The regulator group argues the proposal “would result in a less predictable, more costly, and lengthier process for all types of potential bank mergers.”
The CSBS letter outlines several key concerns with the FDIC’s proposed merger guidelines:
- Market uncertainty: The proposal could perpetuate uncertainty in the banking market by introducing subjective evaluative criteria that would make the merger application process more unpredictable and burdensome.
- Regulatory misalignment: State regulators argue that the FDIC’s approach is misaligned with other federal banking agencies, which complicates the regulatory environment and may encourage regulatory arbitrage.
- Impact on rural banks: There is a need for a de minimis exception for mergers involving local banks in rural markets to ensure these institutions can continue to serve their communities effectively.
“The FDIC has proposed a host of new, subjective considerations it would use to evaluate merger applications,” the letter read. “Unfortunately, the proposed changes would result in a less predictable, more costly, and lengthier process for all types of potential bank mergers. State regulators request that the FDIC significantly revise the proposed SOP.”
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CSBS said mergers play a critical role in helping banks expand into new markets, invest in technology, and adapt to evolving economic conditions. Discouraging mergers, they argue, could destabilize individual banks and the broader financial system, especially given the rising costs and regulatory burdens.
