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Chopra releases statement on bank merger policy conflict
On December 14, after his first public meeting as a Member of the Board of Directors of the FDIC, CFPB Director Rohit Chopra issued a statement detailing the circumstances leading up to the request for information (RFI) that seeks public comment on revising the FDIC’s framework for vetting proposed bank mergers. Chopra’s statement follows an FDIC statement (covered by InfoBytes here) refuting a request for review of bank merger policies announced in a CFPB blog post. In his December 14 statement, Chopra challenged the view that only the FDIC Chairperson has the right to raise matters for discussion in board meetings and explained how the Directors had “circulated a draft Request for Information on the Bank Merger Act with the intention of releasing it jointly with the Office of the Comptroller of the Currency.” Chopra noted the draft RFI “was not a draft rule or guidance document – it was largely a series of questions to solicit input, given the President’s reasonable request, the need to incorporate the Dodd-Frank Act’s amendments, and the long-term trend in consolidation.” Chopra further stated that it “should have been a no-brainer where consensus could easily be achieved,” but due to “the General Counsel’s improper assertion that the Chairperson had implicit veto power, the draft was not given appropriate attention.”
Chopra called for “immediate[]” resolution of the conflict, adding that “[a]bsent a return to legal reality and constructive engagement, board members will need to take further steps to exercise independence from management and to ensure sound governance of the [FDIC].”
The same day, acting Comptroller of the Currency Michael J. Hsu released a statement supporting “the view of the majority of the FDIC Board members that the Bank Merger Act (BMA) guidelines are ripe for review,” noting that his particular focus is on “the financial stability prong, given large bank merger trends and my experience in the 2008 financial crisis with too-big-to-fail firms.” Hsu also stated that he “voted for the Request for Information (RFI) on the BMA due to the inability to reach compromise and urgency on the financial stability issue,” and he expressed concerns that “legal or procedural quicksand may ultimately limit our ability to act on this issue in a timely manner.”
FDIC refutes CFPB’s bank merger policy announcement
On December 9, the FDIC issued a statement refuting a request for review of bank merger policies announced in a CFPB blog post. According to a joint statement issued by FDIC Board member Martin J. Gruenberg and Rohit Chopra (who has an automatic board seat as Director of the CFPB), the FDIC Board of Directors voted to launch a public comment period on updating the FDIC’s regulatory implementation of the Bank Merger Act. Gruenberg and Chopra indicated that the Board members taking part in this action have approved a Request for Information and Comment on Rules, Regulations, Guidance, and Statements of Policy Regarding Bank Merger Transactions, which would seek public input on the FDIC’s approach to considering prudential factors in acting on a bank merger application, specifically related to “whether bright line minimum standards for prudential factors should be established, and if so, what minimum standards for which prudential factors.” In his blog post, Chopra noted that the Bureau is particularly interested in how the assessment of a bank merger’s impact on families and businesses in local communities would work in practice, and how should regulators ensure a merger does not increase the risk of bank failure or otherwise disrupt the economy should the bank face financial distress. According to the Gruenberg and Chopra joint statement, the Board’s action authorizes the FDIC’s executive secretary to publish the RFI in the Federal Register, upon which a 60-day window for comments will commence.
Shortly following the release of the joint statement, the FDIC released a statement disputing that any action had been approved, stressing that it “has longstanding internal policies and procedures for circulating and conducting votes of its Board of Directors, and for issuing documents for publication in the Federal Register.” Adding that “[i]n this case, there was no valid vote by the Board, and no such request for information and comment has been approved by the agency for publication in the Federal Register,” the FDIC commented that “[n]otwithstanding the actions taken today, the FDIC expects this time-honored tradition of collegiality and comity to continue.”