45440 Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices
1 74 FR 32931 (Jul. 9, 2009)
Dated: August 20, 2009.
Andrew M. Gaydosh,
Acting Regional Administrator, Region 8.
[FR Doc. E9–20801 Filed 9–1–09; 8:45 am]
BILLING CODE 6560–50–P
FARM CREDIT ADMINISTRATION
Farm Credit Administration Board;
Regular Meeting
AGENCY: Farm Credit Administration.
SUMMARY: Notice is hereby given,
pursuant to the Government in the
Sunshine Act (5 U.S.C. 552b(e)(3)), of
the regular meeting of the Farm Credit
Administration Board (Board).
Date and Time: The regular meeting
of the Board will be held at the offices
of the Farm Credit Administration in
McLean, Virginia, on September 10,
2009, from 9 a.m. until such time as the
Board concludes its business.
FOR FURTHER INFORMATION CONTACT:
Roland E. Smith, Secretary to the Farm
Credit Administration Board, (703) 883–
4009, TTY (703) 883–4056.
ADDRESSES: Farm Credit
Administration, 1501 Farm Credit Drive,
McLean, Virginia 22102–5090.
SUPPLEMENTARY INFORMATION: Parts of
this meeting of the Board will be open
to the public (limited space available),
and parts will be closed to the public.
In order to increase the accessibility to
Board meetings, persons requiring
assistance should make arrangements in
advance. The matters to be considered
at the meeting are:
Open Session
A. Approval of Minutes
• August 13, 2009.
B. New Business
• Fall 2009 Abstract of the Unified
Agenda of Federal Regulatory and
Deregulatory Actions and Fall 2009
Regulatory Performance Plan.
Closed Session*
A. Reports
• Office of Secondary Market
Oversight Quarterly Report.
B. New Business
• Supervisory Actions.
Dated: August 28, 2009.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
*Session Closed—Exempt pursuant to
5 U.S.C. 552b(c)(8) and (9).
[FR Doc. E9–21291 Filed 8–31–09; 4:15 pm]
BILLING CODE 6705–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
RIN 3064–AD47
Final Statement of Policy on
Qualifications for Failed Bank
Acquisitions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final statement of policy.
SUMMARY: The FDIC is issuing a Final
Statement of Policy on Qualifications
for Failed Bank Acquisitions (Final
Statement). This Final Statement
provides guidance to private capital
investors interested in acquiring or
investing in failed insured depository
institutions regarding the terms and
conditions for such investments or
acquisitions.
DATES: Effective Date: August 26, 2009.
FOR FURTHER INFORMATION CONTACT:
Catherine Topping, Counsel, Legal
Division, (202) 898–3975 or
ctopping@fdic.gov, Charles A. Fulton,
Counsel, Legal Division, (703) 562–2424
or chfulton@fdic.gov, Lisa Arquette,
Associate Director, (202) 898–8633 or
larquette@fdic.gov, or Mindy West,
Chief, Policy and Program Development,
Division of Supervision and Consumer
Protection, (202) 898–7221 or
miwest@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
On July 9, 2009, the FDIC published
for comment a Proposed Statement of
Policy on Qualifications for Failed Bank
Acquisitions (Proposed Policy
Statement) with a 30-day comment
period to provide guidance to private
capital investors interested in acquiring
the deposit liabilities, or both such
liabilities and assets, of failed insured
depository institutions regarding the
terms and conditions for such
investments or acquisitions.1 After
carefully reviewing and considering all
comments, the FDIC has adopted certain
revisions and clarifications to the
Proposed Policy Statement (as discussed
in Part III) in the Final Statement.
