Global: U.S. Bank Regulator Aims to Enhance Transparency in Merger Reviews

In an effort to bolster transparency in the process of bank mergers and acquisitions (M&A), the Office of the Comptroller of the Currency (OCC), a key U.S. bank regulator, has proposed new regulations. The move aims to address concerns about the lack of clarity in regulatory procedures for bank deals and to prevent transactions from progressing automatically without thorough scrutiny.

The proposal, unveiled on Monday, outlines the types of deals that typically receive approval and identifies issues that could complicate or impede transactions. According to Michael Hsu, the acting comptroller, increasing transparency can expedite the approval of sound deals and assist banks in avoiding transactions that may encounter regulatory hurdles.

Hsu stated in an interview with Reuters, “You have two risks with mergers: One risk is that we approve too many mergers and therefore we’re approving bad mergers. The other risk is we approve too few mergers and therefore there are good mergers that should happen that aren’t. The purpose of being transparent is to encourage more accuracy on both ends.”

The OCC, responsible for reviewing mergers involving banks with a federal charter, often collaborates with other regulators in the process. Some mergers face challenges due to supervisory issues within the involved banks. Hsu emphasized that the proposed regulations aim to codify existing practices and make the process more transparent.

Simultaneously, the OCC is suggesting the elimination of a 1996 policy where some deals are automatically approved if the OCC does not act within a specified timeframe. Hsu views bank mergers as “significant corporate transactions” requiring explicit regulatory approval or rejection.

Bank merger policies have faced scrutiny, particularly in the aftermath of last year’s banking challenges, prompting regulators to orchestrate rescue deals. The OCC’s move aligns with ongoing efforts to update the broader government framework for reviewing bank mergers, involving collaboration with other regulators and the Justice Department. The OCC plans to release new data on bank mergers under its purview and issue a comprehensive report evaluating merger policy.