The Federal Reserve Board has approved the merger of M&T Bank in Buffalo, N.Y., and Hudson City Bancorp in Paramus, N.J., after more than three years of delay.

The approval came on Wednesday, the day the regulator had set as a deadline to announce its verdict on the deal. The two companies now have until Oct. 31 to complete it.

The deal was first announced in August of 2012 but was repeatedly delayed while both companies dealt with compliance issues. The $97 billion-asset M&T was ordered to fix its anti-money-laundering controls; and the $35 billion-asset Hudson City dealt with accusations of discriminatory lending, which it settled with regulators last week, clearing the way to closing its sale to M&T.

While it approved the merger, the Federal said that it does not plan to let other bank deals to remain in limbo while regulatory issues get sorted out.

"M&T's issues largely arose during processing of this application, and the Board took the highly unusual step of permitting the case to pend while M&T addressed its weaknesses. The Board does not expect to take such action in future cases," the order stated. "Rather, in the future, if issues arise during processing of an application, the Board expects that a banking organization will withdraw its application pending resolution of any supervisory concerns."

In approving the merger, the Federal Reserve said the deal would not create too much concentration risk in the banking system or impede competition among banks. The acquisition would give M&T a beachhead in New Jersey and additional diversification into consumer lending.

The price of the deal will be approximately $5.5 billion, according to each company's latest quarterly earnings reports.

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