Acting Comptroller of the Currency Michael Hsu said Monday his agency is rescinding an agency rule that limits the time the agency can consider merger applications.
Hsu flagged the agency's action in the form of a notice of proposed rulemaking — set for release later in the day on Monday — which eliminates a 1996 OCC rule requiring merger applications to be deemed approved on the 15th day after the close of the regulatory comment period.
"The forthcoming NPR [reflects] our view that bank mergers are significant corporate transactions that require the OCC to make a decision," said Hsu.
As one of the three main bank regulators that regulates nationally chartered banks, the OCC is tasked with approving many merger applications.
Hsu noted his agency — along with the Federal Deposit Insurance Corp. and Federal Reserve — are continuing to work to update bank merger analytical frameworks, something that requires input from the Department of Justice, which is tasked with ensuring mergers uphold market competition as specified under the Bank Merger Act.
Hsu also indicated the agency will post statistics on bank mergers reviewed by the OCC in a user-friendly, downloadable and accessible database at OCC.gov. The data will list important metrics about the transactions including applicant and target bank information, asset size of each party, Community Reinvestment Act ratings, target bank information and the OCC's actions on the merger.
"Along with this, we will be issuing a report that provides a comprehensive review of the literature related to bank mergers and consolidation and identifies key outstanding questions," he said.
As part of Monday's actions the OCC will also update its official statement of policy for bank mergers, singling out traits in merger applications that can increase or decrease the likelihood of an approval. The agency will also publish a document providing transparency into the agency's merger decision process for extending the public comment period or holding a public meeting regarding mergers.
"Merger applications exist along a spectrum. Some have significant deficiencies [while] others are straightforward because the acquiring bank is a model of safety and soundness and has earned the trust of the community and its supervisors," he said. "The majority lie somewhere in between and require varying degrees of scrutiny and multiple rounds of inquiry."
The head of the bank regulatory agency also noted in his remarks the need for regulators to reconsider bank merger approvals with what he dubbed a "macro view," or as he describes it, answering the questions of what regulators believe the banking system should look like with regard to the number of overall firms in the system and the concentration of assets at each.
Hsu noted that over recent decades, the banking system has seen a simultaneous overall decline of OCC bank charters even as such firms saw an increase in the assets on their balance sheet. Such change has led to a high concentration of assets at a relatively small number of firms.
"In 1984 the OCC supervised nearly 6,500 institutions, which had around $2 trillion in assets," he said. "Today, we supervise roughly 1,000 institutions with over $15 trillion in assets."
While these numbers provide a framework for approaching the macro question, Hsu said simply looking at the number of firms is too reductive. While the comptroller said regulators are not quite ready to offer details on what the broader vision for the banking industry's role in the economy would look like, he said considering the broader economic landscape when considering bank mergers is a critical evolution of the process.
"In order to understand whether or not there is balance between the economy and banking system requires taking a closer look at the economy and its constituent parts — the individuals, communities, and sectors that comprise it — and then looking to the banking system to see where and how it matches up," he noted. "At what level of consolidation would there be a clear imbalance and impairment in support for the diversity of small businesses, rural communities, and individuals?"
