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FDIC proposes new limits on big bank mergers

Written on Mar 29, 2024

The FDIC has proposed new rules that would make it harder to complete big bank mergers, after a group of lenders with more than $100 billion in assets ran into difficulties. 

The restrictions set by the FDIC would apply to any takeover that created a bank with more than $50 billion in assets and increase for any deal above $100 billion. 

If the guidelines come into force, it will be the first time since the financial crisis that the FDIC has updated its rules governing takeovers. The board of the FDIC voted to approve the update on March 21, but the proposals are still subject to a 60-day comment period. 

The rules will for the first time make the size of the bank created by a merger a factor in determining which deals receive further scrutiny from the FDIC. 

Lenders with more than $50 billion in assets would now face FDIC hearings examining whether a deal was in the public interest, under the proposed rules, while those with combined assets of more than $100 billion would have to clear more stringent hurdles to ensure the enlarged institution did not pose a risk to the financial system. 

Forty-seven banks in the U.S. out of more than 4,300 currently have more than $50 billion in assets, of which 32 have more than $100bn. 

Most bank mergers need approval from all three of the U.S. federal bank regulators: the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency. The Federal Reserve set the threshold at which it conducts a significant review at $100 billion in 2017. Earlier this year, the OCC proposed updating its merger rules to set a $50 billion threshold above which deals face increased scrutiny. 

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