The intense pressure on banks, which have had to respond to new regulations and rapidly changing markets for financial products and services, has only been compounded by the recent volatility in the banking sector. However, during such times, one bank's struggles could present an opportunity for others.

Here are eight questions an organization should ask itself when considering acquiring a distressed bank:

  1. Are there restrictions on its ability to acquire a bank? A financial institution may not be able to acquire a bank if, for example, the institution has outstanding anti-money laundering compliance deficiencies or a low Community Reinvestment Act rating.
  2. Are its existing business activities consistent with the activity restrictions imposed on banks and bank holding companies? An organization that acquires control of a bank becomes subject to restrictions on its activities, including prohibitions against commercial activities, proprietary trading, and asset management activities. This may require divestitures or restructuring of the current business or necessitate a non-controlling investment.
  3. What financial resources are required to acquire a bank? While the exact capital commitment depends on the situation, an acquirer must serve as a financial source of strength for the bank and demonstrate that the bank and the bank holding company will be sufficiently capitalized after the acquisition.
  4. What type of managerial resources are expected by the regulators to acquire a bank? Among other things, an acquirer must have personnel with bank experience and robust risk management and compliance programs.
  5. Would an acquisition of the target bank present antitrust or systemic risk concerns? Banking acquisitions are subject to an antitrust analysis that has not been updated since the mid-1990s and may necessitate branch/deposit divestitures.
  6. Is the target bank subject to any existing regulatory actions or investigations? A bank that has an existing enforcement action with its regulator may have ongoing compliance and remediation obligations. And information about the existence or extent of any existing investigations or examination concerns may be limited by restrictions on sharing confidential supervisory information (CSI), making due diligence complicated.
  7. What other licenses or registrations do the target bank's affiliates hold? A target bank that owns a broker-dealer might be subject to FINRA approval for a transfer in ownership. Similarly, asset management subsidiaries may be subject to client consent requirements that the acquirer would need to navigate.
  8. What type of personal information must owners, officers and directors disclose to the regulators as part of the application to acquire a bank? Even noncontrolling or natural person acquisitions of a bank may require the acquirer and others to disclose significant amounts of information to federal and state banking regulators, including fingerprints and financial information.

To summarize, the prospective acquirer's and target's current business circumstances, activities and relationships could present regulatory and other hurdles—which can be surmounted. To learn more about the eight considerations above and others for a contemplated deal, please contact one of the authors of this Legal Update or another member of our Financial Institutions M&A practice, which works closely with Mayer Brown's Financial Services Regulatory & Enforcement, Private Equity, Funds & Investment Management, Banking & Finance, and Technology & IP Transactions practices.

Visit us at

Mayer Brown is a global services provider comprising associated legal practices that are separate entities, including Mayer Brown LLP (Illinois, USA), Mayer Brown International LLP (England & Wales), Mayer Brown (a Hong Kong partnership) and Tauil & Chequer Advogados (a Brazilian law partnership) and non-legal service providers, which provide consultancy services (collectively, the "Mayer Brown Practices"). The Mayer Brown Practices are established in various jurisdictions and may be a legal person or a partnership. PK Wong & Nair LLC ("PKWN") is the constituent Singapore law practice of our licensed joint law venture in Singapore, Mayer Brown PK Wong & Nair Pte. Ltd. Details of the individual Mayer Brown Practices and PKWN can be found in the Legal Notices section of our website. "Mayer Brown" and the Mayer Brown logo are the trademarks of Mayer Brown.

© Copyright 2023. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.