[Federal Register Volume 73, Number 32 (Friday, February 15, 2008)]
[Notices]
[Pages 8870-8872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-2885]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Statement of Policy on Bank Merger Transactions

AGENCY: Federal Deposit Insurance Corporation (``FDIC'').

ACTION: Amendment of statement of policy.

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SUMMARY: The FDIC is amending its Statement of Policy on Bank Merger 
Transactions (``Statement of Policy'') in order to conform it to the 
Bank Merger Act, as amended by the Financial Services Regulatory Relief 
Act of 2006 (``FSRRA''). The FSRRA (i) eliminated the need for the FDIC 
to obtain a competitive factors report from the other three Federal 
banking agencies in processing a merger application and (ii) eliminated 
both the post-approval waiting period and the need to obtain any 
competitive factors reports, when the merger solely involves an insured 
depository institution and one or more affiliates. In addition, the 
FDIC is amending its Statement of Policy in order to remove any 
discussion of ``Oakar Transactions'' since the Federal Deposit 
Insurance Reform Act of 2005 consolidated the former Savings 
Association Insurance Fund (``SAIF'') and the former Bank Insurance 
Fund (``BIF'') into the Deposit Insurance Fund. Finally, the FDIC is 
amending its Statement of Policy in order to conform the description of 
the factors to be considered in evaluating a merger more closely to the 
language of the Bank Merger Act, and for other technical reasons.

DATES: February 15, 2008.

FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Review Examiner 
(816) 234-8099 x4223, in the Division of Supervision and Consumer 
Protection; Julia E. Paris, Senior Attorney (202) 898-3821 or Robert C. 
Fick, Counsel, (202) 898-8962, in the Legal Division.

SUPPLEMENTARY INFORMATION: 

I. Background

    On October 13, 2006, the President signed into law the FSRRA, 
Public Law No. 109-351. The stated purpose of the law is to reduce 
regulatory burden and improve productivity for insured depository 
institutions. Many of the provisions of this law amended statutes that 
the FDIC administers. One of those statutes is the Bank Merger Act.\1\ 
In addition, the Federal Deposit Insurance Reform Act of 2005 
(``FDIRA'') \2\ consolidated the SAIF and the BIF into the Deposit 
Insurance Fund. As a result, the FDIC is amending its Statement of 
Policy \3\ to conform it to the Bank Merger Act, as amended by FSRRA, 
and to the changes made by FDIRA. The FDIC is not seeking comment on 
the amendments that it is making to the Statement of Policy, and the 
amendments are effective upon publication in the Federal Register.
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    \1\ Section 18(c) of the Federal Deposit Insurance Act, 12 
U.S.C. 1828(c).
    \2\ Pub. L. 109-171, 120 Stat. 9 (Feb. 8, 2006).
    \3\ The FDIC's Statement of Policy on Bank Merger Transactions 
was published in the Federal Register at 63 FR 44761 on August 20, 
1998; subsequent amendments were published at 67 FR 48178 on July 
23, 2002 and at 67 FR 79278 on December 27, 2002.
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II. FSRRA Amendments to the Bank Merger Act

A. Section 606 of FSRRA

    Four Federal banking agencies must utilize the Bank Merger Act to 
approve merger transactions subject to their respective jurisdiction; 
those agencies are the FDIC, the Federal Reserve Board (``FRB''), the 
Office of the Comptroller of the Currency (``OCC''), and the Office of 
Thrift Supervision (``OTS''). Prior to FSRRA, the Federal banking 
agency responsible for processing a particular merger application had 
to request and obtain a competitive factors report from each of the 
other three Federal banking agencies. Section 606 of FSRRA amended 
section 18(c)(4) of the Federal Deposit Insurance Act (``FDI Act''), 12 
U.S.C. 1828(c)(4), to eliminate that requirement. Section 606 did not, 
however, eliminate the requirement that the responsible agency obtain a 
competitive factors report from the Attorney General of the United 
States; that requirement remains unchanged. In addition, section 606 
also added the requirement that in processing a merger application, the 
FRB, the OCC, or the OTS, as the case may be, must submit a copy of 
each request for a competitive factors report to the FDIC.
    Section 606 also made two changes to the Bank Merger Act that apply 
to mergers that solely involve an insured depository institution and 
one or more affiliates (``Affiliate Mergers''). First, for Affiliate 
Mergers, section 606 amended section 18(c)(4) of the FDI Act, 12 U.S.C. 
1828(c)(4), to eliminate the need for the responsible Federal banking 
agency to request competitive factors reports from either the other 
Federal banking agencies or the Attorney General of the

