FDIC Board Proposes Two New Rules And Rescinds A 2016 Supervisory Statement At Busy Board Meeting

The Federal Deposit Insurance Corporation (“FDIC”) Board’s September 17 meeting produced two proposed rules and rescinded a 2016 Supervisory Statement on the Development and Communication of Supervisory Recommendations. The bank merger review notice of proposed rulemaking (the “Merger Proposal”) would establish shorter time periods for the FDIC’s review of Bank Merger Act applications. The state bank parity proposal would extend the FDIC’s interpretation of interstate parity to state banks serving customers in a host state even if the state bank doesn’t have a branch in the host state, but otherwise does permitted business in the host state. Separately, the FDIC Board rescinded its 2016 statement on supervisory recommendations, which the FDIC says has been superseded by its new rule on unsafe or unsound practices and matters requiring attention (MRAs) that we discussed here. Comments on both NPRs are due November 23, 2026.

Bank merger review NPR

The Merger Proposal follows the FDIC’s rescission of its 2024 merger policy statement in 2025. If finalized, the FDIC expects the Merger Proposal would replace that currently operative statement with a regulatory framework for processing transactions and evaluating the Bank Merger Act’s statutory factors. The proposal would directly govern transactions requiring FDIC approval; it would not itself change the separate approval or review processes of the Federal Reserve, OCC or Department of Justice.

The proposed framework assigns transactions to rapid, expedited or standard processing. A new de minimis category would permit a short letter filing and deemed approval, generally five business days after the relevant filing and competition-review conditions are satisfied. It would encompass certain acquisitions below the applicable Hart–Scott–Rodino threshold that also amount to less than 5% of the acquiring institution’s assets, as well as certain mergers with operating subsidiaries that leave the insured institution’s legal and financial risk substantially unchanged. The participating institutions and resulting institution would have to meet additional eligibility standards. The FDIC also proposes to eliminate the public comment period for these transactions. This would be a narrow route with defined conditions, rather than automatic approval for every small deal. The proposed change in approach to merger of a bank’s own operating subsidiaries could result in a substantial change for banks that would like to simplify their corporate structures, but have avoided such internal corporate reorganizations becasue of friction in FDIC processing of such applications.

For qualifying corporate reorganizations outside the de minimis category, the FDIC generally would act within 30 days after receiving a substantially complete filing and would shorten the public comment period to 15 days. The proposal would expand another expedited category by increasing the permitted acquired-assets threshold from 10% to 25% of the acquirer’s assets. Standard applications generally would receive a decision within 90 days if the resulting institution would have less than $50 billion in assets, the decision is delegated rather than reserved to the Board, and consummation does not depend on another federal regulator’s action. Other standard applications generally would be subject to a 150-day period. Both periods could be extended for specified extenuating circumstances. The condition concerning another regulator may limit how many bank mergers that also involve holding-company mergers receive the 90-day timetable.

The proposal also addresses when those clocks start. The FDIC would have to identify missing information in writing within 21 days after receiving a filing; otherwise, the filing would be deemed substantially complete as of its receipt date. The FDIC would have to give a specific reason for an extension, and the proposal indicates that delays within the agency’s control, such as workload, would not suffice. 

Several substantive changes bear watching. The FDIC proposes to count credit union shares/deposits and centrally booked deposits in its initial local-market competition analysis. It would replace its qualitative approach to a “merger in substance” with a threshold involving acquisition of at least 80% of another institution’s assets, directly or through a series of transactions over 12 months. A separate notice and non-objection process would apply to certain significant asset transfers. The Merger Proposal would also limit the circumstances in which a filing can be removed from expedited processing; an adverse public comment or Community Reinvestment Act protest would not, by itself, automatically end expedited treatment. The FDIC noted that, together, these provisions seek to make the outcome and timing of FDIC review more predictable while retaining review of transactions that present greater risks.

State bank parity NPR

The second proposal turns on section 24(j) of the Federal Deposit Insurance Act, enacted as part of the Riegle–Neal amendments of 1997. That provision expressly addresses when a host state’s laws apply to a branch of an out-of-state state bank by likening its treatment with that of an out-of-state national bank branch. The FDIC now proposes to apply the same parity principle when an out-of-state state bank provides services in the host state without a branch in that host state. If a host-state law does not apply to the comparable national bank activity, it would likewise not apply to the state bank’s activity; the state bank’s home-state law would apply instead. The proposed text expressly includes host-state laws concerning community reinvestment, consumer protection, fair lending and intrastate branching in its comparative framework.

The FDIC’s rationale reflects how banks now deliver services. Reading section 24(j) to require a physical branch, the agency argues, could force a state bank either to establish a branch merely to obtain parity or to face host-state laws from which a national bank is protected. The proposal also responds to uncertainty in litigation concerning the Illinois Interchange Fee Prohibition Act. A federal district court’s injunction protects certain out-of-state state banks “subject to” Riegle–Neal, but the parties dispute whether that description includes state banks doing business in Illinois without an Illinois branch.

The proposal’s limits deserve equal attention. The FDIC would not decide that any particular host-state law is preempted; that determination by the OCC remains necessary before parity dictates the state bank’s treatment. Nor would it change state banks’ authority to charge loan interest under section 27 of the FDI Act. The textual question—whether a statutory provision written expressly in terms of branches supports application to services delivered without a branch—is likely to be central to comments and any eventual challenge.

Supervisory recommendations

The FDIC Board’s third action is effective as a policy change now: it rescinded the 2016 Board statement governing the development and communication of supervisory recommendations. The FDIC says the statement has been superseded by the recent final rule adding part 305 to its regulations. That rule establishes standards for unsafe or unsound practices, MRAs and supervisory observations. The FDIC (together with the OCC) had announced that it is ending the use of Matters Requiring Board Attention and Supervisory Recommendations as separate categories in its prior examination approach.

This rescission does not enact a new MRA standard on September 17. It retires a Board statement built around the FDIC’s former supervisory vocabulary as the agency implements the standard adopted in part 305. For banks assessing examination findings, the operative question is increasingly whether a finding meets the applicable standard for an MRA, a violation or a nonbinding observation—and what corrective action the FDIC can require under that standard.

The three actions share an emphasis on defining the reach of FDIC judgment: when a merger application must be decided, when a host state’s law reaches an out-of-state state bank, and when an examiner’s concern warrants mandatory remediation. 

As noted above, the comment periods on the two proposed rulemakings are open until November 23.