FDIC Proposes Sweeping Reforms to Bank Merger Review Framework

On September 17, 2026, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a notice of proposed rulemaking that would significantly modernize and reform the agency’s framework for reviewing merger transactions under the Bank Merger Act (BMA) in Subpart D of 12 CFR part 303. The proposed rule is intended to create a more efficient, transparent, and risk-focused review process by tailoring regulatory scrutiny to the size, complexity, and risk profile of a given transaction. Comments are due by November 23, 2026.

If adopted, the proposed rule would represent a notable shift in the FDIC’s approach to merger review. Among other changes, it would modernize the agency’s competitive analysis, establish a streamlined pathway for low-risk transactions, provide greater certainty regarding expedited processing, and impose greater discipline around application review timelines. Collectively, these reforms address longstanding industry concerns regarding regulatory burden, processing delays, and unpredictability in merger approvals.  This could also have a significant impact on deal volume and analysis for buyers and sellers.

Background

The Bank Merger Act, codified in Section 18(c) of the Federal Deposit Insurance Act, requires FDIC approval before certain merger and acquisition transactions involving insured depository institutions may be consummated. The statute prohibits transactions that would create a monopoly or substantially lessen competition and requires the responsible federal banking agency to consider several statutory factors in evaluating a proposed transaction.

Those statutory factors include:

• The financial and managerial resources of the institutions involved;
• The future prospects of the institutions;
• The convenience and needs of the communities to be served;
• The competitive effects of the transaction;
• The risk to the stability of the U.S. banking or financial system; and
• The effectiveness of the institution’s efforts to combat money laundering activities.

Key Components of the Proposed Rule

The proposed rule includes several notable reforms to modernize the merger framework:

1. Modernized Competition Analysis: The FDIC proposes to update its analysis of competitive effects by expressly considering the role of credit unions and centrally booked deposits when evaluating market concentration and competition concerns. This change reflects the evolution of the financial services marketplace and recognizes that traditional deposit concentration metrics may not fully capture the competitive environment in which banks operate today. For institutions pursuing acquisitions in markets with significant credit union participation or large volumes of centrally booked deposits, the revised framework could result in a more nuanced assessment of competitive effects.
2. Streamlined Process for “De Minimis” Transactions: A centerpiece of the proposal is the establishment of a streamlined letter filing process for certain low-risk merger transactions. Qualifying transactions would be eligible for a simplified application process and deemed approved if the FDIC does not act within the applicable review period. This approach is expected to reduce compliance costs and expedite regulatory review for routine transactions that present limited supervisory, competitive, or systemic concerns. Community banks and smaller institutions may be among the primary beneficiaries of this streamlined process.
3. Tailored Filing Requirements: The proposal would move away from a one-size-fits-all application process by tailoring filing requirements to the characteristics of a particular transaction. This risk-based approach is intended to reduce unnecessary information requests while preserving the FDIC’s ability to conduct a robust review of transactions that present heightened risks or novel issues. By aligning information requirements more closely with transaction complexity, the FDIC aims to reduce administrative burden for applicants and improve review efficiency.
4. Greater Certainty Regarding Expedited Processing: The proposed rule would clarify and limit the circumstances under which the FDIC may remove an application from expedited processing. Applicants have often expressed concern that transactions initially expected to receive expedited treatment can become subject to extended review with little predictability regarding timing or outcome. The proposed revisions seek to provide greater certainty and transparency, enabling institutions to better assess regulatory risk and transaction timelines during the deal-planning process.
5. Clarification of Statutory Factor Review: The proposal also would refine the FDIC’s approach to evaluating the statutory factors required under the Bank Merger Act. By providing additional guidance regarding how the agency assesses financial, managerial, community, systemic risk, and anti-money laundering considerations, the rule seeks to give applicants a clearer understanding of regulatory expectations. Greater transparency regarding the agency’s analytical framework could help institutions prepare more complete applications and reduce delays associated with supplemental information requests.
6. Increased Focus on Processing Timelines: Perhaps most significantly, the proposal is intended to bring greater discipline and predictability to merger application review timelines. Lengthy review periods have been a recurring concern for institutions pursuing strategic transactions, particularly where regulatory uncertainty creates business, operational, and execution risks. By establishing a framework that is both more structured and more risk-sensitive, the FDIC seeks to concentrate agency resources on transactions warranting heightened scrutiny while allowing straightforward transactions to proceed more efficiently.

Key Takeaways for Banks

If finalized substantially as proposed, the rule could materially improve the merger application process for many banks, particularly community and regional institutions pursuing traditional consolidation strategies. Potential benefits include:

• Faster review and approval timelines;
• Reduced application burden for lower-risk transactions;
• Greater transparency regarding regulatory expectations;
• Increased certainty around expedited processing; and
• More predictable transaction planning and execution.

Banks contemplating strategic transactions should carefully evaluate how the proposed competitive analysis framework, revised filing requirements, and procedural changes could affect future merger activity.  If adopted as proposed, these reforms would substantially reduce regulatory burden for financial institutions pursuing merger transactions. The changes are intended to ensure that the FDIC’s review process is faster, more predictable, and appropriately scaled to the risks presented by each transaction. This could be particularly beneficial for community banks and smaller institutions that have historically faced disproportionate compliance burdens relative to the complexity of their merger transactions.

Comments on the proposed rule are due by November 23, 2026. Banks and other interested stakeholders should consider whether to submit comments, particularly regarding the scope of the streamlined application process, competitive effects analysis, and proposed timeline reforms.

Looking Ahead

The proposal signals a meaningful shift toward a more transparent, efficient, and risk-based merger review framework. At a time when consolidation remains an important strategic tool for many financial institutions, the proposed reforms could facilitate merger activity by reducing uncertainty and regulatory burden while preserving the FDIC’s ability to address competition, safety and soundness, and financial stability concerns.

As the FDIC’s proposal could reshape the merger approval process for banks of all sizes, banks should carefully assess how the proposed framework may affect transaction planning, regulatory review timelines and strategy, and approval certainty. Winthrop’s Community Banking practice has extensive experience advising financial institutions on merger and regulatory matters and is available to discuss the proposal, prepare comment submissions, and develop strategies for navigating the evolving regulatory landscape.