.64(e) through (h). Under new Sec. 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 Sec. 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 Sec. 303.65(e)(2). This time period is
consistent with the existing comment period for such merger
transactions at existing Sec. 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\
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\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 Sec. 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

[[Page 60212]]

public comment period for de minimis merger transactions.
The proposed rule would also make corresponding changes to Sec.
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 (Sec. 303.8(a))
Under Sec. 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 Sec. 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 (Sec. 303.66)

The proposed rule would adopt a new notice and prior non-objection
framework for significant asset transfers under new Sec. 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.
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\47\ 12 CFR 5.53.
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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 Sec. 303.62 and Sec. 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 Sec. 303.62 and Sec. 303.64.\48\
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\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.
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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 Sec. 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

[[Page 60213]]

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 (Sec. 303.67)

The proposed rule would include a severability provision at new
Sec. 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 (Sec. 333.5)

1. Scope (Sec. 333.5(a))
The proposed rule would codify the FDIC's evaluation of the
statutory factors at new Sec. 333.5. Section 333.5(a) would explain
that Sec. 333.5 would apply to merger transactions subject to FDIC
approval under the BMA, and that the definitions in Sec. 303.61 apply
to Sec. 333.5. Historically, the FDIC has provided supplements to the
procedural and other requirements for such transactions in an SOP. New
Sec. 333.5 would provide for more durability and transparency by
codifying all aspects of the FDIC's BMA review framework in regulation.
New Sec. 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 (Sec. 333.5(b))
a. Statutory Factors (Sec. 333.5(b)(1))
New Sec. 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 Sec.
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\
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\49\ 12 U.S.C. 1828(c)(5) and (11).
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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 (Sec. 333.5(b)(2))
New Sec. 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 (Sec. 333.5(b)(3))
New Sec. 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

[[Page 60214]]

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 Sec. 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 Sec. 333.5(b)(3) provide clarity and
certainty to the public? Why or why not?
d. Focus on the Resulting Institution (Sec. 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 Sec.
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 Sec. 333.5(b)(3), and the cumulative benefits and impact of the
merger transaction consistent with new Sec. 333.5(c)(4).
3. Competition (Sec. 333.5(c))
New Sec. 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 (Sec. 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\
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\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).
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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\
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\53\ 12 U.S.C. 1828(c)(4)(B)(i).
\54\ 12 U.S.C. 1828(c)(4)(B)(ii).
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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 Sec.
333.5(c)(1).
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\55\ 12 U.S.C. 1828(c)(5)(A).
\56\ 12 U.S.C. 1828(c)(5)(B).
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b. Initial Herfindahl-Hirschman Index (HHI) Screen (Sec. 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.
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\57\ See, e.g., FDIC, Applications Procedures Manual, p. 4-19
(June 2019), available at <a href="https://www.fdic.gov/regulations/applications/resources/apps-proc-manual/section-04-mergers.pdf">https://www.fdic.gov/regulations/applications/resources/apps-proc-manual/section-04-mergers.pdf</a>; see
also DOJ, ``Herfindahl-Hirschman Index'' (last updated Jan. 17,
2024), available at <a href="https://www.justice.gov/atr/herfindahl-hirschman-index">https://www.justice.gov/atr/herfindahl-hirschman-index</a>.
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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

[[Page 60215]]

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.
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\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.
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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.
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\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: <a href="https://www.federalreserve.gov/newsevents/speech/files/bowman20220928a.pdf">https://www.federalreserve.gov/newsevents/speech/files/bowman20220928a.pdf</a>
[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 <a href="https://www.federalreserve.gov/bankinforeg/competitive-effects-mergers-acquisitions-faqs.htm">https://www.federalreserve.gov/bankinforeg/competitive-effects-mergers-acquisitions-faqs.htm</a> (last
accessed Aug. 19, 2026).
\61\ See <a href="https://cassidi.stlouisfed.org">https://cassidi.stlouisfed.org</a>.
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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\
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\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 <a href="https://www.frbsf.org/research-and-insights/publications/economic-letter/1998/04/bank-charters-vs-thrift-charters/">https://www.frbsf.org/research-and-insights/publications/economic-letter/1998/04/bank-charters-vs-thrift-charters/</a>.
---------------------------------------------------------------------------

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 <a href="http://congress.gov/crs_external_products/IF/HTML/IF11048.html">congress.gov/crs_external_products/IF/HTML/IF11048.html</a>.
\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 Sec. 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.

