H.R. 6556 — Failing Bank Acquisition Fairness Act

This section restricts exceptions to concentration limits for interstate mergers of insured depository institutions and banks, and for bank holding company acquisitions of banks, under the Federal Deposit Insurance Act (FDI Act) and Bank Holding Company Act of 1956, to cases involving institutions in default or danger of default (or FDIC assistance under FDI Act §13(c)) where the responsible agency determines—based on clear and convincing evidence—that the transaction is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and FDIC has not received a qualified bid from a well-capitalized and well-managed acquirer not subject to the prohibition. (1) In FDI Act §18(c)(13)(B), revises the exception previously available for such mergers lacking other qualifiers. (2) In FDI Act §44(e)(2), similarly limits the concentration limit exception previously available without regard to subsection (b)(2). (3) In Bank Holding Company Act §3(d)(5)(B), similarly limits the concentration limit exception previously available without regard to paragraph (2). The amendments further define "qualified bid" to require the bidder (and affiliates) to be well capitalized (per existing definitions in FDI Act §38, Bank Holding Company Act §2(o), or regulations) and well managed (per Bank Holding Company Act §2(o)(9)), with the resulting institution well capitalized. (Thus, exceptions to the nationwide 10% deposit cap or state 30% deposit cap are available only as a last resort for financial stability.)

This section directs the waiving agency and the Federal Deposit Insurance Corporation (FDIC), jointly, to submit a written report to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs not later than 30 days after waiving a concentration limit under specified provisions of the Federal Deposit Insurance Act or Bank Holding Company Act of 1956 in connection with the acquisition of a defaulting or failing insured depository institution or an acquisition assisted by FDIC under section 13 of the Federal Deposit Insurance Act. (Concentration limits generally prohibit mergers resulting in control of more than 10% of nationwide insured deposits or 30% of local market deposits.) The report must contain (1) a justification for the waiver, including an analysis of its necessity to prevent significant economic disruption or adverse effects on financial stability; (2) a description of alternative bids or outcomes considered, including efforts to solicit bids from entities not requiring a waiver; (3) an explanation of why alternatives were not selected, if applicable; and (4) recommendations for legislative or regulatory changes to improve competition in future resolutions. The waiving agency and FDIC must publicly disclose the report on their websites, subject to redactions for confidential supervisory information and other exemptions under the Freedom of Information Act.

This section prohibits the Federal Deposit Insurance Corporation (FDIC), in determining whether an assistance action represents the least costly resolution to the Deposit Insurance Fund (DIF) under section 13(c)(4) of the Federal Deposit Insurance Act, from considering any bid, application, or proposed application that would violate specified statutory prohibitions on bank acquisitions, changes in control, and ownership (i.e., FDI Act §§18(c)(13) and 44(b)(2); Bank Holding Company Act §§3(d)(2), 4(i)(8), and 14). (Thus, the FDIC must exclude such "bad faith" bids from its least-cost analysis, potentially increasing resolution costs to the DIF.)