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The Federal Deposit Insurance Corp.’s board of directors unanimously approved a resolution Thursday aimed at speeding up the application process.
The measure, proposed by Vice Chairman Travis Hill at Thursday’s meeting, was supported by all five board members, though the vice chairman noted that Consumer Financial Protection Bureau Director Rohit Chopra’s reasons for supporting it appeared to differ from Hill’s reasons for supporting it.
“Certain applications are taking too long to be processed,” Hill said. “And this problem has gotten significantly worse over the last few years.” Between 2013 and 2021, the number of applications that had to wait more than 270 days for approval was in the single digits each year. By contrast, the numbers have been in the double digits each year since 2022, Hill said.
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Under the resolution, any merger or deposit insurance application that has been pending approval for more than 270 days will automatically be placed on the FDIC Board’s agenda at its next meeting. For as long as the application remains open, it will be placed on the Board’s agenda quarterly.
FDIC officials must appear before the committee to brief them and provide details of the actions taken since the application was submitted, as well as any further steps that need to be taken and by when, Hill said.
Hill said the resolution would allow the board to exercise “more regular and rigorous oversight” of the merger review process and, more fundamentally, speed up the processing of merger applications.
FDIC Chairman Martin Grunberg supported the move, saying it would be helpful for staff to explain to the board about applications that are taking longer than usual so board members can understand why.
Chopra also praised the resolution, but he called it a way to “get us to a policy place where we can quickly reject applications that are facially flawed or substantively incomplete.”
Chopra said he believes bank authorities are reluctant to reject applications, “resulting in a never-ending game of horse-trading between banks and applicants.”
Concerns about proposed mergers tend to be communicated by FDIC staff, who, rather than presenting the application to the board or management to reject, “go through endless iterations to ensure that everyone is painstakingly able to say ‘yes’ to an application that is, on its face, inadequate,” Chopra said.
Chopra said merger applications are often withdrawn and there is little transparency in the process.
“I think this is a way to process applications and publicize the denial results,” he said. “This will send a great signal to the public of how we view this issue and where our concerns are so that future applicants know what to expect from them.”
“I’m grateful we have an agreement, but I’m not sure we have agreed on all of the fundamental objectives,” Hill replied.
The bill’s adoption came days after Senate Banking Committee Chairman Sherrod Brown, D-Ohio, sent a letter to Gruenberg about proposed changes to regulators’ policy statements on bank mergers. His letter on FridayBrown called on the FDIC to quickly adopt a “robust” policy statement to ensure proposed bank mergers are subjected to full scrutiny.
In March, the agency Increased scrutiny of mergers The creation of banks with more than $100 billion in assets. Anti-money laundering and financial stability are key priorities in these transactions. For smaller banks with more than $50 billion in assets, the FDIC will exercise greater scrutiny over the impact of mergers on communities.
Republican lawmakers have complained that it takes too long to approve bank merger deals. The bill was submitted The aim is to reduce the time banks wait for regulators’ responses to their merger applications.
On Thursday, the FDIC board also approved final rules aimed at strengthening bank resolution plans to reduce the chance of panicked weekend sales in the event of a bank with more than $100 billion in assets failing. Given last year’s bank failures, the need for stronger plans is “compelling,” Gruenberg said. The board voted 3-2, with Hill and Board Member Jonathan McKernan, both Republicans, voting against.