The FDIC is 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 insured depository
institutions that are contained in the
established banking laws and
regulations. The preamble to the
Proposed Policy Statement explained
that in view of the increased number of
bank and thrift failures and the increase
in interest by private capital investors in
acquiring insured depository
institutions in receivership, the FDIC
determined to issue, in proposed form,
guidance to potential acquirers. In
developing the Proposed Policy
Statement, the FDIC sought to establish
the proper balance in a number of
important areas including the level of
capital required for these de novo
institutions and whether these owners
would be a source of strength to the
banks and thrifts in which they have
invested. The FDIC also considered the
important policy issues raised by the
structure of investments in insured
depository institutions, particularly
with respect to their compliance with
the requirements applied by the FDIC in
its decision on the granting of deposit
insurance and with the statutes and
regulations aimed at assuring the safety
and soundness of insured depository
institutions and protecting the Deposit
Insurance Fund (‘‘DIF’’).
In the Introduction to the Proposed
Policy Statement, the FDIC set forth its
reasons for adopting a policy on private
capital participating in the acquisition
of or investment in failed insured
depository institutions. In part, the
Introduction stated:
Capital investments by individuals and
limited liability companies acting through
holding companies operating within a well
developed prudential framework has long
been the dominant form of ownership of
insured depository institutions. From the
perspective of the FDIC’s interest as insurer
and supervisor of insured depository
institutions, this framework has included, in
particular, measures aimed at maintaining
well capitalized bank and thrift institutions,
support for these banks when they face
difficulties, and protections against insider
transactions. The ability of the owners to
provide financial support to depository
institutions with adequate capital and
management expertise are essential
safeguards. These safeguards are particularly
appropriate for owners of insured depository
institutions given the important benefits
conferred on depository institutions by
deposit insurance.
* * * The FDIC is also aware that new
banks, regardless of their investor
composition, pose an elevated risk to the
deposit insurance fund since they generally
lack a core base of business, a proven track
record in the banking industry, and are
vulnerable to significant losses in the early
years of incorporation.
The FDIC is of the view that private capital
participation in the acquisition of the deposit
liabilities, or both such liabilities and assets,
from a failed depository institution in
receivership should be consistent with the
foregoing basic elements of insured
depository institution ownership. * * *
VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1
jlentini on DSKJ8SOYB1PROD with NOTICES
1 74 FR 32931 (Jul. 9, 2009)
Dated: August 20, 2009.
Andrew M. Gaydosh,
Acting Regional Administrator, Region 8.
[FR Doc. E9–20801 Filed 9–1–09; 8:45 am]
BILLING CODE 6560–50–P
FARM CREDIT ADMINISTRATION
Farm Credit Administration Board;
Regular Meeting
AGENCY: Farm Credit Administration.
SUMMARY: Notice is hereby given,
pursuant to the Government in the
Sunshine Act (5 U.S.C. 552b(e)(3)), of
the regular meeting of the Farm Credit
Administration Board (Board).
Date and Time: The regular meeting
of the Board will be held at the offices
of the Farm Credit Administration in
McLean, Virginia, on September 10,
2009, from 9 a.m. until such time as the
Board concludes its business.
FOR FURTHER INFORMATION CONTACT:
Roland E. Smith, Secretary to the Farm
Credit Administration Board, (703) 883–
4009, TTY (703) 883–4056.
ADDRESSES: Farm Credit
Administration, 1501 Farm Credit Drive,
McLean, Virginia 22102–5090.
SUPPLEMENTARY INFORMATION: Parts of
this meeting of the Board will be open
to the public (limited space available),
and parts will be closed to the public.
In order to increase the accessibility to
Board meetings, persons requiring
assistance should make arrangements in
advance. The matters to be considered
at the meeting are:
Open Session
A. Approval of Minutes
• August 13, 2009.
B. New Business
• Fall 2009 Abstract of the Unified
Agenda of Federal Regulatory and
Deregulatory Actions and Fall 2009
Regulatory Performance Plan.
Closed Session*
A. Reports
• Office of Secondary Market
Oversight Quarterly Report.
B. New Business
• Supervisory Actions.
Dated: August 28, 2009.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
*Session Closed—Exempt pursuant to
5 U.S.C. 552b(c)(8) and (9).
[FR Doc. E9–21291 Filed 8–31–09; 4:15 pm]
BILLING CODE 6705–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
RIN 3064–AD47
Final Statement of Policy on
Qualifications for Failed Bank
Acquisitions
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final statement of policy.
