[Federal Register Volume 89, Number 186 (Wednesday, September 25, 2024)]
[Rules and Regulations]
[Pages 78207-78221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21560]



[[Page 78207]]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 5

[Docket ID OCC-2023-0017]
RIN 1557-AF24


Business Combinations Under the Bank Merger Act

AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.

ACTION: Final rule.

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SUMMARY: The OCC is adopting a final rule to amend its procedures for 
reviewing applications under the Bank Merger Act and adding, as an 
appendix, a policy statement that summarizes the principles the OCC 
uses when it reviews proposed bank merger transactions under the Bank 
Merger Act.

DATES: The final rule is effective on January 1, 2025.

FOR FURTHER INFORMATION CONTACT: Valerie Song, Assistant Director, 
Christopher Crawford, Special Counsel, Elizabeth Small, Counsel, Chief 
Counsel's Office, 202-649-5490; or Yoo Jin Na, Director for Licensing 
Activities, 202-649-6260, Office of the Comptroller of the Currency, 
400 7th Street SW, Washington, DC 20219. If you are deaf, hard of 
hearing or have a speech disability, please dial 7-1-1 to access 
telecommunications relay services.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Bank Merger Act (BMA), section 18(c) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(c)), and the OCC's implementing 
regulation, 12 CFR 5.33, govern the OCC's review of business 
combinations of national banks and Federal savings associations with 
other insured depository institutions (institutions) that result in a 
national bank or Federal savings association.\1\ Under the BMA, the OCC 
must consider the following factors: competition, the financial and 
managerial resources and future prospects of the existing and proposed 
institutions, the convenience and needs of the community to be served, 
the risk to the stability of the United States banking or financial 
system, and the effectiveness of any insured depository institution 
involved in combatting money laundering activities, including in 
overseas branches.\2\ The BMA generally requires public notice of the 
transaction to be published for 30 days.\3\ OCC regulations require the 
public notice include essential details about the transaction and 
instructions for public comment. The regulations incorporate the 
statutory 30-day public notice period and provide a 30-day public 
comment period, which the OCC may extend.\4\ The OCC may also hold a 
public hearing, public meeting, or private meeting on an 
application.\5\
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    \1\ A business combination for these purposes includes an 
assumption of deposits in addition to a merger or consolidation.
    \2\ 12 U.S.C. 1828(c)(5), (11).
    \3\ 12 U.S.C. 1828(c)(4).
    \4\ 12 CFR 5.8(b), 5.10(b)(1).
    \5\ 12 CFR 5.11.
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    The OCC has issued several publications that provide additional 
information about the procedures that the OCC follows in reviewing and 
acting on proposed business combinations. For example, the ``Business 
Combinations'' booklet of the Comptroller's Licensing Manual details 
the OCC's review of applications under the BMA. The ``Public Notice and 
Comments'' booklet of the Comptroller's Licensing Manual sets forth 
policies related to the public notice and comment process, including 
hearings and meetings. The Comptroller's Licensing Manual provides OCC 
staff, institutions, and the public with information about the 
procedures applicable to corporate applications filed with the OCC.
    After reviewing these materials, the OCC determined that additional 
transparency about the standards and procedures that the agency applies 
when reviewing bank business combinations may be helpful to 
institutions and the public.
    To better reflect the OCC's view that a business combination is a 
significant corporate transaction, the OCC proposed amendments to 12 
CFR 5.33 to remove provisions related to expedited review and the use 
of streamlined applications.\6\ The OCC also proposed adding a policy 
statement at appendix A to 12 CFR part 5, subpart C, that would discuss 
both the general principles the agency uses to review applications 
under the BMA and how it considers financial stability, financial and 
managerial resources and future prospects, and convenience and needs 
factors. Proposed appendix A also described the criteria informing the 
OCC's decision on whether to hold a public meeting on an application 
subject to the BMA.
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    \6\ 89 FR 10010 (February 13, 2024).
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    The OCC received 34 substantive written comments on this proposal 
from banks, trade groups, academics, and members of the public. Most 
commenters agreed that the OCC should update its merger regulations and 
guidelines, but expressed varying views on the proposed changes. The 
comments are addressed below with the relevant discussion of 12 CFR 
5.33 and appendix A. After careful consideration of these comments, the 
OCC is adopting its proposed amendments to 12 CFR 5.33 in final form 
and making minor, clarifying modifications to proposed appendix A.

II. Description of the Final Policy Statement and Regulatory Amendments

Regulatory Amendments

    The OCC proposed two substantive changes to its business 
combination regulation at 12 CFR 5.33. First, the OCC proposed removing 
the expedited review procedures in Sec.  5.33(i). Paragraph (i) 
currently provides that a filing that qualifies either as a business 
reorganization as defined in Sec.  5.33(d)(3) or for a streamlined 
application under Sec.  5.33(j) is deemed approved as of the 15th day 
after the close of the comment period, unless the OCC notifies the 
applicant that the filing is not eligible for expedited review or the 
expedited review process is extended under Sec.  5.13(a)(2).\7\
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    \7\ Under the proposal, the provisions in 12 CFR 5.13(a)(2) 
regarding adverse comments would no longer apply to business 
combination applications because they only apply to filings that 
qualify for expedited review.
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    Some commenters opposed eliminating the expedited review 
procedures. These commenters argued that eliminating the expedited 
review procedures would unnecessarily increase the complexity and cost 
of the application process for categories of transactions that are 
unlikely to present issues under the BMA, such as reorganizations. 
Further, many commenters expressed concern that removing Sec.  5.33(i) 
would increase the burden on smaller institutions, including community 
banks. Some of these commenters suggested that the OCC continue to 
allow expedited processing for banks under a certain size. Other 
commenters supported eliminating expedited review, stating that 
eliminating the possibility that an application will be deemed approved 
solely due to the passage of time is necessary to address the systemic 
risks posed by large banks and the harms of consolidation. Further, 
some commenters that supported eliminating expedited review noted that 
the current expedited review process fails to adequately prevent anti-
competitive mergers and the proposed changes to the review process 
would allow for a

[[Page 78208]]

more comprehensive evaluation of merger application. Nevertheless, some 
supportive commenters noted that the proposed changes, including the 
removal of expedited review, do not go far enough to effectively 
address the issues raised by large bank consolidations.
    The OCC reviews business combination applications to determine 
whether applicable procedural \8\ and substantive \9\ requirements are 
met. The only benefit conferred by the expedited review provisions in 
Sec.  5.33(i) is that these applications are deemed approved as of the 
15th day after the close of the comment period \10\ unless the OCC 
takes action to remove the application from expedited review or extends 
the expedited review process. As described in the OCC's Annual Report, 
Licensing Activity section, the OCC's current target time frame for 
licensing decisions on merger applications is 45 days for expedited 
review and 60 days for standard review.\11\ However, as noted in Sec.  
5.33(i), the OCC can remove an application from expedited review. 
Additionally, as noted in the OCC's Annual Report, the OCC may extend 
the standard review target time frame if it needs additional 
information to reach a decision, process a group of related filings as 
a single transaction, or extend the public comment period. The OCC's 
practice has been to approve or deny an application on expedited review 
within 15 days after the close of the comment period or remove the 
application from expedited review. The OCC is not aware of any 
application for a business combination having been deemed approved 
solely due to the passage of time. Accordingly, the OCC does not expect 
that removing this provision will result in a significant change to the 
time in which the OCC processes merger applications. Instead, this 
change will more closely align the regulatory framework with the OCC's 
current practices and promote transparency. Further, it is consistent 
with the OCC's view that any business combination subject to a filing 
under Sec.  5.33 is a significant corporate transaction requiring 
active OCC consideration and decisioning of the application. The 
principles underlying the expedited process in Sec.  5.33(i) (i.e., 
transactions with certain indicators are likely to satisfy the 
statutory factors, do not otherwise raise supervisory or regulatory 
concerns, and therefore can be processed more expeditiously) are 
reflected in section II of the final appendix A.
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    \8\ See, e.g., 12 U.S.C. 215a (procedures for mergers resulting 
in a national bank).
    \9\ See, e.g., 12 U.S.C. 1828(c) (BMA).
    \10\ The public comment period is typically 30 days. See 12 CFR 
5.10(b)(1).
    \11\ See, e.g., Office of the Comptroller of the Currency, 2023 
Annual Report, at 36.
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    Second, the OCC proposed removing Sec.  5.33(j), which specifies 
four situations in which an applicant may use the OCC's streamlined 
business combination application, rather than the Interagency Bank 
Merger Act Application.\12\ The streamlined application requests 
information about topics similar to those addressed in Interagency Bank 
Merger Act Application, but the former only requires an applicant to 
provide detailed information if the applicant answers in the 
affirmative to any one of a series of yes or no questions.
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    \12\ 12 CFR 5.33(j) authorizes the use of a streamlined 
application if: (i) At least one party to the transaction is an 
eligible bank or eligible savings association, and all other parties 
to the transaction are eligible banks, eligible savings 
associations, or eligible depository institutions, the resulting 
national bank or resulting Federal savings association will be well 
capitalized immediately following consummation of the transaction, 
and the total assets of the target institution are no more than 50 
percent of the total assets of the acquiring bank or Federal savings 
association, as reported in each institution's Consolidated Report 
of Condition and Income filed for the quarter immediately preceding 
the filing of the application; (ii) The acquiring bank or Federal 
savings association is an eligible bank or eligible savings 
association, the target bank or savings association is not an 
eligible bank, eligible savings association, or an eligible 
depository institution, the resulting national bank or resulting 
Federal savings association will be well capitalized immediately 
following consummation of the transaction, and the filers in a 
prefiling communication request and obtain approval from the 
appropriate OCC licensing office to use the streamlined application; 
(iii) The acquiring bank or Federal savings association is an 
eligible bank or eligible savings association, the target bank or 
savings association is not an eligible bank, eligible savings 
association, or an eligible depository institution, the resulting 
bank or resulting Federal savings association will be well 
capitalized immediately following consummation of the transaction, 
and the total assets acquired do not exceed 10 percent of the total 
assets of the acquiring national bank or acquiring Federal savings 
association, as reported in each institution's Consolidated Report 
of Condition and Income filed for the quarter immediately preceding 
the filing of the application; or (iv) In the case of a transaction 
under 12 CFR 5.33(g)(4), the acquiring bank is an eligible bank, the 
resulting national bank will be well capitalized immediately 
following consummation of the transaction, the filers in a prefiling 
communication request and obtain approval from the appropriate OCC 
licensing office to use the streamlined application, and the total 
assets acquired do not exceed 10 percent of the total assets of the 
acquiring national bank, as reported in the bank's Consolidated 
Report of Condition and Income filed for the quarter immediately 
preceding the filing of the application.
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    Many commenters opposed eliminating the streamlined application. 
Commenters stated that it is easy to complete and generally more 
efficient. Commenters stated that its removal would lead to longer 
processing times and higher costs for applicants. Several commenters 
emphasized that eliminating the streamlined application would 
disproportionately affect smaller banks, which often have limited 
resources to devote to a more complex, administratively burdensome, and 
detailed application process. Commenters critical of eliminating the 
streamlined application focused on the increased burden of associated 
with the Interagency Bank Merger Act Application. On the other hand, 
some commenters supported removing the streamlined application, with 
one also supporting the adoption of a more robust interagency merger 
application that would include a question on community benefit 
agreements or commitments.
    The OCC believes that the more complete record created with the 
Interagency Bank Merger Act Application provides the appropriate basis 
for the OCC to consider a business combination application. Further, 
the removal of the streamlined business combination form should not 
significantly increase the burden on applicants. Although the 
Interagency Bank Merger Act Application requires the submission of 
additional information with the initial application, in practice, the 
OCC often requests additional information from many applicants, 
including those that file a streamlined application. Eliminating the 
streamlined application may decrease the likelihood the OCC requests 
additional information from applicants, which slows down the agency's 
processing an application and increases the burden on applicants. 
Further, the OCC may tailor the information applicants must submit in 
the Interagency Bank Merger Act Application as appropriate to reduce 
the information that the applicant needs to provide.\13\ For example, 
there may be situations where a discussion of all items in the 
Interagency Bank Merger Act Application may not be appropriate, such as 
in a purchase and assumption transaction from an insured depository 
institution in Federal Deposit Insurance Corporation receivership.
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    \13\ Under 12 CFR 5.2(b), the OCC may adopt materially different 
procedures for a particular filing or class of filings as it deems 
necessary (e.g., in exceptional circumstances or for unusual 
transactions) after providing notice of the change to the filer and 
any other party that the OCC determines appropriate. For example, 
the OCC may use this authority, if appropriate, to reduce the 
information it requires in a transaction involving a failing bank, 
given the limited time available to prepare the application.
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    Additionally, the U.S. Small Business Administration's (SBA's) 
Office of Advocacy and one other commenter stated that the OCC's 
Regulatory

