The Federal Deposit Insurance Corporation published two proposed rules in the Federal Register today, and the more consequential of them is procedural. One would rewrite the framework for reviewing bank mergers under the Bank Merger Act. The other would extend to state-chartered banks the same treatment national banks get when they operate outside their home state.

The board approved both on September 17. Comments close November 23.

The merger proposal's central move is a change of instrument. The FDIC has historically kept the substance of its merger review in a statement of policy, a document the agency can rewrite without notice and comment. The proposal would move that content into regulation, at a new Section 333.5, and attach deadlines to it. The agency said as much in its notice of proposed rulemaking, where it argues that codifying the framework gives it more durability and transparency, and that parts of the current process are more stringent than the statute itself requires.

The agency bound itself to a calendar

The proposed timelines are the provisions with the shortest path to a banker's calendar. A new category of de minimis transactions would move by letter filing with deemed approval, generally decided within five business days. De minimis requires that the assets being acquired fall below the adjusted Hart-Scott-Rodino threshold and under 5 percent of the acquiring institution's assets, that all parties meet the rule's criteria, and that the resulting bank be well capitalized immediately after closing.

Above that, the proposal sorts filings into processing tracks. Corporate reorganizations that are not de minimis would be decided by 30 days after a substantially complete filing, or five business days after the FDIC receives word from the host state in an interstate deal. A standard track would run to 150 days from receipt of a substantially complete filing, capped at 270 days for that category, and an extended standard category would carry a 180-day maximum.

The rule also disciplines the agency's own intake. If the FDIC does not tell an applicant within 21 days that a filing is incomplete, the filing is deemed substantially complete as of the date it arrived, and the clock starts then. An applicant that fails to supply missing information within 30 days of being asked can have its filing returned without a decision. Public notice obligations would be trimmed, and the comment period for qualifying corporate reorganizations would fall to 15 days.

The FDIC's own framing is that its review has been too slow and too heavy for applicants, a judgment it supports with estimates that most standard-track filings would save an average of 22 days, and 192 days in the category where the old practice ran longest.

What falls out of the argument

The de minimis category is where the proposal gives up the most scrutiny, and the trade is explicit. Transactions that small, the FDIC reasons, "necessarily result in a favorable finding on each of the statutory factors," so a full application produces paperwork rather than information. Whether that reasoning holds depends on what the category captures in practice, and the answer is not obvious from the definition, because 5 percent of a large acquirer's assets is a different number than 5 percent of a small one's.

The intended effect of that speed is a lower transaction cost, and the feared effect is the same thing. A small acquisition that once required a full application, with the delay and the public record that come with it, becomes a letter. If the rule works as designed, more of those deals happen, and each one is smaller than the mergers that draw attention. That is the mechanism at work when critics describe the proposal as a change in what the public gets to see, and it is why the de minimis threshold will draw more comments than the timelines around it.

There is an interagency wrinkle. The FDIC is one of three agencies that act on merger applications, alongside the Comptroller of the Currency and the Federal Reserve, and this rule binds only the FDIC's own decisions. Comptroller Jonathan Gould has suggested pushing the changes across agencies, which would matter for deals where more than one regulator has to sign off. As it stands, a transaction needing the Federal Reserve's approval still faces that agency's process.

The competition screen counts more of the market

The competitive effects analysis is the substantive change analysts will spend the most time on. Under the proposal, the FDIC's initial Herfindahl-Hirschman Index screen would account for credit unions and for centrally booked deposits, the money a bank records at its central office rather than attributing to a branch where the depositor lives.

Both additions move in the same direction, which is to say they make the market look more crowded and the concentration arithmetic look smaller. A nationwide deposit platform competing for the same customer as a local bank is treated as a participant, and so is a credit union that takes deposits in the same town. The FDIC's stated rationale is that competition has increased substantially since the statute passed in 1960, and it names nonbanks, fintechs, money market funds, retailers, independent mortgage companies and private credit as participants in the same business.

That premise is contested, and the comment file is where it will be tested. The strongest counterargument is that a credit union with a field-of-membership restriction does not discipline the pricing of a bank that serves the general public, so counting its deposits in the market share denominator overstates the competitive constraint. The FDIC anticipated the objection: it asks specifically whether its definition of centrally booked deposits captures the right universe, and whether a narrower one would do better.

