The OCC is taking steps to improve not only the bank merger application process, but also transparency to help foster a diverse and dynamic banking system.

The OCC also wants to develop a competitive analysis that goes beyond retail deposits as a measure of market power.

Smaller banks, however, have lobbied regulators in recent years to grant their merger deals exemptions from some scrutiny, citing their modest size, relatively simple structures and lack of systemic risk.

Acting U.S. Comptroller of the Currency Michael Hsu, meanwhile, is seeking to eliminate a decades-old requirement that certain merger applications get automatic approval on the 15th day after the close of the public comment period if the OCC fails to act within that time frame.

Hsu favors reforming the "least-cost test" for approving bank mergers in a situation like last year's acquisition of First Republic Bank after its failure by JPMorgan Chase & Co (JPM), which made the nation's largest lender even bigger.

Currently, regulators must favor the deal that entails the least cost to the Federal Deposit Insurance Corporation (which could uncover uninsured deposits), unless they are trying to avoid systemic risk.

Banks should be able to fail in an orderly fashion without any government support, Hsu said.

Hsu said future withdrawals would not be slower and that banks should consider resorting to the discount window when facing liquidity problems. During last March's turmoil, depositors made electronic withdrawal requests totaling billions of dollars that drained some banks almost overnight.

As for non-bank entities, which are taking market share away from regulated lenders, Hsu says it is important to raise standards for non-bank firms to meet existing standards, not weaken existing standards.

Translated by: A.M