[[Page 8871]]

United States. Prior to FSRRA the responsible Federal banking agency 
had to request competitive factors reports for Affiliate Mergers. 
Second, section 606 revised section 18(c)(6) of the FDI Act, 12 U.S.C. 
1828(c)(6), to eliminate the post-approval waiting period for Affiliate 
Mergers. Prior to FSRRA the applicant in an Affiliate Merger had to 
wait up to thirty days after obtaining the agency's approval before it 
could consummate the transaction.
    Therefore, the FDIC is conforming its Statement of Policy to the 
Bank Merger Act, as amended by the FSRRA. Accordingly, the FDIC is 
hereby amending paragraphs 4 and 5 of Section II of the Statement of 
Policy to read as follows:

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

II. Application Procedures

* * * * *
    4. Reports on competitive factors. As required by law, the FDIC 
will request a report on the competitive factors involved in a proposed 
merger transaction from the Attorney General. This report must 
ordinarily be furnished within 30 days, and the applicant upon request 
will be given an opportunity to submit comments to the FDIC on the 
contents of the competitive factors report.
    5. Notification of the Attorney General. After the FDIC approves 
any merger transaction, the FDIC will immediately notify the Attorney 
General. Generally, unless it involves a probable failure, an emergency 
exists requiring expeditious action, or it is solely between an insured 
depository institution and one or more of its affiliates, a merger 
transaction may not be consummated until 30 calendar days after the 
date of the FDIC's approval. However, the FDIC may prescribe a 15-day 
period, provided the Attorney General concurs with the shorter period.
* * * * *

III. Consolidation of the SAIF and the BIF

    In addition to changes necessitated by the FSRRA, the FDIC is 
amending its Statement of Policy to reflect the enactment of the FDIRA. 
Section 2102(a) of FDIRA merged the BIF and the SAIF into a single new 
fund, the Deposit Insurance Fund. Among the many consequences of this 
legislative action, it obviated the need for special rules governing 
merger transactions that involved a member of the BIF and a member of 
the SAIF, commonly known as Oakar transactions. As a result, the 
discussion in the Statement of Policy addressing Oakar transactions is 
no longer necessary. Thus the FDIC is amending the Statement of Policy 
to remove paragraph 3 Optional Conversion of Section IV Related 
Considerations. The removed paragraph read as follows:

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

IV. Related Considerations

* * * * *
    3. Optional conversion. Section 5(d)(3) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1815(d)(3), provides for ``optional 
conversions'' (commonly known as Oakar transactions) which, in general, 
are merger transactions that involve a member of the Bank Insurance 
Fund and a member of the Savings Association Insurance Fund. These 
transactions are subject to specific rules regarding deposit insurance 
coverage and premiums. Applicants may find additional guidance in Sec.  
327.31 of the FDIC rules and regulations (12 CFR 327.31).
    Additionally, as a consequence of deleting the above paragraph, the 
FDIC is renumbering the following paragraphs in Section IV Related 
Considerations. Accordingly, Branch Closings; Legal Fees and Other 
Expenses; and Trade Names are renumbered as paragraphs 3, 4, and 5 
respectively.

