ABA: Updates needed to FDIC merger guidelines

In a detailed comment letter to the FDIC on Friday, the American Bankers Association called for updates to the agency’s 25-year-old guidelines regarding bank merger transactions, acknowledging the significant changes that the financial services industry has undergone since they were originally put in place.

As it contemplates changes to the guidelines, ABA urged the FDIC to consider adopting joint guidance with the Department of Justice’s Antitrust Division and the other banking agencies. (DOJ has also sought feedback on its merger guidelines, and ABA has submitted similar comments.) ABA also emphasized that competitive analysis should take into account financial services provided to a market through channels other than branch networks, and by nonbank firms. The association also advocated for an increase in the threshold of the Herfindahl-Hirschman Index below which the FDIC will generally not challenge proposed mergers or require divestitures of branches or other operations.

“Under current application of the banking guidelines, small institutions may be prevented from merging if the government assumes they are the only competitors in their geographic markets, as FDIC, the other bank regulatory agencies, and the [Antitrust] Division define those markets,” ABA said. “This outdated conception fails to reflect the competitive impact of online channels and other means of delivering financial services that do not depend on physical branch networks and are not captured by current competitive analyses. A more comprehensive analysis of these competitive factors will provide an accurate picture of products and services available to customers and promote a healthy market and economy.”

Finally, ABA said that any changes to the banking guidelines should offer adequate opportunity for public review and comment.