BB&T Corp. and SunTrust Banks Inc. are one step closer to completing their merger as the Federal Reserve terminated an enforcement action regarding Bank Secrecy Act and anti-money laundering compliance that was issued against BB&T in 2017.
Regulators are required to review a bank's AML record when considering bank mergers, acquisitions and other applications for business combinations, according to the Bank Secrecy Act/Anti-Money Laundering Examination Manual published on the Federal Financial Institutions Examination Council's website.
Analysts said they were expecting the termination since the North Carolina state bank regulator and the Federal Deposit Insurance Corp. had already removed similar enforcement actions.
"The fact that they were willing and able to announce that deal with SunTrust made you feel like this was coming fairly shortly," said Stephen Scouten, a bank analyst with Sandler O'Neill. "When those other two agencies already removed it, it was kind of a foregone conclusion."
The bank likely discussed the issue with the regulators before announcing the deal, according to analysts. "It's standard procedure to have a conversation with your regulator about something you're planning," said Christopher Marinac, a bank analyst with FIG Partners.
The two banks will still have to go through the remainder of the regulatory process. Analysts said they expect the deal to be approved, however. "What's still left is what's normal," said Brian Klock, a bank analyst with Keefe Bruyette & Woods.
The deal may be approved later than the third-quarter close that bank management is pushing for, according to Marinac. "A fourth-quarter close or even a year-end close seems more likely at this juncture," he said.
Fed Chairman Jerome Powell said the Fed will take its time reviewing the merger. The Fed has scheduled community feedback meetings in Charlotte, N.C., and Atlanta.
Scouten said the enforcement action was the "one issue" that commenters could have pointed to in an effort to stop the merger, but with the termination the banks should have "relatively smooth sailing" when it comes to getting regulatory approval.
The deal received pushback from some members of Congress, and the two banks will need to resolve some issues around deposit concentrations, according to Scouten. "But at the end of the day, we've seen a much more accommodative mindset from the regulatory agencies," he said.
"This should give anyone who had any fear about [the deal] not getting approved another level of comfort," Scouten said.