The Federal Deposit Insurance Corporation (FDIC) released revised FAQs on April 23, 2010 (available on the FDIC website at, which supplement the FAQs it issued on January 7, 2010 regarding its Statement of Policy on Qualifications for Failed Bank Acquisitions (PE Policy Statement). See FDIC Issues Revised FAQs Regarding Its Private Equity Policy Statement, 21st Century Money, Banking & Commerce Alert® (Jan. 11, 2010). The additional FAQs respond to and provide useful clarification of many of the issues that we have pointed out in our recent article regarding potential hazards for private equity investors. See Viewpoint: Clear Up Capital Regs, Free Up Capital Access, American Banker (Apr. 20, 2010). Based in part on subsequent discussions with the FDIC, we expect the FDIC to issue additional written guidance shortly to further standardize the processes involved in making failed bank acquisitions under the PE Policy Statement. That guidance should further clarify topics such as the size and timing of capital infusions by investors into a shelf charter or other bank investment vehicle.

Organizers of investment vehicles and their investors have had to deal with ever-expanding and changing interpretations of the PE Policy Statement by the FDIC, in which the requirements of or exemptions from coverage have been a moving target. The new FAQs attempt to paint a clearer picture of the rules, but the target is still shifting a bit. For example, the earlier FAQs provided that exempt private equity investors (investors acquiring not more than 5% of the voting equity) in an investment vehicle seeking to acquire a failed bank may not hold collectively more than two-thirds of the total voting equity of such entity. The earlier FAQs also allowed for rebuttal of this limit. The new FAQs require that at least one-third of the total voting equity or total equity of the entity must be held by an “anchor group” of investors (which may include investors under 5% that are subject to or agree to be subject to all provisions of the PE Policy Statement).

On the other hand, the new FAQs clarify the type and limit the scope of information that private equity investors acquiring less than 5% of the voting stock must provide to the FDIC. The FAQs do not address the issues that have arisen where other federal or state banking regulators with concurrent jurisdiction over a transaction have expressed differing views about acquirer eligibility, funding commitments, timing of investments and similar matters.

Perhaps most problematic for small private equity investors has been the FDIC’s application of the concept of “concerted action” to determine whether investors may be subject to the PE Policy Statement. In some instances, this has triggered voluminous information requests and great delay in finalizing the status of investors and investment vehicles. We expect that the FDIC will take steps to rectify this situation.

The dialogue between the FDIC and private equity investors continues, and in the process, each side is attempting to accommodate the requirements of the other. From the signals given by the FDIC, it appears that the agency is listening and is thinking constuctively about how it can refine its recently-minted private investor acquisition policies.