The Federal Deposit Insurance Corporation has published guidance for investors interested in acquiring or investing in the deposit liabilities of failed banks or thrifts.<
The Federal Deposit Insurance Corporation has published guidance for investors interested in acquiring or investing in the deposit liabilities of failed banks or thrifts.
The Final Statement of Policy on Qualifications for Failed Bank Acquisitions contains guidance about the standards investors will be expected to meet in order to qualify to bid on a failed institution.
FDIC chairman Sheila C. Bair says: "The policy statement strikes a thoughtful balance to attract non-traditional investors in insured depository institutions while maintaining the necessary safeguards to ensure that these investors approach banking in a way that is transparent, long term and prudent. Most importantly, the statement assures that acquired institutions will have adequate capital, that there will be stability in management, and there will be strong protections to ensure that lending decisions will be both objective and independent. It both protects the interests of taxpayers in a safe and sound banking system, and provides the guidance that investors need to evaluate investments in the deposit operations of failed institutions."
The FDIC wants all owners of banks or thrifts, whether they are individuals, partnerships, limited liability companies, or corporations, to have the experience, competence and willingness to run the banks in a prudent manner, to support them when they face difficulties, and to protect them from abuses.
At the same time, the FDIC has noted that the banking industry is in need of additional capital and that there is capital available that could fill that need. In order to facilitate private capital investments in the banking industry, the FDIC issued in July a proposed statement and sought public comment on the proposal.
Law firm Goodwin Procter says the final statement retains many of the provisions contained in the proposed statement released in July, but makes significant changes to the applicability, capital commitment and cross-guarantee standards, as well as certain other more minor changes. In addition, it does not contain a requirement that private capital investors agree to serve as a source of strength for their subsidiary depository institutions.
Changes include refining the description of the types of investors covered, changing the capital standard to one that is a better measure of the capital available to absorb losses, and clarifying the circumstances in which the cross support obligation would apply.