[[Page 60216]]

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) \69\ 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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\69\ 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

[[Page 60217]]

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
(Sec. 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 Sec. 333.5(c)(3). As discussed in
greater detail below, the safe harbor is intended to enable potential
applicants to rely on a simple, definitive metric for determining how
the FDIC would evaluate the competitive effects of a merger
transaction. In the FDIC's experience, many merger transactions would
fall within the proposed safe harbor. The proposed rule is intended to
streamline the initial analysis for such transactions to reduce cost
and burden for applicants and the FDIC. The safe harbor is not intended
to deter or prohibit merger transactions that do not qualify for the
safe harbor. Under new Sec. 333.5(c)(4), the FDIC would also consider
other factors in evaluating the competition statutory factor when a
merger transaction does not satisfy the HHI safe harbor.
New Sec. 333.5(c)(3) would establish that, absent objection from
the Attorney General, the FDIC would not deny a merger filing on
competition grounds where: (1) the HHI, as calculated by the FDIC, in
each relevant geographic market is 1,800 points or less after
consummation of the merger transaction; (2) if the HHI, as calculated
by the FDIC, is more than 1,800 in a relevant geographic market after
consummation of the merger transaction, the increase is less than 200
points from the HHI in the relevant geographic market prior to the
merger transaction; or (3) the transaction is a corporate
reorganization.
The FDIC is seeking comment on whether to establish a separate HHI-
based safe harbor for merger transactions involving rural areas. Most
rural banking markets are highly concentrated based on traditional
metrics such as HHI, resulting in ``stuck'' markets where the merger of
two small local banks could appear to present competition concerns
using traditional HHI metrics.\70\ To establish a separate HHI-based
safe harbor for rural areas, the FDIC would first establish a
definition of ``rural area.'' The FDIC could define ``rural area'' as a
geographical area not within a metropolitan statistical area, as
established by the Office of Management and Budget. The rural area safe
harbor could be available when either the acquiring institution or the
institution to be acquired is a small institution, as defined at Sec.
327.8(e), with a main office located in rural area whose customer base
is primarily located in a rural area.
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\70\ See Andrew P. Meyer, Market Concentration and Its Impact on
Community Banks, Federal Reserve Bank of St. Louis (Apr. 12, 2018),
available at <a href="https://www.stlouisfed.org/publications/regional-economist/first-quarter-2018/concentration-community-banks">https://www.stlouisfed.org/publications/regional-economist/first-quarter-2018/concentration-community-banks</a>.
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The FDIC emphasizes that an HHI-based safe harbor is not intended
to establish a bar to any merger transactions that fall outside the
contemplated safe harbors. The FDIC recognizes that the FDIC's initial
HHI screen may not be sufficiently tailored for a specific merger
transaction, the potential parties, and the surrounding community. As
noted further below, the FDIC would conduct additional analysis with
respect to the competition factor for transactions that do not satisfy
the safe harbor.
Finally, nothing in the proposed rule is intended to obligate
applicants to rely on CASSIDI to conduct market competition analysis.
The FDIC intends to provide the initial HHI screen concept and safe
harbor as standard metrics that all parties can consider freely and
easily. It is the FDIC's experience that most applicants already rely
on this data. The proposed rule is intended to permit this usage but is
not intended to require it. Applicants may continue to furnish their
own market competition analysis for the FDIC's consideration.
The Interagency BMA Application requires submission of information
regarding the effects of the merger transaction on existing competition
in the relevant geographic market(s) where the applicant and the target
institution operate.\71\ Each responsible agency provides different
instructions to complete the competitive analysis in a supplement to
the Interagency BMA Application. The FDIC requires an

