The Federal Deposit Insurance Corporation (FDIC) has issued a request for information and comments regarding the current state of the regulatory framework of the Bank Merger Act. The request is seeking comments on the current application of the laws, practices, rules, regulations, guidance and statements of policy that apply to FDIC-regulated institutions.
The FDIC is trying to gauge the effectiveness of the existing regulatory framework in meeting the requirements of Section 18(c) of the Federal Deposit Insurance Act (also known as the Bank Merger Act). This request for comment comes not long after the Federal Trade Commission and the Department of Justice’s Antitrust Division have begun the process of reviewing and revising their regulation and review process for mergers and acquisitions involving financial institutions.
According to the FDIC, this request for information was prompted by the significant changes that have occurred in the banking industry and financial systems over the past few decades. Specifically, the request states that three decades of consolidation and growth in the banking industry have significantly reduced the number of smaller banks and increased the number of large banks that are classified as “Global Systemically Important Banks” (GSIB).
These GSIBs individually hold assets greater than $100 billion and collectively hold approximately 70 percent of industry assets, despite being less than 1 percent of the total number of FDIC-regulated banks. Over the same 30-year period, non-GSIBs, holding assets less than $100 billion, also saw a substantial increase, which a number of these banks being owned entirely or in part by those GSIBs.
The FDIC is looking to reconsider the existing framework for assessing the financial stability risks under the Bank Merger Act to apply greater scrutiny to both BSIBs and non-GSIBs. The new regulatory framework would take greater consideration to potential ramifications should larger financial institutions fail, and the potential to trigger another economic recession or depression.
The FDIC is accepting comments and information for 60 days following the publication of this request to the Federal Register.