Relevance Factors for FDIC's Consideration
Question
First State Bank, a state nonmember institution, plans to purchase a company that would be a financial subsidiary of the bank. First State will send a notice to the
FDIC of its proposed acquisition. Of the following factors, which one would NOT be relevant to the FDIC's consideration of the bank's acquisition?
Answers
Explanations
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A. B. C. D.A
First State Bank's proposed acquisition of a financial subsidiary would trigger a notice requirement to the FDIC under the Change in Bank Control Act (CBCA). The FDIC would then evaluate the proposed acquisition to determine whether it is consistent with the purposes of the Federal Deposit Insurance Act (FDIA) and whether it would pose a risk to the deposit insurance fund or to the safety and soundness of the bank.
Of the factors listed, all except one would be relevant to the FDIC's consideration of the bank's acquisition.
A. First State Bank's asset size: This factor would be relevant to the FDIC's evaluation because larger institutions generally pose a greater risk to the deposit insurance fund and to the stability of the banking system as a whole.
B. Whether First State Bank is well capitalized: This factor would be relevant because a well-capitalized institution is better able to absorb potential losses and therefore poses less risk to the deposit insurance fund and to the safety and soundness of the bank.
C. First State Bank's CRA rating: This factor would be relevant because the CRA (Community Reinvestment Act) requires institutions to help meet the credit needs of the communities they serve, particularly low- and moderate-income neighborhoods. The CRA rating reflects the extent to which the bank has fulfilled this obligation, and a low CRA rating could indicate potential compliance or reputational risks.
D. The impact of the acquisition on First State Bank's safety and soundness: This factor is the only one of the listed factors that would NOT be relevant to the FDIC's consideration of the bank's acquisition. This is because the FDIC's evaluation already includes a determination of whether the proposed acquisition would pose a risk to the safety and soundness of the bank. Therefore, the impact of the acquisition on the bank's safety and soundness would already be taken into account in the FDIC's assessment of the proposal.
In summary, all of the factors except for the impact of the acquisition on the bank's safety and soundness would be relevant to the FDIC's consideration of First State Bank's proposed acquisition of a financial subsidiary.