[[Page 60218]]

applicant to delineate the relevant geographic market in the FDIC
supplement to the Interagency BMA Application (FDIC Supplement).\72\
Specifically, the FDIC Supplement notes that the relevant geographic
market includes the areas in which the offices to be acquired are
located and from which those offices derive the predominant portion of
their loans, deposits, or other business. The FDIC Supplement also
notes the relevant geographic market includes the areas where existing
and potential customers impacted by the merger transaction may
practically turn for alternative sources of banking services. New Sec.
333.5(c) enables applicants to rely on established standards for
delineating the relevant geographic market and the effect of the merger
transaction on competition in the relevant market when submitting a
merger filing. The FDIC intends to update the FDIC Supplement to remove
references to the SOP and to cite to Sec. 333.5(c). The FDIC also
intends to make conforming changes to align the FDIC Supplement with
the proposed rule, particularly Sec. 333.5.
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\71\ See Interagency BMA Application, Q. 16, available at
<a href="https://www.fdic.gov/formsdocuments/f6220-01.pdf">https://www.fdic.gov/formsdocuments/f6220-01.pdf</a>.
\72\ FDIC Supplement, Part I, available at <a href="https://www.fdic.gov/formsdocuments/f6220-01.pdf">https://www.fdic.gov/formsdocuments/f6220-01.pdf</a>.
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Question 107: Is the safe harbor for transactions falling within
specified HHI thresholds sufficiently tailored to the current U.S.
banking market? Why or why not?
Question 108: Should the FDIC adopt different HHI thresholds for
the safe harbor? If yes, please explain.
Question 109: Should the FDIC adopt a separate HHI threshold for
the safe harbor for merger transactions in rural areas? Why or why not?
If yes, how should the FDIC delineate qualifying for the rural area
safe harbor; what would be an appropriate HHI threshold and why; and
how should the FDIC define ``rural area?''
Question 110: Should the FDIC characterize this section as a
presumption instead of a safe harbor? If yes, please explain.
Question 111: Should the FDIC revise the FDIC Supplement? Why or
why not? If yes, what should be revised and how?
d. Additional Considerations for Merger Transactions That Exceed the
Safe Harbor (Sec. 333.5(c)(4))
The proposed rule would incorporate additional considerations that
the FDIC takes into account for merger transactions that exceed the HHI
safe harbor at new Sec. 333.5(c)(4). If the initial HHI screen for a
merger transaction exceeds the safe harbor thresholds in new Sec.
333.5(c)(3), the FDIC would consider other factors related to the
impact of the transaction on competition in its market concentration
analysis, including alternative geographic market definitions, the
extent to which the initial HHI screen accurately reflects the
competitive effects of the merger transaction, and any procompetitive
effects of the merger transaction, including those that are in the
public interest. This new Sec. 333.5(c)(4) would enable applicants to
submit additional evidence and/or considerations for the FDIC's review
to mitigate HHIs that exceed the safe harbor thresholds.
The FDIC has historically considered mitigating factors, including
alternative geographic markets and the extent to which the initial HHI
screen accurately reflects the competitive effects of the merger
transaction, to offset concentrated HHI results. For example, in the
FDIC's experience, the relevant banking market presented in CASSIDI may
not always appropriately account for the nuances associated with a
specific transaction, the relevant parties, or the banking needs of a
particular community. For this reason, the FDIC has historically
considered whether the boundaries of a specific CASSIDI market should
