This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
18740
Vol. 87, No. 62
Thursday, March 31, 2022
1 Bank Merger Act, Public Law 86–463, 72 Stat.
129 (1960); Bank Merger Act Amendments of 1966,
Public Law 89–356, 80 Stat. 7 (codified as amended
at 12 U.S.C. 1828(c)(2018)), available at fdic.gov/
regulations/laws/rules/1000-2000.html#
1000sec.18c.
2 Prior to the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, Public Law 103–
328 (the Riegle-Neal Act of 1994), many states did
not permit intra-state branching and interstate
branch branching was not permitted. Following the
passage of the Riegle-Neal Act of 1994, many bank
holding companies chose to consolidate existing
bank charters.
3 See Financial Stability Board, 2020 list of global
systemic important banks, available at https://
www.fsb.org/wp-content/uploads/P111120.pdf.
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 303
RIN 3064–ZA31
Request for Information and Comment
on Rules, Regulations, Guidance, and
Statements of Policy Regarding Bank
Merger Transactions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Request for information and
comment.
SUMMARY: The FDIC is soliciting
comments from interested parties
regarding the application of the laws,
practices, rules, regulations, guidance,
and statements of policy (together,
regulatory framework) that apply to
merger transactions involving one or
more insured depository institution,
including the merger between an
insured depository institution and a
noninsured institution. The FDIC is
interested in receiving comments
regarding the effectiveness of the
existing framework in meeting the
requirements of section 18(c) of the
Federal Deposit Insurance Act (known
as the Bank Merger Act).
DATES: Comments must be received by
May 31, 2022.
ADDRESSES: Commenters are encouraged
to use the title ‘‘Request for Comment
on Rules, Regulations, Guidance, and
Statement of Policy on Bank Merger
Transactions (RIN 3064–ZA31)’’ and to
identify the number of the specific
question(s) for comment to which they
are responding. Please send comments
by one method only directed to:
• Agency Website: https://
www.fdic.gov/resources/regulations/
federal-register-publications/. Follow
the instructions for submitting
comments on the agency’s website.
• Email: Comments@fdic.gov. Include
RIN 3064–ZA31 in the subject line of
the message.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments—RIN 3064–ZA31, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery/Courier: Comments
may be hand-delivered to the guard
station at the rear of the 550 17th Street
NW building (located on F Street NW)
on business days between 7:00 a.m. and
5:00 p.m. ET.
Public Inspection: All comments
received will be posted without change
to https://www.fdic.gov/resources/
regulations/federal-register-
publications/—including any personal
information provided—for public
inspection. Paper copies of public
comments may be ordered from the
FDIC Public Information Center, 3501
North Fairfax Drive, Room E–1002,
Arlington, VA 22226, or by telephone at
877–275–3342 or 703–562–2200.
FOR FURTHER INFORMATION CONTACT: Rae-
Ann Miller, Senior Deputy Director,
Supervisory Examinations and Policy,
Division of Risk Management
Supervision, 202–898–3898, rmiller@
fdic.gov; or Ashby G. Hilsman, Assistant
General Counsel, Bank Activities and
Regional Affairs Section, Supervision,
Legislation and Enforcement Branch,
Legal Division, 202–898–6636,
ahilsman@fdic.gov.
SUPPLEMENTARY INFORMATION:
Background Information
Significant changes over the past
several decades in the banking industry
and financial system necessitate a
review of the regulatory framework that
applies to bank merger transactions
involving one or more insured
depository institutions pursuant to the
Bank Merger Act.1 First, more than three
decades of consolidation and growth in
the banking industry have significantly
reduced the number of smaller banking
organizations and increased the number
of large and systemically-important
banking organizations. Second, the FDIC
has a responsibility to promote public
confidence in the banking system,
maintain financial stability, review
proposed mergers, and resolve failing
large insured depository institutions.
Third, the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act) amended the Bank
Merger Act to include, for the first time,
a financial stability factor. Fourth, and
finally, a recent Executive Order
instructed U.S. agencies to consider the
impact that consolidation may have on
maintaining a competitive marketplace.
Thus, the FDIC has determined that it is
both timely and appropriate to review
the regulatory framework and consider
whether updates or other changes are
warranted.
