The Federal Deposit Insurance Corporation on Thursday proposed two regulatory changes: an approval track that could process some bank mergers within five business days, and a rule clarifying when state-chartered banks may rely on federal preemption rules while serving customers outside their home states. Both proposals will be subject to 60 days of public comment. If finalized, they could alter the pace of bank consolidation and affect the competitive balance between state-chartered and national banks.
Some mergers could be processed in five business days
Under the merger-review proposal, the FDIC would establish several processing categories based on the size and structure of a transaction, with separate filing requirements and review timelines. Certain transactions meeting “de minimis” criteria could qualify for an expedited track and be processed in as little as five business days, without a public comment period.
The proposal would also shorten the comment period for most corporate reorganizations, including transactions that do not qualify as de minimis. The FDIC plans to expand its existing expedited-review framework and set standard timelines of 90 or 180 days for merged institutions of different sizes. The maximum timeline for the procedures would be 270 days.
Smaller, simpler transactions could therefore move through review more quickly, while larger deals would remain subject to longer standard processes. For banks, the review timetable directly affects merger integration, capital planning and branch strategies. For the market, the categories and eligibility requirements will determine which transactions can use the expedited route.
Deposit measures would broaden the competition review
The proposal would also change how the FDIC uses the Herfindahl-Hirschman Index, or HHI, to assess whether a bank merger could harm competition. The revised calculation would continue to include deposits held by all banks, while also accounting for representative deposit shares held by savings associations and credit unions, as well as deposits maintained through centralized booking arrangements at banks and savings associations. The FDIC says the changes are intended to provide a fuller picture of competition in financial services.
If the attorney general does not object, transactions that meet specified HHI thresholds, along with certain corporate reorganizations, could receive safe-harbor treatment. Deals that fall outside the safe harbor would remain subject to review of other factors that could promote competition, with particular attention to the effects of transactions involving rural areas.
FDIC Chairman Travis Hill said consumers now obtain financial products through a broader range of channels, including digital platforms and nonbank institutions. At a board meeting, he said the Bank Merger Act and related Supreme Court precedents were developed decades ago, when banking was more local, legal restrictions limited interstate and intercounty operations, and technology constrained banks’ ability to deliver products beyond their branch networks. Although not every bank operates nationally, Hill said, all banks compete with both banks and nonbanks.
FDIC board unanimously approves merger proposal
The merger proposal was approved unanimously by the three participating FDIC board members: Hill, Comptroller of the Currency Jonathan Gould and acting Consumer Financial Protection Bureau Director Jonathan Paoletta.
Gould recused himself from the vote on the state-bank rule, which was approved by Hill and Paoletta. Gould said mergers play an important role in maintaining the banking system’s normal operation and that he wanted to explore whether the FDIC could advance reforms independently or jointly with other agencies. He added that any changes must comply with the Bank Merger Act.
The proposals also represent a shift from the FDIC’s 2024 bank-merger policy. Hill, who was then the agency’s vice chairman, opposed that policy and withdrew it shortly after becoming FDIC chairman.
State-chartered banks could rely on home-state law
The second proposal addresses state-chartered banks that provide services outside their home states. Under the proposed rule, an out-of-state state-chartered bank generally would not be subject to another state’s laws when providing services there that are the same as those offered by banks in that state, regardless of whether the bank maintains a branch locally. In those circumstances, the law of the bank’s chartering state would continue to apply.
The proposal would not change the authority of state-chartered banks to set interest rates on loans. The FDIC said the rule is intended to clarify which laws apply when financial services are provided across state lines, rather than change lending-pricing standards.
The proposal comes as several states move to restrict interchange fees in certain transactions, creating legal disputes over which state’s rules apply. Litigation involving Illinois’ interchange-fee law has sharpened questions about whether federal preemption protections for national banks should also cover out-of-state state-chartered banks that serve local customers without maintaining branches in the state.
Hill said recent state legislation and related litigation have increased uncertainty over which state laws apply to out-of-state banks and could create competitive differences between state-chartered and national banks. The FDIC said clearer rules could help preserve competitive parity between the two groups as banks expand interstate services through digital channels and other non-branch models.
Both measures remain proposals, and their final terms will depend on changes made after the 60-day comment period and on subsequent regulatory procedures. Banks and parties to merger transactions will be watching the criteria for expedited review, the HHI safe-harbor thresholds, and the boundaries between state law and federal preemption.