InfoBytes Special Alert, December 2, 2008
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OCC "SHELF CHARTER," FDIC MODIFIED BIDDER QUALIFICATION PROCESS EXPECTED TO FACILITATE INVESTMENT IN FAILING DEPOSITORY INSTITUTIONS
On November 17, the Office of the Comptroller of the Currency (OCC) granted its first "conditional preliminary approval" of a new national bank "shelf charter" (reported in InfoBytes, Nov. 21, 2008). The first shelf charter approval was granted to establish the Ford Group Bank, N.A., which was organized primarily to assume liabilities and purchase assets in receivership from the Federal Deposit Insurance Corporation (FDIC) (only chartered depository institutions may assume deposit liabilities from the FDIC). The approval notes that some of the bank’s owners will apply to the Federal Reserve Board to become bank holding companies. The bank will be required to submit to the OCC for review a more detailed operating plan if the bank targets a specific institution for acquisition. The OCC retains the ability to oversee how the shelf charter bank will operate through imposing approval conditions and review of the detailed operating plan. The OCC anticipates that it would grant final approval for the bank and approve a purchase and assumption transaction under the Bank Merger Act when the bank’s bid to acquire a failed institution is first accepted by the FDIC. For a copy of the OCC’s press release, please see http://www.occ.gov/ftp/release/2008-137.htm. For a copy of the "shelf charter" preliminary approval letter issued for Ford Group Bank, N.A., please see http://www.occ.gov/ftp/release/2008-137a.pdf.
Complementing the OCC’s shelf charter approval, on November 26, the FDIC announced that it will allow entities without a bank charter to participate in the bidder qualification process for the deposits and assets of failing depository institutions. The FDIC will require (i) a business plan compliant with the Community Reinvestment Act, (ii) readily available capital, and (iii) an identified management team subject to financial and biographical review. The FDIC will consider abbreviated information submissions and applications, and may issue conditional approval for deposit insurance, in order to qualify such entities. Entities wishing to participate must have conditional approval for a bank charter and meet the bid criteria established by the FDIC. In some cases, such entities must also obtain conditional approval to establish a bank or thrift holding company. For a copy of the press release, please see http://www.fdic.gov/news/news/press/2008/pr08127.html.
Based on recent discussions with all of the federal financial institution regulators and several state financial regulators, it is likely that both federal and state regulators will continue to take innovative steps to encourage private investment in the banking system. This will include the compilation of a "match list" of private investors that may be available to assist struggling or failing institutions. Such efforts would supplement the Treasury’s Capital Purchase Program (CPP), providing support for institutions that are probably unable to participate in the CPP.
For additional information regarding these announcements and programs, please contact Bob Serino of Buckley Kolar at 202-349-8053, or via email at .