The Regulatory Approval Process for Bank Mergers

Introduction

The regulatory approval process is what makes bank M&A fundamentally different from corporate M&A. In a typical corporate acquisition, antitrust clearance (HSR filing) is often the only regulatory hurdle, resolved in 30-60 days. In bank M&A, every deal routes through multiple federal agencies (each applying its own statutory factors), the DOJ (conducting independent antitrust analysis using deposit market concentration), and state banking regulators (sometimes in multiple states simultaneously). The process can take as little as four months under favorable conditions or stretch beyond 15 months for complex transactions. Under the current administration, approval timelines have collapsed to their shortest levels in 35 years, creating a historically favorable window for bank consolidation. For FIG bankers, understanding the approval process is not optional; it determines deal timing, structure, and ultimately whether a transaction is feasible.

The precise combination of regulators reviewing a bank merger depends on the charter type of the resulting institution, but most large deals require approvals from three or more federal agencies plus state regulators.

Federal Reserve Board: The Fed's authority derives from the Bank Holding Company Act of 1956. Any time a bank holding company acquires a bank or merges with another BHC, the Fed is the lead federal regulator. The Fed evaluates financial condition, managerial resources, competitive effects, CRA compliance, financial stability, and AML effectiveness. For large deals, the Fed solicits competitive-effects opinions from other banking agencies and the DOJ.

Office of the Comptroller of the Currency: The OCC's jurisdiction covers national banks and federal savings associations under the Bank Merger Act. When the resulting institution will be a national bank, the OCC is the primary bank-level regulator, conducting its own independent review of capital, liquidity, earnings, compliance, and managerial capacity.

Federal Deposit Insurance Corporation: The FDIC's Bank Merger Act authority applies when the resulting institution is a state nonmember bank or state savings association. The FDIC also has jurisdiction over any merger involving an insured depository institution and a noninsured institution.

Department of Justice: The DOJ receives notice of every bank merger application and conducts independent antitrust review. Unlike the banking agencies, the DOJ uses deposit market concentration as its primary competitive lens and can seek to block deals in federal court, though it has not formally done so in decades.

State regulators: Each state where the resulting institution is chartered or operates significant branches requires separate state-level approval. Delaware's State Bank Commissioner approved Capital One-Discover because Discover Bank is chartered in Delaware. Texas's Department of Banking approved Fifth Third-Comerica because Comerica is chartered in Texas.

Bank Merger Act vs. Bank Holding Company Act

Most large bank mergers require applications under both statutes simultaneously. The Bank Holding Company Act (BHC Act) applies at the holding company level whenever one BHC acquires control of another BHC or bank; the Federal Reserve is always the reviewing agency. The Bank Merger Act (BMA) applies at the bank level for mergers between insured depository institutions; the reviewing agency depends on the charter of the resulting bank (OCC for national banks, FDIC for state nonmember banks, Fed for state member banks). Capital One's acquisition of Discover required both a BHC Act application to the Fed and a BMA application to the OCC, since Capital One National Association is a national bank. This dual-filing requirement means large deals have two parallel federal review tracks running simultaneously, each with its own timeline and potential conditions.

Under both the BMA and BHC Act, regulators evaluate six factors when reviewing merger applications.

Financial resources and prospects: The resulting institution must be well-capitalized. Regulators scrutinize pro forma CET1 ratios, liquidity positions, and earnings trajectories. Acquirers with thin capital buffers or that would fall near their SCB-inclusive requirements post-deal face intensive scrutiny.

Managerial resources: Regulators assess management depth, compliance infrastructure, and the acquiring institution's supervisory track record. Unresolved consent orders or enforcement actions are, in practice, bright-line disqualifiers. TD Bank's AML/BSA deficiencies prevented the approval of its $13.4 billion acquisition of First Horizon for 15 months before the deal was terminated.

