By Alice Crowe

On September 17, 2024, three separate agencies released material that seemed to represent a shift in the way that bank mergers and acquisitions will be reviewed and scrutinized under the Bank Merger Act, creating the potential for new and tougher challenges to be faced by banks.[1] The Federal Deposit Insurance Corporation (FDIC) issued a final statement of policy, the Office of the Comptroller of the Currency (OCC) issued a statement adopting a final rule, and the Department of Justice (DOJ) withdrew from the 1995 Merger Guidelines and announced its use of the 2023 Merger Guidelines and 2024 Addendum—all suggesting an expansion of antitrust enforcement.[2]

The FDIC statement declared that the agency would utilize “a heightened financial stability analysis” to scrutinize mergers that form banks with assets valued over $100 billion due to the how “highly consequential” they are.[3] In addition, the statement specified that to receive approval of an application, there must be a finding that the needs and conveniences of a relevant community are greater than the anticompetitive effects of the merger.[4] The OCC stated that it will take to investigating some mergers more closely than before, including banks with over $50 billion in assets.[5] The DOJ does not have the same direct hand in regulation of bank mergers that the FDIC and OCC have, but its analysis of the antitrust implications influences these agencies’ decisions.[6] The 2023 Merger Guidelines constitute a “broad, one-size-fits-all” approach to evaluating many different transaction types; whereas the previous guidelines allowed banks to hold higher market shares and concentration before meeting “rebuttable presumptions of harm to competition,” the new guidelines hold all transactions to the same strict index.[7] It is worth noting that the Federal Reserve did not make any recent changes in conjunction with the other agencies, even though it directly reviews and approves bank deals alongside the FDIC and OCC.[8]

Moving forward, these changes will present challenges for banks seeking mergers and acquisitions.[9] There is likely to be uncertainty for banks that are considering merging due to interagency differences in the interpretations of the new, “more open-ended” guidelines and statements, in addition to the heightened scrutiny on a variety of new fronts.[10] For example, the Capital One-Discover deal that was announced in February 2024 now faces significant challenges.[11] Capital One is valued at $479 billion in assets and the acquisition of Discover Financial Services is set for $35.3 billion.[12]  The approval of this acquisition is held at an incredibly high level, and if there is any chance for success, a showing of community convenience, need, and financial stability will likely be required to balance out anticompetitive effects—yet it is “significantly less likely that [it] will clear the bar as of now.”[13] This deal serves as a test of the new statements and guidelines, and it could be just one example of the merger deals that will be scrutinized to a higher extent and potentially denied as a result of these changes.[14]

[1] Jeffrey A. Brill et al., The Modernization of the US Bank Merger Review Process Begins, Skadden (Sept. 20, 2024),  https://www.skadden.com/insights/publications/2024/09/the-modernization-of-the-us-bank-merger-review-process-begins.

[2] Id.; Dana Seesel Bayersdorfer et al., Key takeaways from bank merger policy updates, Davis Polk (Sept. 23, 2024), https://www.davispolk.com/insights/client-update/key-takeaways-bank-merger-policy-updates.

[3] Andrew Ross Sorkin et al., Bank Mergers May Get Tougher to Do, N.Y Times: Dealbook newsl. (Sept. 17, 2024), https://www.nytimes.com/2024/09/17/business/dealbook/fdic-bank-mergers-rules.html; Final Statement of Policy on Bank Merger Transactions, Fed. Deposit Ins. Corp., https://www.skadden.com/-/media/files/publications/2024/09/the-modernization-of-the-us-bank-merger-review-process-begins/fdic-policy-statement.pdf?rev=1af783b640414dd5bb7c193038a4de23&hash=A388D0293E52D236C0EE2BE4E7E374AF

[4] Fed. Deposit Ins. Corp., supra note 3.

[5] Brill, supra note 1; Business Combinations Under the Bank Merger Act, Skadden, https://www.skadden.com/-/media/files/publications/2024/09/the-modernization-of-the-us-bank-merger-review-process-begins/occ-policy-statement.pdf?rev=95e529d2394b4ae188ba5ba74a8a3162&hash=A3516A70A850CBF5EA2787BEDD505476.

[6] Brill, supra note 1.

[7] See Fed. Deposit Ins. Corp, supra note 3; Justin P. Murphy et al., DOJ Withdraws 1995 Bank Merger Guidelines as FDIC, OCC Make Regulatory Changes, Baker Hostetler (Sept. 24, 2024), https://www.bakerlaw.com/insights/doj-withdraws-1995-bank-merger-guidelines-as-fdic-occ-make-regulatory-changes/; Bayersdorfer, supra note 2; Lauren Hirsch, Banking Deal Oversight to Get a Major Revamp, N.Y. Times: Dealbook Newsletter (Sept. 17, 2024), https://www.nytimes.com/2024/09/17/business/dealbook/banking-oversight-fdic-justice-department.html.

[8] Hirsch, supra note 7.

[9] See Sorkin et al., supra note 3.

[10] Jeffrey A. Brill et al., The Modernization of the US Bank Merger Review Process Begins, Skadden (Sept. 20, 2024),  https://www.skadden.com/insights/publications/2024/09/the-modernization-of-the-us-bank-merger-review-process-begins; Dana Seesel Bayersdorfer et al., Key takeaways from bank merger policy updates, Davis Polk (Sept. 23, 2024), https://www.davispolk.com/insights/client-update/key-takeaways-bank-merger-policy-updates; Caitlin Mullen, DOJ joins OCC, FDIC in updating bank merger guidelines, BankingDive (Sept. 18, 2024), https://www.bankingdive.com/news/doj-occ-fdic-updated-bank-merger-guidelines/727377/.

[11] Evan Weinberger & Justin Wise, Capital One-Discover Deal Hits Roadblock in Bank Merger Overhaul, Bloomberg L. (Sept. 19, 2024), https://www.bloomberglaw.com/bloomberglawnews/antitrust/BNA%20000001920628d2eaafb6f728e8c40001?bna_news_filter=antitrust; Andrew Ross Sorkin et al., Bank Mergers May Get Tougher to Do, N.Y Times: Dealbook Newsl. (Sept. 17, 2024), https://www.nytimes.com/2024/09/17/business/dealbook/fdic-bank-mergers-rules.html (“One thing worth noting: While the F.D.I.C. is one of three regulators that approve banking deals, it doesn’t have oversight over some transactions, such as Capital One’s…”).

[12] Lauren Hirsh & Emma Goldberg, Capital One to Acquire Discover, Creating a Consumer Lending Colossus, N.Y. Times (Feb. 19, 2024), https://www.nytimes.com/2024/02/19/business/capital-one-discover-merger.html; Sorkin, supra note 11.

[13] Weinberger & Wise, supra note 11; Seesel, supra note 10.

[14] Weinberger & Wise, supra note 11.