Consolidation in the Banking Sector
The banking sector has experienced a
significant amount of consolidation over
the last 30 years as shown in Tables 1
through 3. This period of consolidation,
fueled in large part by mergers and
acquisitions, has contributed to the
significant growth of the number of
large insured depository institutions,
especially insured depository
institutions with total assets of $100
billion or more.
In 1990, there was only one insured
depository institution with assets
greater than $100 billion; however, that
number had increased to 33 by 2020.2
Of these 33 insured depository
institutions with assets greater than
$100 billion, nine were owned by the
eight U.S. bank holding companies
designated as Global Systemically
Important Banks (U.S. GSIBs), and three
were owned by foreign banking
organizations designated as foreign
Global Systemically Important Banks
(foreign GSIBs).3 While insured
depository institutions with total assets
of more than $100 billion comprise less
than one percent of the total number of
insured depository institutions, they
hold about 70 percent of total industry
assets and 66 percent of domestic
deposits.
Consolidation also has contributed to
the economic landscape of insured
depository institutions with assets less
than $100 billion. Over the same 30-year
period, the number of institutions with
assets less than $10 billion has declined
from 15,099 in 1990 to 4,851 in 2020,
VerDate Sep<11>2014 17:33 Mar 30, 2022 Jkt 256001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\31MRP1.SGM 31MRP1
jspears on DSK121TN23PROD with PROPOSALS1
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
18740
Vol. 87, No. 62
Thursday, March 31, 2022
1 Bank Merger Act, Public Law 86–463, 72 Stat.
129 (1960); Bank Merger Act Amendments of 1966,
Public Law 89–356, 80 Stat. 7 (codified as amended
at 12 U.S.C. 1828(c)(2018)), available at fdic.gov/
regulations/laws/rules/1000-2000.html#
1000sec.18c.
2 Prior to the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994, Public Law 103–
328 (the Riegle-Neal Act of 1994), many states did
not permit intra-state branching and interstate
branch branching was not permitted. Following the
passage of the Riegle-Neal Act of 1994, many bank
holding companies chose to consolidate existing
bank charters.
3 See Financial Stability Board, 2020 list of global
systemic important banks, available at https://
www.fsb.org/wp-content/uploads/P111120.pdf.
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 303
RIN 3064–ZA31
Request for Information and Comment
on Rules, Regulations, Guidance, and
Statements of Policy Regarding Bank
Merger Transactions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Request for information and
comment.
SUMMARY: The FDIC is soliciting
comments from interested parties
regarding the application of the laws,
practices, rules, regulations, guidance,
and statements of policy (together,
regulatory framework) that apply to
merger transactions involving one or
more insured depository institution,
including the merger between an
insured depository institution and a
noninsured institution. The FDIC is
interested in receiving comments
regarding the effectiveness of the
existing framework in meeting the
requirements of section 18(c) of the
Federal Deposit Insurance Act (known
as the Bank Merger Act).
DATES: Comments must be received by
May 31, 2022.
ADDRESSES: Commenters are encouraged
to use the title ‘‘Request for Comment
on Rules, Regulations, Guidance, and
Statement of Policy on Bank Merger
Transactions (RIN 3064–ZA31)’’ and to
identify the number of the specific
question(s) for comment to which they
are responding. Please send comments
by one method only directed to:
• Agency Website: https://
www.fdic.gov/resources/regulations/
federal-register-publications/. Follow
the instructions for submitting
comments on the agency’s website.
• Email: Comments@fdic.gov. Include
RIN 3064–ZA31 in the subject line of
the message.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments—RIN 3064–ZA31, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery/Courier: Comments
may be hand-delivered to the guard
station at the rear of the 550 17th Street
NW building (located on F Street NW)
on business days between 7:00 a.m. and
5:00 p.m. ET.
Public Inspection: All comments
received will be posted without change
to https://www.fdic.gov/resources/
regulations/federal-register-
publications/—including any personal
information provided—for public
inspection. Paper copies of public
comments may be ordered from the
FDIC Public Information Center, 3501
North Fairfax Drive, Room E–1002,
Arlington, VA 22226, or by telephone at
877–275–3342 or 703–562–2200.
