FDIC Meets with Private Investors on Failed Bank Acquisitions

Senior officials of the ""FDIC"":http://www.fdic.gov held a roundtable discussion this week with members of the private equity sector to discuss acquisitions of failed banks and the role these investors can play in bringing additional capital to the nation's struggling banking industry.

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""Participants in the open dialogue"":http://www.fdic.gov/news/news/press/2010/pr10063a.html included fund managers, investment groups, and pension funds â€" such industry-leading names as the Carlyle Group, Warburg Pincus, Stone Point Capital, Paulson & Co., and CalPERS. Public interest organizations, such as the Center for Responsible Lending, and banking trade groups, including the Independent Community Bankers Association (ICBA) and the American Bankers Association (ABA), were also represented.

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""Bringing responsible new investors into the banking system is an important step towards a strengthened banking system,"" said FDIC Chairman Sheila C. Bair. ""In doing so, we must also make sure that new investment supports strong banking institutions for the long term and meets the fundamental principles applicable to the ownership of insured depository institutions.""

The ""FDIC's policy statement"":http://www.fdic.gov/news/news/press/2009/pr09152.html on the acquisition of failed institutions issued last summer provides guidance to investors interested in acquiring or investing in the acquisition of failed banks or thrifts. It outlines the standards private investors are expected to meet in order to qualify to bid on a failed institution.

Bair says since the policy statement was adopted ""qualified private investors in new banks and in partnership with existing banks and holding companies have successfully bid on and acquired failed institutions.""

But some industry observers say it has dulled investors' interest in such deals because under the policy, private investors are required to maintain higher capital levels than bank buyers looking to pick up the pieces after a competitor has collapsed.

According to Bair, the policy statement has been crucial tool in unwinding and resolving the growing number of failed banks' since the recession set in by allowing private capital to step in. She explained that this week's roundtable discussion will help guide the FDIC's ongoing review of its procedures for private equity investors.