The U.S. Federal Bank Reserve has numerous regulations regarding the acquisition of other banks throughout the country. These regulations have to do with the procedures, laws, notice periods and review to ensure that all regulations were followed. Each state also has specific laws regarding bank acquisitions that must be taken into consideration when going through the process -- even when following the Federal Bank Reserve regulations.
Procedure for Acquisition
According to the Federal Deposit Insurance Corporation (FDIC), when an acquisition is to occur, an application must be submitted to the Board of Governors of the Federal Reserve System. After the application is submitted, a notice must be sent to the primary banking supervisor for review. The supervisor must submit its recommendations and opinions to the Board within 30 days of receiving the notice. After the Board receives the note from the supervisor, the Board has seven days to begin processing the application and sending it to the appropriate people, if more information is needed to make a decision. After this, the Reserve Bank has the option of delaying the acquisition by 30 days if it feels it is necessary to gather more information. If they choose not to delay the process, the Board has 60 days to accept or reject the application for acquisition. The Board may extend the process, but it may never take longer than 91 days from the time the Reserve Bank has chosen not to delay the process.
Circumstances for Rejection
According to the FDIC law (Section 6000 (c)), the Board is to reject any acquisition or merger that results in a monopoly or could endanger the banking system of the U.S. They are also to reject any acquisition or merger that could result in a future monopoly based on the implications of the move. The Board must consider all resources, including the future prospects of the new company after the acquisition. If the Board feels that the company will not be able to sustain its business or will not be able to submit all information necessary to the Board, they are to reject the application as well.
State Laws
The Board must abide by all state-banking laws, according to the FDIC regulations. However, if the bank being acquired has been in existence for five years, the Board is allowed to surpass any waiting periods in the state laws and allow the acquisition to occur immediately.
