The Federal Deposit Insurance Corporation (FDIC) issued today for public comment its anticipated guidance for private equity investors in failed banks or thrifts. The proposed policy statement, which will be open for public comment for 30 days following publication in the Federal Register, would impose significant and, in many cases, ambiguous restrictions on (i) private equity investors in a company (other than certain existing bank or thrift holding companies) seeking to acquire from the FDIC deposits (or deposits and assets) of failed institutions, and (ii) applicants for de novo bank or thrift charters in connection with the resolution of failed institutions. The restrictions would include:
Absent a fundamental reversal of course—which seems unlikely—the policy statement, when it is adopted, will likely represent a disappointment to investors that were anticipating greater FDIC receptivity to private equity investments in failed institutions.
This development, together with the rather modest changes previously made by the Federal Reserve Board to its “control” policies relating to equity investments in banks (see our Client Update, “Federal Reserve Board Policy Statement on Equity Investments in Banks and Bank Holding Companies”), the continuing hurdles to these types of investments posed by the requirements of the Bank Holding Company Act, and the recent reaffirmation of the separation of banking and commerce in the Obama Administration’s regulatory reform proposals (see our Client Update, “Obama Administration Proposes Comprehensive Changes to Financial Services Regulation”), suggest that private equity investors seeking to acquire banks and thrifts (whether operating or failed) will continue to face significant challenges in structuring those investments to comply with applicable regulatory requirements and expectations.
For a copy of the draft FDIC policy statement, please click here.
For more information about the FDIC policy statement or other regulatory issues relating to private equity investments in banks and thrifts, please contact at +1 202 263 3303, at +1 202 263 3216, at +1 202 263 3219, at +1 212 506 2540, or at +1 202 263 3293, or any member of our Financial Services Regulatory & Enforcement group.
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