[[Page 78209]]

Flexibility Act (RFA) certification in the proposal lacked a factual 
basis. The SBA's Office of Advocacy and others recommended that the OCC 
continue to allow small entities to have access to expedited review and 
use the streamlined application form. Specifically with respect to the 
RFA certification, the commenters stated it lacked sufficient 
information about (1) the number of small entities that would be 
impacted (because the OCC only estimated the number of entities that 
apply for business combinations in a given year and did not explain how 
many of those entities were small entities) and (2) the basis for its 
conclusion that the impact on affected institutions would be de 
minimis.
    In response to these comments, the OCC has revised the number of 
small entities that will be impacted by this rulemaking. (This change 
is reflected in its discussion of the RFA below.) Further, as discussed 
above, the OCC's process for reviewing business combination 
applications allows the agency to vary the information that applicants 
must submit on a case-by-case basis and to request additional 
information not required on the initial application, if necessary. The 
OCC also may remove an application from expedited review if it needs 
additional review time. Accordingly, the OCC expects these changes will 
have a de minimis impact on small entities.
    For the reasons discussed above, the final rule removes Sec.  
5.33(i) and (j) as proposed. Further, because the term ``business 
reorganization,'' as defined in Sec.  5.33(d)(3), is only used to 
define a class of applications eligible for expedited review under 
Sec.  5.33(i), the final rule also removes Sec.  5.33(d)(3).

Policy Statement

    As discussed in Section I, Introduction, of proposed appendix A, 
the policy statement would have provided institutions and the public 
with a better understanding of how the OCC reviews applications subject 
to the BMA and thus provided greater transparency, facilitate 
interagency coordination, and enhance public engagement. Specifically, 
proposed appendix A would have outlined the general principles the OCC 
applies when reviewing applications and provided information about how 
the OCC considers the BMA statutory factors of financial stability, 
financial and managerial resources, and convenience and needs of the 
community.\14\ Proposed appendix A would have provided transparency 
regarding the public comment period and the factors the OCC considers 
in determining whether to hold public meetings.
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    \14\ Proposed appendix A would not have addressed the BMA 
statutory factors of competition and the effectiveness of any 
insured depository institution involved in combatting money 
laundering activities, including in overseas branches. 12 U.S.C. 
1828(c)(5), (11).
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    Commenters generally supported the OCC's goals of increasing 
transparency; however, some commenters stated that by merely codifying 
current practices, the proposed appendix A did not go far enough in 
fulfilling the OCC's statutory obligations in reviewing bank mergers or 
preventing anti-competitive mergers in the banking industry. Several 
commenters also urged the OCC to coordinate closely with other 
regulators, such as the Federal Deposit Insurance Corporation, in 
finalizing the proposed policy statement and in updating the 1995 
interagency document, Bank Merger Competitive Review--Introduction and 
Overview.
    Other commenters suggested that appendix A should address the 
uncertainty surrounding the processing considerations and timelines of 
the OCC's review of BMA applications, noting that uncertainty in the 
timelines for regulatory approval could deter beneficial merger 
transactions. Several commenters offered additional ways to increase 
transparency, including by releasing some of the confidential 
supervisory information (e.g., ratings) that the OCC uses in evaluating 
the statutory factors, televising live coverage of internal OCC 
deliberations, making all agency requests for additional information 
and bank responses public, and responding to all comments raised by the 
public in merger approval orders.
    Several commenters suggested topics that the OCC should add to 
proposed appendix A. For example, several commenters suggested appendix 
A should provide details of the OCC's analysis of the BMA statutory 
factor of competition, generally and particularly with regard to how 
improvements in convenience and needs can outweigh anticompetitive 
effects. These commenters provided several suggested approaches. Other 
commenters urged the OCC to be more transparent when an applicant 
withdraws an application. One commenter also suggested the OCC take 
steps to reduce ``charter shopping.'' Another commenter urged the OCC 
to avoid the use of non-standard conditions to approve problematic 
mergers. Some commenters expressed concerns with the OCC's practice of 
holding prefiling meetings described in the Explanatory Calls or 
Meetings section of the ``Business Combinations'' booklet of the 
Comptroller's Licensing Manual and were concerned that such 
communications could unduly influence the agency. Suggestions to 
resolve this issue included automatically making transcripts or 
summaries of the calls or meetings public or ending the practice of 
holding the meetings.
    The OCC is finalizing appendix A generally as proposed, with minor 
grammatical changes, except as noted below. The OCC intends for 
appendix A to provide substantive information on how it evaluates many 
of the BMA's statutory factors. Given complexities of the competition 
factor review and the involvement of the Department of Justice, the OCC 
does not believe that appendix A is the appropriate vehicle for 
discussing its current approach to competition issues.\15\ The OCC's 
existing regulations govern the standards for impositions of 
conditions.\16\ Similarly, the OCC does not intend appendix A to 
address OCC processing issues such as the disclosure of confidential 
supervisory information, the reasons for withdrawal of applications, 
its internal decision-making process, or its practice of holding pre-
filing meetings. Accordingly, the OCC is finalizing Section I, 
Introduction, as proposed, with minor grammatical changes.
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    \15\ The OCC notes that the convenience and needs analysis is 
relevant to the competition analysis in some instances. Under 12 
U.S.C. 1828(c)(5)(B), the OCC may approve a merger 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 if it 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.
    \16\ 12 CFR 5.13(a)(1) governs the OCC's imposition of 
conditions to address a significant supervisory, Community 
Reinvestment Act (CRA), or compliance concern if the OCC determines 
that the conditions are necessary or appropriate to ensure that 
approval is consistent with relevant statutory and regulatory 
standards, including those designed to ensure the fair treatment of 
consumers and fair access to financial services, and OCC policies 
thereunder and safe and sound banking practices. The OCC imposes 
conditions on a case-by-case basis and makes a determination of 
appropriate conditions based on a merger's facts and circumstances.
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    Section II, General Principles of OCC Review, of proposed appendix 
A would have discussed the OCC's review of and action on an 
application. Although, the OCC aims to act promptly on all 
applications, proposed appendix A identified certain indicators that, 
in the OCC's experience, generally feature in applications that are 
consistent with approval. These indicators included: (i) attributes 
regarding the acquirer's

[[Page 78210]]

