On February 7, 2022, Acting Chairman Martin J. Gruenberg released a statement outlining the FDIC’s 2022 priorities. He also recognized the contributions of former Chairman Jelena McWilliams, who resigned on February 4, 2022.

The FDIC has been the recent subject of uncommon public infighting, as the FDIC board faces internal and external turmoil related to political and intra-agency pressures brought into focus due to the change in presidential administrations. Many on the board support a more pro-active and progressive approach, while Ms. McWilliams favored a more conservative style of oversight. With her resignation, as well as the recent FDIC, Department of Justice (DOJ), and Financial Crimes Enforcement Network actions related to bank oversight, it appears the activist wing has succeeded for now.

Entities operating in the financial services industry should pay close attention to the agenda, and specifically to two of these priorities in particular:

A Bank Merger Process Review “is Warranted”

The FDIC is calling for an interagency review of the bank merger process, stating that “the process for considering bank mergers by the agencies has not been comprehensively reviewed for 25 years.” This comes on the heels of DOJ statements and action supporting a similar review of the bank merger approval process, including a recent public request for information and comment.

What This Could Mean For You

It is no secret that bank merger review and approval has come to a grinding halt over the last couple years, with many merger applications taking much longer to receive the required regulatory blessing.

While any review of the outdated merger approval process is welcome, it is unclear whether the FDIC (and DOJ) will ultimately adjust the review process to be more streamlined and in tune with the realities of modern banking and finance. The FDIC appears open to changes that would help make the process more efficient and less burdensome, including by potentially adjusting the requirements and evaluation process related to competitive effects of mergers.

This would be a boon for the increasing number of small and midsize institutions for which a merger may be the best way to innovate and continue offering competitive banking products and services.

Crypto Scrutiny “is Imperative”

Citing the “rapid introduction of a variety of crypto-asset or digital asset products,” the FDIC is calling for “robust guidance” on the “management of prudential and consumer risks.”

What This Could Mean For You

No longer merely a fintech buzzword, cryptocurrencies and decentralized currencies appear here to stay. More and more, banks are seeking ways to enter the space and offer crypto products and services in order to meet all of their customers financial and banking needs.

While efforts to craft regulations and requirements related to crypto custody and stablecoin offerings have led the charge, a larger push to create a framework to allow banks to offer more robust crypto services is needed. The inclusion of crypto issues in the FDIC’s priorities is a welcome signal that appropriate guidance is on the horizon.

Other 2022 Priorities

• Strengthening the CRA
  Major revisions are expected for the Community Reinvestment Act, which requires banks to meet the needs of low- and moderate-income communities. The joint revision is expected from the Fed, Comptroller, and FDIC.
• Climate Change Risks
  The FDIC will pursue a number of actions to address climate change risks to banks and the financial system. This includes public comment on guidance to banks, establishing an interdivisional working group, and joining the International Network of Central Banks and Supervisors for Greening the Financial System.
• Final Modifications to the Basel III Capital Rule
  Implementation of the final agreement to modify the Basel III international regulatory framework is a priority this year.