Fed eases bank merger rules by lifting size threshold for review

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By Olivia Oran

<span class="articleLocation”>The U.S. Federal Reserve on Thursday made it
easier for bigger lenders to merge, by quadrupling its threshold
of combined size that would require an extensive regulatory
review of a proposed deal.

A merger that creates a bank with total assets of less than
$100 billion is not a threat to the financial system, the
central bank said in a statement on Thursday. Since 2012, that
threshold had been $25 billion.

Mergers that create banks “with less than $100 billion in
total assets, are generally not likely to create institutions
that pose systemic risks,” the Federal Reserve said.

Industry officials applauded the change, saying it should
speed up the approval process for bank deals.

The regulator announced the change in approving People’s
United Financial Inc’s acquisition of Suffolk Bancorp
. Together, the two lenders will have consolidated
assets of around $43 billion.

Bank regulatory lawyers and financial dealmakers have argued
that overly tight regulation since the 2008 financial crisis was
hindering industry mergers and acquisitions. Under the sweeping
Dodd-Frank financial reforms adopted to prevent another crisis,
the Fed must consider the extent to which a bank merger would
result in risks to the financial system.

Bank mergers on average take six months to a year to get
approved by the Fed, depending on size and complexity.

But some reviews can take even longer, such the one for M&T
Bank Corp’s acquisition of Hudson City Bancorp Inc,
which took more than three years. It was the longest delay ever
for a U.S. bank deal valued at more than $1 billion.

The People’s United-Suffolk tie-up, which was initially
announced in June 2016, is the second U.S. bank merger to
receive regulatory clearance in 2017. Raleigh, North
Carolina-based Yadkin Financial Corp and Pittsburgh,
Pennsylvania-based based F.N.B Corp gained regulatory
approval for another merger in February.

But there have been relatively few bank mergers since the
crisis, with several deals called off because of a failure to
obtain regulatory approval. Among them were New York Community
Bancorp Inc’s bid for Astoria Financial and Investors
Bancorp Inc’s bid for The Bank of Princeton. (Additional reporting by Patrick Rucker in Washington)

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