FDIC to Take Second Look at PE Buyers
By Joe Adler
Just a week after the Federal Deposit Insurance Corp. unveiled its plans to restrict private-equity bank owners, investors expect the agency to slice the required capital amounts nearly in half. That would be just under half of what the agency proposed on July 2: a minimum Tier 1 leverage ratio of 15% for private-equity investors who buy failed banks. But how far, or when, the FDIC will pull back is unclear. The proposal was issued for comment this week, and the public still has nearly a month to weigh in. Some sources left open the possibility that the FDIC could leave the capital ratio at 15% and instead ease other aspects of the plan. Karen Shaw Petrou, a managing partner of Federal Financial Analytics Inc., said the capital requirement is similar to another proposed restriction — that private-equity investors who already have majority interests in other banks pledge to cover losses to the FDIC if one of their institutions fails. She said both elements ensure a strong parent company, and therefore one could be altered. “Those two provisions are a classic belt-and-suspenders,” she said. “I would expect you would see either one of them eased or eliminated, and the other kept as is or strengthened. They each reach to the same goal.”