A PYMNTS Company

FDIC Proposes Stricter Oversight for Bank Mergers Above $100 Billion

 |  March 21, 2024

The U.S. Federal Deposit Insurance Corporation (FDIC) has proposed heightened scrutiny for mergers that could result in banks with assets surpassing $100 billion. The announcement came following a 3-2 vote by the FDIC’s board of directors to issue the proposal, marking the first update to the agency’s merger guidance in 16 years.

According to reports by Reuters, the proposed policy statement underscores the FDIC’s commitment to safeguarding the stability of the banking industry, particularly in light of recent high-profile bank failures and acquisitions. FDIC Chair Martin Gruenberg emphasized the potential risks associated with banks exceeding the $100 billion asset threshold, citing the notable bank failures of 2023 as a stark reminder of these risks.

However, the proposal has faced criticism from Republican board members who argue that it could hinder competition by discouraging new entrants to challenge established Wall Street behemoths. Jonathan McKernan, a Republican member of the board, voiced concerns that the heightened regulatory scrutiny could further consolidate the industry and reinforce barriers to entry for emerging competitors.

Related: SVB Financial Sues To Recover $1.9 Billion From FDIC

Industry trade groups, including the Bank Policy Institute, have also expressed reservations about the proposal, labeling it as part of an “alarming trend” among regulators to discourage mergers and acquisitions within the banking sector. The institute cautioned that the subjective standards outlined in the proposal could introduce uncertainty into the merger review process.

The proposed changes, outlined in a draft proposal subject to a 60-day public comment period, reflect provisions enacted by Congress in the Dodd-Frank Wall Street reform legislation of 2010. The updated guidance aims to address various financial stability concerns, including the potential impact of mergers on the complexity of the financial system and the extent of cross-border activities.

Critics of the proposal, including Democratic Senator Elizabeth Warren, have raised concerns over regulatory leniency towards large Wall Street institutions.

Source: Reuters