FDIC proposes expanding criteria for bank merger evaluations 

The FDIC board in mid-March voted 3-2 to pursue potential modifications to its approach in evaluating bank merger applications. This includes expanding the range of competitive factors considered when determining approval or denial of applications and mandating a comprehensive assessment of potential impacts on communities, such as branch closures or relocations.

The FDIC’s last update to its policy statement on bank mergers occurred in 2008. Under the new proposal presented, the FDIC aims to clarify that its evaluation of a proposed merger's competitive effects will encompass considerations beyond deposit-based metrics, such as small business or residential loan origination volumes, as noted by FDIC Chairman Martin Gruenberg. 

In cases requiring divestiture, the statement would specify that divestitures should be finalized before the merger's completion. Additionally, it would establish a policy prohibiting the use or enforcement of noncompete agreements with any employee of the divested entity.

Gruenberg emphasized that the policy would outline the FDIC’s expectation for the resulting depository institution to maintain sound financial performance and condition. It would delineate the factors used to assess the merged entity’s effectiveness in combating money laundering and underscore the FDIC’s expectations for meeting community needs, potentially through increased lending limits or enhanced access to products, services and facilities. 

Applicants would need to provide projections for branch expansions, closures, consolidations and relocations for the initial three years post-merger.