Recent proposals to reform the regulatory approval process for bank mergers and acquisitions may actually make the problem worse, as policymakers have put improving the speed for reaching decisions on merger applications “lower on the list of priorities,” Federal Reserve Governor Michelle Bowman said today.
The OCC in February proposed to end the time limit for automatic approvals of mergers of banks that it supervises as well as reevaluate its approval process, while the FDIC last month proposed a major overhaul of its approval process. Speaking at a Kansas City Fed event on the future of banking, Bowman was critical of the FDIC proposal in particular, saying that some of the proposed changes—such a move away from deposit-based analysis in merger consideration—could result in more delays in the process.
“We should focus on ensuring that we can improve the speed and timeliness of regulatory decision making, applying review standards that are reasonable and consistent with the statutory framework,” Bowman said. “Too often it seems that regulators discount the fact that these organizations do not simply hit the pause button during the merger review process. We must remember that these organizations are businesses that continue to operate and must do so in a way that supports their ongoing business operations and future growth.”
Bowman also said that the M&A process can be inappropriately influenced when regulators make demands on firms that are not squarely grounded in statutory approval requirements or based on safety and soundness considerations. “During the application deliberation process, regulators can impose limitations or restrictions to address specific supervisory or policy concerns in the form of ‘conditions’ or ‘commitments’ on the approval,” Bowman said. “While this can be an important tool, it should not be used to replace rulemaking or existing regulations and statutes that guide regulatory action; we should not engage in ‘regulation by application.’ Conditions or commitments that impose obligations that are inconsistent with our existing regulatory framework raise issues of significant concern.”
