Fed OIG flags gaps slowing bank application process

Dive Brief:

The Federal Reserve Board isn’t tracking enough information to bolster efficiency and timeliness of its processing of bank merger, acquisition or change-in-control applications, the Fed’s Office of Inspector General said in a report.
In a report published Monday, the OIG said the central bank’s division of supervision and regulation “tracks certain aspects of the application process but does not track some key internal milestones, which hinders management’s ability to pinpoint delays and prioritize possible improvement opportunities.”
After facing “internal and external pressure” related to lengthy application wait times, the Fed has made some updates to its FedEZFile system that appear to address data gaps the report identified, according to the OIG. But it’s too soon to assess whether those will be sufficient in enabling the board to pinpoint delays and realize improvement, the report said.

Dive Insight:

In 2022, the Fed’s supervision and regulation division implemented measures aimed at increasing efficiency, including launching FedEZFile, a system that allows for the tracking of an application’s status; and time targets for certain steps within the process.

Yet median processing times for all application types increased by about 11% from 2021 to 2024, the OIG report said. And median processing time for M&A applications jumped by about 40% for small community banks and about 18% for large community banks.

Board officials and interviewees pointed to several factors that add to processing delays, including getting incomplete or untimely responses to requests for more information from applicants, consultation with other regulatory agencies, conducting background checks, complex applications that may pose policy issues, conducting internal reviews to determine final action, insufficient delegation practices and the consideration of adverse public comments, the OIG report said.

The supervision and regulation division does track application processing times in FedEZFile, as well as things that involve external parties such as requests to the applicant for additional information and receipt of adverse public comments.

But certain internal milestones haven’t been tracked in the system, like the kickoff meeting held early in the process, the completion of managers’ and officers’ review for final action for each division, and Fed governors’ notation vote, the OIG said.

“Data availability limitations affected our ability to validate the root cause of delays and identify the most useful improvement opportunities,” the OIG report said. “We believe that these data gaps are contributing to the Board’s challenges in making meaningful progress to fulfill its objective of improving banking application process efficiency and timeliness.”

In April 2025, an interviewee told the OIG the Fed board “would like to improve FedEZFile by capturing additional information to support ongoing monitoring by early 2026 but did not have the budget to fund the improvements.”

Then, in October, the division of supervision and regulation updated FedEZFile to address monitoring gaps, adding fields to track the kickoff meeting, division reviews for final action and Fed governors’ notation vote, the report said.

“An interviewee noted that the Board prioritized making these updates due to internal and external pressure to develop better reporting on processing times and assess why some applications are taking so long to disposition,” the OIG report said.

The OIG also recommended the board issue guidance and hold training on the FedEZFile updates, and develop dashboards and draft reports leaning on the updated data fields, to give managers better visibility into an application’s status.

And the OIG encouraged the Fed to establish a process that identifies themes or patterns across applications, to spot pain points; evaluate whether existing time targets are sufficient or more targets should be set; and assess whether more information should be collected in FedEZFile to bolster the application monitoring process.

Fed management concurred with the recommendations. It issued guidance on the recent FedEZFile updates in December and plans to hold required employee training by the third quarter of this year.

And by the first quarter of 2027, the Fed intends to add aggregate reporting functionality and develop a process to assess whether FedEZFile updates have led to meaningful progress, the report said.