Dive Brief:

• Federal Reserve Gov. Michelle Bowman on Friday called out the central bank’s approach to negative comments on applications it receives, asserting that a single adverse comment dragged out the approval process for Los Angeles-based Commonwealth Business Bank to open a branch in New Jersey.
• “This case is emblematic of the current deficient approach to processing applications in cases where a member of the public has made an adverse comment, particularly when the recent supervisory record addresses the concerns raised and is consistent with approval,” Bowman said in a Friday statement. “It is time for the Board to revisit its current approach to adverse comments.”
• The Fed on Friday said it had approved the lender’s application to establish a branch in Fort Lee, New Jersey. It received three negative comments from the same source, according to the approval order. A Fed spokesperson declined to comment on the board’s policy on handling adverse comments.    

Dive Insight:

Bowman, President Donald Trump’s nominee to be the Fed’s vice chair for supervision, has pledged to take “a pragmatic approach to supervision and regulation.” 

The industry has seen Trump’s return to the White House prompting more business-friendly, streamlined processes related to things like bank mergers and acquisitions. The American Bankers Association, in a post on X Friday, backed Bowman’s statement, saying the trade group supports the call for “timely action on bank applications.” 

In her statement Friday, Bowman noted her support for the board’s approval, but sought to highlight “the significant delays” in the process caused by a negative comment.

CBB submitted its application to open a branch in New Jersey in September 2024, “yet because of the receipt of a single adverse comment, the application came to the Board for review and vote of the full Board,” Bowman said. 

“Instead of being acted upon by the Reserve Bank under delegated authority within approximately 30 days, this application has only just been presented to the Board for action nearly six months later,” Bowman said.

The New Jersey branch is the first full-service branch on the East Coast for CBB, a $1.8 billion-asset bank which has branches in Hawaii, California and Texas.

Objecting to CBB’s proposal, the commenter said the lender lacks a branch in southern Dallas and alleged CBB has provided too few small-business and consumer-lending services to the area’s predominantly Black communities. 

The commenter also said CBB made no home loans to African-Americans in Dallas from 2021 to 2023, based on Home Mortgage Disclosure Act data, and the bank has trailed its Dallas peers in lending to businesses with less than $1 million in annual revenue, according to the Fed order. 

The bank pointed to its 2019 “satisfactory” Community Reinvestment Act ratings, both overall and specifically in the Texas area. CBB also noted it’s not subject to HMDA reporting requirements and didn’t make any home loans in Dallas because it doesn’t offer a home loan product.

Additionally, the bank noted its CRA evaluation found CBB’s loans to businesses with less than $1 million in revenue “exceeded the market average for other lenders,” and CBB’s current Texas branches in Dallas and Carrollton serve the entire Dallas market.

The Fed’s order noted the board’s consideration of CBB’s CRA record and the bank’s record of compliance with fair lending and other consumer protection laws, among other aspects, and determined that convenience and needs considerations were consistent with approval. The board made the same determination with respect to CBB’s managerial, financial and other supervisory considerations.

Bowman’s call echoes one she made in 2023, regarding Vantage Bank in Texas. At that time, she said the board should enhance its approach when a negative comment is received, “particularly when the recent supervisory record addresses the concerns raised and is consistent with approval.” 

Bowman is not the only banking regulator aiming to speed up the merger evaluation process. The Federal Deposit Insurance Corp.’s now-acting chair, Travis Hill, introduced a resolution last June that would require merger or deposit insurance applications that have spent 270 days awaiting approval to automatically be put on the agenda at the FDIC board’s next meeting. Under the measure, as long as an application remains outstanding, it would appear on the board’s agenda on a quarterly basis.