Key takeaways from the FDIC’s 2026 proposed rule on bank mergers

The Federal Deposit Insurance Corporation (the FDIC) released a notice of proposed rulemaking (the Proposal) to modernize its review process for merger transactions subject to the FDIC’s jurisdiction under the Bank Merger Act (the BMA). The FDIC is the first of the federal banking agencies to release a proposal to update its bank merger standards since the Trump administration’s 2025 reversals of the Biden-era bank merger standards for the FDIC and Office of the Comptroller of the Currency (the OCC). The Proposal seeks to make the FDIC’s review “faster, more predictable, and appropriately tailored to reflect the type, size, and complexity of the potential risks of a merger transaction subject to FDIC approval.”

Although the Proposal is limited to M&A transactions that are subject to the FDIC’s jurisdiction – i.e., transactions in which the FDIC is the acquiring bank’s primary federal regulator, as well as all merger or consolidation transactions between any insured depository institution (IDI) and an uninsured institution – the Proposal could signal changes to come from the other federal banking agencies. Comptroller of the Currency Jonathan Gould, who joined the FDIC Board’s unanimous approval of the Proposal, stated “I’m particularly interested in whether there are opportunities for further reforms by the FDIC or on an interagency basis that are consistent with the requirements of the Bank Merger Act.” In a similar vein, the preamble to the OCC’s 2025 interim final rule, which reinstated the OCC’s bank merger policies predating the Biden administration, indicated that the OCC would consider issuing a new bank merger policy statement after reviewing any comments on that interim final rule. Please refer to our previous client update for more details on the OCC’s 2025 interim final rule. 

Our key takeaways are below, along with an Appendix summarizing key details of the new processing procedures, including the different eligibility criteria, public notice and comment requirements, and processing deadlines.

The Proposal is worth the attention of any party considering a transaction in the banking sector, as the Proposal may prompt the OCC, as well as the Federal Reserve and the Department of Justice (the DOJ), to reevaluate their current bank merger standards.

Comments on the Proposal are due November 23, 2026.

Key takeaways

1. The Proposal would establish a tailored framework to filing requirements and processing timelines for merger transactions.

Rapid processing, expedited processing and standard processing

The Proposal would establish three different tracks for filing requirements and processing timelines, tailored to the facts of the merger transaction: (1) rapid processing, (2) expedited processing and (3) standard processing. The FDIC expects that the overall impact of this tailored framework would be to reduce processing times for merger transactions. 

Rapid processing is the fastest track and only available for de minimis merger transactions (see Appendix 1 for the eligibility criteria). The Proposal would apply expedited processing to (1) certain corporate reorganizations that do not qualify as de minimis merger transactions and (2) certain merger transactions involving eligible depository institutions that do not qualify as either corporate reorganizations or de minimis mergertransactions. Expedited processing would take longer than rapid processing but shorter than standard processing. 

Under the Proposal, the FDIC may remove a filing from expedited processing based on an adverse public comment or Community Reinvestment Act (CRA) protest only if the comment or protest is supported by the supervisory record or other available information and warrants additional investigation or review, and, in the case of a CRA protest, raises a significant CRA concern. The preamble adds that the FDIC would not remove a filing based on an adverse comment or CRA protest unless the supervisory record or other available information supports the conclusion that the filing presents “a significant CRA concern, a significant compliance or supervisory concern, a significant legal or policy issue, or that other good cause exists for removal.” The Proposal would put it explicitly into the regulation that the FDIC expects removal from expedited processing to be rare and reserved for allegations that are sufficiently severe to impact the FDIC’s analysis of the BMA’s statutory factors.

Definition of “substantially complete” 

The deadlines for rapid, expedited and standard processing are each keyed to when the FDIC determines a filing to be “substantially complete.” The Proposal defines “substantially complete” as meaning when “the FDIC has received information sufficient to evaluate and make a determination on the statutory factors in [the BMA], as described in § 333.5, and confirm the applicant has complied with its obligations under applicable law.” 

As a practical matter, that qualitative definition affords the FDIC some latitude in when to determine an application is substantially complete and therefore when to begin the countdown for the decision deadline. Nevertheless, the Proposal also establishes a process for supplementing a filing that is not substantially complete and for deeming the application to be substantially complete. If a filing is not substantially complete, the FDIC must notify the applicant within 21 days of information requested to render the filing substantially complete. If the FDIC does not do so, the filing will automatically be deemed substantially complete. If the applicant does not provide the information requested by the FDIC within 30 days after receipt of the FDIC’s notice, then the FDIC may return the filing to the applicant as incomplete and allow the applicant to subsequently resubmit. 

