Mergers Under Scrutiny: How New Guidelines are Changing the Game for Retail Banks

Bank mergers in 2024 are facing unprecedented challenges due to new regulations from the Department of Justice (DOJ) and updates from the Federal Deposit Insurance Corporation (FDIC). The DOJ’s new Bank Merger Guidelines, which replace those from 1995, introduce a broader, more rigorous antitrust evaluation process. Community banks and retail institutions considering mergers must now prove how their consolidation benefits consumers and enhances competition ​(Acceleron Bank).

Stricter Regulatory Oversight

One of the most notable changes includes the removal of the expedited review process by the Office of the Comptroller of the Currency (OCC), which previously allowed smaller institutions a faster approval pathway​ (Acceleron Bank). This could result in approval delays, even for community banks that previously might not have faced such hurdles. Additionally, the FDIC now evaluates mergers based on a wider range of criteria, including small business and residential loan originations, making the process more complex.

For example, the number of bank mergers in the U.S. dropped by 15% from 2021 to 2023, and analysts expect this trend to continue as smaller banks struggle with increased regulatory scrutiny​ (Acceleron Bank) ​(Deloitte United States). Larger banks have already adjusted to these changes by expanding their legal and compliance teams, while smaller institutions are feeling the financial pressure of the extended approval timelines.

How Retail Banks Can Navigate the New Landscape

To succeed under these new guidelines, retail banks need to be strategic. Transparency in demonstrating public benefits, such as improved access to credit and enhanced community services, will be critical. Community banks may need to adjust by seeking strategic partnerships rather than outright mergers. Smaller institutions should also consider bolstering their internal compliance capabilities to manage the more rigorous review process.

While these new rules may slow down merger activity in the short term, they aim to ensure that future consolidations serve the public’s best interests, promoting a more competitive and resilient banking environment.