Convenience and needs of the communities: Regulators evaluate whether the combined institution will serve affected communities effectively: branch access, deposit products, small business lending, and retail credit availability.

CRA record of performance: Banks rated "Outstanding" or "Satisfactory" face no CRA barrier. Banks rated "Needs to Improve" or "Substantial Noncompliance" face presumptive denial or onerous conditions. Approximately 97-98% of banks earn Satisfactory or Outstanding ratings, so CRA is rarely the dispositive factor but remains a meaningful lever for imposing conditions.

Financial stability (added by Dodd-Frank): The Fed evaluates whether the combined institution would pose heightened systemic risk. This factor receives the most weight for deals resulting in institutions above $100 billion in assets, assessing interconnectedness, complexity, cross-border activity, and reliance on short-term funding.

AML/BSA effectiveness: Regulators explicitly evaluate whether the applicant has adequate policies, procedures, and internal controls to detect and report suspicious activity. Deficiencies here are fatal to a pending application, as TD Bank demonstrated.

The statutory factors describe what regulators weigh; the application sequence determines how long the weighing takes. Every large bank deal passes through the same stages, and FIG bankers set the merger agreement's outside date (the deadline after which either party can walk away) by estimating how long each stage will run for this particular buyer.

The statutory deadlines look tighter than they are. The Bank Merger Act fixes the DOJ's reporting window and the post-approval waiting period, and the BHC Act deems an application granted if the Fed fails to act within 91 days. But that 91-day clock only starts once the Fed has the complete record, and staff can keep requesting additional information, so the backstop rarely forces a decision. In practice, timing is driven by how quickly the applicant answers follow-up questions and whether public comments raise issues the agency must address in its order.

Delegated Authority

Delegated authority is the power a banking agency's leadership hands to its staff or, at the Fed, to the regional Reserve Banks to approve applications that meet set criteria without a vote of the Board or agency head. Deals lose that eligibility when they raise significant legal or policy questions, draw substantive adverse comments, or exceed size and complexity screens, and Board-level review typically adds materially to processing time. Whether a deal can be approved under delegated authority is one of the first timing questions a FIG banker asks.

Formal denials are equally rare, because the real rejection mechanism is withdrawal. Applicants that receive negative staff signals usually pull the filing rather than accept a published denial: Federal Reserve data compiled by the Bank Policy Institute showed roughly 10% of 2,352 bank M&A applications filed from 2011 to 2021 were withdrawn. The same data showed why comment letters matter: in the second half of 2020, proposals without adverse comments averaged 67 days from filing to approval, against 232 days for those that drew them. For deal teams, this means the buyer's supervisory standing and community record are the inputs that predict the timeline, and they need to be diligenced before the outside date is negotiated.

The approval timeline for bank mergers has swung dramatically with the political cycle.

The 2021-2024 Slowdown

Under the Biden administration (2021-January 2025): The average time to regulatory approval peaked at almost seven months, according to S&P Global data reported by the ABA Banking Journal. The administration issued a July 2021 executive order directing agencies to take a harder look at financial sector consolidation. Columbia Banking System's merger with Umpqua Holdings took 504 days. NYCB's acquisition of Flagstar Bancorp took approximately 19 months (the parties eventually restructured the transaction to route through the OCC rather than the FDIC to break the logjam). TD Bank's $13.4 billion acquisition of First Horizon was terminated after 15 months with no approval date in sight, functioning as de facto denial without a formal order.

The 2025 Reversal

Under the current administration (2025 forward): The average approval time fell to about four months in 2025, the shortest since 1990 on the same S&P Global data. Fifth Third-Comerica was announced on October 6, 2025, cleared the OCC in mid-December and received Federal Reserve approval on January 13, 2026, just 99 days after announcement. The rule changes behind that speed came in quick succession:

2026: Writing Speed Into the Rules

The shift is now moving from supervisory posture into rule text, which matters because posture can reverse with the next administration while codified deadlines are harder to unwind. In March 2026 the OCC finalized community bank licensing amendments that broaden eligibility for expedited and reduced filing procedures. In September 2026 the FDIC proposed a rewrite of its merger review framework that would create a letter filing with deemed approval for de minimis deals, impose defined processing timelines on other transactions, limit the FDIC's discretion to remove filings from expedited processing, and add an HHI safe harbor that counts credit unions and centrally booked deposits in the initial competitive screen.