FOR FURTHER INFORMATION CONTACT: Rae-
Ann Miller, Senior Deputy Director,
Supervisory Examinations and Policy,
Division of Risk Management
Supervision, 202–898–3898, rmiller@
fdic.gov; or Ashby G. Hilsman, Assistant
General Counsel, Bank Activities and
Regional Affairs Section, Supervision,
Legislation and Enforcement Branch,
Legal Division, 202–898–6636,
ahilsman@fdic.gov.
SUPPLEMENTARY INFORMATION:
Background Information
Significant changes over the past
several decades in the banking industry
and financial system necessitate a
review of the regulatory framework that
applies to bank merger transactions
involving one or more insured
depository institutions pursuant to the
Bank Merger Act.1 First, more than three
decades of consolidation and growth in
the banking industry have significantly
reduced the number of smaller banking
organizations and increased the number
of large and systemically-important
banking organizations. Second, the FDIC
has a responsibility to promote public
confidence in the banking system,
maintain financial stability, review
proposed mergers, and resolve failing
large insured depository institutions.
Third, the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act) amended the Bank
Merger Act to include, for the first time,
a financial stability factor. Fourth, and
finally, a recent Executive Order
instructed U.S. agencies to consider the
impact that consolidation may have on
maintaining a competitive marketplace.
Thus, the FDIC has determined that it is
both timely and appropriate to review
the regulatory framework and consider
whether updates or other changes are
warranted.
Consolidation in the Banking Sector
The banking sector has experienced a
significant amount of consolidation over
the last 30 years as shown in Tables 1
through 3. This period of consolidation,
fueled in large part by mergers and
acquisitions, has contributed to the
significant growth of the number of
large insured depository institutions,
especially insured depository
institutions with total assets of $100
billion or more.
In 1990, there was only one insured
depository institution with assets
greater than $100 billion; however, that
number had increased to 33 by 2020.2
Of these 33 insured depository
institutions with assets greater than
$100 billion, nine were owned by the
eight U.S. bank holding companies
designated as Global Systemically
Important Banks (U.S. GSIBs), and three
were owned by foreign banking
organizations designated as foreign
Global Systemically Important Banks
(foreign GSIBs).3 While insured
depository institutions with total assets
of more than $100 billion comprise less
than one percent of the total number of
insured depository institutions, they
hold about 70 percent of total industry
assets and 66 percent of domestic
deposits.
Consolidation also has contributed to
the economic landscape of insured
depository institutions with assets less
than $100 billion. Over the same 30-year
period, the number of institutions with
assets less than $10 billion has declined
from 15,099 in 1990 to 4,851 in 2020,
VerDate Sep<11>2014 17:33 Mar 30, 2022 Jkt 256001 PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 E:\FR\FM\31MRP1.SGM 31MRP1
jspears on DSK121TN23PROD with PROPOSALS1
18741Federal Register / Vol. 87, No. 62 / Thursday, March 31, 2022 / Proposed Rules
4 Based on Thrift Financial Reports (TFR) and
Consolidated Reports of Condition and Income (Call
Report) between 1990 and 2005, the number of
institutions with assets less than $10 billion
declined from 15,099 to 8,715, before falling to
4,851 in 2020. Over the same time period, the
percentage of industry assets held by those banks
declined from 66.4 percent in 1990 to 26.1 percent
in 2005, and then to 14.8 percent in 2020. Similarly,
the percentage of domestic deposits held by those
institutions declined from 73.9 percent in 1990 to
34.2 percent in 2005, and then to 15.4 percent in
2020.
5 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111–203, section 604(f),
124 Stat. 1376, 1602 (2010) (codified as 12 U.S.C.
1828(c)(5) (2018)), available at https://
www.govinfo.gov/app/details/PLAW-111publ203.
6 See Federal Reserve Board and FDIC joint final
rules: Resolution Plans Required, 76 FR 67323,
(Nov. 1, 2011), available at https://
www.govinfo.gov/content/pkg/FR-2011-11-01/pdf/
2011-27377.pdf, and Tailored Resolution Plan
Requirements, 80 FR 59194, (Nov. 1, 2019),
available at https://www.govinfo.gov/content/pkg/
FR-2019-11-01/pdf/2019-23967.pdf. See also, FDIC
final rule, Certain Orderly Liquidation Authority
Provisions under Title II of the Dodd Frank Wall
Street Reform and Consumer Protection Act, 76 FR
41626, (July 15, 2011), available at https://
www.govinfo.gov/content/pkg/FR-2011-07-15/pdf/
2011-17397.pdf.
