FDIC Wants to Lessen Scrutiny Into Banking Mega-Mergers

The FDIC wants to roll back a policy that had increased oversight into large bank mergers.

The proposal unveiled by the Federal Deposit Insurance Corp. (FDIC) Monday (March 3) would rescind the group’s 2024 Statement of Policy on Bank Merger Transactions, replacing it — for the time being — with an earlier merger rule amid a wider examination of the merger review process.

“The proposal approved today seeks to address concerns that the 2024 Statement added considerable uncertainty to the merger application process,” the regulator said. “While the FDIC considers broader revisions to its merger policy, the FDIC is proposing to return to its historical approach, which is well-understood by market participants.”

Under the previous rule, mergers that would create financial institutions with assets of at least $100 billion would be subject to “heightened financial stability analysis.”

The 2024 policy also said that deals that would form institutions with assets of $50 billion or more could require public hearings.

And as covered here last year, the FDIC said it would also “consider proposed deals’ impact on concentrations of services and products other than deposits,” looking at things such as the number of small business or residential loan originations, or the levels of activities at a bank that require specialized expertise.

The news comes weeks after Travis Hill, acting head of the FDIC, said he would undertake a “wholesale review of regulations, guidance and manuals to ensure our rules and approach promote a vibrant, growing economy.”

Hill, who had been the FDIC’s vice chair since 2023, also plans for a “more open-minded approach to innovation and technology adoption,” including a “more transparent approach to FinTech partnerships.”

The FDIC had begun stepping up scrutiny into bank/FinTech partnerships during the closing weeks of the Biden administration.

As PYMNTS wrote, regulators were already examining the “downstream risks associated with know your customer (KYC), compliance and risk management, fraud and the financial safety of FinTechs and their partners.”

Hill has also called for the withdrawal of “problematic proposals from the past three years, such as proposals on brokered deposits and corporate governance.”

In addition, he said the FDIC needs to bolster its readiness for “resolving large financial institutions, incorporating lessons from the far-too-costly failures of 2023,” a year in which several regional banks had to be bailed out by the federal government.

Meanwhile, the FDIC itself faces an uncertain future, with a number of reports from Washington suggesting the Trump administration could fold the agency into other regulators, or limit its powers solely to providing deposit insurance.