Regulatory Changes Spark Resurgence in U.S. Bank Mergers and Acquisitions

Recent regulatory changes under the Trump administration have revitalized mergers and acquisitions (M&A) among U.S. banks, signaling a significant shift in the financial sector's landscape.

The Federal Reserve's proposal to ease the "well managed" criteria for banks, coupled with the Office of the Comptroller of the Currency's (OCC) reinstatement of expedited merger reviews, has removed substantial barriers to bank consolidations. These policy shifts have prompted exploratory talks among major and regional banks, with institutions like BNY Mellon and Northern Trust reportedly considering mergers. The approval of Capital One's $35.3 billion acquisition of Discover Financial Services further underscores the renewed momentum in bank M&A activities.

On July 10, 2025, the Federal Reserve proposed amendments to its supervisory rating framework for large bank holding companies, specifically targeting the "well managed" status—a crucial designation for banks seeking to engage in M&A activities. Under the existing framework, a single "deficient-1" rating in any supervisory category (capital, liquidity, or governance and controls) disqualifies a bank from being considered well managed. The proposed changes would allow a bank to maintain its well managed status unless it has deficiencies in multiple categories or a single "deficient-2" rating. This adjustment could enable approximately two-thirds of banks with over $100 billion in assets, previously restricted due to poor ratings, to qualify for M&A activities. Federal Reserve Vice Chair for Supervision Michelle Bowman supports the proposal, stating it better aligns ratings with banks' true financial health. However, Fed Governor Michael Barr opposes the move, cautioning it could weaken oversight and increase financial risk by allowing poorly managed firms to expand through acquisitions.

On May 8, 2025, the Office of the Comptroller of the Currency (OCC) issued an interim final rule rescinding its 2024 final rule related to bank mergers. The 2024 rule had removed expedited review procedures and streamlined applications for certain bank mergers, introducing more rigorous reviews. The interim final rule restores these provisions, allowing qualifying transactions to receive automatic approval after a designated period, thereby reducing regulatory burdens and uncertainty for banks. Acting Comptroller of the Currency Rodney E. Hood stated that the OCC's actions aim to "reduce burden and uncertainty for banks and support a regulatory framework for bank mergers that is effective and not excessive."

These regulatory shifts have revitalized M&A discussions among major and regional banks. Notably, BNY Mellon and Northern Trust are reportedly considering mergers. Additionally, the approval of Capital One's $35.3 billion acquisition of Discover Financial Services indicates renewed momentum in bank M&A activities. Financial executives and analysts observe a resurgence of deal speculation, encouraged by the more permissive regulatory environment. While M&A activity in 2025 has remained flat so far, dealmakers anticipate an uptick in the latter half of the year, especially among regional and super-regional banks like PNC, U.S. Bancorp, and Truist. However, top global systemically important banks (GSIBs) like JPMorgan and Bank of America may face greater scrutiny due to regulatory caps on deposit holdings and financial stability concerns.

The easing of M&A regulations under the Trump administration reflects a broader deregulatory agenda aimed at fostering economic growth and innovation. Proponents argue that facilitating bank mergers can enhance competition, improve efficiency, and lead to better services for consumers. However, critics warn that reducing oversight could increase financial risks by allowing less stable institutions to expand, potentially leading to systemic vulnerabilities. The debate underscores the delicate balance between promoting economic activity and ensuring financial stability.

The current regulatory changes mark a departure from the previous administration's approach, which generally opposed large bank consolidations and implemented more stringent review processes. The reinstatement of expedited reviews and the relaxation of "well managed" criteria signal a return to a more permissive regulatory environment reminiscent of pre-2024 policies.

As the banking industry navigates this evolving regulatory landscape, the coming months are likely to witness increased M&A activity, reshaping the competitive dynamics of the sector. Stakeholders will closely monitor the outcomes of these mergers to assess their impact on market competition, financial stability, and consumer services.