The FDIC has released questions and answers related to its Statement of Policy on Qualifications for Failed Bank Acquisitions (“Statement of Policy”), which was issued on August 26, 2009, to provide guidance to investors interested in acquiring the assets and liabilities of failed banks and thrifts. The Statement of Policy does not apply to “investors in partnerships or similar ventures with bank or thrift holding companies or in such holding companies (excluding shell holding companies) where the holding company has a strong majority interest in the resulting bank or thrift and an established record for successful operation of insured banks or thrifts." The Statement of Policy also excludes “any investor with 5 percent or less of the total voting power of an acquired depository institution or its bank or thrift holding company provided there is no evidence of concerted action among these investors.” The questions and answers aim to clarify four aspects of these exclusions.

What constitutes a “strong majority interest”?

The FDIC will not apply the Statement of Policy to investments in a failed bank or thrift that are made by private investors who invest through a partnership or venture with an established bank or thrift holding company as long as the private investors do not hold more than one-third of both the total equity and the voting equity of the partnership or joint venture following the acquisition of the failed bank or thrift.

How does the Statement of Policy apply to private investors who invest directly in an established bank or thrift holding company that is acquiring the assets and liabilities of a failed bank or thrift, rather than investing in a partnership or joint venture with an established holding company?

The Statement of Policy would not apply in such situations, as long as the shareholders of the established bank or thrift holding company own at least two-thirds of the total equity of the resulting bank or thrift holding company.

How does the FDIC determine if there has been “concerted action among investors”?

Such determinations are made based on a facts and circumstances analysis. Investors who own 5% or less of the total voting power of an acquired institution or holding company, and who participate in widespread offerings, will not generally be considered to have acted in concert if, after their investments, they hold an aggregate of two-thirds or less of the total voting power. However, the FDIC will presume concerted action among investors who own less than 5% of voting stock if, following their investments, neither the investors nor the applicable depository institution are subject to the Statement of Policy, and, in the aggregate, they own more than two-thirds of the total voting power. Such a presumption can be rebutted if the investors or their placement agents can prove that the investors were not acting in concert.

Does the 5% exclusion apply to investors who own less than 5% of the voting power but more than 5% of the resulting bank’s equity, provided there is no concerted action?

If the non-voting shares cannot be converted to voting shares, they will not be aggregated with the number of voting shares for purposes of the applying the Statement of Policy. If the non-voting shares can be converted to voting shares, and the investor is not required to transfer them following such conversion, the non-voting shares will be aggregated with the voting shares for purposes of applying the Statement of Policy. Should an investor own 5% or more of the voting equity of a depository institution or its bank, financial or thrift holding company, the Statement of Policy would apply to that investor, as well as to the acquiring insured depository institution.