More than 20 private equity industry insiders came together in a roundtable discussion last week and debated rules put in place last year to govern investments in failed banks.
At last week’s meeting, the list of attendees—representatives from institutional investors, private equity firms, the banking community and law firms—included the
The meeting was part of a six-month review of the rules, which include requirements that private investors hold a higher capital level than bank buyers. The rules were criticized at the time by the private equity industry, and some investors have said that the new standards have dampened private equity deals in the banking sector.
The “roundtable was useful to help guide the FDIC’s ongoing review of the Statement of Policy,”
Since the rules were introduced in the fall, “qualified private investors… have successfully bid on and acquired failed institutions,” Bair said.
But data provided by the
In the 24 months between September 2007, the beginning of the bank capital-raising cycle, and Aug. 26, when the FDIC announced its policy, private equity investment in insured depository institutions averaged $895 million per month, the council said.
In the six months following the FDIC Policy Statement, investment has averaged $58 million per month, a 94% decline.
But some deals are still being done. Among the recent buyers are Bond Street Holdings, a newly formed bank holding company backed by a group of investors, which bought two small failed banks in quick succession in January. The targets were Premier American Bank, a Miami-based bank with about $350.9 million in assets, and Florida Community Bank, an Immokalee, Fla.-based bank with about $875.5 million in assets.
Prior to last August, when the new rules were introduced, notable bank acquisitions by private equity firms include the $900 million purchase of BankUnited, a failed Florida bank, by a consortium of buyout shops that included The Blackstone Group, The Carlyle Group and WL Ross & Co.
Also, First Southern Bancorp Inc., the parent company of Boca Raton, Fla.-based First Southern Bank, reached an agreement totaling $450 million from Crestview Partners, Lightyear Capital and Fortress Investment Group.
Separately, the FDIC is trying to encourage public retirement funds that control more than $2 trillion in assets to buy all or part of failed lenders, hoping that the LPs will take a more direct role in propping up the banking system, according to a BusinessWeek report earlier this month.
The report, which cited people familiar with the matter, said that direct investments may allow state pension funds in Oregon, New Jersey and California to participate and the FDIC to get better prices for distressed banking assets, the people said. They declined to be identified because talks with regulators are confidential.
Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,” Jay Fewel, a senior investment officer at the Oregon State Treasury, said in a presentation at the fund’s Feb. 24 meeting. New Jersey’s fund may also participate, said Orin Kramer, chairman of New Jersey State Investment Council.
The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010.
PE Week contributed to this story.
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