HR6556-119

What This Bill Does

The Failing Bank Acquisition Fairness Act limits when regulators can let already-large banking organizations acquire failed or failing institutions despite statutory concentration limits. It amends the Bank Merger Act, FDIC receivership provisions, and Bank Holding Company Act exceptions so default, danger-of-default, and FDIC-assisted acquisitions can use concentration-limit exceptions only when the responsible agency finds by clear and convincing evidence that the acquisition is necessary to prevent significant economic disruption or adverse financial-stability effects.

The bill also bars those exceptions when FDIC has received a qualified bid from an institution that is not prohibited by the concentration limits. A qualified bid requires the company and its affiliates to be well capitalized and well managed and the resulting depository institution to be well capitalized. When the Federal Reserve, OCC, or FDIC waives concentration limits for default or FDIC-assisted transactions, the waiving agency and FDIC must report to the House Financial Services Committee and Senate Banking Committee within 30 days, explain the justification, identify alternative bids and outcomes, explain why alternatives were not selected, and make the report public subject to redactions. FDIC may not count bids that would violate concentration limits when making its least-cost Deposit Insurance Fund determination.

Who Benefits and How

Regional bank bidders benefit because large-bank concentration exceptions become harder to use when a qualified non-prohibited bid exists. Community banks benefit if failed-bank sales are less likely to default to the largest acquirers. Deposit Insurance Fund stakeholders benefit if regulators must justify why concentration-limit waivers are necessary and why alternatives were rejected. Congressional banking committees benefit from prompt reports on waived concentration limits. Banking-market competitors benefit from rules designed to preserve competition in emergency acquisitions.

Who Bears the Burden and How

Federal Reserve merger staff must make and document clear-and-convincing necessity determinations before concentration-limit exceptions are used. OCC licensing staff must apply the same test for covered national-bank transactions. FDIC resolution staff must evaluate qualified non-prohibited bids, join waiver reports, and ignore bad-faith concentration-violating bids in least-cost analysis. Large banking organizations near concentration limits bear a burden because their bids are less usable in failed-bank acquisitions. Treasury and financial-stability officials may have fewer emergency acquisition paths when a qualified smaller bidder exists.

Key Provisions

• Tightens concentration-limit exceptions for default and danger-of-default bank mergers.
• Requires clear and convincing evidence that a covered acquisition is necessary to prevent significant economic disruption or adverse financial-stability effects.
• Bars exceptions when FDIC has received a qualified bid from a non-prohibited institution.
• Defines qualified bid using well-capitalized and well-managed standards for the bidder and affiliates.
• Requires the waiving agency and FDIC to report to congressional banking committees within 30 days.
• Requires public waiver reports with justification, alternatives, reasons for rejecting alternatives, and competition recommendations.
• Excludes concentration-violating bids from FDIC least-cost Deposit Insurance Fund determinations.