7 Although the FDIC has developed a framework
of systemic resolution regulations, strategies, and
policies and procedures to operationalize its
authority to handle the orderly failure of a GSIB or
other systemically important financial company
under Title II of the Dodd-Frank Act, such a failure
would present additional risks for the FDIC and
could, depending on the circumstances, also
involve failure of a large insured depository
institution.
a reduction of approximately 68
percent.4 The declining number of
smaller insured depository institutions
may limit access to financial services
and credit in communities, potentially
adversely affecting the welfare of the
communities’ workers, farmers, small
businesses, startups, and consumers.
Over this same period, the number of
insured depository institutions with
assets between $10 billion and $100
billion has doubled from 59 in 1990 to
118 in 2020. However, the percentage of
total industry assets held by all insured
depository institutions with assets less
than $100 billion declined by 68 percent
and their percentage of insured deposits
held declined by approximately 70
percent.
Several insured depository
institutions with assets less than $100
billion were owned by either a U.S.
GSIB or a foreign GSIB. For example, 12
insured depository institutions with
assets less than $10 billion were owned
by GSIBs, with six owned by U.S.
GSIBs, and six owned by foreign GSIBs.
Further, 11 insured depository
institutions with assets between $10
billion to $100 billion were owned by
GSIBs, with four owned by U.S. GSIBs,
and seven owned by foreign GSIBs.
TABLE 1—NUMBER OF INSURED DE-
POSITORY INSTITUTIONS BY ASSET
SIZE
Asset size Year
1990 2005 2020
$10B–$50B ............. 52 86 102
$50B–$100B ........... 7 21 16
$100B–$250B ......... 1 5 20
$250B–$500B ......... 0 3 8
$500B–$700B ......... 0 0 1
≥$700B ................... 0 3 4
Source: TFR and Call Reports.
TABLE 2—PERCENTAGE OF INDUSTRY
ASSETS HELD BY INSURED DEPOSI-
TORY INSTITUTIONS BY ASSET SIZE
Asset size
Year
1990
(%) 2005
(%) 2020
(%)
$10B–$50B ............. 20.2 16.7 10.5
$50B–$100B ........... 10.0 13.1 5.3
$100B–$250B ......... 3.4 7.2 13.3
$250B–$500B ......... 0.0 11.1 13.9
$500B–$700B ......... 0.0 0.0 2.5
≥$700B ................... 0.0 25.8 39.8
Source: TFR and Call Report.
TABLE 3—PERCENTAGE OF DOMESTIC
DEPOSITS HELD BY INSURED DEPOS-
ITORY INSTITUTIONS BY ASSET SIZE
Asset size
Year
1990
(%) 2005
(%) 2020
(%)
$10B–$50B ............. 18.5 16.6 11.4
$50B–$100B ........... 6.4 12.2 5.9
$100B–$250B ......... 1.2 6.4 13.9
$250B–$500B ......... 0.0 12.8 14.3
$500B–$700B ......... 0.0 0.0 2.6
≥$700B ................... 0.0 17.8 35.5
Source: TFR and Call Report.
The Financial Stability Factor in the
Bank Merger Act and Large Bank
Resolution
The Dodd-Frank Act made a number
of statutory changes aimed at addressing
the risks posed by the largest banks,
including an amendment to the Bank
Merger Act requiring consideration of
the risk posed to the stability of the
United States banking or financial
system of a proposed bank merger.5 To
date, from a financial stability
perspective, efforts to improve the
resolvability of large banks have focused
on GSIBs.6 As shown above, given the
increased number, size, and complexity
of non-GSIB large banks, however, a
reconsideration by the FDIC of the
framework for assessing the financial
stability prong of the BMA and focused
attention on the financial stability risks
that could arise from a merger involving
a large bank is warranted.
In particular, the failure of a large
insured depository institution would
present significant challenges to the
FDIC’s resolutions and receivership
functions and could present a threat to
the financial stability of the United
States. Insured depository institutions
are resolved under the Federal Deposit
Insurance Act. For various reasons,
including their size, sources of funding,
and other organizational complexities,
the resolution of large insured
depository institutions can present great
risk to the Deposit Insurance Fund, as
well as extraordinary operational risk
for the FDIC. In addition, as a practical
matter, the size of an insured depository
institution may limit the resolution
options available to the FDIC in the
event of failure.7
In recent history, including the global
financial crisis that began in 2008, the
most common resolution transactions
have involved a purchase and
assumption transaction where an
acquiring institution takes all or a
substantial part of the failed insured
depository institution. For example,
between 2008 and 2013, there were a
total of 489 bank failures, of which 463,
or approximately 95 percent, were
resolved by the FDIC through purchase
and assumption transactions.
