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Bank Mergers Face More Public Hearings, Scrutiny Under Biden

May 24, 2022, 3:00 PM

Public hearings are set to become a more common feature in big bank merger reviews, allowing community groups and regulators to seek changes and conditions before deal approvals.

Acting Comptroller of the Currency Michael Hsu said in a May 9 speech that he sees value in holding public meetings on large bank mergers. On May 17, the Office of the Comptroller of the Currency and the Federal Reserve announced upcoming public hearings for a pair of pending deals: Bank of Montreal’s acquisition of BancWest Holding Inc. and Toronto-Dominion Bank’s purchase of First Horizon Bank.

Hsu’s comments and the increasing number of hearings for big bank deals come as the Federal Deposit Insurance Corp. and the Justice Department revisit their merger review guidelines with an eye to making them tougher. The policy shift is in line with the Biden administration’s priority to heighten scrutiny on competition and antitrust violations across industries.

The OCC hasn’t officially announced changes to its merger review process, but its staff are collaborating with the two agencies.

Public hearings for big bank mergers may end up being mandatory when the agency reviews are done, said Patrick Hanchey, a partner at Alston & Bird LLP.

“I think there’s no coincidence with the FDIC and the OCC stating that they’re reviewing their merger review process,” he said.

More Interactive

Regulators are required under the Bank Merger Act and the Bank Holding Company Act to collect public comments on proposed bank mergers. But they aren’t required to hold public hearings.

Members of the public can request a public hearing if they think that a proposed merger poses a particular risk to competition, financial stability or consumers. But the bank regulators don’t have to agree to one, said Amber Hay, a former Fed lawyer who worked on merger reviews.

“They really have to be of the viewpoint that the comment period has not been sufficient to develop a record,” Hay, an Arnold & Porter partner, said.

Public hearings have the potential to add months to the approval process. Hearings are added after the comment period closes and usually require extensive preparation before they are held.

The hearings are typically held in the acquisition-target bank’s home market, giving the public a chance to air concerns about potential job cuts or branch closures. Deal proponents also have a chance to speak.

The coronavirus pandemic has caused bank merger hearings to go virtual. Even so, the events present opportunities for the public to speak directly to regulators and make an impact beyond their comment letters, said Karen Solomon, a former OCC chief counsel.

The regulators can ask direct questions and have conversations with concerned citizens or parties, she said.

“When you’ve got a written submission, it’s not interactive,” Solomon, senior of counsel at Covington & Burling LLP, said.

Public Pressure

Public merger hearings also provide insight into what bank regulators are thinking about a deal, said Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition.

“We think they enhance the transparency of the approval process that’s otherwise totally behind the scenes,” he said.

Public hearings can also attract media attention and other scrutiny on a proposed merger that otherwise wouldn’t be there.

Greater public attention gives local activists leverage in negotiating community benefit plans, which can result in large local investments or promises to preserve branches from banks looking to buy up a rival, Hay said.

In some instances, a bank will propose their own community benefit plans ahead of a meeting to get public support. Bank also will propose plans after meetings to win over parties opposed to a deal.

U.S. Bancorp. announced a $100 billion community benefits plan on May 9 related to its $8 billion proposed acquisition of MUFG Union Bank NA. The move came roughly two months after community groups withheld support for the deal at a March public meeting hosted by the Fed and OCC.

PR Exercise?

Critics of the public meetings say they’re usually very scripted and don’t include the agency heads who make the final decisions on mergers.

“They are performative public relations events,” said Jeremy Kress, a University of Michigan professor and former Fed attorney.

Advocates pushing for tougher merger review standards are concerned that adopting public hearings would be the extent of any changes.

Of 336 mergers filed with the Fed, FDIC and OCC between 2018 and 2020, only 22 were withdrawn or returned after regulatory review, according to an October report from the Congressional Research Service.

Kress and others want the regulators to make wholesale changes to the merger review process with tighter standards for approving deals.

“I worry that these public meetings will distract from that work,” Kress said.

Added Value

All indications are that the OCC will make public meetings a routine function of big bank merger reviews, potentially lengthening the time it takes to get a deal approved, Hanchey said.

Hsu said in his May 9 speech that the agency “is considering adopting a presumption in favor of holding public meetings.”

The OCC and Fed have already scheduled a July 14 virtual public meeting for the Bank of Montreal’s $16.3 billion deal for BancWest Holding Inc. announced last year. Toronto-Dominion Bank’s proposed $13.4 billion acquisition of First Horizon Corp. will be the focus of an Aug. 18 hearing by the two regulators.

It’s unclear how the “big bank” standard would be used to trigger a requirement that a deal undergo a public hearing. Some want an asset threshold, although it’s not clear whether a deal creating a $100 billion or $500 billion bank should be the floor, Hanchey said.

Van Tol said other factors beyond asset size should be considered, such as the deal’s potential impact on local markets.

“A merger between two rural banks could have a very significant impact on market competition” and should require a public hearing, he said.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editors responsible for this story: Michael Ferullo at; Roger Yu at