On March 16, 2017, the Federal Reserve Board (the “Board”) issued an order approving the merger of two bank holding companies, People’s United Financial, Inc. and Suffolk Bancorp, under Section 3 of the Bank Holding Company Act of 1956 (the “Act”).Although the approval of the merger itself is relatively insignificant, the order expanded a key presumption regarding financial stability used by the Board in evaluating bank mergers and acquisitions under Section 3 and may have a significant positive impact on the approval process moving forward.

Section 3 of the Act requires bank holding companies to seek prior approval of the Board for mergers or acquisitions with banks and other bank holding companies.2 In determining whether to approve a proposed transaction, the Board is required by the Act to consider various factors, one of which is “the extent to which [the] proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system.” 3

Since 2012, the Board had presumed that a proposal would not raise material financial stability concerns, and thus would satisfy the financial stability factor, if it involved an acquisition of less than $2 billion in assets, would result in a firm with less than $25 billion in total assets or represented a corporate reorganization, absent evidence that the proposed transaction would result in a significant increase in interconnectedness, complexity, or cross-border activities, or other risk factors were present.4 In the order approving the People’s United merger, however, the Board expanded the presumption to include proposals involving an acquisition of less than $10 billion in assets or that would result in a firm with less than $100 billion in total assets.

Accordingly, the Board will now presume that a proposal does not raise material financial stability concerns, and thus that the financial stability factor is satisfied if the following two conditions are met:

 1.   The proposal

a.  Involves an acquisition of less than $10 billion in assets;

b.  Would result in a firm with less than $100 billion in total assets; or

c.  Represents a corporate reorganization; and

         2.   There is no evidence that the transaction would result in a significant increase in interconnectedness, complexity, or cross-border activities, and there are no other risk factors present.5

Although the effects of the Board’s decision to expand its financial stability presumption cannot be determined at this time, it is likely that its decision will yield faster Board approvals and reduced evidentiary burdens for bank holding companies proposing larger transactions in the future.


1 People’s United Financial, Inc., FRB Order No. 2017-08 (March 16, 2017).

2 12 U.S.C. § 1842(a).

3 12 U.S.C. § 1842(c)(7).

4 See Capital One Financial Corporation, FRB Order No. 2012-2 at 30 (February 14, 2012).

5 FRB Order No. 2017-08 at 25-26. Notwithstanding this presumption, the Board has the authority to review the financial stability implications of a proposal, even if the presumption applies.