On March 3, 2025, the Federal Deposit Insurance Corporation (FDIC) announced that its Board of Directors[1] voted to rescind the agency’s 2024 Statement of Policy on Bank Merger Transactions and withdraw four other Biden-era proposals.

The sweeping purge effectuates Acting Chairman Travis Hill’s top priority as highlighted in his January 21, 2025, statement on the FDIC’s key focus areas (the Statement of Priorities) (for more information, see this Latham blog post). In the Statement of Priorities, Acting Chairman Hill pledged to “[c]onduct a wholesale review of regulations, guidance, and manuals to ensure [the FDIC’s] rules and approach promote a vibrant, growing economy.” He also promised to “[w]ithdraw problematic proposals” that were issued in the previous administration, and which he unanimously opposed while then-vice chairman of the FDIC.

The rescission and withdrawals are discussed below.

Statement of Policy on Bank Merger Transactions

On September 17, 2024, the FDIC Board of Directors approved a final Statement of Policy on Bank Merger Transactions. The Statement of Policy aimed to update, strengthen, and clarify the FDIC’s policies and expectations on the evaluation of bank merger transactions subject to FDIC approval under the Bank Merger Act (for more information, see this Latham blog post and this blog post).

Acting Chairman Hill made it clear in the Statement of Priorities that he intended to reform the FDIC’s merger approval process and replace the 2024 FDIC Statement of Policy, which he criticized at the time it was finalized as threatening to make the merger process “longer, more difficult, and less predictable.”

According to the rescission announcement, the FDIC will “reinstate, on an interim basis, the Merger Policy Statement that was in effect prior to 2024 as the agency conducts a broader reevaluation of its bank merger review process.”

The rescission was issued as a new proposal, and FDIC invites the public to submit comments until 30 days after publication in the Federal Register.

The Brokered Deposits Proposal

On July 30, 2024, the FDIC proposed to amend the agency’s brokered deposit regulations that implements Section 29 of the Federal Deposit Insurance Act (FDI Act). The FDI Act generally restricts a less-than-well-capitalized insured depository institution from accepting funds from deposit brokers. The proposal sought to substantially broaden the scope of deposits that IDIs would be required to classify as “brokered” by expanding the scope of the definition of “deposit broker” and narrowing the scope of exceptions from the definition (for more information, see this Latham blog post).

Then-Vice Chairman Hill called the proposal “a poor use of [FDIC] time and resources.”

According to the withdrawal announcement, the proposal “would have significantly disrupted many aspects of the deposit landscape.”

The Corporate Governance Proposal

On October 11, 2023, the FDIC proposed corporate governance, risk management, and board oversight guidelines. The proposal emphasized the need for certain supervised institutions[2] to develop a strategic plan and risk management policies and procedures, and supervise senior management to ensure the institution operates in a safe and sound manner.

Then-Vice Chairman Hill, while generally supportive of sound corporate governance and appropriate controls for banking institutions, did not support the proposal. He was “skeptical that many of the [proposal’s] provisions[3] should rise to the level of enforceable safety and soundness standards.”

According to the withdrawal announcement, the proposal “would have created a number of overly prescriptive and process-oriented expectations for management and boards of directors.”

The Change in Bank Control Act Proposal

On July 30, 2024, the FDIC proposed to amend the agency’s regulations under the Change in Bank Control Act (CBCA). The CBCA generally prohibits any “person” from acquiring “control” of a bank unless the person has provided notice to the appropriate federal banking agency and that agency has not disapproved. The CBCA establishes a rebuttable presumption that, if certain conditions are met, a 10% ownership stake constitutes control.

Oftentimes, executives would enter passivity agreements to rebut the presumption of control for purposes of the CBCA. The proposal sought to “require the provision of advance notice to the FDIC for certain acquisitions of voting securities of FDIC-supervised institutions, at a level sufficient to trigger a presumption of control under the regulations, whether such investments are made directly in the institution or indirectly through a holding company.”

Then-Vice Chairman Hill did not support the proposal, noting that it “would expand well beyond ensuring passivity at the largest asset managers, and would require a range of other types of bank investors to file duplicative notices with both the FDIC and the Federal Reserve.”

According to the withdrawal announcement, the proposal “would have removed an exemption from the requirement to submit a notice to the FDIC for an acquisition of voting securities of a depository institution holding company for which the Federal Reserve reviews a CBCA notice.”

The Proposal to Curb Incentive-Based Compensation

On May 6, 2024, the FDIC — along with the Office of the Comptroller of the Currency (OCC), the Federal Housing Finance Agency (FHFA), and the National Credit Union Administration (NCUA) — proposed a rule to curb “excessive risk-taking” resulting from incentive-based compensation arrangements. The proposal sought to curtail incentives for certain financial services sector officers, employees, and directors from taking inappropriate risks as a result of seeking excessive compensation, fees, or benefits (for more information, see this Latham blog post).

Then-Vice Chairman Hill did not support the proposal, saying it was overly prescriptive rather than principles-based as well as “too broad and too blunt.” He also criticized the fact that it was issued without participation from the Board of Governors of the Federal Reserve System (FRB) and the Securities and Exchange Commission (SEC).

The proposal was never published in the Federal Register, and the announcement states that the FDIC withdrew the Staff’s authority to publish it.

Conclusion

The FDIC’s actions are not surprising given the priorities Acting Chairman Hill announced in his Statement of Priorities, and they also correspond to similar rulemaking freezes and purges (and withdrawals from active enforcement actions and investigations) taken by other executive agencies since the start of the Trump administration.

Several banking industry participants have responded favorably to the FDIC’s actions, viewing them as an opportunity to revisit regulations that many considered to be too complex and disruptive. Critics of the FDIC’s actions, however, have expressed concern regarding the potential negative effect of the rescissions and withdrawals on banks and consumers, and questioned the FDIC’s decision not to hold a public meeting on these actions.

ENDNOTES

[1] The FDIC Board currently has three members, all Republican: FDIC Acting Chairman Travis Hill, Acting Comptroller of the Currency Rodney Hood, and Acting Director of the Consumer Financial Protection Bureau Russell Vought.

[2] FDIC-supervised institutions with $10 billion or more in total consolidated assets.

[3] For example, that a bank’s leadership “‘set an appropriate tone,’ ‘develop a written strategic plan,’ ‘articulate an overall mission statement,’ establish a ‘written code of ethics,’ conduct an ‘annual self-assessment,’ and have a ‘comprehensive written statement’ based on its risk profile that should ‘describe a safe and sound risk culture.’”

This post comes to us from Latham & Watkins LLP. It is based on the firm’s article “FDIC Conducts Regulatory Review and Purge,” dated March 10, 2025, and available here.