be expanded to consider, for example, whether members of the community
are willing and able to cross a geographic feature, e.g., a mountain or
river, to access banking services. This consideration has proven
particularly relevant for merger transactions in rural areas. The
proposed rule would introduce additional transparency into the FDIC's
consideration of mitigating factors in its competitive analysis.
Analysis of the procompetitive effects of a merger transaction to
offset the anticompetitive effects of such transaction is consistent
with the BMA and the practice of other regulators.\73\ The BMA allows
the FDIC to find that the anticompetitive effects of a merger
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.'' \74\ A ``procompetitive effect,'' in
essence, would be a public interest or benefit that offsets any
anticompetitive effects of a merger transaction. The FDIC would
consider any procompetitive effect in the community or communities to
be served by the resulting institution that are proffered by an
applicant. For example, the FDIC would consider any improvements in the
general availability and accessibility of banking products and
services, quantity or quality of banking products and services, and
pricing of banking products and services. However, any such
procompetitive effect should be verifiable, or at the very least not
speculative, to be credited as a mitigating factor in the FDIC's
competitive analysis. Any such procompetitive effect should also be
merger-specific, meaning that the procompetitive effect would be
unlikely to be achieved without the merger. This is consistent with the
approach of other regulators.\75\
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\73\ See, e.g., 12 U.S.C. 1828(c)(5)(B); 2023 Merger Guidelines,
Rebuttal Evidence Showing That No Substantial Lessening of
Competition Is Threatened by the Merger, DOJ Antitrust Division,
available at <a href="https://www.justice.gov/atr/merger-guidelines/rebuttal-evidence">https://www.justice.gov/atr/merger-guidelines/rebuttal-evidence</a>.
\74\ 12 U.S.C. 1828(c)(5)(B).
\75\ 2023 Merger Guidelines, Rebuttal Evidence Showing That No
Substantial Lessening of Competition Is Threatened by the Merger,
DOJ Antitrust Division, available at <a href="https://www.justice.gov/atr/merger-guidelines/rebuttal-evidence">https://www.justice.gov/atr/merger-guidelines/rebuttal-evidence</a>.
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Additionally, in considering the procompetitive effects of a merger
transaction, the FDIC would give particular emphasis to procompetitive
effects associated with merger transactions in rural areas. The FDIC
notes that there may be unique and significant public interests and
benefits associated with merger transactions in rural areas that
warrant additional weight, particularly when compared to the
traditionally high HHI concentrations associated with rural area merger
transactions. For example, the combination of two local institutions
may create a stronger competitor to national banks with a physical or
online presence in the community.
Question 112: Should the FDIC codify the specific factors that
would be considered when evaluating a merger transaction involving a
rural area? Why or why not?
Question 113: Should the FDIC provide more specificity regarding
the analysis of transactions that do not satisfy the safe harbor? If
so, how?
Question 114: Are there other factors that should be considered
when evaluating a merger transaction involving a rural area? If yes,
please explain what they are and how they should be considered.
4. Financial and Managerial Resources and Future Prospects (Sec.
333.5(d))
The BMA requires the responsible agency to take into consideration
the financial and managerial resources and future prospects of the
existing and proposed institutions (financial, managerial, and future
prospects statutory factor) when evaluating a merger filing. The
proposed rule would

