The FDIC is two weeks into the comment period on its proposed rules for PE bank investments, and has begun publishing the inbox. Only three up there so far, but I’d expect a slew more to appear before the August 10 deadline.
For the uninitiated, many of these rules are pointlessly punative and would literally prevent PE firms from investing in banks (troubled or otherwise). For example, a cross-guarantee requirement not only would violate a private equity fund’s charter, but would create the very systemic risk that some other legislation is trying to guard against.
The most pertinent comment comes from from Charles Moore, president of Banc Funds. Seems he’s okay with the rules for most, but not for firms (like his) that limit their investments to less than 10% ownership. As such, he’d like a safe harbor for those at 9.9% or below. He writes, in part:
“Since 1986, we have invested primarily in small depository institutions known as community banks… We think it is an important distinction to note that the pool of bank investors in the United States is not homogeneous, and the pool of private equity investors is not homogeneous… The proposed Qualifications would be very onerous for us. We are not a large investor with a large staff, but we have made dozens of investments over the years in banks where we owned between 5-9% of the company. We and other investors owning less than 9.9% would have our ability to invest capital eliminated without the 9.9% safe harbor.”
The other two emails come from individuals who do not identify themselves via any corporate affiliation. Someone named Alan Keeler argues that the proposed 15% leverage ratio requirement is far too high, and that a 10% ratio should be satisfactory. Then there is Michigan resident Mark Maisonneuve, who is outright “opposed to private equity ownership of banks,” adding that “private equity is the tenement landlord capital of the financial world.” (I disagree, but great line).
We’ll keep an eye on the FDIC’s site, and have put in a call to see if there are submitted comments that have yet to be posted.