FDIC may ease bank-buying rules
Written on August 27, 2009
The Federal Deposit Insurance Corp. is poised to make it easier for private-equity firms to buy banks after the fastest pace of bank closings in 17 years cost the agency’s insurance fund more than $21 billion.
The FDIC board meets today in Washington and probably will lower the requirements for private investors to buy failed lenders after a proposal made in July sparked opposition from the industry. The agency needs new bidders as bankers avoid buying failed lenders, forcing the FDIC to share losses or take other steps that deplete its insurance fund.
"There are a lot of private-equity bidders that have been waiting to see how this rule plays out," Mark Tenhundfeld, senior vice president at the American Bankers Association, said Monday. "As modified, I think private equity is likelier to want to get back in the game."
Banks are collapsing at the fastest pace since 1992, with 81 failures so far this year, as losses mount on unpaid real estate debt. The failures have cost the FDIC’s deposit insurance fund an estimated $21.5 billion so far this year. The agency may impose an emergency fee in the third quarter — sooner than planned — to replenish the fund, the second such assessment this year.
The modifications may lower to 10 percent from 15 percent the Tier 1 capital ratio private-equity investors must maintain after buying a bank, Tenhundfeld said. Tier 1 ratios measure a lender’s ability to withstand losses and new banks must maintain at least 8 percent to be deemed well capitalized.
FDIC spokesman Andrew Gray said the agency sought feedback to refine the proposal.
The FDIC has twice brokered deals with investor groups this year. In March, California-based IndyMac Federal Bank was sold to investors led by Steven Mnuchin, an ex-Goldman Sachs Group Inc. investment banker, and including buyout firm J.C. Flowers & Co. Florida’s BankUnited Financial Corp. was sold in May to firms including Blackstone Group and WL Ross & Co.
The FDIC insures consumer deposits at lenders, finds buyers for banks on the verge of collapse and unwinds them after they fail. The agency in July gave the industry 30 days to comment and today plans to release modified rules based on that feedback.
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