IV. Technical Amendments

    The FDIC is also taking this opportunity to conform the description 
of the factors to be considered in evaluating a merger more closely to 
the language of the Bank Merger Act. Specifically, the FDIC is 
inserting text omitted from the description of the antitrust factor in 
Section I Introduction and Section III Evaluation of Merger 
Applications and also inserting a reference to the anti-money 
laundering factor omitted from Section I Introduction.
    In addition, the FDIC is revising certain text in the discussion of 
the evaluation of certain anticompetitive mergers involving failing 
banks. The second paragraph of subsection 4 Consideration of the public 
interest of section III Evaluation of Merger Applications can be read 
to indicate that the FDIC may approve a merger involving a failing bank 
contrary to its statutory duty to resolve an institution in the manner 
that results in the least cost to the Deposit Insurance Fund.\4\ As a 
result, the FDIC is revising that paragraph to simply state that where 
a proposed merger transaction is the least costly alternative to the 
probable failure of an insured depository institution, the FDIC may 
approve the merger transaction even if it is anticompetitive.
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    \4\ See 12 U.S.C. 1823(c)(4).
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    Finally, a change is being made to reflect the new address of the 
FDIC's Public Information Center.
    Accordingly, the third and fourth unnumbered paragraphs of Section 
I Introduction; paragraph 6 of Section II Application Procedures; and 
paragraph 4 of Section III Evaluation of Merger Applications of the 
Statement of Policy are hereby amended to read as follows:

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

I. Introduction

* * * * *
    The Bank Merger Act prohibits the FDIC from approving any proposed 
merger transaction that would result in a monopoly, or would further a 
combination or conspiracy to monopolize or to attempt to monopolize the 
business of banking in any part of the United States. Similarly, the 
Bank Merger Act prohibits the FDIC from approving a proposed merger 
transaction whose effect in any section of the country may be 
substantially to lessen competition, or to tend to create a monopoly, 
or which in any other manner would be in restraint of trade. An 
exception may be made in the case of a merger transaction whose effect 
would be to substantially lessen competition, tend to create a 
monopoly, or otherwise restrain trade, if the FDIC finds that the 
anticompetitive effects of the proposed transaction are clearly 
outweighed in the public interest by the probable effect of the 
transaction in meeting the convenience and needs of the community to be 
served. For example, the FDIC may approve a merger transaction to 
prevent the probable failure of one of the institutions involved.
    In every proposed merger transaction, the FDIC must also consider 
the financial and managerial resources and future prospects of the 
existing and proposed institutions, the convenience and needs of the 
community to be served, and the effectiveness of each insured 
depository institution involved in the proposed merger transaction in 
combating money-laundering activities, including in overseas branches.

II. Application Procedures

* * * * *
    6. Merger decisions available. Applicants for consent to engage in 
a

[[Page 8872]]

merger transaction may find additional guidance in the reported bases 
for FDIC approval or denial in prior merger transaction cases compiled 
in the FDIC's annual ``Merger Decisions'' report. Reports may be 
obtained from the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, VA 22226. Reports may also be viewed at 
http://www.fdic.gov.

III. Evaluation of Merger Applications

* * * * *
    4. Consideration of the public interest. The FDIC will deny any 
proposed merger transaction whose overall effect likely would be to 
reduce existing competition substantially by limiting the service and 
price options available to the public in the relevant geographic 
market(s), unless the anticompetitive effects of the proposed merger 
transaction are clearly outweighed in the public interest by the 
probable effect of the transaction in meeting the convenience and needs 
of the community to be served. For this purpose, the applicant must 
show by clear and convincing evidence that any claimed public benefits 
would be both substantial and incremental and generally available to 
seekers of banking services in the relevant geographic market(s) and 
that the expected benefits cannot reasonably be achieved through other, 
less anticompetitive means.
    Where a proposed merger transaction is the least costly alternative 
to the probable failure of an insured depository institution, the FDIC 
may approve the merger transaction even if it is anticompetitive.

    By Order of the Board of Directors.

    Dated at Washington, DC, the 19th day of December, 2007.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
 [FR Doc. E8-2885 Filed 2-14-08; 8:45 am]
BILLING CODE 6714-01-P