Dodd-Frank Act: New Test for Bank Expansion

On December 23, 2011, the Federal Reserve Board ("Board") issued a statement setting forth the rationale for its December 19 approval of a bank acquisition, subject to the newly added criteria under the Dodd-Frank Act ("Dodd-Frank") that the Board must provide in its analysis of bank expansion applications. Section 604(d) of Dodd-Frank amended Section 3(c) of the Bank Holding Company Act (12 U.S.C. 1842(c)) ("BHC Act") to require the Board to determine whether a proposed bank acquisition would lead to greater or more concentrated risks "to the stability of the United States banking or financial system." This new standard of weighing the risk to the financial stability of the U.S. banking or financial system applies to expansion by acquisition of banks and/or bank holding companies by banks, bank holding companies, financial holding companies and systematically important financial institutions ("SIFIs").