The Federal Deposit Insurance Corp (FDIC) kicked up a storm last month when it proposed tough guidelines for private investors seeking to buy failed banks, suggesting such groups should have to maintain higher capital levels and support the banks they buy.
The proposed guidelines have drawn critical comments from many investors who argue that they unfairly place an onerous burden on them and warn that the rules, if finalized as they are, would chill private investments in banks.
Firms such as The
But the regulator’s proposed policy has also drawn some support. Three U.S. Senators — Susan Collins, Carl Levin and Daniel Akaka — have urged the FDIC to strengthen its policy related to use of offshore structures.
In its letter on Monday, Lone Star Funds, which has invested more than $60 billion in buying non-performing loans and related securities from financial institutions, also highlighted a proposal dealing with the type of deal structures that can be used in bank takeovers.
Lone Star Funds said regulators should prefer the “silo” structures in bank takeovers, where an investor wants to take a controlling stake, rather than “club deals,” where several investors take smaller bits of the company.
“‘Club’ or ‘consortium’ arrangements necessarily reduce the number of potential bidders for a given institution,” Senior Managing Director Len Allen wrote in the letter.
In a separate letter,
“If we succeed, there is an understandable public concern that we may make too much money too quickly,” KKR’s Deryck Maughan wrote. “There is no easy way around this concern.”
But he added the auction process resulted in lower cost to the taxpayer, and the FDIC could retain an interest in the bank so that it gets a piece of the recovery.
Private investors’ interest in buying banks surged this summer after a group of buyout shops, including Wilbur Ross‘s
But uncertainty over the rules has stalled plans by investors to buy banks, and slowed some deals already in the works, sources previously told Reuters.
Last week, industry sources said the FDIC is expected to move quickly in finalizing the guidelines, possibly easing one of its most controversial proposals that would impose a high capital requirement.