SUMMARY: The FDIC is issuing a Final
Statement of Policy on Qualifications
for Failed Bank Acquisitions (Final
Statement). This Final Statement
provides guidance to private capital
investors interested in acquiring or
investing in failed insured depository
institutions regarding the terms and
conditions for such investments or
acquisitions.
DATES: Effective Date: August 26, 2009.
FOR FURTHER INFORMATION CONTACT:
Catherine Topping, Counsel, Legal
Division, (202) 898–3975 or
ctopping@fdic.gov, Charles A. Fulton,
Counsel, Legal Division, (703) 562–2424
or chfulton@fdic.gov, Lisa Arquette,
Associate Director, (202) 898–8633 or
larquette@fdic.gov, or Mindy West,
Chief, Policy and Program Development,
Division of Supervision and Consumer
Protection, (202) 898–7221 or
miwest@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
On July 9, 2009, the FDIC published
for comment a Proposed Statement of
Policy on Qualifications for Failed Bank
Acquisitions (Proposed Policy
Statement) with a 30-day comment
period to provide guidance to private
capital investors interested in acquiring
the deposit liabilities, or both such
liabilities and assets, of failed insured
depository institutions regarding the
terms and conditions for such
investments or acquisitions.1 After
carefully reviewing and considering all
comments, the FDIC has adopted certain
revisions and clarifications to the
Proposed Policy Statement (as discussed
in Part III) in the Final Statement.
The FDIC is 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 insured depository
institutions that are contained in the
established banking laws and
regulations. The preamble to the
Proposed Policy Statement explained
that in view of the increased number of
bank and thrift failures and the increase
in interest by private capital investors in
acquiring insured depository
institutions in receivership, the FDIC
determined to issue, in proposed form,
guidance to potential acquirers. In
developing the Proposed Policy
Statement, the FDIC sought to establish
the proper balance in a number of
important areas including the level of
capital required for these de novo
institutions and whether these owners
would be a source of strength to the
banks and thrifts in which they have
invested. The FDIC also considered the
important policy issues raised by the
structure of investments in insured
depository institutions, particularly
with respect to their compliance with
the requirements applied by the FDIC in
its decision on the granting of deposit
insurance and with the statutes and
regulations aimed at assuring the safety
and soundness of insured depository
institutions and protecting the Deposit
Insurance Fund (‘‘DIF’’).
In the Introduction to the Proposed
Policy Statement, the FDIC set forth its
reasons for adopting a policy on private
capital participating in the acquisition
of or investment in failed insured
depository institutions. In part, the
Introduction stated:
Capital investments by individuals and
limited liability companies acting through
holding companies operating within a well
developed prudential framework has long
been the dominant form of ownership of
insured depository institutions. From the
perspective of the FDIC’s interest as insurer
and supervisor of insured depository
institutions, this framework has included, in
particular, measures aimed at maintaining
well capitalized bank and thrift institutions,
support for these banks when they face
difficulties, and protections against insider
transactions. The ability of the owners to
provide financial support to depository
institutions with adequate capital and
management expertise are essential
safeguards. These safeguards are particularly
appropriate for owners of insured depository
institutions given the important benefits
conferred on depository institutions by
deposit insurance.
* * * The FDIC is also aware that new
banks, regardless of their investor
composition, pose an elevated risk to the
deposit insurance fund since they generally
lack a core base of business, a proven track
record in the banking industry, and are
vulnerable to significant losses in the early
years of incorporation.
The FDIC is of the view that private capital
participation in the acquisition of the deposit
liabilities, or both such liabilities and assets,
from a failed depository institution in
receivership should be consistent with the
foregoing basic elements of insured
depository institution ownership. * * *
VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 PO 00000 Frm 00029 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1
jlentini on DSKJ8SOYB1PROD with NOTICES
45441Federal Register / Vol. 74, No. 169 / Wednesday, September 2, 2009 / Notices
2 See http://www.fdic.gov/regulations/laws/
federal/2009/09comAD47.html.
