Economic Recovery Task Force

On Friday, November 21, 2008, the Office of the Comptroller of the Currency (“OCC”) announced approval of a new type of national bank charter intended to facilitate investment into or acquisition of troubled or failed banks and thrifts.  Under the new process, the OCC grants preliminary approval to investors for a national bank charter which remains inactive, or “on the shelf”, until such time as the investor group is in a position to acquire a troubled institution. 

Generally, private investors who do not already hold a financial institution charter must be approved for a new banking charter prior to being eligible to participate in FDIC auctions of troubled or failing banks or thrifts.  Approval of a new charter generally requires significant amounts of time and a specific business plan, which has served as a major disadvantage for private investors seeking to participate in fast paced auctions of failing or failed institutions.  The new process announced by the OCC allows for potential investors to receive preliminary approval of a charter based on a streamlined business plan.  The charter remains on the shelf for up to 18 months following preliminary approval by the OCC.  The availability of this new type of charter should serve to minimize current disadvantages faced by potential investors, and thereby expand the pool of bidders for failing institutions.  (more…)

On November 17, 2008, the U.S. Treasury (“UST”) issued guidance for participation in the TARP – Capital Purchase Program (“CPP”) by qualified financial institutions (“QFIs”) that are not “publicly traded,”¹  including (a) any privately-held top-tier bank holding company or top-tier savings and loan holding company that engages solely or predominately in activities permissible for financial holding companies, (b) any privately-held U.S. bank or U.S. savings association organized in a stock form that is not controlled by a holding company, or (c) any U.S. bank or U.S. savings association that is not publicly traded and that is controlled by a privately-held holding company that does not engage solely or predominately in activities that are permitted for financial holding companies.  Under this new guidance, “QFI” does not include any institution that is controlled by a foreign bank or company, mutual depository institutions or entities that have made elections under Subchapter S of the Internal Revenue Code of 1986, as amended (“S Corporations”).  Participation in the CPP by S Corporations and mutual depository institutions still is being considered by the UST. (more…)