#FDIC

27 03, 2024

FedFin on: Bank Merger Policy

2024-03-27T16:44:22-04:00March 27th, 2024|The Vault|

Following its 2022 request for input, the FDIC has released a formal proposal that would redefine the agency’s bank-merger policy into one that will make it difficult for all but the smallest and simplest transactions within its jurisdiction to have the clear prospects for approval usually necessary in non-emergency transactions, subjecting other M&A applications to protracted review with a high likelihood of denial.  Strategic alliances involving nonbanks and/or nonbank affiliates and BHCs with nonbank activities may also come under critical FDIC scrutiny, complicating transactions otherwise under the FRB or OCC’s review….

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27 03, 2024

MERGER15

2024-03-27T13:21:30-04:00March 27th, 2024|1- Financial Services Management|

Bank Merger Policy

Following its 2022 request for input, the FDIC has released a formal proposal that would redefine the agency’s bank-merger policy into one that will make it difficult for all but the smallest and simplest transactions within its jurisdiction to have the clear prospects for approval usually necessary in non-emergency transactions, subjecting other M&A applications to protracted review with a high likelihood of denial.  Strategic alliances involving nonbanks and/or nonbank affiliates and BHCs with nonbank activities may also come under critical FDIC scrutiny, complicating transactions otherwise under the FRB or OCC’s review.  Transactions over $100 billion would face the toughest scrutiny, but even small bank mergers could be denied if the FDIC is dissatisfied with the bank’s prior supervisory, enforcement, or community/consumer record.

MERGER15.pdf

25 03, 2024

M032524

2024-03-25T11:45:52-04:00March 25th, 2024|6- Client Memo|

How the FDIC Fails and Why It Matters So Much

Last January, we sent a forecast of likely regulatory action and what I called a “philosophical reflection” on the contradiction between the sum total of rules premised on unstoppable taxpayer rescues and U.S. policy that no bank be too big to fail.  Much in our forecast is now coming into public view due to Chair Powell and Vice Chair Barr; more on that to come, but these rules like the proposals are still premised on big-bank blow-outs.  I thus turn here from the philosophical to the pragmatic when it comes to bank resolution, picking up on a stunning admission in the FDIC’s proposed merger policy to ponder what’s really next for U.S. banks regardless of what any of the agencies say will result from all the new rules.

m032524.pdf

25 03, 2024

Karen Petrou: How the FDIC Fails and Why It Matters So Much

2024-03-25T11:45:45-04:00March 25th, 2024|The Vault|

Last January, we sent a forecast of likely regulatory action and what I called a “philosophical reflection” on the contradiction between the sum total of rules premised on unstoppable taxpayer rescues and U.S. policy that no bank be too big to fail.  Much in our forecast is now coming into public view due to Chair Powell and Vice Chair Barr; more on that to come, but these rules like the proposals are still premised on big-bank blow-outs.  I thus turn here from the philosophical to the pragmatic when it comes to bank resolution, picking up on a stunning admission in the FDIC’s proposed merger policy to ponder what’s really next for U.S. banks regardless of what any of the agencies say will result from all the new rules.

Let me quote at some length from the FDIC’s proposed merger policy:

“In particular, the failure of a large IDI could present greater challenges to the FDIC’s resolution and receivership functions, and could present a broader financial stability threat. For various reasons, including their size, sources of funding, and other organizational complexities, the resolution of large IDIs can present significant risk to the Deposit Insurance Fund (DIF), as well as material operational risk for the FDIC. In addition, as a practical matter, the size of an IDI may limit the resolution options available to the FDIC in the event of failure.”

In short, the FDIC wants to block most big-bank mergers because it can’t ensure orderly resolution of a large insured depository …

21 03, 2024

DAILY032124

2024-03-21T17:00:13-04:00March 21st, 2024|2- Daily Briefing|

FDIC Plans Merger Squelch

Both the policy and politics of the FDIC’s proposed merger policy follow that of its 2022 RFI (see FSM Report MERGER9), a very stringent approach to bank-merger review that split the FDIC 3-2 on party lines.  We will shortly provide clients with an in-depth analysis of the proposed approach, approved on a 3-2 vote.  It tracks much in the OCC’s proposal (see FSM Report MERGER14) but is still more stringent in several key areas.  Notably, it does not rely on qualitative financial-stability considerations, instead setting a $100 billion threshold for additional scrutiny.

Chopra Wants Far Tougher Bank-Merger Policy

CFPB Director Chopra elaborated today on his comments at the FDIC meeting, saying that he thinks the proposal is fine as far as it goes but that federal policy should go considerably further to curtail bank consolidation.  Actions he advocates include hard caps on bank growth and size (presumably meaning a limit on organic growth as well as via acquisition) and a roll-back of the systemic exemption in failing-bank acquisitions to block any future JPM/FRC-style transactions.

