Michael Hsu, Acting Comptroller of the Currency, has gone on to propose the elimination of fast bank merger procedures that could as well enable certain deals to get approval without appropriate scrutiny.
The proposal, which was issued on January 29 and also discussed by Hsu at the University of Michigan School of Business, would very well get rid of a 1996 OCC rule dictating that bank deals are deemed approved by the OCC on the 15th day post the end of the comment period, unless the Office of The Comptroller of The Currency- OCC eliminates the filing from expedited processing.
Hsu said that the forthcoming NPR goes on to reflect the view that bank mergers happen to be significant corporate transactions that indeed need the OCC to make a decision.
In an interview with Reuters, Hsu remarked that there are a couple of risks inherent with mergers.
The first risk is that there is an approval of too many mergers, and hence they are approving bad mergers too. The second risk is that we go on to approve very few mergers, and hence there are good mergers that must take place, but they aren’t. The idea of being transparent is to make sure that there is more accuracy on both ends.
In Michigan, Hsu noted that merger applications go on to exist along a spectrum, some having significant deficiencies and others that happen to be straightforward due to the fact that the acquiring bank happens to be a model of safety and soundness and has even gone on to earn the trust of the community as well as its supervisors.
The fact is that the majority lie somewhere in between and hence require varying levels of scrutiny and also numerous rounds of inquiry. The transparency offered in their proposed policy statement effectively chalks lines that demarcate these three groups.
This proposal would also go on to amend the regulator’s policy statement in an endeavor to offer greater clarity to banks as well as transparency to the public with regards to bank deals.
The altered statement would outline principles the OCC makes use of so as to review merger applications under the Bank Merger Act and also include the agency’s considerations when it comes to financial stability, financial and managerial resources as well as future prospects, convenience, and needs elements.
According to the proposed rule, the regulator would go on to apply a balancing test to a proposed transaction, thereby weighing the financial stability risk of approving it against the financial stability risk of overlooking it, specifically if the deal involves an institution of troubled repute.
Apparently, the OCC may also go on to impose conditions in order to address as well as mitigate financial stability concerns, said the proposal.
Moreover, Hsu remarked that the OCC is planning to make the statistics on bank mergers that are available to be reviewed by the OCC by way of an accessible database on the website of the agency. Within the data is going to be information on deal applicants, the asset size, the rating of the Community Reinvestment Act, target bank data, as well as whether or not the OCC has gone on to approve the deal application.
In addition to this, they will also be issuing a report that offers an overall review of the literature related to bank mergers as well as consolidation and tracks major outstanding questions too.
