FDIC, PE pros to meet

U.S. regulators are set to hold a meeting on March 22 with private equity executives and advisors as they review rules put in place last year to govern private investment in failed banks, sources familiar with the matter said.

The Federal Deposit Insurance Corp. (FDIC) held a similar meeting last summer before setting tough guidelines in August 2009 for private equity firms looking to invest in banks.

The rules include requirements that private investors hold a higher capital level than bank buyers. Investors say that the new rules have helped dampened private equity deals in the banking sector.

The FDIC guidelines were to be reviewed after six months, and the meeting to be held Monday afternoon is a part of that effort, the sources said.

The list of attendees for the latest conference was not available, but FDIC Chairman Sheila Bair told Reuters earlier this month that it would include bidders, lawyers and accountants.

The agency will issue “additional clarifications” about the rules in the next several weeks, Bair said in the March 2 interview.

The FDIC declined to comment when asked about the date of the meeting.

The FDIC has been talking with the industry about the impact of these rules in the past months, and private equity executives say they do not expect the regulator to make any major changes.

Bair said earlier this month that the rules had “struck a good balance,” noting that private equity groups have still been showing up to bid on failed bank assets.

Since late January, the regulator has sold at least three failed banks to institutions backed by private investors.

OneWest Bank, formerly IndyMac, bought La Jolla Bank, with $3.6 billion. The deal, OneWest’s second, came on the heels of its acquisition of California’s First Federal Bank in December.

In late January, Bond Street Holdings, a newly formed bank holding company backed by a group of investors, bought two small failed banks in quick succession. The targets were Premier American Bank, a Miami-based bank with around $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 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.

“There have been some concerns raised in the process during the six-month period and there have been some questions and answers that have been put out to address that,” Comptroller of the Currency John Dugan, who is a voting member of the FDIC board, told reporters earlier this month on the sidelines of a banking conference in Washington, D.C.

“But I look forward to a robust review and seeing whether it’s working as we hoped it would,” Dugan added.

Failed bank deals promise attractive returns and often come with loss-sharing agreements with the FDIC that protect investors’ downside.

Investors have been searching for various ways to get in the door, including through so-called “blind pools” of capital raised by independent management teams and other variations of structures that involve teaming up with other investors.

The Blackstone Group is trying to raise a blind pool of up to $1 billion for that purpose, and is working with R. Brad Oates on the project, according to a source familiar with the matter.

Previously, Oates was president and COO of Bluebonnet Savings Bank FSB from 1998-2003. Blackstone declined to comment.

Last year, the FDIC invited a wide range of high-profile executives and advisers from the industry and academia to discuss the guidelines for investments.

They included senior executives from US Bancorp, BB&T Corp., Kohlberg Kravis Roberts & Co. and Warburg Pincus, as well as big name investors such as Wilbur Ross and John Paulson.