PRESS RELEASE
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
July 2, 2009
Media Contact:
David Barr (202) 898-6992
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-112-2009
FDIC Board Approves Proposed Policy Statement on Qualifications
for Failed Bank Acquisitions
The FDIC Board today authorized publication of a Proposed Statement of Policy on
Qualifications for Failed Bank Acquisitions. This proposed policy statement would
provide guidance to private capital investors interested in acquiring or investing in the
assets and liabilities of failed banks or thrifts regarding the terms and conditions of the
investments or acquisitions.
"How investments in insured depository institutions are structured is critical for the
banking system as well as the FDIC," said FDIC Chairman Sheila C. Bair. "We are
particularly concerned with the owners' ability to support depository institutions with
adequate capital and management expertise. This proposed policy statement is
intended to provide those essential safeguards. We are trying to find the best way to
have a balanced approach, and we look forward to comments that can help us
accomplish that."
Recently, private capital investors have indicated interest in purchasing insured
depository institutions in receivership. 1 The FDIC is particularly concerned that owners
of banks and thrifts, whether they are individuals, partnerships, limited liability
companies, or corporations, have the experience, competence, and willingness to run
the bank in a prudent manner, and accept the responsibility to support their banks when
they face difficulties and protect them from insider transactions.
The FDIC has reviewed various elements of private capital investment structures and
considers that some of these investment structures raise potential safety and
soundness considerations and risks to the Deposit Insurance Fund (DIF) as well as
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
July 2, 2009
Media Contact:
David Barr (202) 898-6992
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-112-2009
FDIC Board Approves Proposed Policy Statement on Qualifications
for Failed Bank Acquisitions
The FDIC Board today authorized publication of a Proposed Statement of Policy on
Qualifications for Failed Bank Acquisitions. This proposed policy statement would
provide guidance to private capital investors interested in acquiring or investing in the
assets and liabilities of failed banks or thrifts regarding the terms and conditions of the
investments or acquisitions.
"How investments in insured depository institutions are structured is critical for the
banking system as well as the FDIC," said FDIC Chairman Sheila C. Bair. "We are
particularly concerned with the owners' ability to support depository institutions with
adequate capital and management expertise. This proposed policy statement is
intended to provide those essential safeguards. We are trying to find the best way to
have a balanced approach, and we look forward to comments that can help us
accomplish that."
Recently, private capital investors have indicated interest in purchasing insured
depository institutions in receivership. 1 The FDIC is particularly concerned that owners
of banks and thrifts, whether they are individuals, partnerships, limited liability
companies, or corporations, have the experience, competence, and willingness to run
the bank in a prudent manner, and accept the responsibility to support their banks when
they face difficulties and protect them from insider transactions.
The FDIC has reviewed various elements of private capital investment structures and
considers that some of these investment structures raise potential safety and
soundness considerations and risks to the Deposit Insurance Fund (DIF) as well as
important issues with respect to their compliance with the requirements applied by the
FDIC in its decision on the granting of deposit insurance.
Under the proposed policy statement, the FDIC would establish standards for bidder
eligibility in connection with the resolution of failed insured depository institutions, which
provide for:
• capital support of the acquired depository institution;
• agreement to a cross guarantee over substantially commonly owned depository
institutions;
• limits on transactions with affiliates;
• maintenance of continuity of ownership;
• clear limits on secrecy law jurisdiction vehicles as the channel for investments;
• limitations on whether existing investors in an institution could bid on it if it failed;
and
• disclosure commitments.
The FDIC is keenly aware of the need for additional capital in the banking system, and
the contribution that private equity capital could make to meeting this need provided this
contribution is consistent with basic concepts applicable to the ownership of these
institutions that are contained in our banking laws and regulations, and now
summarized in the proposed Policy Statement.
One of the most important safeguard elements in the Proposed Policy Statement is the
requirement that the acquired depository institution be very well capitalized at a Tier 1
leverage ratio of 15 percent, to be maintained for a period of at least 3 years, and
thereafter at a "well capitalized" level.
Safety and soundness considerations may also be satisfied with a lower, but a still high
level, of Tier 1 capital. Accordingly, the FDIC seeks the views of commenters on the
appropriate level of initial capital that will satisfy concerns relating to both safety and
soundness and the economic viability of the terms of investment in insured depository
institutions.
While the issue of capital adequacy is of paramount importance, the FDIC is seeking
comment on all aspects of the proposed policy statement, including nine specific
questions set out in the Notice of Public Comment. Comments are due 30 days from the
date of publication in the Federal Register.
# # #
FDIC in its decision on the granting of deposit insurance.
Under the proposed policy statement, the FDIC would establish standards for bidder
eligibility in connection with the resolution of failed insured depository institutions, which
provide for:
• capital support of the acquired depository institution;
• agreement to a cross guarantee over substantially commonly owned depository
institutions;
• limits on transactions with affiliates;
• maintenance of continuity of ownership;
• clear limits on secrecy law jurisdiction vehicles as the channel for investments;
• limitations on whether existing investors in an institution could bid on it if it failed;
and
• disclosure commitments.
The FDIC is keenly aware of the need for additional capital in the banking system, and
the contribution that private equity capital could make to meeting this need provided this
contribution is consistent with basic concepts applicable to the ownership of these
institutions that are contained in our banking laws and regulations, and now
summarized in the proposed Policy Statement.
One of the most important safeguard elements in the Proposed Policy Statement is the
requirement that the acquired depository institution be very well capitalized at a Tier 1
leverage ratio of 15 percent, to be maintained for a period of at least 3 years, and
thereafter at a "well capitalized" level.
Safety and soundness considerations may also be satisfied with a lower, but a still high
level, of Tier 1 capital. Accordingly, the FDIC seeks the views of commenters on the
appropriate level of initial capital that will satisfy concerns relating to both safety and
soundness and the economic viability of the terms of investment in insured depository
institutions.
While the issue of capital adequacy is of paramount importance, the FDIC is seeking
comment on all aspects of the proposed policy statement, including nine specific
questions set out in the Notice of Public Comment. Comments are due 30 days from the
date of publication in the Federal Register.
# # #