* * * The FDIC is particularly concerned
that owners of banks and thrifts, whether
they are individuals, partnerships, limited
liability companies, or corporations, accept
the responsibility to serve as responsible
custodians of the public interest that is
inherent in insured depository institutions
and will devote the efforts to assuring that
banks or thrifts acquired with assistance from
the deposit insurance fund do not return to
the category of troubled institutions.
These same reasons underlie the need
to adopt the Final Statement described
below.
The Proposed Policy Statement
described the terms and conditions that
private capital investors would be
expected to satisfy to obtain bidding
eligibility for a proposed acquisition
structure. These standards would apply
to (1) private capital investors in certain
companies that sought to assume
deposit liabilities or both such deposit
liabilities and assets from a failed
insured depository institution and (2)
private capital investors involved in
applications for deposit insurance in
conjunction with de novo charters
issued in connection with the resolution
of failed insured depository institutions
(hereinafter ‘‘Investors’’). As more fully
summarized below, the Proposed Policy
Statement provided, among other
measures, standards for capital support
of an acquired depository institution; an
agreement to a cross guarantee over
substantially commonly-owned
depository institutions; limits on
transactions with affiliates; maintenance
of continuity of ownership; and
avoidance of secrecy law jurisdictions
as investment channels, absent
consolidated home country supervision.
Capital Commitment
The Proposed Policy Statement
required private investors to agree to
cause an insured depository institution
acquiring a failed bank’s deposit
liabilities, or both such deposit
liabilities and assets, to have a Tier 1
leverage ratio of 15 percent for the first
three years of operation, subject to
further extensions by the FDIC.
Thereafter, such investors would be
required to cause the insured depository
institution’s capital to remain at ‘‘well
capitalized’’ levels for the duration of
their ownership. The FDIC explained
that failing to meet those standards
could cause the insured depository
institution to be considered
‘‘undercapitalized’’ for purposes of
Prompt Corrective Action and other
supervisory measures.
Source of Strength
The FDIC would require Investors
covered by its Proposed Policy
Statement to agree to serve as a source
of strength for subsidiary depository
institutions. As necessary, the Proposed
Policy Statement required depository
institution holding companies in which
such Investors held interests to sell
equity or to engage in capital qualifying
borrowing.
Cross Guarantees
If Investors had an individual or
collective investment that constituted a
majority interest in more than one
insured depository institution, the
Proposed Policy Statement required
them to pledge to the FDIC their interest
in each institution to cover losses to the
Deposit Insurance Fund caused by the
failure of such insured depository
institution(s) or by the FDIC’s provision
of assistance to such institutions.
Transactions With Affiliates
The Proposed Policy Statement
prohibited extensions of credit to an
Investor by an insured depository
institution acquired or controlled by the
Investor. According to the Proposed
Policy Statement, this prohibition also
applied to related investment funds, any
affiliates (that is, any company in which
an Investor owns 10 percent or more),
and to any companies in which the
Investor or its affiliates invested.
Secrecy Law Jurisdictions
The Proposed Policy Statement
prohibited investors in entities
domiciled in bank secrecy jurisdictions
from making a direct or indirect
investment in an insured depository
institution unless the investors are
subsidiaries of companies subject to
comprehensive consolidated
supervision, as recognized by the Board
of Governors of the Federal Reserve
System. Among other things, such
investors also would be required to
agree to provide information to their
primary Federal regulator, abide by
statutes and regulations administered by
U.S. banking agencies, consent to U.S.
jurisdiction, and cooperate with the
FDIC.
Continuity of Ownership
Absent the FDIC’s prior approval, the
Proposed Policy Statement would
prohibit covered Investors from selling
or transferring securities of their holding
company or insured depository
institution for three years following
acquisition. The FDIC indicated that it
did not expect to approve such transfers
within the initial three-year period
unless the buyer agreed to be bound by
the same conditions of the Proposed
Policy Statement that were applicable to
the Investor.