[[Page 60219]]

modify and codify certain elements of the FDIC's approach for
considering each component of this statutory factor at new Sec.
333.5(d).
a. Financial Resources (Sec. 333.5(d)(1))
When evaluating the financial resources of the institutions as part
of its consideration of the financial, managerial, and future prospects
statutory factor, the FDIC considers the institutions' capital, funding
and liquidity, and key financial metrics. As discussed below, the
proposed rule would codify further detail on the FDIC's review of this
component of the statutory factor at new Sec. 333.5(d)(1).
i. Capital (Sec. 333.5(d)(1)(i))
Under new Sec. 333.5(d)(1)(i), the FDIC would consider the
regulatory capital levels of the applicant at both the IDI-level and on
a consolidated basis. The proposed rule would include a review of the
availability of additional capital or resources to support consummation
of the merger transaction and the subsequent integration of the
institutions while continuing to satisfy all minimum regulatory capital
and buffer requirements. The FDIC believes that available capital
resources should be considered not only within the context of the
initial consummation of a merger transaction, but also on a routine
basis going forward after the parties have integrated. Integration can
be a capital-intensive process, with costs often exceeding initial
projections. Accordingly, the FDIC would consider capital adequacy at
multiple points in time when evaluating the financial, managerial, and
future prospects statutory factor.
ii. Funding and Liquidity (Sec. 333.5(d)(1)(ii))
Similarly, new Sec. 333.5(d)(1)(ii) would require the FDIC to
evaluate whether the applicant has adequate liquidity and funding
sources to support the merger transaction in the ordinary course. This
evaluation would consider the liquidity position of the resulting
institution, not only upon consummation, but also during and for
purposes of integration. Whether an applicant has sufficient funding
and liquidity to support consummation and integration would be part of
the consideration of the statutory factor. The FDIC would also consider
whether the applicant would need to access contingency funding to
support unforeseen circumstances as determined under scenario testing.
In the FDIC's experience, funding and liquidity testing under multiple
scenarios is important to ensure that an applicant has sufficient
financial resources.
iii. Key Financials (Sec. 333.5(d)(1)(iii))
Under new Sec. 333.5(d)(1)(iii), the FDIC would consider the
historical financial performance of the applicant using additional
financial metrics typically referenced by market participants to
evaluate the financial strength of a banking organization. Such metrics
may include Net Interest Margin, Return on Assets, or Z-Score. The FDIC
has found these metrics provide helpful insight into the financial
resources of the parties when reviewing merger filings. Accordingly,
the proposed rule would codify the FDIC's practice of reviewing such
metrics when evaluating the statutory factors.
Question 115: Are there other metrics that the FDIC should consider
when evaluating the financial resources of the existing and proposed
institutions? If yes, please explain.
Question 116: Should the FDIC adopt a presumption or safe harbor
for finding favorably on the financial resources of the institutions
involved in the merger transaction in certain instances? Why or why
not? If yes, what would be an appropriate presumption or safe harbor?
b. Managerial Resources (Sec. 333.5(d)(2))
i. Qualifications and Experience (Sec. 333.5(d)(2)(i))
As part of its consideration of the financial, managerial, and
future prospects statutory factor, the FDIC must take into
consideration the managerial resources of the existing and proposed
institutions. New Sec. 333.5(d)(2)(i) would provide that the FDIC
would consider management's relevant qualifications and experience to
operate the resulting institution when evaluating this statutory
factor. The FDIC has found that prior experience and positive outcomes
in prior merger transactions involving an IDI may increase the
likelihood of successful merger consummation and integration.
Accordingly, such experience and outcomes may receive favorable
consideration by the FDIC. However, lack of relevant experience with
merger transactions involving an IDI would not by itself be viewed
negatively in evaluating this statutory factor. The FDIC completes a
tailored review of management's prior experience within the context of
the specific transaction. Under the proposed rule, the FDIC would
provide greater weight to the operation of the resulting institution
than it would to deficiencies at the institution to be acquired, if the
acquiring institution has proposed appropriate remediation plans.
ii. Supervisory History (Sec. 333.5(d)(2)(ii))
Under the proposed rule, prior supervisory ratings and the
resulting institution's managements' responsiveness to supervisory
concerns would be taken into consideration when the FDIC evaluates the
managerial resources of the existing and proposed institutions. As part
of this review, the FDIC would consider the reasons for particular
supervisory criticisms or ratings concerning management and
management's remediation of supervisory concerns as mitigating factors.
The FDIC also would consider the extent to which the reasons for
particular supervisory criticisms or ratings bear on the ability of
management to successfully integrate the institution to be acquired and
operate the resulting institution.
iii. UFIRS Ratings
When evaluating the managerial resources of the existing and
proposed institutions under new Sec. 333.5(d)(2), the FDIC would take
into account the acquiring institution's UFIRS rating. If the acquiring
institution has received a UFIRS composite rating of 1 or 2 as a result
of its most recent Federal or State examination and on the management
component of its rating, there is a very high probability the FDIC
would find favorably on this component of the statutory factor. The
FDIC also expects that the agency can find favorably on this component
of the statutory factor for 3-rated institutions, depending on the
reasoning for the 3 rating and other considerations relevant to
managerial resources. A favorable finding would be significantly less
likely if the acquiring institution received a 4 or 5 rating as a
result of the most recent Federal or State examination, but a favorable
finding could still be possible, depending on the existence and quality
of a remediation plan and/or other mitigating circumstances.
Question 117: Are there other metrics the FDIC should consider when
evaluating the managerial resources of the existing and proposed
institutions? If yes, please explain.
Question 118: Should the proposed rule codify in the regulatory
text that the FDIC will find favorably with respect to managerial
resources if an institution receives certain ratings? If so, which
ratings? Alternatively, should the regulatory text include a
presumption or safe harbor? Why or why not?
c. Future Prospects (Sec. 333.5(d)(3))
New Sec. 333.5(d)(3) would require the FDIC to consider the
following when evaluating the institutions' future