While most of these purchase and
assumption resolution transactions were
for insured depository institutions with
assets under $10 billion, the largest
purchase and assumption transaction
completed by the FDIC was that of
Washington Mutual Bank, which failed
on September 25, 2008, with assets of
approximately $307 billion. However,
that transaction resulted in a larger and
more complex acquirer (JPMorgan Chase
& Co.), and the need for the resolution
heightened financial turmoil and
contributed to concerns about the safety
of the financial system. As a result of
the systemic concerns arising from the
resolution of Washington Mutual Bank,
when Wachovia Bank required
resolution days later, the FDIC, the
Board of Governors of the Federal
Reserve System (Board), and the
Secretary of the Treasury invoked the
systemic risk exception (SRE) to allow
the acquisition of Wachovia by another
VerDate Sep<11>2014 17:33 Mar 30, 2022 Jkt 256001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\31MRP1.SGM 31MRP1
jspears on DSK121TN23PROD with PROPOSALS1
4 Based on Thrift Financial Reports (TFR) and
Consolidated Reports of Condition and Income (Call
Report) between 1990 and 2005, the number of
institutions with assets less than $10 billion
declined from 15,099 to 8,715, before falling to
4,851 in 2020. Over the same time period, the
percentage of industry assets held by those banks
declined from 66.4 percent in 1990 to 26.1 percent
in 2005, and then to 14.8 percent in 2020. Similarly,
the percentage of domestic deposits held by those
institutions declined from 73.9 percent in 1990 to
34.2 percent in 2005, and then to 15.4 percent in
2020.
5 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111–203, section 604(f),
124 Stat. 1376, 1602 (2010) (codified as 12 U.S.C.
1828(c)(5) (2018)), available at https://
www.govinfo.gov/app/details/PLAW-111publ203.
6 See Federal Reserve Board and FDIC joint final
rules: Resolution Plans Required, 76 FR 67323,
(Nov. 1, 2011), available at https://
www.govinfo.gov/content/pkg/FR-2011-11-01/pdf/
2011-27377.pdf, and Tailored Resolution Plan
Requirements, 80 FR 59194, (Nov. 1, 2019),
available at https://www.govinfo.gov/content/pkg/
FR-2019-11-01/pdf/2019-23967.pdf. See also, FDIC
final rule, Certain Orderly Liquidation Authority
Provisions under Title II of the Dodd Frank Wall
Street Reform and Consumer Protection Act, 76 FR
41626, (July 15, 2011), available at https://
www.govinfo.gov/content/pkg/FR-2011-07-15/pdf/
2011-17397.pdf.
7 Although the FDIC has developed a framework
of systemic resolution regulations, strategies, and
policies and procedures to operationalize its
authority to handle the orderly failure of a GSIB or
other systemically important financial company
under Title II of the Dodd-Frank Act, such a failure
would present additional risks for the FDIC and
could, depending on the circumstances, also
involve failure of a large insured depository
institution.
a reduction of approximately 68
percent.4 The declining number of
smaller insured depository institutions
may limit access to financial services
and credit in communities, potentially
adversely affecting the welfare of the
communities’ workers, farmers, small
businesses, startups, and consumers.
Over this same period, the number of
insured depository institutions with
assets between $10 billion and $100
billion has doubled from 59 in 1990 to
118 in 2020. However, the percentage of
total industry assets held by all insured
depository institutions with assets less
than $100 billion declined by 68 percent
and their percentage of insured deposits
held declined by approximately 70
percent.
Several insured depository
institutions with assets less than $100
billion were owned by either a U.S.
GSIB or a foreign GSIB. For example, 12
insured depository institutions with
assets less than $10 billion were owned
by GSIBs, with six owned by U.S.
GSIBs, and six owned by foreign GSIBs.
