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FDIC Federal Register Citations

[Federal Register: February 15, 2008 (Volume 73, Number 32)]
[Notices]              
[Page 8870-8872]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe08-54]                        

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FEDERAL DEPOSIT INSURANCE CORPORATION

 
Statement of Policy on Bank Merger Transactions

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

ACTION: Amendment of statement of policy.

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

DATES: February 15, 2008.

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

SUPPLEMENTARY INFORMATION:

I. Background

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

A. Section 606 of FSRRA

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

[[Page 8871]]

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

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

II. Application Procedures

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

III. Consolidation of the SAIF and the BIF

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

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

IV. Related Considerations

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

IV. Technical Amendments

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

FDIC Statement of Policy on Bank Merger Transactions

* * * * *

I. Introduction

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

II. Application Procedures

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

[[Page 8872]]

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


III. Evaluation of Merger Applications

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

    By Order of the Board of Directors.

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

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

BILLING CODE 6714-01-P

 


Last Updated 02/15/2008 Regs@fdic.gov