The proposal also creates safe harbors, including one for the financial-stability factor that would conclusively resolve that analysis favorably for described categories of transactions. Safe harbors cut both ways in a rulemaking. They give applicants the certainty the agency says it wants, and they remove the case-by-case judgment that produced the outcomes the current framework reached under the 2024 policy this proposal would replace.

A rule outlasts the people who wrote it

Here is the argument for codifying all of this rather than revising the statement of policy. A policy statement is an instrument of the agency that issued it. A regulation survives a change in the board's composition, and it can only be undone by another notice-and-comment proceeding, which is slower and more visible than an internal rewrite.

The 2024 policy is the illustration. It was drafted when Travis Hill, now the FDIC's chairman, was its vice chairman, and it represented a more skeptical posture toward consolidation. The proposal before the public now reverses it, and doing that through a rule makes the reversal harder to reverse again. The board vote was unanimous: Hill, Gould, and acting Consumer Financial Protection Bureau director Jonathan Paoletta.

Gould's own framing of the direction was direct. He has said that "mergers are critical to a healthy, functioning banking system," which is the industry's position stated by a regulator whose agency competes for the same chartering business as the states.

The cost of durability is flexibility. A regulation that specifies a 150-day clock and a five-day track for small deals cannot be adjusted between boards when the market changes, unless the agency runs a new rulemaking. The FDIC is aware of the trade and asks commenters to weigh it, including the question of whether mandatory processing timelines are the right mechanism at all.

Parity is a different question with a smaller footprint

The second proposal addresses where a state bank's rules come from when it does business across state lines. Under Section 24(j) of the Federal Deposit Insurance Act, host state law is applied differently to an out-of-state state bank than to a national bank, and the FDIC proposes to close that gap. Where a host state law does not apply to a national bank, it would not apply to an out-of-state state bank providing services there, whether or not it has a branch.

The proposal is explicit that it does not touch interest rates, which Section 27 of the Act governs separately. That distinction matters more than it reads, because the rate authority of a state bank lending into another state is the point of most parity arguments in this area, and this rule leaves it where it is. What changes is the application of the host state's substantive law to services delivered into its territory.

How much that is worth depends on which state laws currently apply. Consumer protection statutes, licensing requirements for particular products and state-specific disclosure rules are the categories that tend to reach services delivered into a jurisdiction, and a state bank lending or taking deposits across a border without a branch has had to work through them one state at a time. National banks have had a federal answer to the same question. The proposal hands state banks the national bank answer without changing their charter, which is the substance of the parity argument and also its most obvious point of attack, since the states that wrote those laws did not expect them to be displaced by a charter they do not issue.

What the comment record will decide

The criticism of the merger proposal is coming from a specific direction. Inner City Press, publishing as Fair Finance Watch, called it the agency's "third move this year to shrink what the public gets to see," pointing to deemed approval for whole categories of transactions, limits on the FDIC's discretion to pull a filing off expedited processing, and the way hearing requests are resolved. On that last point the agency's existing framework is candid: hearings are rare because the FDIC grants one only when written submissions would be insufficient, and a denial is final and not appealable. The proposal keeps that structure rather than creating one.

The broader context is a year of threshold changes at the banking agencies, including a proposal to raise the Community Reinvestment Act examination threshold, which critics argue would move hundreds of mid-sized institutions out from under full CRA review. American Banker read the package as faster reviews plus preemption, which is a fair summary of the direction and a reminder that the two proposals were released together on purpose.

What the FDIC has not done is publish evidence that the current process produced wrong decisions. The case it makes is about time and burden: that lenders wait too long, that the paperwork does not change the answer for small transactions, and that the market has more competitors than the 1960 statute assumed. Those are measurable claims, and the comment period that opened today is the first place they will be tested by people who have waited. The rule that emerges will say how much of this was a negotiation and how much was a decision already made.

Primary sources

  1. Federal Register for the text of both proposals, the processing timelines, the de minimis definition and criteria, the centrally booked deposits and credit union provisions in the competitive effects analysis, the Section 333.5 codification of the statutory factors and its financial-stability safe harbor, and the November 23 comment deadline.
  2. FDIC press releases for the September 17 board action, the stated policy objectives, and the description of the state bank parity amendment under Section 24(j).
  3. American Banker for the characterization of the package and Comptroller Gould's remarks on interagency adoption.
  4. Inner City Press and Fair Finance Watch for the criticism of the proposal's effect on public notice and hearing opportunities.