Underscoring the importance that the federal banking regulators are placing on attracting new private capital to the banking industry, today the OCC announced its “conditional preliminary approval” of an application from an investor group to establish a new national bank for the primary purpose of acquiring assets and assuming deposits of failed institutions. The OCC approved a “shelf charter” for Ford Group Bank, National Association, which would become an active national bank upon satisfaction of certain conditions including Federal Reserve membership for the bank and Bank Holding Company Act approval for the bank’s holding company, FDIC deposit insurance approval for the bank, and a successful bid to acquire a failed or troubled institution. The holding company of the bank will be owned by a group of investors that includes public corporations and several private equity funds, at least one of whom would likely also have to register as a bank holding company.
The OCC stated that the primary purpose of the new bank is to “assume[e] liabilities and purchas[e] assets from the [FDIC] acting as the receiver of a depository institution, inasmuch as only chartered depository institutions may assume deposit liabilities from the FDIC.” By granting preliminary approval for a shelf charter, the OCC intends to expand the pool of potential bidders available to buy troubled assets and effectively open the door to purchasers that may not otherwise be positioned to place bids.
Importantly, because the new bank’s size, scope and activities are unclear until such time as it is approved as a purchaser by the FDIC, the applicants are not able to provide a traditional business plan during the chartering process. Instead, the OCC based its preliminary approval predominantly on the experience of the management team, sources of capital and confirmation that any acquisition will be reviewed and approved by the OCC in advance.
During its preliminary stage, the new bank must provide monthly updates of all material changes in the information previously submitted to the OCC and status updates of all outstanding purchase and assumption applications. The OCC will grant final approval of the bank at the time of its first acquisition, and require a comprehensive business plan at that time that would include the traditional business plan components as well as the target’s initial capitalization and proposed operations with an emphasis on the first 60 days following acquisition. The first transaction must occur within 18-months of the preliminary approval.
Presumably, this transaction and the OCC’s willingness to grant a preliminary shelf charter will be of particular interest to those investors currently outside of the banking arena who are intrigued by the possibility of buying failed or troubled institutions or assets and who would like to be in a position to bid quickly as opportunities arise. This approval provides a roadmap to a new alternative for such investors.