The speed-up has not been uniform. A March 2026 Federal Reserve inspector general evaluation found that processing times rose from 2021 to 2024 for every application type, including M&A applications from community banking organizations, and that the Fed's application system did not track key internal milestones needed to pinpoint delays. The headline four-month average is flattered by large, well-prepared regional deals; smaller acquirers and buyers with open supervisory issues should still plan for longer reviews.

Capital One's $35.3 billion acquisition of Discover is the most significant bank merger approval of the current cycle, and the fullest case study of the process in action (the deal itself is covered in our Capital One-Discover deal breakdown). Announced February 19, 2024, applications were filed with the OCC and Fed in March 2024. The Fed and OCC held a joint public meeting on July 19, 2024. Delaware's State Bank Commissioner approved in December 2024. The OCC and Fed issued final approvals on April 18, 2025. The deal closed May 18, 2025, approximately 15 months from announcement.

The OCC's conditional approval required Capital One to submit, within 120 days of closing, a plan detailing corrective actions and timelines to address the root causes of the outstanding enforcement actions against Discover Bank and remediate the harm. Those actions included a $100 million Fed penalty for card misclassification, a $150 million FDIC penalty, and an FDIC order requiring at least $1.225 billion in restitution to merchants and other parties overcharged on interchange fees after Discover misclassified consumer cards as commercial cards from 2007 to 2023.

The deal's approval demonstrates that even a $35 billion+ acquisition with significant pre-existing enforcement actions against the target can be approved when the regulatory environment is favorable. Conditions (not denial) are the preferred enforcement tool. The DOJ did not object to the transaction despite the deal creating the largest US credit card issuer.

The DOJ evaluates competitive effects using deposit market concentration measured by the Herfindahl-Hirschman Index (HHI). HHI is calculated as the sum of the squares of each competitor's deposit market share in a defined geographic market.

The 1995 Bank Merger Guidelines flagged transactions that increased HHI by more than 200 points in a market where post-merger HHI exceeded 1,800. In September 2024, the DOJ withdrew from the 1995 guidelines and applied its 2023 Merger Guidelines supplemented by a Banking Addendum. Under the new standard, a presumption of competitive harm arises if HHI increases by more than 100 points (not 200) in a market exceeding 1,800 post-merger, or if the resulting institution's share exceeds 30% and HHI rises by more than 100 points. The 2024 Addendum also extended review beyond deposit share to branch overlaps, specific customer groups such as small businesses, and financial networks and platforms. The Fed, by contrast, still screens at the 1995 thresholds, a split covered in detail in antitrust review for financial institution mergers.

Under the current administration, the DOJ has not formally rescinded the 2023 guidelines or the 2024 Banking Addendum, but enforcement posture has shifted to non-objection. Where deposit concentration raises concerns, the standard remedy is requiring branch divestitures in overlapping markets. US Bancorp was required to divest three Union Bank branches in San Bernardino County, California, as a condition of its acquisition of MUFG Union Bank in 2022.

The regulatory approval process is the execution risk that separates bank M&A from corporate M&A. In corporate deals, the question is "will the deal close?" In bank deals, the question is "when will the deal close, and under what conditions?" The current environment, with approval timelines at multi-decade lows and the regulatory framework explicitly favoring consolidation, creates a historically favorable window for bank M&A. FIG bankers who understand the approval mechanics can advise clients on timing, structuring deals to minimize regulatory friction, and anticipating the conditions that agencies are likely to impose.