FDIC seeks to shorten deal, de novo application approval timelines

The Federal Deposit Insurance Corp. is aiming to tackle long-pending bank deal and de novo applications with a new process.

The FDIC Board on June 20 approved a resolution in which applications that pend for more than 270 days will automatically be put on the next board meeting agenda and stay on the agenda quarterly until a decision is made. During those meetings, staff would be required to brief the board on the timeline and next steps.

"A long application review process is costly for a variety of reasons. In the case of mergers, it adds uncertainties for employees and customers, it makes post-merger integration more challenging, and it can be dangerous if one of the merging entities is in a vulnerable condition," Vice Chair Travis Hill said during the FDIC Board meeting on June 20. "The purpose of this requirement is, in part, to give the Board more regular and rigorous insight into the review process, but more fundamentally it is intended to motivate faster processing of applications. 270 days is an extremely long time; we need to find ways to move faster."

According to the agency, in each year between 2013 and 2021, less than 10 bank applications pended for more than nine months. Since then, 12 applications pended beyond that time frame in 2022, and 2023 saw 16, Hill said.

"In 2024, we have essentially already hit 11 halfway through the year with 10 more currently pending that are past that threshold and more likely on the way," he said.

Since President Joe Biden penned an executive order on competition in summer 2021, more bank deals have faced prolonged closing timelines with some taking well over a year to secure regulatory approval.

The resolution, which was introduced by Hill, was unanimously approved. Although FDIC Board actions are often taken on party lines, Chairman Martin Gruenberg expressed support for the resolution from the Republican vice chair.

"I know that FDIC staff work diligently to process these applications in a timely way," Gruenberg said during the board meeting. "I also believe that it would be helpful for staff to brief the board on applications that require longer than normal processing so that the board can gain an understanding on the reasons for that, and so for that reason I'm prepared to support the proposal."

Consumer Financial Protection Bureau Director Rohit Chopra, a member of the FDIC Board, also voiced support. But Chopra said he would like to see even more transparency on pending applications, such as making denials public information in order to help future applicants.

The agency recently made steps to increase transparency on M&A through its recent proposed policy statement on mergers. Under that proposal, the agency would issue statements about concerns with withdrawn transactions as information for future applicants and the public. Chopra's wish to include public disclosures on denials in Hill's resolution is a step further.

During the meeting on June 20, the FDIC also finalized its resolution planning rule for banks with more than $100 billion in assets, voting 3-2 along party lines. The rule is meant to improve resolutions when there are bank failures.