financial condition; size; Uniform Financial Institution Ratings System 
(UFIRS) \17\ or risk management, operational controls, compliance, and 
asset quality (ROCA) \18\ ratings; Uniform Interagency Consumer 
Compliance Rating System (CC Rating System) rating; Community 
Reinvestment Act (CRA) rating; the effectiveness of its Bank Secrecy 
Act/anti-money laundering program; and the absence of fair lending 
concerns; (ii) attributes regarding the target's size and status as a 
eligible depository institution, as defined in Sec.  5.3; (iii) the 
transaction clearly not having a significant adverse effect on 
competition; and (iv) the absence of significant CRA or consumer 
compliance concerns, as indicated in any comments or supervisory 
information.
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    \17\ UFIRS is also known as the CAMELS rating system. The CAMELS 
component factors address capital, asset quality, management, 
earnings, liquidity, and sensitivity to market risk.
    \18\ The ROCA System is the interagency uniform supervisory 
rating system for U.S. branches and agencies of foreign banking 
organizations.
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    The General Principles of OCC Review section of proposed appendix A 
would have also recognized that there are indicators that raise 
supervisory or regulatory concerns. Based on the OCC's experience, if 
any of these indicators are present, the OCC is unlikely to find the 
statutory factors under the BMA to be consistent with approval unless 
and until the applicant has adequately addressed or remediated the 
concern. Proposed appendix A would have stated that these indicators 
include: (i) the acquirer has a CRA rating of Needs to Improve or 
Substantial Noncompliance; (ii) the acquirer has a UFIRS or ROCA 
composite or management rating of 3 or worse; (iii) the acquirer has a 
consumer compliance rating of 3 or worse; (iv) the acquirer is a global 
systemically important banking organization (G-SIB), or subsidiary 
thereof; \19\ (v) the acquirer has an open or pending Bank Secrecy Act/
Anti-Money Laundering enforcement or fair lending action, including 
referrals or notification to other agencies; \20\ (v) failure by the 
acquirer to adopt, implement, and adhere to all the corrective actions 
required by a formal enforcement action in a timely manner; and (vi) 
multiple enforcement actions against the acquirer executed or 
outstanding during a three-year period.
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    \19\ The Basel Committee on Bank Supervision annually identifies 
certain banking organizations as global systemically important.
    \20\ For example, the OCC is required to institute an 
enforcement action or make a referral if it makes certain 
supervisory findings with respect to the Bank Secrecy Act or fair 
lending laws. See, e.g., 12 U.S.C. 1818(s)(3); 15 U.S.C. 1691e(g).
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    Commenters expressed confusion about how these indicators apply and 
how the OCC's reviews applications that meet some, but not all, of the 
indicators that generally feature in applications consistent with 
approval. For example, numerous commenters interpreted the proposed 
policy statement as indicating that the OCC would not approve an 
application if one of the first set of indicators was absent. 
Commenters also requested clarification about how an absence or 
resolution of any or most of the listed indicators of supervisory or 
regulatory concerns would expedite a positive decision on an 
application.
    The OCC understands the confusion of some commenters with respect 
to appendix A as proposed. In addition to the two categories of 
transactions recognized in proposed section II, there is a middle 
category of transactions that do not feature all of the indicators in 
the first category but also have none of the indicators that raise 
supervisory or regulatory concerns. The OCC believes that most 
transactions will be in this middle category and that many of these 
transactions are likely consistent with approval.
    The OCC is revising proposed appendix A to eliminate this confusion 
and clarify the significance of the two types of indicators. The final 
appendix A includes prefatory text that notes that applications that 
feature all of the first set of indicators tend to be more likely to 
withstand scrutiny and to be approved expeditiously. In the OCC's 
experience, these indicators reflect a national bank or Federal savings 
association's condition or other features that the OCC is likely to 
quickly find consistent with approval. However, these indicators are 
not required for a transaction to be approved. For example, the OCC has 
approved many transactions where the target is not an eligible 
depository institution and the acquirer brings the appropriate 
financial and managerial resources to bear to mitigate deficiencies at 
the target.
    With respect to the individual indicators, some commenters objected 
to $50 billion in total assets serving as a ceiling for transactions 
consistent with approval. One commenter requested that the OCC raise 
indicator to $100 billion or more in total assets. Another commenter 
noted that having $50 billion dollars as a threshold could prevent or 
make it more difficult for regional and midsized institutions to 
combine and compete with the largest banks. As clarified in final 
appendix A, the $50 billion indicator merely reflects the likelihood of 
an expeditious approval. The OCC recognizes that national banks and 
Federal savings associations with $50 billion or more in total assets 
tend to be more complex than smaller banks. For example, insured 
national banks and Federal savings associations with at least $50 
billion in total assets are subject to the OCC Guidelines Establishing 
Heightened Standards for Certain Large Insured National Banks, Insured 
Federal Savings Associations, and Insured Federal Branches. In light of 
the increased complexity of these institutions, the OCC may require 
additional time for review of the application. The OCC believes that 
many transactions where the resulting institution will have total 
assets of more than $50 billion are consistent with approval. 
Accordingly, the OCC is finalizing the indicator as proposed at $50 
billion or more in total assets, as clarified by a modification to the 
prefatory text to the indicators.
    Two commenters expressed concern with the indicator focusing on 
transactions where the target's total assets are less than or equal to 
50 percent of acquirer's total assets. The indicator is not intended to 
discourage mergers of equals. It was included because, in the OCC's 
supervisory experience, mergers between institutions of similar sizes 
are likely to require more review than transactions where the target is 
much smaller than the acquirer. In transactions with significant size 
disparities, the acquirer is more likely to use its existing policies, 
procedures, and control framework, with which the OCC is already 
familiar. Integration of two similarly sized institutions is more 
likely to result in more changes to resulting institution, which the 
OCC will need to review for consistency with the applicable BMA 
factors. The inclusion of this indicator simply highlights that 
applications for mergers between institutions that are similar in size 
may require additional time to assess but does not indicate that those 
applications will not be approved. The OCC is, however, deleting the 
word ``combined'' referring to the target's total assets in this 
indicator for clarity. The OCC is thus finalizing this indicator as 
proposed, as clarified by a modification of the prefatory text to the 
indicators which emphasizes that the first set of indicators are 
intended to identify applications that are more likely to withstand 
scrutiny and to be approved expeditiously.
    Commenters also asserted that the proposed indicators regarding 
lack of enforcement actions, lack of fair lending concerns, clear 
absence of a ``significant

[[Page 78211]]

adverse effect'' on competition, and no adverse public comments are 
inconsistent with the applicable standards under the BMA. Other 
commenters supported these indicators but had additional suggestions 
including urging the OCC to include language about coordinating with 
the Consumer Financial Protection Bureau regarding fair lending and 
consumer protection matters; barring applicants with records of 
noncompliance with fair lending, CRA, and other consumer protection 
laws from being acquired; and requiring merging parties to undergo new 
fair lending and CRA reviews under heightened scrutiny. The OCC does 
not require that all of these indicators are present for a transaction 
to be consistent with the BMA's statutory factors. Rather, the OCC can 
more quickly find that applications with all of these indicators are 
consistent with the BMA factors and approve the transactions. For 
example, a merger between two institutions without an overlapping 
footprint and few products in common will require less analysis with 
respect to competition compared to a merger between institutions with 
significant overlap. Similarly, the OCC approves mergers on which the 
public has commented after reviewing all comments. The OCC recognizes 
that while comments play an important role in the review process, some 
comments may fail to raise a significant supervisory, CRA, or 
compliance concern.\21\ The OCC does not expect such comments, on their 
own, to warrant less expeditious processing of the application. 
Therefore, OCC is finalizing these indicators as proposed, as clarified 
by a modification of the prefatory language to the indicators.
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    \21\ See 12 CFR 5.13(a)(2)(ii) (describing comments that do not 
warrant removing a filing from expedited review).
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    With respect to the indicators of supervisory or regulatory 
concern, commenters expressed concern with any indication in the 
proposed appendix A that the acquirer is a G-SIB or subsidiary thereof 
would be unlikely to be consistent with approval. Some commenters noted 
that the indicator could restrict internal reorganizations by a G-SIB 
and its subsidiaries. Additionally, two commenters noted that Congress 
has already addressed large-bank concentration by prohibiting bank 
acquisitions based on deposit concentrations and that the OCC's use of 
the G-SIB designation was inconsistent with Congressional intent. Other 
commenters expressed concern that the indicator could be interpreted to 
include proposed business combinations involving U.S.-based bank 
subsidiaries of non-U.S. G-SIBs. These commenters assert that 
applications for combinations involving such entities could bring 
diversity to the U.S. banking system. On the other hand, another 
commenter supported increased scrutiny of transactions involving G-SIBs 
but asserted that transactions undertaken by large, non-G-SIBs should 
also trigger enhanced scrutiny.
    The indicators of regulatory or supervisory concern do not preclude 
OCC approval of a BMA application by an institution that exhibits one 
or more of the indicators. For example, internal corporate 
reorganizations are frequently consistent with the BMA, notwithstanding 
many regulatory or supervisory concerns, particularly where the 
transaction enhances the resolvability of the institution. The OCC 
views these factors regarding size as independent from limits that 
Congress established in the BMA and the Riegle-Neal Interstate Banking 
and Branching Efficiency Act of 1994 (Riegle-Neal).\22\ For certain 
interstate transactions, the BMA contains a national deposit cap, and 
Riegle-Neal has national and State deposit caps.\23\ Similarly, there 
is a liability cap imposed by the Dodd-Frank Wall Street Reform and 
Consumer Protection Act \24\ that applies to both holding companies and 
banks.\25\ These are all limits that a bank may not exceed absent a 
specific statutory exception. In contrast, the G-SIB indicator in the 
proposal reflects the OCC's supervisory experience with organizations 
of that size and the impact of size and complexity on the review of a 
business combination.
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    \22\ Public Law 103-328, 108 Stat. 2338 (Sept. 29, 1994).
    \23\ 12 U.S.C. 1828(c)(13), 1831u(b)(2).
    \24\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
    \25\ See 12 U.S.C. 1852.
---------------------------------------------------------------------------

    Similarly, even though the U.S. operations of a foreign-based G-SIB 
may be smaller than those of domestic G-SIBs, the potential for 
supervisory issues remains high, particularly if the foreign G-SIB's 
U.S. operations are material. G-SIBs are among the most complex 
financial institutions and, in the OCC's supervisory experience, they 
often present supervisory issues such that inclusion of this indicator 
is warranted. The OCC recognizes, however, that G-SIB status is 
unlikely to be remediated. While the OCC continues to believe that the 
G-SIB indicator is appropriate, it will evaluate all applications from 
foreign and domestic G-SIBs on their individual merits and undertake a 
fulsome analysis under the BMA and other applicable law.
    Another commenter noted that a less than ``Satisfactory'' CRA 
rating should not preclude an internal reorganization that would 
simplify the banking organization and make it safer and sounder. 
Congress has mandated that the OCC consider an institution's CRA rating 
when acting on any BMA application.\26\ The OCC recognizes that 
internal reorganizations present facts and analysis distinguishable 
from many other BMA applications, and while the inclusion of this 
indicator does not indicate those applications will not be approved, 
additional scrutiny may be warranted. In some instances, the benefits 
of a reorganization may overcome the less than ``Satisfactory'' CRA 
rating. Nevertheless, the OCC regards a less than ``Satisfactory'' CRA 
rating as raising significant regulatory or supervisory concerns and 
warranting inclusion on the list of indicators. One commenter also 
praised the inclusion of instances where an acquirer has experienced 
rapid growth as an indicator of supervisory or regulatory concern.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 2903(a)(2).
---------------------------------------------------------------------------

    The OCC is making one change to the indicator regarding open 
enforcement actions. Proposed appendix A was specific to Bank Secrecy 
Act/Anti-money Laundering or fair lending actions, including referrals 
or notifications to other agencies. The OCC is including all types of 
consumer compliance enforcement actions in final appendix A to reflect 
the seriousness of these types of enforcement actions. Accordingly, the 
OCC is generally finalizing these indicators as proposed, as clarified 
by a modification to the prefatory language to the indicators and the 
addition of consumer compliance enforcement actions.
    Section III, Financial Stability, of proposed appendix A would have 
provided additional information about how the OCC considers ``the risk 
to the stability of the United States banking or financial system'' as 
required by the BMA, including (i) the factors the OCC considers (which 
are currently described in the ``Business Combinations'' booklet of the 
Comptroller's Licensing Manual); (ii) the balancing test that the OCC 
applies; and (iii) the OCC's ability to consider imposing conditions on 
the approval of any such transaction. The OCC's approach to considering 
the risk to the stability of the financial system set forth in proposed 
appendix A is consistent with longstanding OCC practice and

[[Page 78212]]

principles.\27\ Specifically, the OCC considers (i) whether the size of 
the combined institutions would result in material increases in risk to 
financial stability; (ii) any potential reduction in the availability 
of substitute providers for the services offered by the combining 
institutions; (iii) whether the resulting institution would engage in 
any business activities or participate in markets in a manner that, in 
the event of financial distress of the resulting institution, would 
cause significant risks to other institutions; (iv) the extent to which 
the combining institutions contribute to the complexity of the 
financial system; (v) the extent of cross-border activities of the 
combining institutions; (vi) whether the proposed transaction would 
increase the relative degree of difficulty of resolving or winding up 
the resulting institution's business in the event of failure or 
insolvency; and (vii) any other factors that could indicate that the 
transaction poses a risk to the U.S. banking or financial system.
---------------------------------------------------------------------------

    \27\ See, e.g., OCC Conditional Approval #1298 (November 2022); 
OCC Corporate Decision #2012-05 (April 2012).
---------------------------------------------------------------------------

    Section III, Financial Stability, of proposed appendix A would have 
clarified that the OCC applies a balancing test when considering the 
financial stability factor and weighs the financial stability risk of 
approving the proposed transaction against the financial stability risk 
of denying it, particularly if the proposed transaction involves a 
troubled target. Specifically, the OCC considers each factor 
individually and in combination. Even if only a single factor indicates 
a risk to the stability of the U.S. banking or financial system, the 
OCC may determine that the proposal would have an adverse effect on the 
stability of the U.S. banking or financial system.\28\ The OCC also 
considers whether the proposed transaction would provide any stability 
benefits and the enhanced prudential standards that would be applicable 
as a result of the proposed transaction would offset any potential 
risks.\29\
---------------------------------------------------------------------------