Disclosures
The Proposed Policy Statement
provided for disclosures of certain
specified information (and other non
specified information deemed necessary
by the FDIC) from Investors and other
entities in their ownership chains.
II. Overview of the Comments
The FDIC requested public comment
on all aspects of the Proposed Policy
Statement and set forth nine specific
questions for consideration by
commenters. The issues presented by
the specific questions included the
definition of the ‘‘investors’’ to whom
the policies would apply; the bidding
eligibility of so-called ‘‘silo’’ structures;
the appropriate capital levels for failed
insured depository institutions acquired
by private capital investors; whether
source of strength commitments should
be required and the scope of such
commitments; whether cross guarantee
commitments should be required and
the scope of such commitments; the
bidding eligibility of entities established
in bank secrecy jurisdictions; whether a
three-year continuity of ownership rule
is the appropriate period of time; the
bidding eligibility of investors that
directly or indirectly hold 10 percent or
more of the equity of a bank or thrift in
receivership; and whether the proposed
limitations should be lifted after a
certain number of years of successful
operation of a bank or thrift holding
company.
The FDIC received 61 individual
comment letters.2 The comment letters
were sent by private investment firms,
investment advisory firms, law firms,
insured depository institutions,
advocacy organizations, financial
services trade associations, 4 United
States Senators, a labor union, research
organizations, academics, and 6
individuals. Most of the commenters
were private capital firms or their
representatives that would be affected
by the Proposed Policy Statement. The
FDIC also received 3,190 form letter
comments in support of the Proposed
Policy Statement.
Many commenters expressed the
general view that limitations and
restrictions contained in the Proposed
Policy Statement would deter many
private capital investors and inhibit the
flow of capital into failed banks,
resulting in greater costs to the DIF. On
the other hand, some commenters stated
that they did not have confidence in the
motives of private equity investors
because of their short-term investment
objectives and limited regulatory
VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1
jlentini on DSKJ8SOYB1PROD with NOTICES
2 See http://www.fdic.gov/regulations/laws/
federal/2009/09comAD47.html.
* * * The FDIC is particularly concerned
that owners of banks and thrifts, whether
they are individuals, partnerships, limited
liability companies, or corporations, accept
the responsibility to serve as responsible
custodians of the public interest that is
inherent in insured depository institutions
and will devote the efforts to assuring that
banks or thrifts acquired with assistance from
the deposit insurance fund do not return to
the category of troubled institutions.
These same reasons underlie the need
to adopt the Final Statement described
below.
The Proposed Policy Statement
described the terms and conditions that
private capital investors would be
expected to satisfy to obtain bidding
eligibility for a proposed acquisition
structure. These standards would apply
to (1) private capital investors in certain
companies that sought to assume
deposit liabilities or both such deposit
liabilities and assets from a failed
insured depository institution and (2)
private capital investors involved in
applications for deposit insurance in
conjunction with de novo charters
issued in connection with the resolution
of failed insured depository institutions
(hereinafter ‘‘Investors’’). As more fully
summarized below, the Proposed Policy
Statement provided, among other
measures, standards for capital support
of an acquired depository institution; an
agreement to a cross guarantee over
substantially commonly-owned
depository institutions; limits on
transactions with affiliates; maintenance
of continuity of ownership; and
avoidance of secrecy law jurisdictions
as investment channels, absent
consolidated home country supervision.
Capital Commitment
The Proposed Policy Statement
required private investors to agree to
cause an insured depository institution
acquiring a failed bank’s deposit
liabilities, or both such deposit
liabilities and assets, to have a Tier 1
leverage ratio of 15 percent for the first
three years of operation, subject to
further extensions by the FDIC.
Thereafter, such investors would be
required to cause the insured depository
institution’s capital to remain at ‘‘well
capitalized’’ levels for the duration of
their ownership. The FDIC explained
that failing to meet those standards
could cause the insured depository
institution to be considered
‘‘undercapitalized’’ for purposes of
Prompt Corrective Action and other
supervisory measures.
