Davis Polk partner Luigi De Ghenghi was quoted in Bank Director discussing bank M&A and the proposed revisions to bank merger procedures.

The article notes that there can be a variety of reasons why some mergers take a long time to get approval, including competitive and regulatory compliance problems, but deal size has become increasingly important. “As a general matter, small M&A transactions, if both banks are clean, still get done very quickly,” said Luigi. “The moment an M&A transaction goes above, say, $100 billion in total consolidated assets, those tend to get more scrutiny.”

Luigi noted that the DOJ has taken a greater interest in bank mergers, and because of that, “I think the banking agencies themselves are being more cautious and in some cases reluctant to approve large bank M&A transactions.”

Noting that he wished that the proposal had not been so prescriptive on the issue of size, Luigi said, “I think it would have been better not to draw arbitrary lines and simply to say that size is just one of the factors that is taken into account … and does not in and of itself become any part of a bright line test.”

The article also noted that the FDIC and the Federal Reserve did not join the OCC in a joint rulemaking process in these proposals. Luigi said that the absence of a collaborative process concerns him because all three agencies use the same application form, and it raises the possibility that the OCC might view a transaction differently than the other two agencies. “I worry about individual federal banking agencies putting out individual policy statements [and] expressing their own individual agency views on statutory standards instead of developing an interagency approach,” he said.

Is America’s Banking System the System It Needs?”,” Bank Director (April 10, 2024) (subscription required)