    \28\ See, e.g., FRB Order No. 2012-2 (February 14, 2012) at 30.
    \29\ See, e.g., FRB Order No. 2021-04 (May 14, 2021) at 24.
---------------------------------------------------------------------------

    Section III also would have noted that, consistent with current OCC 
practice,\30\ the OCC's review of the financial stability factors may 
result in a decision to approve a proposed transaction, subject to 
conditions that are enforceable under 12 U.S.C. 1818. These conditions 
may include asset divestitures or higher minimum capital requirements 
and are intended to address and mitigate financial stability risk 
concerns.
---------------------------------------------------------------------------

    \30\ See, e.g., OCC Conditional Approval #1298 (November 2022).
---------------------------------------------------------------------------

    Further, the OCC's review of the financial stability factors 
considers the impact of the proposed transaction in the context of any 
heightened standards applicable to the resulting institution pursuant 
to 12 CFR part 30, appendix D, ``OCC Guidelines Establishing Heightened 
Standards for Certain Large Insured National Banks, Insured Federal 
Savings Associations, and Insured Federal Branches'' and the recovery 
planning standards applicable to the resulting institution pursuant to 
12 CFR part 30, appendix E, ``OCC Guidelines Establishing Standards for 
Recovery Planning by Certain Large Insured National Banks, Insured 
Federal Savings Associations, and Insured Federal Branches.'' Section 
III also would have stated that the OCC may consider the facts, 
circumstances, and representations of concurrent applications for 
related transactions, including the impact of the related transactions 
on the proposed transaction.\31\
---------------------------------------------------------------------------

    \31\ For example, many business combinations under the BMA are 
part of a larger transaction that requires a filing with the Board 
under the Bank Holding Company Act.
---------------------------------------------------------------------------

    Commenters generally supported the OCC's goal of providing 
additional transparency about how the OCC considers the effect of a 
transaction on financial stability. However, some commenters criticized 
the OCC's balancing test approach to evaluating financial stability as 
too lenient to protect financial institutions and the broader economy, 
especially for G-SIBs. These commenters noted that the OCC should not 
rely on enhanced prudential standards to offset risks. One commenter 
also objected to the OCC's consideration of the financial stability 
risk associated with denying an application in the balancing test and 
noted that the OCC should use the supervisory process and not business 
combinations to address concerns about troubled institutions. Some 
commenters suggested options including other, scored risk factors like 
the list of systemic risk factors used to calculate the G-SIB surcharge 
in 12 CFR part 217, subpart H. Additionally, commenters expressed 
concern that the OCC's review would consider the representations made 
in other pending applications and noted that applicants may not have 
detailed knowledge of pending or future applications. Another commenter 
suggested that the OCC revise proposed appendix A to promote more 
actively the acquisition of a troubled institution before it fails. One 
commenter suggested automatically categorizing transactions involving 
institutions below $10 billion in assets as low risk to financial 
stability unless specific factors suggest otherwise. Other commenters 
suggested that considerations of financial stability risks under the 
BMA must include an evaluation of climate-related financial risks and 
the impact of a resulting institution's activities on financial 
stability in that regard.
    The proposed appendix A described the OCC's long-standing approach 
to considering the risk to the stability of the financial system and 
would have provided additional clarity on the factors considered, the 
balancing test applied, and the possibility that the OCC may impose 
conditions in certain situations. Although the OCC's considerations are 
not scored, the OCC considers each factor individually and in 
combination to develop a holistic view of the potential transaction's 
effect on financial stability. The OCC believes this balancing test 
allows it to consider all factors relevant to financial stability and 
results in determinations that fully incorporate the effect of the 
transaction on financial stability. Additionally, the OCC's review 
would have only considered the representations of other concurrent 
applications for related transactions, not unrelated applications that 
have no nexus to the application under consideration.
    The OCC is removing the word ``requirements'' from the discussion 
of the OCC's consideration of the impact of the proposed transaction in 
light of the standards applicable to the resulting institution's 
recovery planning in Section III, Financial Stability, to more 
accurately describe the standards in 12 CFR part 30, appendix E, ``OCC 
Guidelines Establishing Standards for Recovery Planning by Certain 
Large Insured National Banks, Insured Federal Savings Associations, and 
Insured Federal Branches''. The OCC is otherwise generally finalizing 
Section III, Financial Stability, as proposed.
    Section IV, Financial and Managerial Resources and Future 
Prospects, of proposed appendix A would have discussed the BMA's 
requirement that the OCC consider the managerial resources, financial 
resources, and future prospects of any proposed transaction. Under the 
BMA, the OCC must consider each of these factors independently for both 
the combining and resulting institutions.\32\ However, because these 
factors are directly related

[[Page 78213]]

to one another, the OCC also considers these factors holistically. This 
section of proposed appendix A would have described the overarching 
considerations of the OCC's review of these factors and provide 
additional details about what the OCC considers while reviewing these 
factors. The overarching considerations of this proposed section would 
have noted that the OCC would consider the size, complexity, and risk 
profile of the combining and resulting institutions.
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 1828(c)(5).
---------------------------------------------------------------------------

    Further, proposed appendix A would have expanded the discussion in 
the Comptroller's Licensing Manual about the types of transactions the 
OCC would normally not approve to provide additional details about 
acquirer characteristics with respect to financial and managerial 
resources and future prospects that are less likely to result in an 
approval. Specifically, the OCC is less likely to approve an 
application when the acquirer (i) has a less than satisfactory 
supervisory record, including its financial and managerial resources; 
(ii) has experienced rapid growth; (iii) has engaged in multiple 
acquisitions with overlapping integration periods; (iv) has failed to 
comply with conditions imposed in prior OCC licensing decisions; or (v) 
is functionally the target in the transaction.\33\ The OCC also 
normally does not approve a combination that would result in a 
depository institution with less than adequate capital, less than 
satisfactory management, or poor earnings prospects.
---------------------------------------------------------------------------

    \33\ For example, in a reverse triangular merger, a holding 
company may acquire an institution and merge its existing subsidiary 
into the newly acquired institution, which survives as a subsidiary 
of the holding company. See Comptroller's Licensing Manual, 
``Business Combinations'' at 23 (January 2021).
---------------------------------------------------------------------------

    Finally, this subsection would have confirmed the OCC's practice of 
considering all comments on proposed transactions, including those on 
financial and managerial resources and future prospects. To the extent 
public comments address issues involving confidential supervisory 
information, however, the OCC generally would not discuss or otherwise 
disclose confidential supervisory information in public decision 
letters.
    Section IV of proposed appendix A would have next discussed the 
OCC's consideration of the financial resources, managerial resources, 
and future prospects factors. With respect to financial resources, 
proposed appendix A would have discussed the OCC's review of pro forma 
capital levels. Additionally, the OCC is generally prohibited by 
statute from approving business combination applications filed by an 
institution that is undercapitalized as defined in 12 CFR 6.4.\34\ 
Proposed appendix A also would have specified that the OCC closely 
scrutinizes transactions that increase the risk to the bank's financial 
condition and resilience, including risk to the bank's capital, 
liquidity, and earnings that can arise from any of the eight categories 
of risk included in the OCC's Risk Assessment System.\35\ Further, with 
respect to the financial resources factor, the OCC considers the 
ability of management to address increased risks that would result from 
the transaction. Finally, proposed appendix A would have clarified that 
a transaction involving an acquirer with a strong supervisory record is 
more likely to satisfy the review factors. By contrast, a transaction 
involving an acquirer with a recent less than satisfactory supervisory 
record is less likely to satisfy this factor.
---------------------------------------------------------------------------

    \34\ 12 U.S.C. 1831o(e)(4). The OCC may only approve a 
combination application by an undercapitalized institution if the 
agency has accepted the institution's capital restoration plan and 
determines that the proposed combination is consistent with and will 
further the achievement of the plan or if the Board of Directors of 
the Federal Deposit Insurance Corporation determines that the 
proposed combination will further the purposes of 12 U.S.C.1831o. 12 
U.S.C. 1831o(e)(4)(A)-(B).
    \35\ These are credit, interest rate, liquidity, price, 
operational, compliance, strategic, and reputation risks. See 
Comptroller's Handbook, ``Bank Supervision Process'' at 26-28 
(Version 1.1, September 2019).
---------------------------------------------------------------------------

    Section IV of proposed appendix A would have also discussed the 
OCC's approach to the managerial resources standard. The OCC considers 
the supervisory record and current condition of both the acquirer and 
target to determine if the resulting institutions will have sufficient 
managerial resources. For example, a significant number of matters 
requiring attention (MRA), or lack thereof, may impact the 
determination as to whether there are sufficient managerial resources. 
The OCC also reviews (i) both institutions' management ratings under 
the UFIRS or ROCA system, as well as their component ratings under the 
CC Rating System, Uniform Rating System for Information Technology, and 
Uniform Interagency Trust Rating System, as applicable; and (ii) 
relevant Risk Assessment System (RAS) conclusions for the applicant as 
well as the RAS conclusions for an OCC-supervised target. The OCC also 
considers the context in which the rating or RAS element was assigned 
and any additional information resulting from ongoing supervision. 
Finally, proposed appendix A would have noted that less than 
satisfactory ratings at the target do not preclude the approval of a 
transaction, provided that the acquirer can employ sufficiently robust 
risk management and financial resources to correct the weaknesses.
    Proposed appendix A would have stated that the OCC considers 
whether the acquirer has conducted sufficient due diligence of the 
target depository institution to understand its business model, systems 
compatibility, and weaknesses. This consideration includes the 
acquirer's plans and ability to address its own previously identified 
weaknesses, remediate the target's weaknesses, and exercise appropriate 
risk management for the size, complexity, and risk profile of the 
resulting institution. Similarly, the OCC considers the acquirer's 
plans for and history of integrating combining institutions' 
operations, including systems and information security processes, 
products, services, employees, and cultures.
    Proposed appendix A next would have discussed the OCC's 
consideration of the acquirer's plans to identify and manage systems 
compatibility and integration issues, such as information technology 
compatibility and implications for business continuity and resilience. 
A critical component of these plans includes identifying overreliance 
on manual controls, strategies for automating critical processes, and 
capacity and modernization of aging and legacy information technology 
systems. The OCC may conduct additional reviews where there are 
concerns with systems integration and, in some cases, the OCC may 
impose conditions that are enforceable pursuant to 12 U.S.C. 1818 to 
address those concerns. The OCC may deny an application if the 
integration or other issues present significant supervisory concerns, 
and the issues cannot be resolved through appropriate conditions or 
otherwise.\36\
---------------------------------------------------------------------------

    \36\ See 12 CFR 5.13(b).
---------------------------------------------------------------------------

    Finally, with regard to managerial resources, proposed appendix A 
would have described the OCC's consideration of the proposed governance 
structure of the resulting institution. This includes consideration of 
(i) governance in decision-making processes, the board management 
oversight structure, and the risk management system, including change 
management; and (ii) the expansion of existing activities, introduction 
of new or more complex products or lines of business, and implications 
for managing existing and acquired subsidiaries and equity investments. 
When applicable, the resulting institution's governance is also

