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FDIC Eases Rules on Failed Bank Asset Purchases
December 1, 2008
The FDIC announced last week that it is altering the requirements for companies interested in bidding on failed bank assets in an effort to attract more potential buyers.
The government is going outside of the financial services sector in an attempt to find bidders for the growing pool of assets of failed financial institutions, the first time it has ever done so, according to a spokesman for the regulator.
The FDIC late last week announced that it was establishing a modified bidder qualification process to expand the pool of qualified bidders for the deposits and assets of failing depository institutions, allowing parties that do not currently have a bank charter to participate in the bid process through which failing depository institutions are resolved.
“The FDIC recognizes that investors not organized as an FDIC insured depository institution or holding company may potentially be interested in bidding to purchase a failing institution,” the agency said in a prepared statement. Speed is essential, the agency added, so the regulator will consider abbreviated information submissions and applications, and may issue conditional approval for Deposit Insurance, in order to qualify interested parties for the FDIC's failing institution bidders list.
“There’s been a lot of interest, [but] we have only 90 days to market a failing bank,” said FDIC spokesperson David Barr. “That’s not always enough time to get the necessary charters and approvals. This system would open up the bidding process to those who do not have a banking charter.”
Investors must have conditional approval for a charter from the responsible agency (e.g., FDIC, Office of Thrift Supervision) and meet the bid criteria established by the FDIC. In certain cases it would also be necessary to obtain conditional approval to establish a bank or thrift holding company.
Federal and state agencies are coordinating on specific information needs and timing requirements and ultimately the granting of a charter and deposit insurance.
“It’s important to point out that this isn’t being done to circumvent any of the necessary approvals,” Barr added.
In order to qualify for the bidding process, bidders would need to have a business plan that complies with the Community Reinvestment Act, readily available capital, and a management team subject to financial and biographical review.
The FDIC late last week announced that it was establishing a modified bidder qualification process to expand the pool of qualified bidders for the deposits and assets of failing depository institutions, allowing parties that do not currently have a bank charter to participate in the bid process through which failing depository institutions are resolved.
“The FDIC recognizes that investors not organized as an FDIC insured depository institution or holding company may potentially be interested in bidding to purchase a failing institution,” the agency said in a prepared statement. Speed is essential, the agency added, so the regulator will consider abbreviated information submissions and applications, and may issue conditional approval for Deposit Insurance, in order to qualify interested parties for the FDIC's failing institution bidders list.
“There’s been a lot of interest, [but] we have only 90 days to market a failing bank,” said FDIC spokesperson David Barr. “That’s not always enough time to get the necessary charters and approvals. This system would open up the bidding process to those who do not have a banking charter.”
Investors must have conditional approval for a charter from the responsible agency (e.g., FDIC, Office of Thrift Supervision) and meet the bid criteria established by the FDIC. In certain cases it would also be necessary to obtain conditional approval to establish a bank or thrift holding company.
Federal and state agencies are coordinating on specific information needs and timing requirements and ultimately the granting of a charter and deposit insurance.
“It’s important to point out that this isn’t being done to circumvent any of the necessary approvals,” Barr added.
In order to qualify for the bidding process, bidders would need to have a business plan that complies with the Community Reinvestment Act, readily available capital, and a management team subject to financial and biographical review.
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Comments
Comment from Ron West, Cold Spring Harbor, New York on December 1, 2008 at 12:55PM EST
I was a VP of a New York Bank, when the CRA was enacted. That Act is what led to all the problems we have now, with unqualified mortgage borrowers ........along with those 3 Senators with questionable motives Chris Dodd, Barney Frank and Schumer (spelling?). They should all be investigated, not just Dodd and all face jail time. The only difference between them and Al Capone was Capone had a gun.
Comment from Nutmeg on December 2, 2008 at 7:31AM EST
I agree with Mr. West. When will they ever learn? The CRA and those other politically correct laws caused so many of the problems in the first place, so now someone wants to buy the loans of a failed bank and they have to comply with those same, worthless laws? Only in America.
Comment from Lee on December 2, 2008 at 2:00PM EST
Isn't "Free Enterprise" great; free, meaning it doesn't cost anything; and, enterprise, meaning rip-off the unsuspecting public all you can. Our government has become so corrupt that our greatest threat is not from Al-Kida, but from our own politicians, who all seem to have a personal hidden agenda. Perhaps we, as voting citizens, need to be more vigilant about who we vote for and quicker to remove them from office when the politician fails to represent the good of the people. Yeah, like that will ever happen.