The Federal Deposit Insurance Corp. (FDIC) has proposed a rule that may delay investors’ bank share purchases by up to six months, with potential effects on mergers and acquisitions.
The proposal requires investors to notify the FDIC before acquiring voting securities at a level presumed to indicate control. The FDIC expects to review 52 such notices annually.
Currently, investors file similar notices with the Federal Reserve when banks have a holding company structure, but FDIC-regulated subsidiaries have been exempt.
This proposal, introduced by Consumer Financial Protection Bureau Director Rohit Chopra, aims to remove the exemption. Chopra cited the ownership change at Farmington State Bank, linked to Sam Bankman-Fried’s FTX, as an example of the need for increased oversight.
FDIC’s responsibility to oversee bank ownership and control. Although considered passive, some investors hold significant influence, including board seats, despite these agreements.
FDIC wants to assess the economic influence of these investors due to their large stakes. However, the potential six-month approval process could deter index fund managers from investing in bank shares, affecting their strategies.
This proposal may create challenges for large funds investing in public bank shares, adding friction or deterring them from further investments. Stanford pointed out that the rule could affect various types of investors, not just index funds.
The rule’s broad application could be problematic, particularly for smaller banks. He anticipates significant industry pushback and hopes for a more tailored solution. Estate planning transfers at small, family-owned banks could also trigger filings under this rule.
In 2023, FDIC entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank by Flagstar Bank, a wholly owned subsidiary of New York Community Bancorp.
The 40 former branches of Signature Bank will operate under New York Community Bancorp’s Flagstar Bank, N.A., on March 20, 2023.
The branches will open during their normal business hours. Customers of Signature Bridge Bank, N.A., should continue to use their current branch until they receive notice from the assuming institution that full-service banking is available at branches of Flagstar Bank, N.
by 