[[Page 78214]]

considered in the context of the institution's relationship with its 
holding company and the scope of the holding company's activities.
    Section IV of proposed appendix A also would have discussed how the 
OCC considers the future prospects factor. The OCC considers this 
factor in light of its assessment of the institutions' financial and 
managerial resources. The OCC also considers the proposed operations of 
the resulting institutions and the acquirer's record of integrating 
acquisitions. Specifically, the OCC considers whether the integrated 
institution will be able to function effectively as a single entity. 
The OCC also considers the resulting institution's business plan or 
strategy and management's ability to implement it in a safe and sound 
manner. Finally, the OCC considers the combination's potential impacts 
on the resulting institution's continuity planning and operational 
resilience.
    One commenter highlighted the importance of assessing managerial 
resources and firm culture when considering an application under the 
BMA. This commenter urged the OCC to make it clear that, when 
considering the managerial resources factor, the OCC would take into 
consideration whether the acquirer and target have implemented 
governance solutions that generate outcomes that meet or exceed the 
OCC's expectations and suggested using artificial intelligence and 
machine learning tools to do so. Other commenters suggested that an 
assessment of financial and managerial resources and future prospects 
should include climate-related financial risk expertise. Several other 
commenters suggested the OCC include a requirement that banks describe 
their efforts to promote gender, racial, and ethnic diversity in their 
boards, senior management, and branch personnel, with some commenters 
suggesting that such information be considered under the managerial 
resources factor. One commenter also suggested that applicants submit 
an integration plan as part of their application. Given the varied 
nature of institutions' operations and proposed mergers, the OCC is 
declining to require these items as part of its review of all 
applications under the BMA. To the extent that it is relevant to any 
particular transaction, the OCC may, based on its supervisory 
expertise, request information on these or other items that are 
relevant to the financial and managerial and future prospects factors.
    The OCC is thus generally finalizing section IV as proposed with 
one addition to make explicit a consideration that was implicit in the 
proposal. The OCC is adding a new overarching consideration in section 
IV of appendix A. Specifically, section IV will state that the OCC 
considers the financial and managerial resources and future prospects 
factors within the context of the prevailing economic and operating 
environment. The OCC recognizes that the financial resources and future 
prospects of institutions, and those of community institutions in 
particular, are likely to be highly dependent on the economic and other 
environments within which they operate. As such, a combined 
institution's financial resources and future prospects may in some 
cases be significantly greater than those of the individual 
institutions if no merger were to occur.
    Section V of proposed appendix A would have expanded on the 
discussion in the Comptroller's Licensing Handbook of the OCC's 
consideration of the probable effects of the proposed business 
combination on the community to be served. Specifically, this section 
would have clarified that the OCC's consideration of the impacts of any 
proposed combination on the convenience and needs of the community is 
prospective and considers the likely impact on the community of the 
resulting institution after the transaction is consummated.\37\ For 
this factor, the OCC considers, among other things (i) the proposed 
changes to branch locations, branching services, banking services or 
products, or credit availability offered by the target and acquirer, 
including in low- or moderate-income (LMI) communities; (ii) any job 
losses or lost job opportunities from branching changes; and (iii) any 
community investment or development initiatives, including particularly 
those that support affordable housing and small businesses. With 
respect to (i) above, the OCC also sought comment on whether to specify 
communities in addition to LMI communities as part of these 
considerations.
---------------------------------------------------------------------------

    \37\ As the OCC's review of this factor is with respect to the 
resulting institution, it necessarily includes review of the record, 
products, and services of both the acquirer and target.
---------------------------------------------------------------------------

    Finally, section V of proposed appendix A would have clarified that 
the OCC's forward-looking consideration of the convenience and needs 
factor under the BMA is separate and distinct from its consideration of 
an applicant's CRA record of performance in helping to meet the credit 
needs of the relevant community, including LMI neighborhoods.
    Commenters expressed varying viewpoints on Section V, Convenience 
and Needs, of proposed appendix A. Some commenters criticized the OCC's 
inclusion of job losses or reduced job opportunities, and one commenter 
stated that such consideration lacked a statutory basis and diverged 
from longstanding regulatory precedent. Other commenters encouraged the 
OCC to place greater emphasis on factors such as potential job losses; 
projected branch losses in LMI and majority-minority census tracts; 
impacts to communities of color and underserved census tracts, 
including small businesses in those communities; reduced reinvestment; 
increased fees; and other factors that could affect access to banking 
services when evaluating the community and needs factor. One commenter 
suggested the OCC consider past bank branch closures. Another commenter 
recommended that the OCC require applicants to submit a list of branch 
closures planned for the three years following the consummation of a 
merger and a discussion of the impact on local communities and stated 
that applicants should be prohibited from closing other branches for 
three years. Some commenters suggested that a merger should not be 
approved unless applicants can demonstrate that the transaction will 
better meet the convenience and needs of the community, with several 
commenters specifically noting that the OCC should only approve 
transactions that better serve vulnerable communities, including low-
income communities and communities of color. Several commenters 
suggested that the OCC's review of the convenience and needs factor 
should include broad consideration of the climate-related impact of the 
transaction, including financial risk, impacts resulting from bank 
activities that may impact climate change, and the climate related 
transition plans. One commenter suggested that the OCC should provide 
additional clarity on how it weighs the various impacts it considers. 
Other commenters noted that the OCC should specifically consider how 
the impacts of the expansion of digital banking affects underserved 
communities in the context of merger reviews.
    Several commenters emphasized the importance of community benefit 
agreements and plans and collaboration with community groups and urged 
the OCC to use its policy statement to elevate the importance of these 
agreements, plans, and collaborations. Suggestions included signaling 
that the OCC would enforce community benefit

[[Page 78215]]

commitments made during merger applications or imposing a condition of 
approval on the acquirer requiring it to adhere to the elements of such 
commitments. Another commenter requested additional transparency with 
respect to conditional approvals for convenience and needs, CRA, or 
fair lending concerns.\38\
---------------------------------------------------------------------------

    \38\ Additionally, one commenter recommended increased scrutiny 
of convenience and needs in transactions where credit unions acquire 
national banks because credit unions are not subject to CRA. The 
Federal Deposit Insurance Corporation, not the OCC, is the 
responsible agency for BMA transactions where national bank or 
Federal savings association assets and deposit liabilities are 
transferred to an institution that is not covered by the Deposit 
Insurance Fund, such as a credit union. See 12 U.S.C. 1828(c)(1)(C). 
To the extent an application with the OCC is required, such as a 
substantial asset change under 12 CFR 5.33, the OCC will examine the 
proposed transaction under all applicable standards.
---------------------------------------------------------------------------

    The OCC considers the convenience and needs factor in light of the 
specific facts of each transaction. The factors listed in proposed 
section V are indicators of whether the proposed transaction will 
enable the resulting institution to better meet the convenience and 
needs of its community. A net positive impact on its ability to meet 
the convenience and needs of community is, in the OCC's experience, 
generally consistent with approval with respect to this factor. 
Applicants need not make a showing with respect to any or all of these 
items for the application to be consistent with approval. The OCC 
agrees with commenters that the BMA does not require consideration of 
particular facts such as job losses with respect to the convenience and 
needs of the community. Consistent with the BMA, the OCC will evaluate 
the facts of each application and determine whether particular items 
are relevant to its consideration of convenience and needs of the 
specific community to be served. For example, job losses or reduced job 
opportunities may have an impact on the local community as a whole in 
certain circumstances. Additionally, the OCC will consider any plans 
regarding the availability or cost of banking services or products to 
the community in the context of the communities affected, including LMI 
communities. Based on its supervisory experience, including its review 
of business combination applications, the OCC believes that the 
existing information requirements in the Interagency Bank Merger Act 
Application provide the appropriate initial level of information. The 
OCC may request additional information regarding branch closures or 
other facts impacting the convenience and needs of the community to be 
served. Further, the OCC believes that the items listed in proposed 
section V are appropriately tailored to cover the full range of BMA 
applications it receives.
    Another commenter suggested that unless material changes are 
expected post-consummation, the OCC should use the acquirer's and 
target's CRA ratings as the primary method of assessing a merger's 
impact on the convenience and needs of the community. Other commenters 
asserted that CRA alone is not sufficient for determining a merger's 
impact on the convenience and needs of the community. As discussed in 
the Business Combinations booklet of the Comptroller's Licensing 
Manual, a CRA rating is based on past performance, while the 
convenience and needs factor is prospective.\39\ Accordingly, analysis 
of past CRA performance is not sufficient to analyze the prospective 
convenience and needs of the community. The OCC believes that section V 
correctly articulated this standard as proposed.
---------------------------------------------------------------------------

    \39\ See Comptroller's Licensing Manual, ``Business 
Combinations'' (Jan. 2021) at 7.
---------------------------------------------------------------------------

    The OCC is making clarifying edits to section V of appendix A. The 
OCC is changing the order of the discussion of an institution's plans 
to close, consolidate, limit, or expand branches to have the activities 
in a more logical sequence. Likewise, with respect to credit 
availability, the OCC is specifying that it considers an institution's 
plans to maintain, reduce, or improvement credit availability, 
including access to specific types of loans. Accordingly, the OCC is 
finalizing section V generally as proposed.
    Section VI, Public Comments and Meetings, of proposed appendix A 
would have provided additional details about the process and procedures 
relating to the OCC's receipt of public comments and considerations 
related to public meetings and clarified the information contained 
within 12 CFR part 5 and the ``Public Notice and Comments'' booklet of 
the Comptroller's Licensing Manual.\40\ Specifically, the public 
comments subsection would have articulated the circumstances under 
which the OCC may extend the usual 30-day comment period \41\ pursuant 
to Sec.  5.10(b)(2).\42\ It also would have provided additional clarity 
by noting that the OCC may find that additional time is necessary to 
develop factual information, and thus warrant extending the comment 
period. This could happen, for example, if a filer's response to a 
comment does not fully address the matters raised in the comment and 
the commenter requests an opportunity to respond. This subsection also 
would have provided examples of extenuating circumstances when the OCC 
may determine that an extension is needed, including if a public 
meeting is held, the transaction is novel or complex, or a natural 
disaster has occurred that affects the public's ability to timely 
submit comments.
---------------------------------------------------------------------------

    \40\ While the BMA does not require the OCC to hold meetings or 
hearings, 12 CFR 5.11 describes the consideration and procedures for 
public hearings and notes the availability of several other types of 
meetings. The OCC considers three options for seeking oral input: 
(1) public hearing, (2) public meeting, and (3) private meeting.
    \41\ See 12 CFR 5.10(b)(1).
    \42\ Specifically, part 5 notes that the OCC may extend the 
comment period when: (1) a filer fails to file all required 
publicly-available information on a timely basis or makes a request 
for confidential treatment not granted by the OCC; (2) a person 
requesting an extension demonstrates to the OCC that additional time 
is necessary to develop factual information the OCC determines is 
necessary to consider the filing; and (3) the OCC determines that 
other extenuating circumstances exist.
---------------------------------------------------------------------------

