Statement by Martin J. Gruenberg
Member, FDIC Board of Directors
Bank Merger Act Application: SunTrust Bank, Atlanta, Georgia, to be acquired by
Branch Banking and Trust Company, Winston-Salem, North Carolina
November 19, 2019
Today the FDIC Board of Directors is considering an application for the
merger of two large insured depository institutions, SunTrust and BB&T, under
section 18(c) of the Federal Deposit Insurance Act, commonly referred to as the
Bank Merger Act.1 This is by far the largest bank merger ever to be considered by
the FDIC2 and offers the first meaningful consideration of the new financial
stability factor for mergers added by the Dodd-Frank Act.3
Among several factors, the Bank Merger Act now requires that the
responsible agency -- in this case, the FDIC as the regulator of the merged
institution -- take into consideration “the risk to the stability of the United States
banking or financial system.”4 This was a response to the 2008-2009 financial
crisis when so many large, systemically important financial institutions failed or
nearly failed. This in turn triggered an unprecedented U.S. government response,
including the first exercise of the FDIC’s systemic risk authority under the Federal
Deposit Insurance Act.5
The proposed merger would result in the sixth largest insured depository
institution and the eighth largest bank holding company in the United States.
While the resulting institution is not expected to expand its cross-border activities
1 12 U.S.C. 1828(c).
2 The top 5 FDIC-supervised mergers are:
2015 - BB&T acquired Susquehanna Bank, Lancaster, PA ($19B)
2011 - Hancock Bank, Gulfport, MS ($7B) acquired Whitney Bank, New Orleans, LA ($13B)
2009 - BB&T acquired Colonial Bank, Montgomery, AL ($25B)
2006 - BB&T consolidated BB&T Co. of Virginia ($25B) into their main charter
2005 - NorthFork Bank, Mattituck, NY ($30B) acquired Greenpoint Bank, New York, NY $(32B).
3 Section 604(f) of the Dodd-Frank Act, codified at 12 U.S.C. 1828(c)(5).
4 Id.
5 12 U.S.C. 1823(c)(4)(G). The FDIC is required by statute to choose the resolution that is the least costly to the
Deposit Insurance Fund, the “least cost test.” 12 U.S.C 1823(c)(4). The only exception to the least cost test is the
systemic risk exception, which requires a determination that compliance with the least cost test “would have serious
adverse effects on economic conditions or financial stability; and [] any action or assistance under this subparagraph
would avoid or mitigate such adverse effects.”
Member, FDIC Board of Directors
Bank Merger Act Application: SunTrust Bank, Atlanta, Georgia, to be acquired by
Branch Banking and Trust Company, Winston-Salem, North Carolina
November 19, 2019
Today the FDIC Board of Directors is considering an application for the
merger of two large insured depository institutions, SunTrust and BB&T, under
section 18(c) of the Federal Deposit Insurance Act, commonly referred to as the
Bank Merger Act.1 This is by far the largest bank merger ever to be considered by
the FDIC2 and offers the first meaningful consideration of the new financial
stability factor for mergers added by the Dodd-Frank Act.3
Among several factors, the Bank Merger Act now requires that the
responsible agency -- in this case, the FDIC as the regulator of the merged
institution -- take into consideration “the risk to the stability of the United States
banking or financial system.”4 This was a response to the 2008-2009 financial
crisis when so many large, systemically important financial institutions failed or
nearly failed. This in turn triggered an unprecedented U.S. government response,
including the first exercise of the FDIC’s systemic risk authority under the Federal
Deposit Insurance Act.5
The proposed merger would result in the sixth largest insured depository
institution and the eighth largest bank holding company in the United States.
While the resulting institution is not expected to expand its cross-border activities
1 12 U.S.C. 1828(c).
2 The top 5 FDIC-supervised mergers are:
2015 - BB&T acquired Susquehanna Bank, Lancaster, PA ($19B)
2011 - Hancock Bank, Gulfport, MS ($7B) acquired Whitney Bank, New Orleans, LA ($13B)
2009 - BB&T acquired Colonial Bank, Montgomery, AL ($25B)
2006 - BB&T consolidated BB&T Co. of Virginia ($25B) into their main charter
2005 - NorthFork Bank, Mattituck, NY ($30B) acquired Greenpoint Bank, New York, NY $(32B).
