H.R. 6556: Failing Bank Acquisition Fairness Act

This bill, known as the Failing Bank Acquisition Fairness Act, aims to amend federal laws governing how banks can merge, particularly when one or more banks are in financial distress or at risk of failing. Below are the main points of what the bill proposes:

1. Concentration Limits on Mergers

The bill modifies the existing concentration limits that are placed on bank mergers. Under current law, banks are restricted in how much market share they can hold after a merger. This bill proposes to allow exceptions to these limits only in specific circumstances:
- If a merger involves a bank that is either in default or close to default, the responsible government agency (like the Federal Reserve or FDIC) can approve the merger if it is proven that not doing so would lead to significant economic disruption or harm financial stability.
- It prevents banks from using the concentration limit exceptions simply for competitive advantage unless the affected agency confirms that the merger is crucial for economic stability.

2. Definition of 'Qualified Bids'

The bill establishes a definition for "qualified bid," which refers to offers from companies that meet certain financial health criteria. To be considered well-capitalized and well-managed, institutions must meet specific supervisory requirements. This ensures that only financially sound bids are considered for the acquisition of troubled banks.

3. Enhanced Reporting and Transparency

If an agency decides to waive concentration limits to approve a merger, a detailed report must be submitted to Congress. This report will include:
- Justifications for the waiver.
- An analysis of why the merger was deemed necessary for financial stability.
- Descriptions of alternative bids considered and reasons for their rejection.

This requirement is aimed at increasing transparency and accountability in the process of approving mergers involving failing banks.

4. Limitations on Bids Considered for Cost Determinations

The bill also proposes that in assessing bids, particularly when considering the costs to the Deposit Insurance Fund, authorities cannot consider any bids from companies that would violate the established merger rules or limits set by this bill.

5. Applicability to Bank Holding Companies

The changes outlined in this bill also extend to bank holding companies, ensuring that the concentration limits and definitions of qualified bids apply consistently across different banking entities.

Overall Impact

The aim of the Failing Bank Acquisition Fairness Act is to streamline the process for merging banks that are in distress while ensuring that such mergers do not exacerbate economic disruptions or compromise financial stability. By tightening the criteria for submissions and increasing transparency regarding why certain waivers may be granted, the bill seeks to create a more thorough and responsible approach to handling failing banks.

Relevant Companies

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