    With respect to the discussion of public comments, some commenters 
supported the proposal's discussion of how a comment period can be 
extended when a filer does not adequately respond to a commenter. 
However, other commenters expressed concern that the OCC's ability to 
extend the comment period based on the completeness of a filer's 
response to a comment may create a risk of commenters repeatedly filing 
comments in bad faith, which will result in delay. Two commenters 
suggested that the OCC consider extending the comment period in some 
instances, with one commenter suggesting that the OCC use an initial 
60-day comment period for larger transactions. Other commenters also 
encouraged the OCC to minimize the negative impacts of prolonged review 
periods on affected communities and stakeholders. One commenter also 
requested that the OCC develop policies to address the abuse of the 
public comment process, including via the use of artificial 
intelligence.
    The OCC did not propose any changes to its regulations regarding 
its acceptance and review of public comments, which are broadly 
applicable to transactions covered by 12 CFR part 5 and not only 
business combinations. The OCC periodically considers which of its 
regulations would benefit from proposed changes and will consider 
whether to propose changes to the public comment regulations at an 
appropriate time.\43\ The OCC is mindful

[[Page 78216]]

of the effects of the length of review periods on all relevant parties. 
The OCC uses the standard 30-day notice period prescribed by the BMA 
\44\ and will extend the comment period pursuant to the factors 
discussed in section VI as appropriate. The OCC intends to act on 
applications in a timely fashion, consistent with a fulsome review of 
applications and safety and soundness. To clarify that the purpose of 
section VI is to address considerations regarding the public comment 
period and not the OCC's acceptance and review of public comments, the 
OCC is revising the headings in section VI to specifically reference 
the public comment period.
---------------------------------------------------------------------------

    \43\ For example, the OCC decennially reviews its regulations as 
required by the Economic Growth and Regulatory Paperwork Reduction 
Act. 12 U.S.C. 3311. See, e.g., Regulatory Publication and Review 
Under the Economic Growth and Regulatory Paperwork Reduction Act of 
1996, 89 FR 8084 (February 6, 2024).
    \44\ See 12 U.S.C. 1828(c)(3).
---------------------------------------------------------------------------

    The proposed public meetings subsection of section VI would have 
stated that when determining whether to hold a public meeting, the OCC 
balances the public's interest in the transaction with the value or 
harm of a public meeting to the decision-making process. Proposed 
appendix A would also have clarified the criteria that inform the OCC's 
decision on whether to hold a public meeting. The criteria include (i) 
the public's interest in the transaction; (ii) the appropriateness of a 
public meeting to document or clarify issues raised during the public 
comment process; (iii) the significance of the transaction to the 
banking industry; (iv) the significance of the transaction to the 
communities affected; (v) the potential value of any information that 
could be gathered and documented during a public meeting; and (vi) the 
acquirer's and target's CRA, consumer compliance, fair lending, or 
other pertinent supervisory records, as applicable. Several commenters 
proposed additional triggers for holding public meetings, including 
when there is a significant overlap in branch networks, when CRA 
ratings are lower in affected geographies, when the resulting entity 
will exceed a certain asset size, or when there is a merger protest. 
These commenters also suggested several ways that the OCC could improve 
outreach to underserved communities and dialogue about the impact of 
potential mergers. These included adopting a public registry for CRA 
examinations and mergers, improving the format of public meetings, and 
providing clearer information on regulatory websites on how to engage 
with regulators on particular mergers. One commenter objected to what 
it characterized as the OCC's implication that input from the public 
could be harmful to the OCC's decision-making process. This commenter 
suggested a public meeting should be held when requested.
    As discussed in proposed section VI, the OCC considers the 
significance of the transaction to the communities affected, as well as 
applicable CRA ratings. The OCC believes that these considerations are 
sufficiently broad to cover issues such as a significant overlap in 
branch networks. Further, the OCC believes that a decision to hold a 
public meeting should be based on the individual facts and 
circumstances of each proposed merger. For example, the considerations 
for whether to hold a public meeting on an internal corporate 
reorganization likely differ from those in a transaction between 
unaffiliated institutions. Additionally, the OCC believes that the fact 
that a comment is filed with respect to a proposed merger is 
insufficient alone to warrant a meeting. For example, through requests 
for additional information, the OCC can often obtain the information it 
needs to fully consider the comment without organizing a meeting. 
Consistent with applicable law, the OCC makes public all CRA 
performance evaluations on its website \45\ and all applications under 
the BMA in its Freedom of Information Act Reading Room.\46\ While the 
OCC may consider additional methods to provide information to the 
public it believes that this issue is outside the scope of appendix A. 
Similarly, 12 CFR 5.11(i) provides the OCC with broad discretion in the 
conduct of public meetings. The OCC may tailor the format and structure 
of public meetings as needed based on the specific circumstance. The 
OCC believes that the information contained in proposed section VI is 
appropriate for general consideration of public meetings. Accordingly, 
besides the revision to the headings in section VI to specifically 
reference the public comment period, the OCC is generally finalizing 
section VI as proposed.
---------------------------------------------------------------------------

    \45\ OCC, CRA Performance Evaluations, https://occ.gov/publications-and-resources/tools/index-cra-search.html.
    \46\ OCC, Freedom of Information Act, https://foia-pal.occ.gov/.
---------------------------------------------------------------------------

IV. Regulatory Analysis

A. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\47\ the OCC may 
not conduct or sponsor, and a respondent is not required to respond to, 
an information collection unless it displays a currently valid Office 
of Management and Budget (OMB) control number. The information 
collection requirements in this rule have been submitted to OMB under 
OMB control number 1557-0014 (Licensing Manual).
---------------------------------------------------------------------------

    \47\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

    The final rule amends 12 CFR 5.33 by removing the expedited review 
procedures in Sec.  5.33(i), which currently allow an application to be 
deemed approved by the OCC as of the 15th day after the close of the 
comment period, unless the OCC notifies the filer that the filing is 
not eligible for expedited review or the expedited review process is 
extended. The final rule also removes the streamlined application in 
Sec.  5.33(j), which removes the ability of eligible institutions to 
file for certain types of business combinations using a streamlined 
application form.
    Title: Licensing Manual.
    OMB Control Number: 1557-0014.
    Frequency of Response: Occasional.
    Affected Public: National banks and Federal savings associations.
    The changes to the burden of the Licensing Manual are de minis and 
continue to be:
    Estimated Number of Respondents: 3,694.
    Estimated Total Annual Burden: 12,481.15.
    Comments continue to be invited on:
    a. Whether the collections of information are necessary for the 
proper performance of the agency functions, including whether the 
information has practical utility;
    b. The accuracy of the agency estimates of the burden of the 
information collections, including the validity of the methodology and 
assumptions used;
    c. Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    d. Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    e. Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Written 
comments and recommendations for the information collection should be 
sent within 30 days of publication of this notice. Comments on the 
collection of information should be sent to Chief Counsel's Office, 
Attention: Comment Processing, Office of the Comptroller of the 
Currency, Attention: 1557-0014, 400 7th Street SW, Suite 3E-218, 
Washington, DC 20219. Comments may also be sent to 
[email protected] or www.reginfo.gov/public/do/PRAMain. Find this 
information collection by selecting ``Currently under 30-day

[[Page 78217]]

Review--Open for Public Comments'' or using the search function.

B. Regulatory Flexibility Act

    The RFA \48\ requires an agency, in connection with a proposal and 
final rule, to prepare and make available to the public a Regulatory 
Flexibility Analysis that describes the impact of the rule on small 
entities (defined by the SBA for purposes of the RFA to include 
commercial banks and savings institutions with total assets of $850 
million or less and trust companies with total assets of $47 million or 
less). However, under section 605(b) of the RFA, this analysis is not 
required if an agency certifies that the rule would not have a 
significant economic impact on a substantial number of small entities 
and publishes its certification and a short explanatory statement in 
the Federal Register along with its rule. The OCC included an RFA 
certification in the Federal Register along with its proposal.
---------------------------------------------------------------------------

    \48\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    As discussed above, the SBA's Office of Advocacy and one other 
commenter stated that the proposal's RFA certification lacked a factual 
basis. The SBA's Office of Advocacy, along with other commenters, 
recommended that the OCC continue to allow expedited review for 
applications from small entities and allow those entities to continue 
to use the streamlined application form. Specifically, with respect to 
the proposal's RFA certification, the SBA's Office of Advocacy's 
comment and the other comment addressing the RFA stated that it lacked 
sufficient information about (1) the number of small entities that 
would be impacted because it only estimated the number of entities that 
would apply for business combinations in a given year and did not 
explain how many of those entities were small entities and (2) the 
basis for its conclusion that the impact on affected institutions would 
be de minimis.
    The OCC currently supervises 1,040 institutions (commercial banks, 
trust companies, Federal savings associations, and branches or agencies 
of foreign banks),\49\ of which approximately 636 are small 
entities.\50\ As the SBA's Office of Advocacy noted, all of the 636 
small entities may have been impacted by the proposed rule to the 
extent that they elected to submit applications to the OCC for approval 
of business combination activities. However, in practice and based on 
the number of merger applications that the OCC has received annually 
over the past five years, the agency expects the annual impact of the 
final rulemaking could be 78 OCC-supervised small institutions in a 
given year, assuming that all merger applications are submitted by 
small banks.
---------------------------------------------------------------------------

    \49\ Based on data accessed using FINDRS on August 18, 2024.
    \50\ The estimate of the number of small entities is based on 
the SBA's size thresholds for commercial banks and savings 
institutions, and trust companies, which are $850 million and $47 
million, respectively. Consistent with the General Principles of 
Affiliation 13 CFR 121.103(a), the OCC counts the assets of 
affiliated financial institutions when determining if it should 
classify an OCC-supervised institution as a small entity. The OCC 
uses December 31, 2023, to determine size because a ``financial 
institution's assets are determined by averaging the assets reported 
on its four quarterly financial statements for the preceding year.'' 
See footnote 8 of the SBA's Table of Size Standards.
---------------------------------------------------------------------------

    In terms of the potential economic impact of the final rule on 
affected institutions, the OCC does not expect that the changes will 
result in (1) a different outcome for merger applications or (2) 
additional burden on affected institutions. First, the final appendix A 
aims to provide transparency with respect to the OCC's BMA review 
process, including consideration of certain statutory factors under the 
BMA. This should provide regulated institutions with additional clarity 
and transparency about the OCC's decision-making process. Second, the 
removal of the expedited review process will likely not result in any 
change to the timing of the OCC's processing of licensing applications. 
The only benefit conferred by the expedited review provisions in Sec.  
5.33(i) is that applications are deemed approved as of the 15th day 
after the close of the comment period unless the OCC takes action to 
remove the application from expedited review or extends the process. 
However, the OCC is not aware of an application for a business 
combination being deemed approved due to the passage of time under 
Sec.  5.33(i). Third, the OCC expects that the removal of the 
streamlined application form will not result in a substantive impact on 
affected institutions or on the information collected. Although the 
Interagency Bank Merger Act Application requires the submission of 
additional documentation and information with the initial application, 
that documentation and information is largely related to the same 
categories of information. Further, in practice, the OCC may request 
additional information from applicants to enable it to conclude on the 
applicable statutory factors. Eliminating the streamlined application 
may decrease the likelihood the OCC needs to request additional 
information from applicants, which could otherwise slow down the 
processing of an application. The agency also does not expect that the 
removal of the streamlined application will result in a material change 
to the time it takes to OCC to respond to submitting banks and, 
therefore, does not expect any subsequent impact on bank operations 
that could otherwise result from a delayed response from the OCC. 
Accordingly, the OCC expects these changes to have a de minimis impact 
on small entities.
    In general, the OCC classifies the economic impact on an individual 
small entity as significant if the total estimated impact in one year 
is greater than 5 percent of the small entity's total annual salaries 
and benefits or greater than 2.5 percent of the small entity's total 
non-interest expense. Furthermore, the OCC considers 5 percent or more 
of OCC-supervised small entities to be a substantial number. At 
present, 32 OCC-supervised small entities constitute a substantial 
number. Therefore, the final rule will potentially affect a substantial 
number of OCC-supervised small entities in any given year.
    However, based on the thresholds for a significant economic impact, 
the OCC expects that, if implemented, the final rule will not have a 
significant economic impact on any small entities. For these reasons, 
the OCC certifies that the final rule would not have a significant 
economic impact on a substantial number of small entities.

C. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) \51\ requires that the OCC prepare a budgetary impact 
statement before promulgating a rule that includes any Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more (adjusted annually for inflation, currently $183 
million) in any one year. If a budgetary impact statement is required, 
section 205 of the Unfunded Mandates Act \52\ also requires the OCC to 
identify and consider a reasonable number of regulatory alternatives 
before promulgating a rule.
---------------------------------------------------------------------------

    \51\ 2 U.S.C. 1532.
    \52\ 2 U.S.C. 1535.
---------------------------------------------------------------------------

    The OCC estimates that the annual aggregate cost of the final rule 
once fully phased in will be de minimis. Furthermore, the rule's 
changes are not new substantive or information requirements for OCC-
supervised institutions but rather describe

[[Page 78218]]

considerations and principles that guide the OCC's review of 
applications under the BMA. Therefore, the OCC concludes that the final 
rule will not result in an expenditure of $183 million or more annually 
by State, local, and Tribal governments or by the private sector.

D. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA) of 1994 \53\ in determining the 
effective date and administrative compliance requirements for new 
regulations that impose additional reporting, disclosure, or other 
requirements on insured depository institutions, the OCC must consider, 
consistent with principles of safety and soundness and the public 
interest (1) any administrative burdens that the final rule would place 
on depository institutions, including small depository institutions and 
customers of depository institutions, and (2) the benefits of the final 
rule. In addition, section 302(b) of RCDRIA requires new regulations 
and amendments to regulations that impose additional reporting, 
disclosures, or other new requirements on insured depository 
institutions generally to take effect on the first day of a calendar 
quarter that begins on or after the date on which the regulations are 
published in final form.\54\ The OCC considered the changes made by 
this final rule and believes that the effective date of January 1, 
2025, will provide OCC-regulated institutions with adequate time to 
comply with the rule. The final rule will not impose any new 
administrative compliance requirements, and the administrative burdens 
from the removal of the Streamlined Application are de minimis.
---------------------------------------------------------------------------

    \53\ 12 U.S.C. 4802(a).
    \54\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

E. Congressional Review Act

    For purposes of the Congressional Review Act, the Office of 
Management and Budget (OMB) makes a determination as to whether a final 
rule constitutes a ``major rule.'' \55\ If a rule is deemed a ``major 
rule'' by OMB, the Congressional Review Act generally provides that the 
rule may not take effect until at least 60 days following its 
publication.\56\
---------------------------------------------------------------------------

    \55\ 5 U.S.C. 801 et seq.
    \56\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------

    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in: (1) 
an annual effect on the economy of $100,000,000 or more; (2) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies, or geographic regions; or 
(3) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\57\
---------------------------------------------------------------------------

    \57\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    As required by the Congressional Review Act, the OCC will submit 
the final rule and other appropriate reports to Congress and the 
Government Accountability Office for review.

List of Subjects in 12 CFR Part 5

    Administrative practice and procedure, National banks, Reporting 
and recordkeeping requirements, Savings associations, Securities.

    For the reasons set forth in the preamble, OCC amends 12 CFR part 5 
as follows:

PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES

0
1. The authority citation for part 5 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 24a, 35, 93a, 214a, 215, 215a, 
215a-1, 215a-2, 215a-3, 215c, 371d, 481, 1462a, 1463, 1464, 1817(j), 
1831i, 1831u, 2901 et seq., 3101 et seq., 3907, and 5412(b)(2)(B).


Sec.  5.33  [Amended]

0
2. Section 5.33 is amended by removing and reserving paragraphs (d)(3), 
(i), and (j).

0
3. Add appendix A to subpart C to read as follows:

Appendix A to Subpart C of Part 5--Policy Statement Regarding Statutory

Factors Under the Bank Merger Act

I. Introduction

    The purpose of this policy statement is to provide insured 
depository institutions (institutions) and the public with a better 
understanding of how the Office of the Comptroller of the Currency 
(OCC) considers certain statutory factors under the Bank Merger Act 
(BMA), 12 U.S.C. 1828(c). The matters discussed in this statement 
are intended to provide greater transparency, facilitate interagency 
coordination, and enhance public engagement.

II. General Principles of OCC Review

    The OCC aims to act promptly on all applications. The agency's 
range of potential actions on applications includes approval, 
denial, and requesting that an applicant withdraw the application 
because any shortcomings are unlikely to be resolved in a timely 
manner. Applications that tend to withstand scrutiny more easily and 
are more likely to be approved expeditiously generally feature all 
of the following indicators:
    1. The acquirer is well capitalized under Sec.  5.3, and the 
resulting institution will be well capitalized;
    2. The resulting institution will have total assets less than 
$50 billion;
    3. The acquirer has a Community Reinvestment Act (CRA) rating of 
Outstanding or Satisfactory;
    4. The acquirer has composite and management ratings of 1 or 2 
under the Uniform Financial Institution Ratings System (UFIRS) or 
ROCA rating system;
    5. The acquirer has a consumer compliance rating of 1 or 2 under 
the Uniform Interagency Consumer Compliance Rating System (CC Rating 
System), if applicable;
    6. The acquirer has no open formal or informal enforcement 
actions;
    7. The acquirer has no open or pending fair lending actions, 
including referrals or notifications to other agencies;
    8. The acquirer is effective in combatting money laundering 
activities;
    9. The target's total assets are less than or equal to 50% of 
acquirer's total assets;
    10. The target is an eligible depository institution as defined 
in Sec.  5.3;
    11. The proposed transaction clearly would not have a 
significant adverse effect on competition;
    12. The OCC has not identified a significant legal or policy 
issue; and
    13. No adverse comment has raised a significant CRA or consumer 
compliance concern.
    If certain indicators that raise supervisory or regulatory 
concerns are present, the OCC is unlikely to find that the statutory 
factors under the BMA are consistent with approval unless and until 
the applicant has adequately addressed or remediated the concern. 
The following are examples of indicators that raise supervisory or 
regulatory concerns:
    1. The acquirer has a CRA rating of Needs to Improve or 
Substantial Noncompliance.
    2. The acquirer has a consumer compliance rating of 3 or worse.
    3. The acquirer has UFIRS or ROCA composite or management 
ratings of 3 or worse or the most recent report of examination 
otherwise indicates that the acquirer is not financially sound or 
well managed.
    4. The acquirer is a global systemically important banking 
organization or subsidiary thereof.
    5. The acquirer has open or pending Bank Secrecy Act/Anti-money 
Laundering, fair lending, or consumer compliance actions, including 
enforcement actions, referrals, or notifications to other agencies.
    6. The acquirer has failed to adopt, implement, and adhere to 
all the corrective actions required by a formal enforcement action 
in a timely manner, or there have been multiple enforcement actions 
against the acquirer executed or outstanding during a three-year 
period.

[[Page 78219]]

III. Financial Stability

A. Factors Considered

    The BMA requires the OCC to consider ``the risk to the stability 
of the United States banking or financial system'' when reviewing 
transactions subject to the Act. In reviewing a BMA application 
under this factor, the OCC considers the following factors:
    1. Whether the proposed transaction would result in a material 
increase in risks to financial system stability due to an increase 
in size of the combining institutions.
    2. Whether the proposed transaction would result in a reduction 
in the availability of substitute providers for the services offered 
by the combining institutions.
    3. Whether the resulting institution would engage in any 
business activities or participate in markets in a manner that, in 
the event of financial distress of the resulting institution, would 
cause significant risks to other institutions.
    4. Whether the proposed transaction would materially increase 
the extent to which the combining institutions contribute to the 
complexity of the financial system.
    5. Whether the proposed transaction would materially increase 
the extent of cross-border activities of the combining institutions.
    6. Whether the proposed transaction would increase the relative 
degree of difficulty of resolving or winding up the resulting 
institution's business in the event of failure or insolvency.
    7. Any other factors that could indicate that the transaction 
poses a risk to the U.S. banking or financial system.

B. Balancing Test

    1. In general: The OCC applies a balancing test when considering 
the factors in section III.A. of this appendix in light of all the 
facts and circumstances available regarding the proposed 
transaction, including weighing the financial stability risk posed 
by the proposed transaction against the financial stability risk 
posed by denial of the proposed transaction, particularly if the 
proposed transaction involves a troubled target. The OCC considers 
each factor both individually and in combination with others. Even 
if only a single factor indicates that the proposed transaction 
would pose a risk to the stability of the U.S. banking or financial 
system, the OCC may determine that there would be an adverse effect 
of the proposal on the stability of the U.S. banking or financial 
system. Finally, the OCC also considers whether the proposed 
transaction would provide any stability benefits and whether 
enhanced prudential standards applicable as a result of the proposed 
transaction would offset any potential risks.
    2. Conditions: The OCC's review of the financial stability 
factors will include, as appropriate, whether to impose conditions 
on approval of the transaction. The OCC may impose conditions, 
enforceable under 12 U.S.C. 1818, to address and mitigate financial 
stability risk concerns, such as requiring asset divestitures by the 
resulting institution, imposing higher minimum capital requirements, 
or imposing other financial stability-related conditions.
    3. Recovery planning and heightened standards: The OCC's review 
of the financial stability factors will consider the impact of the 
proposed transaction in light of:
    b. Standards applicable to the resulting institution pursuant to 
12 CFR part 30, appendix D, ``OCC Guidelines Establishing Heightened 
Standards for Certain Large Insured National Banks, Insured Federal 
Savings Associations, and Insured Federal Branches''; and
    c. Standards applicable to the resulting institution's recovery 
planning pursuant to 12 CFR part 30, appendix E, ``OCC Guidelines 
Establishing Standards for Recovery Planning by Certain Large 
Insured National Banks, Insured Federal Savings Associations, and 
Insured Federal Branches''.
    4. Concurrent filings: the OCC's review of the financial 
stability factors may consider the facts, circumstances, and 
representations of concurrent filings for related transactions, 
including the impact of the related transactions to the proposed 
transaction under review by the OCC.

