The Federal Deposit Insurance Corporation (FDIC) has proposed significant revisions to its application procedures for banks seeking to establish a branch or relocate a main office or branch, marking a major shift in regulatory expectations for routine transactions. In its recent proposed rule, the FDIC aims to simplify requirements under 12 CFR Part 303, particularly Subpart C, by eliminating certain public notice and comment requirements, streamlining application content, and revising processing timeframes.
The proposed rule would apply to state-chartered non-member banks, including industrial loan companies, state savings associations, and insured branches of foreign banks. Comments are due September 16, 2025.
Key Takeaways
- The proposal's streamlined procedures would generally support more branches and deals. The proposal would remove newspaper publication and various public comment requirements, and introduce short, predictable timelines, including applications being deemed approved for eligible institutions after a certain amount of time without any further action by the FDIC. The proposal would lower the risk of approvals stalling for branch openings, relocations, and consolidations, and should make transaction timelines more reliable.
- The proposal would likely reduce compliance burdens and better reflect modern banking and customer preferences. Clarifying that remote service units (RSUs) (e.g., ATMs that include other functions) are not "branches" would avoid unnecessary filings, and the removal of non-statutory newspaper publication requirements would streamline routine applications.
- The changes would harmonize certain aspects of the FDIC's branch regulations with OCC regulations, especially concerning RSUs, reflecting modern banking practices as well as continued coordination among the federal banking agencies. If states and the FDIC take the same approach that the OCC has taken with regard to RSUs, the proposal could open the door to more creative solutions for fintech-bank partnerships.
Below is a summary of key changes for banks and financial institutions.
Elimination of various public notice and comment periods for branch applications
Unlike the Bank Merger Act or the Change in Bank Control Act, the Federal Deposit Insurance Act (FDI Act) does not require public notice or comment for branch applications under Section 18(d). Despite this, FDIC regulations have imposed various comment periods.
Citing the minimal volume and relevance of public comments received—averaging just seven per year, often unrelated to the specific application—the FDIC now proposes to eliminate public notice and comment requirements entirely for:
- New domestic branch establishments
- Intrastate branch relocations
- Main office relocations
This proposal reflects the FDIC's view that these transactions are routine and generally do not raise substantive concerns requiring public input. The elimination of these hurdles is expected to increase the ease and speed of these filings.
Revised hearing requirements
Because the hearing process is closely tied to public notice, the FDIC also proposes to eliminate the reference to hearings for these types of applications under 12 CFR 303.10(a). Historically, such hearings have been rare and, according to the FDIC, have not added meaningful value to its supervisory review.
While it may have once made sense for the FDIC to impose comment periods and hearing requirements—for instance, in the spirit of harmonizing frameworks or agency review procedures—deference to federal agencies has been formally repudiated under Loper Bright, and non-statutory requirements such as these would be relatively simple changes for agencies seeking to promote transactions and streamline procedures.
Updated definitions and clarifications
The proposal would include several definitional changes designed to reflect modern banking practices after a significant period of caution and hesitancy at the FDIC:
- Remote Service Unit (RSU). The proposed rule would define "remote service unit" as an automated or unstaffed facility, operated by a customer of a bank with at most limited assistance from bank personnel, that conducts banking functions such as receiving deposits, paying withdrawals, or lending money. The new definition would clarify that ATMs, drop boxes, and interactive teller machines (ITMs) are not considered "branches," provided they meet specific criteria for customer-initiated transactions and limited remote bank personnel assistance. This definition would be harmonized with the OCC's definition. Under the OCC's guidance and practice, fintech and digital asset companies that partner with banks may find new ways to reach customers without violating federal branching requirements. State laws, however, may need to be considered. For instance, some fintechs or bank partners have used the OCC's regulations on RSUs to establish a physical presence that looks a lot like a branch, but is effectively carved out under the OCC's regulations. If the FDIC's regulations are interpreted the same way, this may add a lot of flexibility for certain bank partners.
- De minimis address changes. Branch relocations that fall within a limited geographical area (e.g., across the street, within the same shopping center, etc.) would no longer require a formal application to the FDIC. Banks would only need to provide advance written notice to customers and the FDIC. It is difficult to imagine a scenario where the FDIC would not approve of—or customers would be materially harmed by—a bank moving across a parking lot or street. A more modern, streamlined and focused regulator would not be expected to seek opportunities to manage these types of issues.
- De novo interstate branches. The FDIC proposes replacing the term "de novo branch" with "de novo interstate branch." This change would clarify that the definition refers to new branches established in states outside a bank's home state, which is arguably a more precise and focused term.
Streamlined filing procedures and content
The FDIC proposes to significantly reduce the informational burden banks must submit in branch filings. Banks would no longer be required to submit:
- Details on its newspaper publication
- Information concerning any involvement in the proposal by an insider of the bank
- Comments on any effect the proposal may have on the bank's compliance with the Community Reinvestment Act (CRA). CRA reviews will still take place, and of course, banks will want to carefully consider the effect of CRA compliance, which in some cases may be affected by seemingly subtle moves.
Instead, banks would need to submit a simple letter filing containing:
- The purpose (establishment or relocation),
- The address of the proposed location,
- A statement regarding the bank's intent to continue operating legacy branches, and
- Customer notification confirmation (for relocations).
If adopted, it will be interesting to see if these filings are approved (or deemed to be approved) faster than previously.
Overhauled expedited processing framework
The proposed rule would introduce an aggressive timeline for expedited approval of qualifying applications. Banks meeting relatively accessible supervisory criteria can expect greater certainty and faster turnaround times for branch transactions:
- For "eligible depository institutions"—well-capitalized institutions with composite CAMELS ratings of 1 or 2 in their most recent examination and generally not subject to an enforcement action—applications would be deemed approved by the FDIC within three business days of receipt. (Compared to 21 days, currently.)
- For de novo interstate branches, approval would occur five days after the FDIC receives confirmation of compliance with host state law.
- For intrastate relocations and main office relocations, banks with a CAMELS composite rating of 3 or better would be deemed approved within three business days of receipt. This is a new category of expedited processing, meant to expedite lower risk requests. A "3" rating is not a particularly high standard, which suggests many banks would be able to take advantage of this flexibility.
Rather notably, the FDIC also proposes to eliminate its own discretion to remove a filing from expedited processing, a departure from the current rule. This change makes intuitive sense. Assuming effective supervision and regulation, if there's no concern, there should be no holdup. If there is a concern, the FDIC should know about it and be able to articulate it promptly.
FDIC internal process reforms
In tandem with regulatory revisions, the FDIC plans to:
- Streamline internal response protocols
- Delegate more authority to regional offices
- Issue single acknowledgment letters (rather than multiple communications) for expedited filings.
This operational update is intended to further reduce regulatory friction for straightforward branch applications.
Changes to foreign bank branch relocations
Conforming changes are also proposed for insured branches of foreign banks (admittedly a more niche subcategory) under 12 CFR 303.184, mirroring the process for domestic bank branches.
Final Thoughts
The proposed rule reflects candid introspection for the FDIC, Acting Chair Hill's stated priorities, President Trump's executive orders on financial services and regulation more generally, and an assessment of the evolving nature of bank operations, where technological innovation, customer preferences, and cost efficiencies increasingly demand a more agile regulatory framework.
While the proposal is still subject to public comment, the intent is clear: the FDIC wants to remove unnecessary delays and paperwork for transactions it views as low-risk and routine. In short, this proposal is further evidence of a profound regulatory change in which process is replaced with pragmatism. We expect this trend will continue and see even more dramatic changes on the horizon.
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