3 Section 604(f) of the Dodd-Frank Act, codified at 12 U.S.C. 1828(c)(5).
4 Id.
5 12 U.S.C. 1823(c)(4)(G). The FDIC is required by statute to choose the resolution that is the least costly to the
Deposit Insurance Fund, the “least cost test.” 12 U.S.C 1823(c)(4). The only exception to the least cost test is the
systemic risk exception, which requires a determination that compliance with the least cost test “would have serious
adverse effects on economic conditions or financial stability; and [] any action or assistance under this subparagraph
would avoid or mitigate such adverse effects.”
2
or deviate significantly from its traditional banking business model, other
indicators of complexity and challenges to resolvability raise potential financial
stability concerns. These include a large branch network, a large insurance broker
subsidiary, substantial IT systems, millions of account holders, and heavy reliance
on uninsured deposits. In addition, regional banks such as these are not subject to
a requirement to maintain a minimum amount of long-term unsecured debt to
absorb losses in the event of failure.
My concerns with the proposed merger and its potential risk to financial
stability are informed by the FDIC’s experience with regional bank failures during
the crisis, particularly Washington Mutual Bank and IndyMac Bank.
The Failures of Washington Mutual Bank & IndyMac Bank6
Washington Mutual Bank, with over $300 billion in assets at the time of its
failure in September 2008, was the largest thrift institution in the United States and
the 6th largest insured depository institution. Its failure was the largest in the
FDIC’s history.7
Several factors made it possible for Washington Mutual to fail with no loss
to the Deposit Insurance Fund and no loss imposed on its $45 billion of uninsured
deposits, approximately 24 percent of total deposits.8 There was an acquirer with
the capacity to assume all the assets and all the deposits through a traditional
purchase and assumption transaction. The acquirer could act quickly at the time of
failure because it had previously performed due diligence on Washington Mutual
for a potential open bank acquisition.
Another important factor was that Washington Mutual had a substantial
volume of unsecured debt -- $13.8 billion, or 4.5 percent of total assets -- which
6 For additional background, see Remarks by Martin J. Gruenberg, Member, Board of Directors of the Federal
Deposit Insurance Corporation on An Underappreciated Risk: The Resolution of Large Regional Banks in the
United States to The Brookings Institution Center on Regulation and Markets; Washington, D.C., October 16,
2019.
7 Crisis and Response: An FDIC History, 2008-2013 at 182. https://www.fdic.gov/bank/historical/crisis/
8 FFIEC Reports of Condition and Income, Second Quarter 2008.
or deviate significantly from its traditional banking business model, other
indicators of complexity and challenges to resolvability raise potential financial
stability concerns. These include a large branch network, a large insurance broker
subsidiary, substantial IT systems, millions of account holders, and heavy reliance
on uninsured deposits. In addition, regional banks such as these are not subject to
a requirement to maintain a minimum amount of long-term unsecured debt to
absorb losses in the event of failure.
My concerns with the proposed merger and its potential risk to financial
stability are informed by the FDIC’s experience with regional bank failures during
the crisis, particularly Washington Mutual Bank and IndyMac Bank.
The Failures of Washington Mutual Bank & IndyMac Bank6
Washington Mutual Bank, with over $300 billion in assets at the time of its
failure in September 2008, was the largest thrift institution in the United States and
the 6th largest insured depository institution. Its failure was the largest in the
FDIC’s history.7
Several factors made it possible for Washington Mutual to fail with no loss
to the Deposit Insurance Fund and no loss imposed on its $45 billion of uninsured
deposits, approximately 24 percent of total deposits.8 There was an acquirer with
the capacity to assume all the assets and all the deposits through a traditional
purchase and assumption transaction. The acquirer could act quickly at the time of
failure because it had previously performed due diligence on Washington Mutual
for a potential open bank acquisition.
Another important factor was that Washington Mutual had a substantial
volume of unsecured debt -- $13.8 billion, or 4.5 percent of total assets -- which
6 For additional background, see Remarks by Martin J. Gruenberg, Member, Board of Directors of the Federal
Deposit Insurance Corporation on An Underappreciated Risk: The Resolution of Large Regional Banks in the
United States to The Brookings Institution Center on Regulation and Markets; Washington, D.C., October 16,
2019.
7 Crisis and Response: An FDIC History, 2008-2013 at 182. https://www.fdic.gov/bank/historical/crisis/
8 FFIEC Reports of Condition and Income, Second Quarter 2008.