IV. Financial and Managerial Resources and Future Prospects

    The OCC is required by the BMA to consider the managerial 
resources, financial resources, and future prospects of the 
combining and the resulting institutions. The OCC considers each of 
these factors independently for both the combining and resulting 
institutions. However, because these factors are directly related to 
one another, the OCC also considers these factors holistically.

A. Overarching Considerations

    1. The OCC tailors its consideration of the financial and 
managerial resources and future prospects of the combining and 
resulting institutions to their size, complexity, and risk profile.
    2. The OCC considers these factors within the context of the 
prevailing economic and operating environment.
    3. The OCC is more likely to approve combinations where the 
acquirer has sufficient financial and managerial resources to ensure 
safe and sound operations of the resulting institution than when:
    a. The acquirer has a less than satisfactory supervisory record, 
including its financial and managerial resources;
    b. The acquirer has experienced rapid growth;
    c. The acquirer has engaged in multiple acquisitions with 
overlapping integration periods;
    d. The acquirer has failed to comply with conditions imposed in 
prior OCC licensing decisions; or
    e. The acquirer is functionally the target in the transaction.
    4. The OCC normally does not approve a combination that would 
result in a depository institution with less than adequate capital 
or liquidity, less than satisfactory management, or poor earnings 
prospects.
    5. The OCC considers all comments received on proposed business 
combinations. However, the OCC's consideration of an institution's 
financial and managerial resources and future prospects are 
necessarily based on confidential supervisory information. While the 
OCC will provide an appropriate discussion of comments pertaining to 
the financial resources, managerial resources, and future prospects 
factors, it will generally not discuss or otherwise disclose 
confidential supervisory information in public decision letters.

B. Individual Factors

    1. Financial Resources:
    a. The OCC reviews the existing and proposed institutions' 
current and pro forma capital levels.
    i. The OCC reviews for compliance with the applicable capital 
ratios required by 12 CFR part 3 and the Prompt Corrective Action 
capital categories established by 12 CFR 6.4.
    ii. The OCC may not approve a combination application filed by 
an insured depository institution that is undercapitalized as 
defined in 12 CFR 6.4 unless it has approved the institution's 
capital restoration plan or the Board of Directors of the Federal 
Deposit Insurance Corporation has determined that the transaction 
would fulfill the purposes of 12 U.S.C. 1831o.
    b. The OCC closely scrutinizes transactions that increase the 
risk to the bank's financial condition and resilience, including 
bank capital, liquidity, and earnings, that can arise from any of 
the eight categories of risk included in the OCC's Risk Assessment 
System: credit, interest rate, liquidity, price, operational, 
compliance, strategic, and reputation.
    c. In relation to the financial resources factor, the OCC 
considers management's ability to address increased risks that would 
result from the transaction.
    d. A transaction involving an acquirer with a strong supervisory 
record relative to capital, liquidity, and earnings is more likely 
to satisfy the review factors. By contrast, a transaction involving 
an acquirer with a recent less than satisfactory financial or 
supervisory record is less likely to satisfy this factor.
    2. Managerial Resources: The OCC considers several factors when 
considering the managerial resources of the institutions.
    a. The OCC considers the supervisory record and current 
condition of both the acquirer and target to determine if the 
resulting institutions will have sufficient managerial resources to 
manage the resulting institution.
    i. A significant number of MRAs suggests there may be 
insufficient managerial resources. Additionally, the OCC considers 
both institutions' management ratings under the UFIRS or ROCA system 
and component ratings under the CC Rating System, Uniform Rating 
System for Information Technology, and Uniform Interagency Trust 
Rating System, as applicable.
    ii. When applicable, the OCC also considers the relevant Risk 
Assessment System (RAS) conclusions for the combining institutions.
    iii. The OCC considers the context in which a rating or RAS 
element was assigned and any additional information resulting from 
ongoing supervision.
    iv. Less than satisfactory ratings at the target do not preclude 
the approval of a

[[Page 78220]]

transaction provided that the acquirer can employ sufficiently 
robust risk management and financial resources to correct the 
weaknesses at the target.
    b. The OCC considers whether the acquirer has conducted 
sufficient due diligence of the target depository institution to 
understand the business model, systems compatibility, and weaknesses 
of the target. To facilitate the OCC's review, the acquirer's 
management team should demonstrate its plans and ability to address 
the acquirer's previously identified weaknesses, remediate the 
target's weaknesses, and exercise appropriate risk management for 
the size, complexity, and risk profile of the resulting institution.
    c. The OCC also considers the acquirer's analysis and plans to 
integrate the combining institutions' operations, including systems 
and information security processes, products, services, employees, 
and cultures. The OCC's consideration and degree of scrutiny 
reflects the applicant's track record with information technology 
governance, business continuity resilience, and, as applicable, 
integrating acquisitions.
    d. The OCC considers the acquirer's plans to identify and manage 
systems compatibility and integration issues, such as information 
technology compatibility and the implications for business 
continuity resilience. Any combination in which the OCC identifies 
systems integration concerns may lead to additional review.
    i. A critical component of these plans includes the acquirer's 
identification and assessment of overreliance on manual controls, 
strategies for automating critical processes, and the strategies and 
capacity for modernization of aging and legacy information 
technology systems.
    ii. The OCC may impose conditions, enforceable pursuant to 12 
U.S.C. 1818, if it determines that information technology systems 
compatibility and integration represent a supervisory significant 
concern. These conditions may include requirements and time frames 
for specific remedial actions and specific measures for assessing 
and evaluating the depository institution's systems integration 
progress.
    iii. The OCC may deny the application if the integration issues 
or other issues present significant supervisory concerns, and the 
issues cannot be resolved through appropriate conditions or 
otherwise.
    e. The OCC also considers the proposed governance structure of 
the resulting institution. This includes governance in decision-
making processes, the board management oversight structure, and the 
risk management system, including change management. This also 
includes expansion of existing activities, introduction of new or 
more complex products or lines of business, and implications for 
managing existing and acquired subsidiaries and equity investments. 
When applicable, the resulting institution's governance is also 
considered in the context of the institution's relationship with its 
holding company and the scope of the holding company's activities.
    3. Future Prospects:
    a. The OCC considers the resulting institution's future 
prospects in light of its assessment of the institutions' financial 
and managerial resources.
    b. The OCC also considers the proposed operations of the 
resulting institution. The OCC's consideration and degree of 
scrutiny reflects the acquirer's record of integrating acquisitions.
    i. The OCC considers whether the integration of the combining 
institutions would allow it to function effectively as a single 
unit.
    ii. The OCC considers the resulting institution's business plan 
or strategy and management's ability to implement it in a safe and 
sound manner.
    iii. The OCC also considers the combination's potential impact 
on the resulting institution's continuity planning and operational 
resilience.

V. Convenience and Needs

    A. The OCC considers the probable effects of the proposed 
business combination on the community to be served. Review of the 
convenience and needs factor is prospective and considers the likely 
impact on the community of the resulting institution after the 
transaction is consummated, including but not limited to:
    1. Any plans to close, consolidate, limit, or expand branches or 
branching services, including in low- or moderate-income (LMI) 
areas;
    2. Any plans to reduce the availability or increase the cost of 
banking services or products, or plans to provide expanded or less 
costly banking services or products to the community;
    3. Any plans to maintain, reduce, or improve credit availability 
throughout the community, including, for example, access to home 
mortgage, consumer, small business, and small farm loans;
    4. Job losses or reduced job opportunities from branch staffing 
changes, including branch closures or consolidations;
    5. Community investment or development initiatives, including, 
for example, community reinvestment, community development 
investment, and community outreach and engagement strategies; and
    6. Efforts to support affordable housing initiatives and small 
businesses.
    B. The OCC considers comments received during the comment period 
and information provided during any public hearing or meeting 
related to the proposed business combination. To the extent public 
comments or discussions address issues involving confidential 
supervisory information, however, the OCC generally will not discuss 
or otherwise disclose that confidential supervisory information in 
public decision letters and forums.
    C. The OCC considers the CRA record of performance of an 
applicant in evaluating a business combination application. The 
OCC's forward-looking evaluation of the convenience and needs factor 
under the BMA is separate and distinct from its consideration of the 
CRA record of performance of an applicant in helping to meet the 
credit needs of the relevant community, including LMI neighborhoods.

VI. Public Comment Period and Public Meetings

A. Public Comment Period

    1. Unless an exception applies, a combination under the BMA is 
subject to a 30-day comment period following publication of the 
notice of the proposed combination. The OCC may extend the comment 
period in certain instances:
    a. When a filer fails to file all required publicly available 
information on a timely basis or makes a request for confidential 
treatment not granted by the OCC;
    b. When requested and the OCC determines that additional time is 
necessary to develop factual information necessary to consider the 
filing; and
    c. When the OCC determines that other extenuating circumstances 
exist.
    2. The OCC may find that additional time is necessary to develop 
factual information if a filer's response to a comment does not 
fully address the matters raised in the comment, and the commenter 
requests an opportunity to respond.
    3. Examples of extenuating circumstances necessitating an 
extension include:
    a. Transactions in which public meetings are held to allow for 
public comment after the meeting;
    b. Unusual transactions (e.g., novel or complex transactions); 
and
    c. Natural or other disasters occurring in geographic regions 
affecting the public's ability to timely submit comments.

B. Public Meetings

    1. While the BMA does not require the OCC to hold meetings or 
hearings, the OCC has three methods for seeking oral input: (1) 
public hearing, (2) public meeting, and (3) private meeting. Public 
meetings are the most-employed public option.
    2. The OCC will balance the public's interest in the transaction 
with the value or harm of a public meeting to the decision-making 
process (e.g., although there may be increased public interest in a 
transaction, a public meeting will not be held if it would not 
inform the OCC's decision on an application or would otherwise harm 
the decision-making process).
    3. Criteria informing the OCC's decision on whether to hold 
public meetings include:
    a. The extent of public interest in the proposed transaction.
    b. Whether a public meeting is appropriate in order to document 
or clarify issues presented by a particular transaction based on 
issues the public raises during the public comment process.
    c. Whether a public meeting would provide useful information 
that the OCC would not otherwise be able to obtain in writing.
    d. The significance of the transaction to the banking industry. 
Relevant considerations may include the asset sizes of the 
institutions involved (e.g., resulting institution will have $50 
billion or more in total assets) and concentration of the resulting 
institution in one or more markets.
    e. The significance of the transaction to the communities 
affected. Relevant considerations may include the effects of the 
transaction on the convenience and needs of

[[Page 78221]]

the community to be served, including a consideration of a bank's 
CRA strategy and the extent to which the acquirer and target are 
currently serving the convenience and needs of their communities.
    f. The acquirer's and target's CRA, consumer compliance, fair 
lending, and other pertinent supervisory records, as applicable.

Michael J. Hsu,
Acting Comptroller of the Currency.
[FR Doc. 2024-21560 Filed 9-24-24; 8:45 am]
BILLING CODE 4810-33-P