On September 17, the OCC approved a final rule amending its procedures for reviewing applications under the Bank Merger Act. The rule will aim to provide clearer guidelines for institutions regarding the OCC’s review process for bank mergers and ensure institutions remain relevant in the current financial landscape. Some commenters argued this change could increase the cost of applications — particularly for smaller banks. However, the OCC believes these changes will align the regulatory framework with current practices and promote transparency.

The final rule will also introduce a policy statement, included as Appendix A to 12 CFR Part 5, which will delineate the principles and statutory factors the OCC would consider when reviewing bank merger applications. The OCC will evaluate factors such as financial stability, financial and managerial resources, and the convenience and needs of a community. Applications with positive indicators, such as well-capitalized acquirers and no significant adverse effects on competition, will increase the likelihood of expeditious approval. Conversely, applications with indicators of supervisory or regulatory concerns, such as poor CRA ratings or ongoing enforcement actions, may be less likely to be approved unless these issues are adequately addressed.

In its consideration of financial stability, the OCC will assess factors such as the size of the combined institutions, the availability of substitute providers, and the complexity of the financial system. The OCC will apply a balancing test to weigh the financial stability risks posed by the pending transaction against the risk posed by denying it. The OCC may impose conditions on approval to address financial stability concerns, such as requiring asset divestitures or higher capital requirements. The policy statement will also outline the OCC’s approach to evaluating financial and managerial resources, such as considering the institutions’ capital levels, risk profiles, and managerial capabilities. The OCC plans to assess the needs of the community, considering factors such as branch closures, job losses and community investment initiatives. The final rule will go into effect on January 1, 2025.