FDIC to Allow Private Equity to Buy Failed Banks

The FDIC eased the way today for private-equity firms to buy failed banks through the FDIC.

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.

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.

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.