2. The FDIC would apply a bright-line rule to identifying “mergers in substance,” compared to the current standard based on facts and circumstances, for review under the BMA. 

The Proposal would apply a more predictable, quantitative threshold for identifying a “merger in substance,” which is regarded as a merger transaction and therefore subject to the tailored framework. This bright-line rule would replace the FDIC’s current facts and circumstances-based approach. The Proposal would define a “merger in substance” as any merger transaction or series of merger transactions in which an IDI directly or indirectly acquires all or substantially all – i.e., 80% or more – of another institution’s assets, over a rolling 12-month period.

The FDIC considered, but expressly declined, proposing a factors-based approach, similar to the “de facto merger” doctrine, which the FDIC has long applied to mergers of a non-IDI with an IDI and characterizes here as an equitable remedy that has various formulations in state common law. Question 20, however, invites comment on whether the FDIC should incorporate any common law considerations in making determinations of mergers in substance.  

One of the practical difficulties with the FDIC’s de facto merger doctrine is that the FDIC staff has in the past taken the position that an applicant must file a BMA application with the FDIC in order to determine whether the transaction is in fact a de facto merger – in other words, a BMA application is required to determine whether a BMA application is required. While the use of a quantitative bright-line test instead of a facts and circumstances approach would help address this conundrum, it would not entirely solve it because the preamble states that an IDI should submit a merger filing when it “becomes aware that it will complete one or more transactions that will ultimately exceed the 80 percent threshold” and then the filing should contain information about “all transactions that are part of the series”, including those that individually did not meet the 80% threshold.[1] The FDIC recognizes that an IDI may not know or intend to exceed the 80% threshold until after it has completed the relevant transaction that causes it to exceed the threshold and therefore falls back on encouraging IDIs “to contact the FDIC as soon as possible to discuss associated filing requirements.” As a result, the FDIC would retain a fair amount of discretion in determining whether and when a merger in substance filing would be required.

The preamble to the Proposal notes that determinations of mergers in substance would in practice be limited to merger transactions or series of merger transactions involving nonbanks, given that similar transactions with IDIs almost certainly involve deposits being transferred, which is a sufficient basis for requiring approval under the BMA. 

3. The FDIC would subject “significant asset transfers” to a separate notice and non-objection process.

The Proposal would introduce a new defined term for “significant asset transfers” that would be subject to a separate notice and non-objection process from the tailored framework for review and processing under the BMA. The Proposal would define a “significant asset transfer” as any transaction or series of transactions with the same counterparty that would increase the acquiring IDI’s assets by 25% or more, over a rolling 12-month period. Expressly excluded from the “significant asset transfer” definition would be any change in assets that is subject to other FDIC filing or approval requirements, including merger transactions subject to BMA approval.

Under the Proposal, IDIs subject to the FDIC’s jurisdiction that seek to engage in “significant asset transfers” would be required to provide the FDIC written notice. The written notice should cover: (1) the capital level of the resulting institution, (2) the conformity of the transaction(s) to applicable law, regulation and supervisory policy, (3) the purpose(s) of the transaction(s) and (4) the impact of the transaction(s) on the safety and soundness of the institution(s) involved in the transaction(s). These factors converge with the OCC’s evaluation of substantial asset changes for national banks and federal savings associations. 

The FDIC would in turn be required to render a written decision on the proposed significant asset transfer within 30 days of receiving the notice or, upon notifying the applicant, may extend the 30-day timeframe up to 60 days.  

4. The Proposal would meaningfully revise the FDIC’s existing framework for evaluating the BMA’s statutory factors.

Prior to approval of any bank merger transaction, the BMA requires the applicable banking regulator to evaluate, among other factors, the following: competition; financial and managerial resources and future prospects; convenience and needs; financial stability; and effectiveness in combating anti-money laundering activities. The FDIC’s evaluation of the statutory factors has long been governed by its Statement of Policy on Bank Merger Transactions, which was adopted in 1998 and most recently amended in 2008 (the 1998 Statement of Policy). The 1998 Statement of Policy was briefly replaced in 2024 by the Biden administration and subsequently reinstated in 2025 by the Trump administration. The Proposal would reform the FDIC’s existing framework for evaluating the BMA’s statutory factors and replace the 1998 Statement of Policy with a reformed approach that is codified into regulation. 

