US Bank Merger Deals Face Tougher Scrutiny for US Approval (1)

US bank mergers will face steeper regulatory hurdles under new guidelines from three agencies, the latest in the Biden administration’s effort to clamp down on consolidation by financial firms.

On Tuesday, the Federal Deposit Insurance Corp. voted 3-2 to add layers of scrutiny that more directly take into account an acquisition’s effects on financial stability, competition, communities and customers. The Justice Department and the Office of the Comptroller of the Currency also announced changes and guidance on how they will evaluate bank deals.

Read More: FDIC Meeting May Cement Tough Bank Merger Policies

For a deal to win FDIC approval, the regulator would expect the resulting firm to “better meet the convenience and needs of the community to be served than would occur absent the merger,” according to a statement from the agency. Combinations that lead to a firm with more than $100 billion in assets would face a tougher process as the agency assesses potential risks to the financial system.

The result would be a balancing act, with officials getting authority to evaluate and perhaps reject any merger transaction that fails on one or more of the criteria. For instance, the FDIC will consider whether the applicant has demonstrated that the benefits generated by the convenience and needs of the community will clearly outweigh the anti-competitive effects.

Martin Gruenberg, the FDIC chair, called the change “a significant milestone in the FDIC’s efforts to update, strengthen and clarify its approach to bank mergers.” Both Republican board members voted against the plan, saying it will be too burdensome on the industry.

Competitive Concerns

It’s part of a years-long campaign by the administration to tap the brakes on bank deals, which have been criticized for hurting competition, particularly in regions where rival firms merge. President Joe Biden signed an executive order in 2021 that called on the Justice Department and banking regulators to toughen scrutiny of bank combinations. The concern about stability was heightened last year during the industry turmoil that felled some of the nation’s biggest regional lenders.

The FDIC would measure concentrations based on local deposit shares and take into account any data sources and analytical approaches that might shed light on the transaction. The possible benefits from a deal might also include allowing the merged bank to increase its lending limits. The agency could also more closely monitor whether the promises about benefits were upheld.

Vice Chairman Travis Hill, a GOP member of the board who voted no, said the plan potentially makes the process longer, more difficult and less predictable.

“I also believe our analysis of the financial-stability factor should acknowledge that a merger can both add to and subtract from financial stability risks, and should focus more on a before-and-after comparison, rather than solely looking at the resulting institution,” Hill said.

DOJ’s Revamp

The Justice Department on Tuesday said it had scrapped its 1995 bank-merger guidelines, which were too outdated to effectively review more recent developments, such as fintech, in the banking market. Instead, the agency’s antitrust division will now refer to its updated 2023 merger guidelines, which are broader and allow more flexibility.

The OCC also adopted new guidance, the agency said in a separate statement. The regulator had proposed a related measure in January that removes a decades-old requirement that certain merger applications get automatic approval on the 15th day after the close of the public comment period if the OCC fails to act by that deadline, among other things.

Read More: Bank Mergers Face Tougher, Slower Process Under OCC Proposal

“The diversity of the banking system is critical to the nation’s communities, consumers and economy,” said Michael Hsu, the acting head of the OCC, who also sits on the FDIC board.

(Updates throughout with Justice Department announcement.)

To contact the reporter on this story:
Katanga Johnson in Washington at kjohnson655@bloomberg.net

To contact the editors responsible for this story:
Stephanie Stoughton at sstoughton@bloomberg.net

Rick Green

© 2025 Bloomberg L.P. All rights reserved. Used with permission.