OCC Approves Final Rule and Policy Statement on Bank Mergers

Regulatory Developments

OCC Approves Final Rule and Policy Statement on Bank Mergers
On September 17, the OCC approved a final rule updating its regulations for business combinations involving national banks and federal savings associations. The final rule includes a policy statement summarizing the principles that the OCC uses during its review of Bank Merger Act (BMA) applications, including indicators for applications that are more likely to withstand scrutiny and be approved expeditiously and for applications that would raise supervisory or regulatory concerns. It also discusses the OCC’s consideration of the financial stability, managerial and financial resources and future prospects, convenience and needs statutory factors under the BMA, and the OCC’s decision process for extending the public comment period or holding a public meeting. The final rule becomes effective on January 1, 2025.

FDIC Approves Final Statement of Policy on Bank Merger Transactions
On September 17, the FDIC approved a new Statement of Policy on Bank Merger Transactions (Final SOP). This Final SOP delineates the types of transactions that require FDIC approval, the procedure that the FDIC follows to review merger applications, and the principles guiding the FDIC’s evaluation of the pertinent statutory factors under the BMA. Pertaining to these statutory factors, the Final SOP notes that the FDIC may evaluate concentrations beyond just deposits, such as small business or residential loan originations. It clarifies that the proposed merger should reduce the financial risk posed by the institutions on a standalone basis, specifies the FDIC’s expectation for the merger to better meet community needs, imposes additional scrutiny for mergers that would result in an entity with $100 billion or more in assets, and indicates the FDIC's intent to hold public hearings for mergers resulting in institutions holding more than $50 billion in assets. The Final SOP supersedes the last Statement of Policy from 2008.

“The policy statement dramatically improves the rigor of the agency’s competition analysis. The FDIC will go beyond just a quick look at local deposit market concentrations to understand the deal rationale and market realities.” 

— Rohit Chopra, Director, CFPB

“I continue to believe the revised approach to the competition factor will add considerable unpredictability, by deemphasizing the use of HHI thresholds, long a predictable proxy for concentrations, and by elevating consideration of “concentrations in any specific products or customer segments.”

— Travis Hill, Vice Chairman, FDIC

FDIC Proposes Deposit Insurance Recordkeeping Rule for Banks’ Third-Party Accounts
On September 17, the FDIC issued a notice of proposed rulemaking that would strengthen recordkeeping for bank deposits received from third-party nonbank companies to preserve beneficial owners and depositors right to deposit insurance. Third-party nonbank companies often commingle consumers’ funds into a single custodial account at a bank. Under the proposed rule, FDIC-insured banks holding certain custodial accounts would be required to determine the individual owner of these funds and would be required to reconcile the account for each individual owner on a daily basis. Banks would also be responsible for maintaining constant access to these records in the event of the nonbank’s bankruptcy or other disruption. Comments are due within 60 days of the proposed rule’s publication in the Federal Register.

Agencies Extend Comment Period on Request for Information on Bank-Fintech Arrangements
On September 13, the federal bank regulatory agencies announced that they will extend the comment period on a request for information on bank-fintech arrangements involving banking products and services from September 30 until October 30, 2024. The agencies are seeking feedback on the nature and implications of bank-fintech arrangements and effective risk management practices in this industry.

FinCEN Issues In-Depth Analysis of Check Fraud Related to Mail Theft
On September 9, FinCEN issued a Financial Trends Analysis (FTA) covering trends in check fraud resulting from mail theft based on Bank Secrecy Act data filed between March and September of 2023. The FTA follows an Alert that FinCEN issued in February 2023 on the same topic. In the FTA, FinCEN identified three common outcomes it found during its review period in cases where it identified check fraud resulting from mail theft:

1. In 44% of cases, such checks were altered and deposited;
2. In 26% of cases, such checks were used as templates for counterfeiting; and
3. In 20% of cases, such checks were fraudulently signed and deposited.

FinCEN noted that mail theft-related check fraud remains an ongoing issue, with more than $688 million in reported suspicious activity occurring in the six-month review period. FinCEN recommends that when financial institutions suspect mail theft-related check fraud, they file a Suspicious Activity Report with the U.S. Postal Service and refer affected customers to the U.S. Postal Inspection Service.

FFIEC Issues New Booklet on Examination of Financial Institution’s Risk Management of Development, Acquisition, and Maintenance of Bank Systems
On September 5, the FFIEC issued the “Development, Acquisition, and Maintenance” booklet, as a part of its Information Technology Examination Handbook. This new booklet updates and replaces the FFIEC’s 2004 “Development and Acquisition” booklet. The booklet outlines best practices for financial institutions to manage risk across their IT project management, system development, and ongoing system maintenance. Furthermore, the booklet emphasizes strategies that financial institutions may implement to help mitigate risk related to third-party vendors, supply chain dependencies, and internal technological updates. The updated booklet reflects federal financial regulators increased focus on management for IT systems, ensuring that financial institutions strengthen oversight, resiliency, and operational effectiveness of their systems and components throughout their life cycle.

CFPB to Host Technical Readiness Event for Nonbank Registration
On Monday, September 30 and Wednesday, October 9, the CFPB will host a webinar to introduce its Nonbank Registry. Both days will cover the same information. The event is aimed at compliance staff who will be registering covered orders with the CFPB’s Nonbank Registry. It will demonstrate the process for registering a company for the first time and answer any technical questions participants may have. The event will not take questions about the regulation itself.

• September 30 Registration: https://cfpbgov.webex.com/weblink/register/ ra939a9b902db67173f5ad9e020e011e0.
• October 9 Registration: https://cfpbgov.webex.com/weblink/ register/r9ba12d2ba8e2248167db14d858dc33de.

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