On July 2, the Federal Deposit Insurance Corporation (FDIC) released for comment a Proposed Statement on Qualifications for Failed Bank Acquisitions (Proposed Statement). The Proposed Statement is intended to be guidance for capital investors interested in acquiring or investing in failed depository institutions and sets forth proposed terms and conditions for such investments or acquisitions.
Pursuant to the Proposed Statement, bidders who are eligible to make bids in connection with the resolution of a failed depository institution would have to meet the following standards: (i) capital support of the depository institution; (ii) agreement to cross-guarantee over substantially commonly owned depository institutions; (iii) limits on transactions with affiliates; (iv) maintenance of continuity of ownership; (v) clear limits on secrecy law jurisdiction vehicles as the channel for investments; (vi) limitations on whether existing investors in an institution could bid on it if it failed; and (vii) disclosure commitments.
In addition, the Proposed Statement sets forth a requirement that a depository institution acquired by a capital investor be very well capitalized at a Tier 1 leverage ratio of 15%, to be maintained for a period of at least three years, and thereafter at a well capitalized level.
In the release, the FDIC also issued a series of questions related to the Proposed Statement and seeks specific public input on certain aspects of the proposal.
Comments are due 30 days from the date of publication in the Federal Register.
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