Fed Reports Sharp Increase in Banking Mergers and Acquisitions

The first semiannual report on banking applications activity by the Federal Reserve shows a sharp increase in mergers and acquisitions during the first six months of 2014.

The Federal Reserve, as one of the primary U.S. regulators, reviews applications from bank holding companies, state member banks, foreign banking organizations, and  savings and loan companies.  Applications submitted to the Fed by banks include requests for approval of activities such engaging in new business activities and mergers and acquisitions.

During the first half of 2014 the Federal Review reviewed a total of 630 banking proposals of which 587 were approved.  The Fed’s average processing time for disposition of banking proposals was 44 days.

During the first half of 2014 approval by the Fed of applications for banking mergers and acquisitions increased by 58% to 114 compared to 72 for the comparable prior year six month period.

Applications for mergers and acquisitions often involve complex issues and therefore require extensive review by the Federal Reserve.  Adverse public comments about a potential banking takeover or acquisition can significantly slow down the process as the Fed evaluates the merits of the comments.  When the Fed received adverse public comments related to a pending merger or acquisition, the average review period was 212 days compared to only 50 days when no adverse comments were received.

Due to efforts to limit the size of banks considered “too big to fail” don’t expect to see an institution such as Bank of America or Wells Fargo attempt an acquisition of another bank.  Most of the recent merger and acquisition activity has taken place on the regional or local level as smaller banks seek growth to attain economies of scale and offset the increased burdens of regulation and slow loan growth.