Daily032124.pdf

18 03, 2024

M031824

2024-03-18T12:20:49-04:00March 18th, 2024|6- Client Memo|

The OCC Blesses a Buccaneer Bank

In a column last week, Bloomberg’s Matt Levine rightly observed that only a bank can usually buy another bank.  He thus went on to say that a SPAC named Porticoes ambitions to buy a bank are doomed because Porticoes isn’t a bank.  Here, he’s wrong – Porticoes in fact was allowed last December to become a unique form of national bank licensed to engage in what is often, if unkindly, called vulture capitalism.  This is another OCC charter of convenience atop its approvals leading to NYCB’s woes, and thus yet another contradiction between the agency’s stern warnings on risk when it pops up in existing charters versus its insouciance when it comes to new or novel applications.

M031824.pdf

18 03, 2024

Karen Petrou: The OCC Blesses a Buccaneer Bank

2024-03-18T09:03:04-04:00March 18th, 2024|The Vault|

In a column last week, Bloomberg’s Matt Levine rightly observed that only a bank can usually buy another bank.  He thus went on to say that a SPAC named Porticoes ambitions to buy a bank are doomed because Porticoes isn’t a bank.  Here, he’s wrong – Porticoes in fact was allowed last December to become a unique form of national bank licensed to engage in what is often, if unkindly, called vulture capitalism.  This is another OCC charter of convenience atop its approvals leading to NYCB’s woes, and thus yet another contradiction between the agency’s stern warnings on risk when it pops up in existing charters versus its insouciance when it comes to new or novel applications.

According to the OCC’s charter approval, the Porticoes bank has no other purpose than serving as a wholly-owned subsidiary of Porticoes Capital LLC, a Delaware limited-liability company formed to be a proxy for a parent holding company. The parent holdco is “expected” to enter into binding commitments for the capital needed to back its wholly-owned bank plans to acquire a failed bank or even banks.  This is essentially a buy-now, pay-later form of bank chartering, a policy even more striking because funding commitments for the holdco then to downstream – should they materialize – are more than likely to come from private-equity investors who may or may not exercise direct or indirect control.

Based on the OCC’s approval, it seems that Porticoes’s new charter can buy another bank without capital, pre-approval from …

15 03, 2024

Al031824

2024-03-15T17:23:21-04:00March 15th, 2024|3- This Week|

Answered Prayers?

Banks have been asking regulators for years – decades? – to update 1995 merger guidance.  So the banking agencies are beginning to do, but not exactly as banks would have liked to see it done.  Although Sen. Warren (D-MA) thinks the OCC’s proposed merger policy is too soft, our analysis (see FSM Report MERGER14) and that of many others finds it a formidable barrier to all but the simplest, smallest transactions.  Now comes the FDIC.  As the schedule below makes clear, it plans on Thursday to issue a proposal based on its 2021 RFI (see FSM Report MERGER9).  We doubt any bank-merger policy influenced as strongly by CFPB Director Chopra will be a bank merger policy banks will like any better than the OCC’s, although some compromises may have to be made if Republican members of the FDIC board are willing to contemplate at least some of what Mr. Chopra, surely seconded by Chair Gruenberg, wants done.

Al031824.pdf

14 03, 2024

DAILY031424

2024-03-14T16:33:10-04:00March 14th, 2024|2- Daily Briefing|

Bipartisan Senators See More ILC Charters

Led by Sen. Romney (R-UT), bipartisan senators generally from states with large ILC presence or interest urged the agency to advance pending ILC charters and consider new ones.  The Senators oppose regulatory actions that may “target” ILC charter applications, expressing concerns about delays in the FDIC’s decision process.

Global Supervisors Target Mortgages, BNPL, Fintech as Top NBFI Systemic Priorities

An FSI report today recommends a holistic approach to regulating NBFI retail lenders, urging a policy mix increasing NBFI oversight.  This may well be right, but it will take statutory change in nations such as the U.S. to achieve it.

New Open-Standard-Setting for Open-Banking Set for Stringent Eligibility Standards

CFPB Director Chopra now states that the open-banking regulation regarding consumer data rights (see FSM Report DATA4) will be finalized in the fall, with proposed new standards for standard-setters released ahead of time so that the final rule addresses both issues.  Mr. Chopra is concerned that some forms of standard-setting organizations “weaponize” data to enhance their competitive position.

Daily031424.pdf

11 03, 2024

DAILY031124

2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

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