[[Page 60220]]

prospects under the financial, managerial, and future prospects
statutory factor: (1) business plan, (2) pro formas, and (3)
integration plan. First, the FDIC would consider the relevant business,
integration, and strategic plans to evaluate whether the plans are
appropriate for the resulting institution's risk profile. Second, the
FDIC would consider the pro forma balance sheet of the resulting
institution under various scenarios. As discussed above, the FDIC
believes testing should be conducted under multiple scenarios, as it
provides important insight into the viability of the resulting
institution under the range of conditions in which it may reasonably
operate. Third, the FDIC would consider the sufficiency of the
integration plan in demonstrating that the applicant has the ability to
efficiently integrate the assets, systems, and personnel acquired under
a range of scenarios. Finally, the FDIC may also take into
consideration scenario test results or other information relevant to
the resulting institution's future prospects.
Question 119: Are there other metrics that the FDIC should consider
when evaluating the future prospects of the existing and proposed
institutions? If yes, please explain.
5. Convenience and Needs of the Community (Sec. 333.5(e))
The BMA requires each responsible agency to consider the
convenience and needs of the community to be served (convenience and
needs statutory factor) when evaluating a merger transaction. The
proposed rule would modify and codify the FDIC's approach for
considering the convenience and needs statutory factor at new Sec.
333.5(e).
a. Supervisory Records (Sec. 333.5(e)(1))
Under the proposed rule, the FDIC would continue to consider the
supervisory record of both the applicant and the institution being
acquired for compliance with applicable statutes and regulations,
including the CRA. The FDIC would also review the supervisory record
for fair banking considerations by considering, for mergers in which
the resulting institution has more than $50 billion in assets, whether
the acquiring or target institutions have treated existing or potential
customers less favorably than other existing or potential customers
based on political, social, cultural, or religious considerations
rather than individualized, objective, and risk-based analysis. This
additional review would respond to concerns expressed in Executive
Order 14331, Guaranteeing Fair Banking for All Americans,\76\ and would
help deter and combat politicized or unlawful debanking activities.
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\76\ 90 FR 38925 (Aug. 12, 2025).
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If the acquiring institution has received a rating of 1 or 2 on its
most recent consumer compliance examination and received a satisfactory
or outstanding on its most recent CRA examination, there is a very high
probability the FDIC would find favorably on the convenience and needs
statutory factor, assuming there were no fair banking concerns. The
FDIC also expects that the agency would generally find favorably on the
convenience and needs statutory factor for acquiring institutions that
have received a 3 rating on its most recent consumer compliance
examination and received a satisfactory or outstanding on its most
recent CRA examination, depending on the reasoning for the 3 rating and
other considerations relevant to fair banking and the convenience and
needs of the community. A 4 or 5 rating on the acquiring institution's
most recent consumer compliance examination would not necessarily be a
barrier to finding favorably on the convenience and needs statutory
factor, but a favorable finding would be less likely in the absence of
appropriate remediation plans and/or other mitigating circumstances.
The FDIC would continue to consider the applicant's plans to
remediate any unresolved deficiencies identified in its supervisory
record or in the supervisory record of the institution being acquired,
