Dive Brief:
- House Financial Services Committee Chair French Hill, R-AR, and 14 other Republican lawmakers are asking the Federal Reserve to make “additional progress” in shortening the time it takes to process M&A applications.
- In a Tuesday letter, the lawmakers urged Fed Vice Chair for Supervision Michelle Bowman to conduct “a review of long-pending applications focused on identifying and removing obstacles to final action.”
- They asked Bowman to detail the Fed’s current and planned initiatives geared toward improving M&A application processing, including anticipated milestones. They also encouraged the central bank to expand its use of delegated authority to streamline the review process further, rather than requiring action by vote of the board.
Dive Insight:
Congressional Republicans noted that progress had been made to shorten application processing times, but called for further action to address sources of delay, such as the receipt of adverse comments on potential deals.
In a March report, the Fed’s Office of Inspector General said M&A application processing at the central bank has slowed and data gaps are inhibiting the Fed’s aim to boost efficiency and timeliness. At that point, the Fed had already made some recommended changes – after facing “internal and external pressure” – including updates to its FedEZFile system, which allows for application status tracking.
Several factors add to application processing delays, Fed officials told the OIG. Sometimes the Fed receives incomplete or untimely responses to requests for more information from applicants, the official said. Consultation with other regulatory agencies takes time, as does conducting background checks and internal reviews to determine final action, they said. Sometimes, complex applications may pose policy issues, they said, and the consideration of adverse public comments takes time.
Legislators called for “swift implementation” of OIG recommendations that the Fed agreed to in March, such as issuing guidance and holding training on FedEZFile updates, and developing dashboards and drafting reports leaning on the updated data fields.
The OIG encouraged the Fed to establish a process that identifies themes or patterns across applications, to spot pain points. The office also asked the Fed to evaluate whether existing time targets are sufficient or more targets should be set, and to assess whether more information should be collected in FedEZFile to bolster the application monitoring process.
In their Tuesday letter to Bowman, lawmakers contended that mergers or acquisitions posing concern tend to be flagged before the application process.
“Most proposals formally presented to regulators are the survivors of a substantial vetting process between motivated private parties while problematic proposals are abandoned before such formal presentation,” they wrote.
Delayed application processing can also hamper the value of the acquisition target and create uncertainty for bank customers and employees, the lawmakers said, making it “even more important that the Federal banking agencies act swiftly on these applications.”
Under the second Trump administration, bank M&A activity has soared, egged on by stronger probability of a bank deal gaining regulatory approval, and far shorter wait times to receive a decision, analysts have said.
Additionally, the Justice Department’s antitrust division announced changes Thursday intended to streamline merger reviews, as part of its “commitment to reducing the burden and costs on merging parties,” without compromising its ability to investigate deals that pose concern, the DOJ said.
