Bank Merger Policy

ABA Position

ABA has long supported making the regulatory processes and standards for bank mergers clear and transparent so that regulators can make timely, efficient decisions on mergers. Regulators should ensure that the scope of required application information is tailored to each bank’s specific circumstances, and mergers should not be evaluated based on arbitrary asset thresholds. Instead, we call on regulators to consider holistically financial, competitive, managerial and other relevant factors involving banks of any size.

Regulatory guidelines for assessing the competitive aspects of bank merger applications date from 1995 and do not reflect profound changes in the financial services landscape since then. In the intervening years, the market for financial products and services has seen the rise of availability and use of online banking, the interstate expansion of bank branch networks, the enhanced market access made possible by advertising and communication innovations, and the growing market presence of nonbank financial firms, including “fintechs,” credit unions, thrift institutions, and Farm Credit System institutions. The Federal banking agencies and the Department of Justice have now opened a public discussion about updating the guidelines, but much advocacy still lies ahead. In addition, evolving policies for implementation of the Community Reinvestment Act and for assessing the impact of proposed mergers on the convenience and needs of the communities served require further updates to regulators' merger evaluation standards.

An update of the bank merger guidelines is important to the health of the U.S. financial system and economy. Banks in all markets face increased pressure to maintain investments in technology (for improved customer service and cybersecurity) and in compliance staffing and infrastructure. Some banks may find a merger and related economies of scale to be the most efficient way to meet these needs and maintain and enhance service to their customers and communities. Moreover, a narrow, outdated view of competition is both unreasonably restrictive and likely to cause irrational outcomes.

Recommended Action Items

The FDIC and the Department of Justice have all published Requests for Information or Notices of Proposed Rulemaking in connection with updates to merger guidelines, and we anticipate further regulatory action. Meanwhile, the Comptroller of the Currency has recently proposed amendments that would increase the processing burden and time for simple merger transactions that they review and would make other changes affecting national banks and federal savings associations. Banks should encourage the agencies to pursue the update process to take account of all actual financial services competition in their markets and oppose OCC’s proposed process changes. Data to capture innovative competition can sometimes be elusive, but the competition clearly exists. Banks should emphasize that the agencies will lack an accurate picture of competition otherwise, and their merger decisions will be based on incomplete and inaccurate information.

Banks should also support updating the regulatory framework that implements the Community Reinvestment Act, should urge consistent application of community convenience and needs standards, and should oppose regulators' blanket asset thresholds applied to limit merger activity. Updates to these regulations are necessary to reflect product and delivery channels in the Digital Age.