Consistent with the Proposal’s aim to “conduct a tailored review of a merger filing as appropriate to the facts and circumstances, including consideration of the structure, scale and materiality of the merger transaction,” the Proposal would codify and introduce certain safe harbors, focus on the resulting institution and consider remediation plans for the acquirer, target or resulting institution. Key changes to the analysis of the statutory factors include the following:

a. Competition: The Proposal would expand the scope of the HHI calculations and codify safe harbors. 

Reform of HHI calculation

In evaluating the competitive effects of a proposed merger or acquisition, the federal banking agencies consider, among other things, the concentration levels of deposits in IDIs in banking markets and the increase in these levels as measured by the Herfindahl-Hirschman Index (HHI) under the 1995 Bank Merger Competitive Review guidelines (the 1995 Bank Merger Guidelines). The Proposal would expand the scope of deposits incorporated into the HHI calculation, including in light of the convergence of activities among banks, thrifts and credit unions. Pursuant to the Proposal, the FDIC’s initial HHI analysis for each geographic market would encompass:

• All deposits from thrifts, representing a shift from the 1995 Bank Merger Guidelines’ approach of presumptively applying a 50% weighting; 
• All shares from credit unions, a representative portion of which would be estimated based on credit unions’ total shares and geographic distribution of branches; and 
• Centrally booked deposits (i.e., deposits recorded at an IDI’s central office and therefore not attributed to a branch location), a representative portion of which would be estimated based on the total population of the relevant geographic market compared to the total U.S. population. 

Although the public-facing version of CASSIDI (i.e., a tool by which HHI screens are calculated) does not currently have the capabilities for conducting this expanded analysis, the FDIC continues to recommend that applicants use the public-facing version of CASSIDI to produce a pro forma HHI analysis as a baseline. The preamble indicates that such pro forma HHI analysis should be treated as a “ceiling” because the additional categories of deposits introduced by the FDIC’s expanded HHI analysis would be expected to dilute the overall concentration in a relevant geographic market. 

The preamble acknowledges that fintechs and other nonbank financial institutions increasingly compete with banks by gathering and placing deposits from customers. Although the FDIC declined to propose a methodology for accounting for deposits gathered by such nonbank financial institutions, the preamble invites comments on whether a methodology should be adopted. For example, Question 104 asks whether the FDIC should apply a “scaler” to a relevant geographic market in order for its HHI analysis to take into account deposits relating to online banks and fintechs.

Codification of safe harbor 

Under the 1995 Bank Merger Guidelines, the bank agencies are “unlikely to further review” the adverse competitive effects of a transaction that falls below the 1800/200 screening thresholds for HHI – i.e., where a combination does not produce a post-merger HHI of over 1800 and an increase of more than 200 in any relevant geographic market. The Proposal codifies and tightens this standard by, in the absence of DOJ objections, flatly prohibiting the FDIC from denying on competition grounds a merger transaction that falls under the 1800/200 screening thresholds for HHI. The Proposal also includes corporate reorganizations in this safe harbor.

Failure to meet the safe harbor is not necessarily dispositive for the competition analysis. The preamble notes that “the FDIC’s initial HHI screen may not be sufficiently tailored for a specific merger transaction, the potential parties, and the surrounding community” and “the FDIC would conduct additional analysis with respect to the competition factor for transactions that do not satisfy the safe harbor.” The FDIC may consider other factors such as alternative geographic market definitions, the accuracy of the HHI screen in representing the merger transaction’s competitive effects and the merger transaction’s procompetitive effects. Applicants are also permitted to provide market competition analysis other than the initial HHI screens for the FDIC’s competition review. 

The preamble indicates the FDIC is seeking comment on whether to provide a safe harbor based on HHI that is specific to rural areas and may be keen to underscore the procompetitive effects in such areas. For example, Question 109 asks whether and how the FDIC should establish an HHI-based safe harbor for merger transactions in rural areas. 

b. Financial stability: The Proposal introduces a safe harbor that covers a range of merger transactions.