Further, 11 insured depository
institutions with assets between $10
billion to $100 billion were owned by
GSIBs, with four owned by U.S. GSIBs,
and seven owned by foreign GSIBs.
TABLE 1—NUMBER OF INSURED DE-
POSITORY INSTITUTIONS BY ASSET
SIZE
Asset size Year
1990 2005 2020
$10B–$50B ............. 52 86 102
$50B–$100B ........... 7 21 16
$100B–$250B ......... 1 5 20
$250B–$500B ......... 0 3 8
$500B–$700B ......... 0 0 1
≥$700B ................... 0 3 4
Source: TFR and Call Reports.
TABLE 2—PERCENTAGE OF INDUSTRY
ASSETS HELD BY INSURED DEPOSI-
TORY INSTITUTIONS BY ASSET SIZE
Asset size
Year
1990
(%) 2005
(%) 2020
(%)
$10B–$50B ............. 20.2 16.7 10.5
$50B–$100B ........... 10.0 13.1 5.3
$100B–$250B ......... 3.4 7.2 13.3
$250B–$500B ......... 0.0 11.1 13.9
$500B–$700B ......... 0.0 0.0 2.5
≥$700B ................... 0.0 25.8 39.8
Source: TFR and Call Report.
TABLE 3—PERCENTAGE OF DOMESTIC
DEPOSITS HELD BY INSURED DEPOS-
ITORY INSTITUTIONS BY ASSET SIZE
Asset size
Year
1990
(%) 2005
(%) 2020
(%)
$10B–$50B ............. 18.5 16.6 11.4
$50B–$100B ........... 6.4 12.2 5.9
$100B–$250B ......... 1.2 6.4 13.9
$250B–$500B ......... 0.0 12.8 14.3
$500B–$700B ......... 0.0 0.0 2.6
≥$700B ................... 0.0 17.8 35.5
Source: TFR and Call Report.
The Financial Stability Factor in the
Bank Merger Act and Large Bank
Resolution
The Dodd-Frank Act made a number
of statutory changes aimed at addressing
the risks posed by the largest banks,
including an amendment to the Bank
Merger Act requiring consideration of
the risk posed to the stability of the
United States banking or financial
system of a proposed bank merger.5 To
date, from a financial stability
perspective, efforts to improve the
resolvability of large banks have focused
on GSIBs.6 As shown above, given the
increased number, size, and complexity
of non-GSIB large banks, however, a
reconsideration by the FDIC of the
framework for assessing the financial
stability prong of the BMA and focused
attention on the financial stability risks
that could arise from a merger involving
a large bank is warranted.
In particular, the failure of a large
insured depository institution would
present significant challenges to the
FDIC’s resolutions and receivership
functions and could present a threat to
the financial stability of the United
States. Insured depository institutions
are resolved under the Federal Deposit
Insurance Act. For various reasons,
including their size, sources of funding,
and other organizational complexities,
the resolution of large insured
depository institutions can present great
risk to the Deposit Insurance Fund, as
well as extraordinary operational risk
for the FDIC. In addition, as a practical
matter, the size of an insured depository
institution may limit the resolution
options available to the FDIC in the
event of failure.7
In recent history, including the global
financial crisis that began in 2008, the
most common resolution transactions
have involved a purchase and
assumption transaction where an
acquiring institution takes all or a
substantial part of the failed insured
depository institution. For example,
between 2008 and 2013, there were a
total of 489 bank failures, of which 463,
or approximately 95 percent, were
resolved by the FDIC through purchase
and assumption transactions.
While most of these purchase and
assumption resolution transactions were
for insured depository institutions with
assets under $10 billion, the largest
purchase and assumption transaction
completed by the FDIC was that of
Washington Mutual Bank, which failed
on September 25, 2008, with assets of
approximately $307 billion. However,
that transaction resulted in a larger and
more complex acquirer (JPMorgan Chase
& Co.), and the need for the resolution
heightened financial turmoil and
contributed to concerns about the safety
of the financial system. As a result of
the systemic concerns arising from the
resolution of Washington Mutual Bank,
when Wachovia Bank required
resolution days later, the FDIC, the
Board of Governors of the Federal
Reserve System (Board), and the
Secretary of the Treasury invoked the
systemic risk exception (SRE) to allow
the acquisition of Wachovia by another
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jspears on DSK121TN23PROD with PROPOSALS1