Source of Strength
The FDIC would require Investors
covered by its Proposed Policy
Statement to agree to serve as a source
of strength for subsidiary depository
institutions. As necessary, the Proposed
Policy Statement required depository
institution holding companies in which
such Investors held interests to sell
equity or to engage in capital qualifying
borrowing.
Cross Guarantees
If Investors had an individual or
collective investment that constituted a
majority interest in more than one
insured depository institution, the
Proposed Policy Statement required
them to pledge to the FDIC their interest
in each institution to cover losses to the
Deposit Insurance Fund caused by the
failure of such insured depository
institution(s) or by the FDIC’s provision
of assistance to such institutions.
Transactions With Affiliates
The Proposed Policy Statement
prohibited extensions of credit to an
Investor by an insured depository
institution acquired or controlled by the
Investor. According to the Proposed
Policy Statement, this prohibition also
applied to related investment funds, any
affiliates (that is, any company in which
an Investor owns 10 percent or more),
and to any companies in which the
Investor or its affiliates invested.
Secrecy Law Jurisdictions
The Proposed Policy Statement
prohibited investors in entities
domiciled in bank secrecy jurisdictions
from making a direct or indirect
investment in an insured depository
institution unless the investors are
subsidiaries of companies subject to
comprehensive consolidated
supervision, as recognized by the Board
of Governors of the Federal Reserve
System. Among other things, such
investors also would be required to
agree to provide information to their
primary Federal regulator, abide by
statutes and regulations administered by
U.S. banking agencies, consent to U.S.
jurisdiction, and cooperate with the
FDIC.
Continuity of Ownership
Absent the FDIC’s prior approval, the
Proposed Policy Statement would
prohibit covered Investors from selling
or transferring securities of their holding
company or insured depository
institution for three years following
acquisition. The FDIC indicated that it
did not expect to approve such transfers
within the initial three-year period
unless the buyer agreed to be bound by
the same conditions of the Proposed
Policy Statement that were applicable to
the Investor.
Disclosures
The Proposed Policy Statement
provided for disclosures of certain
specified information (and other non
specified information deemed necessary
by the FDIC) from Investors and other
entities in their ownership chains.
II. Overview of the Comments
The FDIC requested public comment
on all aspects of the Proposed Policy
Statement and set forth nine specific
questions for consideration by
commenters. The issues presented by
the specific questions included the
definition of the ‘‘investors’’ to whom
the policies would apply; the bidding
eligibility of so-called ‘‘silo’’ structures;
the appropriate capital levels for failed
insured depository institutions acquired
by private capital investors; whether
source of strength commitments should
be required and the scope of such
commitments; whether cross guarantee
commitments should be required and
the scope of such commitments; the
bidding eligibility of entities established
in bank secrecy jurisdictions; whether a
three-year continuity of ownership rule
is the appropriate period of time; the
bidding eligibility of investors that
directly or indirectly hold 10 percent or
more of the equity of a bank or thrift in
receivership; and whether the proposed
limitations should be lifted after a
certain number of years of successful
operation of a bank or thrift holding
company.
The FDIC received 61 individual
comment letters.2 The comment letters
were sent by private investment firms,
investment advisory firms, law firms,
insured depository institutions,
advocacy organizations, financial
services trade associations, 4 United
States Senators, a labor union, research
organizations, academics, and 6
individuals. Most of the commenters
were private capital firms or their
representatives that would be affected
by the Proposed Policy Statement. The
FDIC also received 3,190 form letter
comments in support of the Proposed
Policy Statement.
Many commenters expressed the
general view that limitations and
restrictions contained in the Proposed
Policy Statement would deter many
private capital investors and inhibit the
flow of capital into failed banks,
resulting in greater costs to the DIF. On
the other hand, some commenters stated
that they did not have confidence in the
motives of private equity investors
because of their short-term investment
objectives and limited regulatory
VerDate Nov<24>2008 16:56 Sep 01, 2009 Jkt 217001 PO 00000 Frm 00030 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1
jlentini on DSKJ8SOYB1PROD with NOTICES