The Proposal would introduce a safe harbor for the financial stability factor if: 

• The resulting IDI would not be a subsidiary of a global systemically important bank holding company, a Category II FDIC-supervised institution, a Category III FDIC-supervised institution or a Category IV banking organization. (This component of the safe harbor effectively flips the Biden-era FDIC’s presumption that a transaction resulting in an IDI with more than $100 billion would invite scrutiny by the FDIC.);  
• The target is an IDI with a size of less than $20 billion in assets; 
• The merger transaction is a corporate reorganization where the target is less than $20 billion in assets and all parties are organized in the United States and have been affiliated for longer than 12 months; or
• The merger transaction is a de minimis merger transaction.

If the safe harbor is not met, the FDIC would proceed with a balancing test, in part codifying existing guidance, that considers the Federal Reserve’s financial stability factors, a comparison of the applicant pre- and post-transaction and the extent to which financial stability would be promoted, including if the target is at risk of failure. 

c. Convenience and needs: Supervisory records, and effective remediation plans, would be considered by the FDIC.

The Proposal indicates that the FDIC would evaluate the supervisory record of both the acquiring and acquired institutions, including for compliance with the CRA, as part of the transaction review. Notably, for merger transactions resulting in an institution with more than $50 billion in assets, the FDIC would also review fair banking considerations – namely whether any of the parties have implicated de-banking concerns under Executive Order 14331, Guaranteeing Fair Banking for All Americans.

The preamble indicates that the FDIC is highly likely to make a favorable finding for the convenience and needs factor if the acquiring institution has received a 1 or 2 rating from its most recent consumer compliance examination and an outstanding or satisfactory rating on its most recent CRA examination, in the absence of fair banking concerns. Moreover, assuming the other considerations are met, even a 3 rating on an institution’s most recent consumer compliance examination is generally likely to receive a favorable FDIC determination for the convenience and needs factor. Finally, the FDIC notes that even a 4 or 5 rating could be overcome for purposes of this statutory factor, though a favorable determination is less likely without appropriate remediation plans or other mitigants. 

Relatedly, the preamble notes that the FDIC would take into account the applicant’s plans to remediate any unresolved supervisory issues. Similarly, the Proposal’s general provisions for the FDIC’s review of bank merger transactions expressly state that the FDIC shall evaluate the applicant’s plans to timely remediate unresolved supervisory deficiencies of the acquirer, target, or resulting institution and that effective remediation plans may overcome identified weaknesses. 

d. Financial, managerial and future prospects: Business plans and integration plans would become an important part of an application.

In assessing the financial, managerial and future prospects criteria, the Proposal would require the FDIC to consider the business plan, pro formas and integration plan. The relevant business, integration and strategic plans would be considered against the resulting institution’s risk profile. Moreover, the integration plan’s sufficiency would be evaluated to confirm that the applicant is able to integrate the target’s assets, systems and personnel under a variety of scenarios. 

5. Dollar thresholds would be indexed going forward.

Consistent with the FDIC’s expressed aim to index dollar values throughout the FDIC Rules and Regulations, the Proposal offers indexing of the dollar amount thresholds. The baseline asset thresholds from the Proposal that would be subject to indexing include: (i) the $50 billion threshold for the faster subcategory of FDIC standard processing of qualifying merger transactions; (ii) the $50 billion threshold for the FDIC’s evaluation of fair banking concerns for the convenience and needs factor; (iii) the $20 billion threshold for meeting the financial stability factor’s safe harbor based on the size of an acquired IDI; and (iv) the $20 billion threshold for meeting the financial stability factor’s safe harbor based on the size of an acquired institution in a corporate reorganization. The methodology of the indexing would apply an adjustment to the dollar thresholds by multiplying the baseline threshold values by one plus the cumulative percent change in the non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers. Adjustments would be calculated and applied on a biennial basis, effective on October 1 (beginning October 1, 2029 for the new merger thresholds, and October 1, 2027 for thresholds already subject to indexing) following each consecutive two-year period ending August 30.

In periods of high inflation – i.e., if the cumulative percent change of the non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers increased by 8% or more over the 12-month period ending on August 30 since the last adjustment – the thresholds would be adjusted annually. On the other hand, in periods where inflation is negative and the non-seasonally adjusted Consumer Price Index for Urban Wage Earners and Clerical Workers would not result in an increase from current dollar thresholds, no adjustment would be made. Question 130 of the Proposal asks if indexing should be applied to the dollar amounts and thresholds and if any alternative approaches should be considered.