The board of the FDIC voted 4-1 Wednesday to require private-equity firms with no history of bank management to maintain a 10% capital-asset ratio and to submit to strong restrictions on lending to their affiliates. The rules also require private-equity firms that bid on banks to commit to owning and operating them for three years.
The new rules are not as stringent as those proposed last month that would have required a 15% capital commitment.
New banks are required to have an 8% capital commitment.
The new FDIC policy strongly encourages private-equity firms to form partnerships with existing bank holding companies when bidding on failed banks to avoid the capital requirements.
A majority of directors of the FDIC said the policy was a good balance between the desire to attract more capital for the banking system against the need to protect the taxpayers.
The FDIC has shut down 81 banks so far this year. If the FDIC cannot find someone to buy a failed bank, it must take it over itself. The FDIC also covers losses in the bank that are not covered by the price of the winning bid. The FDIC’s insurance fund has shrunk to $13 billion.
FDIC Chairman Sheila Bair said the new rules would expand the pool of capital bidding on failed banks, and she said it was appropriate to put in stronger capital requirements for bidders with no history of running a bank.
“We do want people who are interested in running banks,” Bair said of the anti-flipping provision.
John Bowman, acting director of the Office of Thrift Supervision, voted against the new rules, arguing that all bidders should be treated equally.