February 5, 2024

Bank Mergers: OCC Announces Proposed Changes to Review Process

Late last month, the OCC announced proposed changes to its rules regarding business combinations involving national banks and federal savings associations. This overview describes two proposed amendments to the OCC’s procedures:

– Remove provisions related to expedited review. The OCC reviews business combination applications to determine whether procedural and substantive requirements are met. Any business combination subject to a filing is a significant corporate transaction requiring OCC decisioning, which should not be deemed approved solely due to the passage of time.
– Remove the OCC’s streamlined business combination application. The Interagency Bank Merger Act Application provides the appropriate basis for the OCC to review a business combination application.

The OCC also proposed a new policy statement regarding the general principles used by the OCC when reviewing proposed bank mergers under the Bank Merger Act, including criteria considered when deciding whether to hold a public meeting. The policy statement — which would be added as an appendix to the OCC’s business combinations regulation — is divided into five topics: general principles of OCC review, financial stability, financial & managerial resources & future prospects and convenience & needs. This Sullivan & Cromwell memo describes how these principles may differ from current policy and practice.

Although many of the OCC’s stated principles in the NPR are unremarkable in that they are consistent with current regulatory policy and practice on bank merger applications, certain of the specific proposals set forth in the NPR could be interpreted to represent a major reversal of certain existing policies. These reversals could chill merger activity until there is a final rule. They include:

1) Transactions involving a combined institution with less than $50 billion in assets are regarded as consistent with approval, which could be read as creating a negative implication as to acquisitions of a larger size;

2) Transactions involving a target that is less than 50% of the acquirer are regarded as consistent with approval, which could be viewed as creating a negative implication for mergers of equals; and

3) The OCC is “unlikely to find that the statutory factors under the Bank Merger Act are consistent with approval … [if t]he acquirer is a [GSIB], or subsidiary thereof,” which may be considered to contravene past approval practice.

Comments are due 60 days after publication in the Federal Register.

Meredith Ervine