including any plans to address fair banking concerns. The FDIC's review
would focus on unresolved deficiencies identified in the institution's
most recent CRA or consumer compliance examination and any unresolved
deficiencies when the institution being acquired is rated: (1) Needs to
Improve or Substantial Noncompliance in its most recent CRA
examination; or (2) a 3 or lower in its most recent consumer compliance
examination.
b. Changes to Branches, Products, and Services (Sec. 333.5(e)(2))
The proposed rule would require the FDIC to consider whether the
merger transaction would result in any changes to branches, products,
and services offered in the community to be served. Specifically, the
proposed rule would provide that the FDIC would consider the extent to
which the resulting institution would offer products or services to a
broader or smaller customer base and any impact on prices. If the
resulting institution is expected to offer a broader set of products
and services, its products and services to a broader market, or
products and services at lower prices (if, for example, a result of
economies of scale), this would support a favorable finding.
Conversely, any reduction in products and services offered in the case
of a merger transaction between an IDI and a credit union would be
viewed negatively in the analysis of the convenience and needs factor.
Question 120: Are there other considerations the FDIC should
include in the agency's evaluation of the convenience and needs
statutory factor? Would more specificity be helpful? If yes, please
explain.
Question 121: Should the FDIC adopt a different standard when
evaluating whether an IDI has engaged in fair banking? If yes, please
explain.
6. Record of Combatting Money Laundering Activities (Sec. 333.5(f))
The BMA requires each responsible agency to take into consideration
the effectiveness of any IDI involved in the merger transaction in
combatting money laundering activities, including in overseas branches
(AML statutory factor), when evaluating a merger transaction. The
proposed rule would codify this statutory factor at new Sec. 333.5(f).
When evaluating the effectiveness of the IDIs in combatting money
laundering, the FDIC would expect each IDI, including the resulting
institution, to have a Bank Secrecy Act (BSA)/anti-money laundering
(AML) program commensurate with the volume and risk reflected in the
IDI's enterprise-wide business model. The FDIC would also consider each
IDI's prior compliance with Federal and State AML laws. If an IDI
involved in a merger transaction is not directly supervised by the
FDIC, the FDIC would generally rely on the primary Federal regulator's
supervisory information when evaluating the IDI's effectiveness in
combating money laundering. Prior deficiencies may not necessarily
preclude a favorable finding on the AML statutory factor if the FDIC
finds sufficient mitigating factors exist. For example, sufficient
mitigating factors may include material, demonstrated progress toward
implementing a satisfactory BSA/AML program that addresses the
underlying issues or concerns (including with respect to any required
``look back'' reviews), or validation that the acquiring institution's
satisfactory BSA/AML program will address the less than satisfactory
record of the institution being acquired.

[[Page 60221]]

Question 122: Should the FDIC adopt a different approach for
evaluating the AML statutory factor? Why or why not?
7. Financial Stability (Sec. 333.5(g))
The Dodd-Frank Wall Street Reform and Consumer Protection Act
amended the BMA to require the responsible agency to take into
consideration the risk to the stability of the U.S. banking or
financial system (financial stability statutory factor) when evaluating
a merger filing.\77\ In evaluating the likely impact of a merger
transaction on the stability of the U.S. banking or financial system,
the FDIC has considered quantitative

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