FDIC Issues More FAQs on Statement of Policy Relating to Acquisitions of Failed Banks

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The Federal Deposit Insurance Corp. (FDIC) has issued further interpretive guidance on its Statement of Policy Relating to Acquisitions of Failed Banks. The FDIC adopted the Statement of Policy last year, putting in place stringent eligibility requirements unique to ownership structures in which investors seeking to acquire failed banks and thrifts from the FDIC do not partner with an established bank to acquire the failed bank or thrift. Responding to the requirements of the original Statement of Policy, investors have sought to develop efficient upstream capital delivery structures and strategies to fund failed bank acquisitions. Having reviewed more than a few new approaches, the FDIC has clarified its position on some of the new structures that can fairly be viewed as continuing to discourage the flow of capital into failed bank acquisitions.

FDIC Will Scrutinize Recaps Designed to Avoid Statement of Policy

The Statement of Policy does not apply to acquisitions of failed banks where an established bank, in partnership with private investors, holds a “strong majority interest” in the joint venture or target failed bank and the established bank has a record of successfully operating depository institutions. The FDIC defines a “strong majority interest” to mean ownership structures in which an established depository institution will hold at least two-thirds of the total equity and voting equity of the acquired failed bank. Investors have sought to satisfy the strong majority interest requirement by investing in established banks, which can then be used as a platform for acquiring failed banks without being subject to the Statement of Policy. In contrast, an investor who directly acquires a 5% or greater voting interest in a failed bank in receivership would be subject to the Statement of Policy, including the obligation to hold the investment for a minimum of three years.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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