Quick Hits

  • The FDIC released proposed revisions to its guidelines for reviewing bank mergers.
  • The proposed revisions include a prohibition on banks using noncompete agreements with employees of units that are divested as part of the merger.
  • The FDIC is seeking comments on the proposed revisions.

On March 21, 2024, the FDIC unveiled proposed revisions to its Statement of Policy (SOP) on Bank Merger Transactions, which was last amended in 2008. The revisions would increase scrutiny of bank mergers, particularly mergers involving large banks with $100 billion or more in assets.

A small, but potentially significant part of the revisions is a prohibition on banks from using noncompete agreements in connection with employees of businesses or branches that a bank, or an insured deposit institution (IDI), is forced to sell to gain the FDIC's antitrust approval for a proposed merger.


Section 18(c) of the Federal Deposit Insurance Act (FDI Act), known as the Bank Merger Act (BMA), prohibits banks from merging without first gaining regulatory approval. The BMA provides that the FDIC is one of three agencies with responsibility for scrutinizing these transactions, the others being the Office of the Comptroller of the Currency and the Federal Reserve. The FDIC has jurisdiction to regulate bank mergers involving FDIC-covered institutions, or those mergers that will result in an FDIC-supervised state nonmember bank or state savings association.

Under the BMA, the FDIC independently reviews proposed bank mergers to determine whether the potential business resulting from the merger could monopolize the banking industry and to identify other potential anticompetitive effects that would provide cause to stop the merger. The BMA generally requires the FDIC to request a "competitive factors report" from the U.S. Department of Justice for any mergers between an IDI and a nonaffiliated entity.

Noncompete Agreements

The FDIC's revised SOP would increase its scrutiny of bank mergers by requiring the banks to "demonstrate how the transaction will benefit the public." Further, the SOP stated that the FDIC "expects that a merger between IDIs will enable the resulting IDI to better meet the convenience and the needs of the community to be served than would occur absent the merger."

Under the revised SOP, the FDIC may consider divestitures of businesses or bank branches to mitigate anticompetitive effects but will expect the divestitures to be completed before a merger. In such cases, the SOP states that "the FDIC will generally require that the selling institution will not enter into non-compete agreements with any employee of the divested entity nor enforce any existing non-compete agreements with any of those entities."

The move is the latest attempt by the federal government under the Biden administration to restrict the use of noncompete agreements in employment. The Federal Trade Commission (FTC) is considering a rule to prohibit or restrict the use of noncompete agreements and the National Labor Relations Board general counsel declared in a memorandum that such agreements may violate the National Labor Relations Act.

Next Steps

The FDIC is seeking comments on the revisions to the SOP and is encouraging comments to be submitted within sixty days of publication in the Federal Register.

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