FEDERAL GOVERNMENT RELATIONS
FDIC Proposes to Expand Criteria for Bank Merger Evaluations
The Federal Deposit Insurance Corp. board Thursday voted 3-2 to pursue potential changes to how the agency will evaluate bank merger applications, including broadening the number of competitive factors it will take into consideration when deciding whether to approve or deny applications, and requiring a “thorough accounting” of the potential effects on communities, including possible branch closures or relocations.
The FDIC last updated its policy statement on bank mergers in 2008. Under the proposal unveiled Thursday, the FDIC would clarify that its assessment of a proposed merger’s competitive effects would consider concentrations on products and services beyond those based on deposits, such as the volume of small business or residential loan originations, FDIC Chairman Martin Gruenberg said. In cases where divestiture may be necessary, the statement would clarify that divestitures are expected to be completed before consummation of a merger transaction. It also would establish a policy against entering into or enforcing noncompete agreements with any employee of the divested entity.
The policy would state that the FDIC expects the resulting depository institution to reflect sound financial performance and condition, Gruenberg said. It would articulate the considerations used to assess the merged entity’s effectiveness in combating money laundering. It would also clarify and emphasize the FDIC’s expectations for the merged entity to meet the needs of the community, such as through higher lending limits or greater access to products, services and facilities. As a result, applicants would be required to list expected branch expansions, closures, consolidations and relocations for the first three years of the merger, he said.
The policy also would spell out the FDIC’s general expectation to hold public hearings for transactions when the resulting institution would exceed $50 billion in assets, or when a significant number of Community Reinvestment Act protests are received, Gruenberg said. It also puts into writing a Dodd-Frank Act requirement that bank mergers be evaluated for potential risk to the U.S. financial system, which has been agency practice since passage of the law.
FDIC Board Split on Proposed Bank Merger Policy
The Federal Deposit Insurance Corp. board Thursday voted to move forward with a proposed update of its bank merger policy over the objections of its two Republican members, who said it would add even more obstacles and hurdles to an application process that is already slow and cumbersome.
“The proposed statement of policy under consideration today moves in the wrong direction, potentially making the process longer, more difficult and less predictable,” FDIC Vice Chairman Travis Hill said. Among his concerns, Hill said the statement gives little clarity about what products the FDIC will evaluate or how that analysis will factor into the agency’s final decision.
FDIC Board Member Jonathan McKernan acknowledged that given the age of the current policy, a review and possible update was needed. But he said the proposal “really reflects and implements a bias against mergers that, at the end of the day, is bad policy and also contrary to law."
Nacha Finalizes Rules to Combat Credit-Push Fraud
To reduce the incidence of frauds that use credit-push payments, Nacha announced industry-supported rules for all participants to promote monitoring and recovering fraudulent funds in the ACH payments they receive. Schemes such as vendor and payroll impersonation as well as business email compromise, or BEC, can result in payments being “pushed” from a payer’s account to the account of a fraudster. According to the FBI, BEC was the second-costliest type of cybercrime last year.
The rules:
- Establish a base level of ACH payment monitoring on all parties in the ACH Network except consumers.
- Follow the flow of a credit-push payment to promote the detection of fraud from the point of origination through the point of receipt at the receiving depository financial institution.
- Empower the originating financial institution to request the return of the payment and delay funds availability, and allow the receiving depository financial institution to return suspicious transactions when fraud is detected.
- Facilitate transaction monitoring by applying a standard transaction description for ACH credits used for payroll payments.
Subcommittee Chair: SEC Climate Rule ‘In Jeopardy’
The Securities and Exchange Commission’s industry-opposed final rule requiring climate-related investor disclosures is in jeopardy after a federal court issued a stay of the rulemaking, a key member of the House Financial Services Committee said.
Speaking at a Subcommittee on Oversight and Investigations field hearing on the rule, Chairman Bill Huizenga, R-Mich., cited Friday’s decision by a panel of Fifth Circuit Court of Appeals judges to halt the rulemaking while litigation against it proceeds. The court’s decision “signals the SEC’s authority to develop, finalize and implement a climate disclosure rule is in jeopardy,” Huizenga said.
The agency this month voted 3-2 to finalize an updated rule requiring registrants to include certain climate-related disclosures in their registration statements and periodic reports. The rule requires disclosures on material climate-related risks, activities to mitigate or adapt to such risks, board oversight, and greenhouse gas emissions that reporting companies produce (Scope 1) or indirectly cause by their activities (Scope 2).