Final Statement of Policy on Qualifications for Failed Bank Acquisitions, 45440-45449 [E9-21146]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 74, Number 169 (Wednesday, September 2, 2009)]
[Notices]
[Pages 45440-45449]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21146]


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FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-AD47


Final Statement of Policy on Qualifications for Failed Bank 
Acquisitions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final statement of policy.

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SUMMARY: The FDIC is issuing a Final Statement of Policy on 
Qualifications for Failed Bank Acquisitions (Final Statement). This 
Final Statement provides guidance to private capital investors 
interested in acquiring or investing in failed insured depository 
institutions regarding the terms and conditions for such investments or 
acquisitions.

DATES: Effective Date: August 26, 2009.

FOR FURTHER INFORMATION CONTACT: Catherine Topping, Counsel, Legal 
Division, (202) 898-3975 or ctopping@fdic.gov, Charles A. Fulton, 
Counsel, Legal Division, (703) 562-2424 or chfulton@fdic.gov, Lisa 
Arquette, Associate Director, (202) 898-8633 or larquette@fdic.gov, or 
Mindy West, Chief, Policy and Program Development, Division of 
Supervision and Consumer Protection, (202) 898-7221 or miwest@fdic.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 9, 2009, the FDIC published for comment a Proposed 
Statement of Policy on Qualifications for Failed Bank Acquisitions 
(Proposed Policy Statement) with a 30-day comment period to provide 
guidance to private capital investors interested in acquiring the 
deposit liabilities, or both such liabilities and assets, of failed 
insured depository institutions regarding the terms and conditions for 
such investments or acquisitions.\1\ After carefully reviewing and 
considering all comments, the FDIC has adopted certain revisions and 
clarifications to the Proposed Policy Statement (as discussed in Part 
III) in the Final Statement.
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    \1\ 74 FR 32931 (Jul. 9, 2009)
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    The FDIC is aware of the need for additional capital in the banking 
system and the contribution that private equity capital could make to 
meeting this need provided this contribution is consistent with basic 
concepts applicable to the ownership of insured depository institutions 
that are contained in the established banking laws and regulations. The 
preamble to the Proposed Policy Statement explained that in view of the 
increased number of bank and thrift failures and the increase in 
interest by private capital investors in acquiring insured depository 
institutions in receivership, the FDIC determined to issue, in proposed 
form, guidance to potential acquirers. In developing the Proposed 
Policy Statement, the FDIC sought to establish the proper balance in a 
number of important areas including the level of capital required for 
these de novo institutions and whether these owners would be a source 
of strength to the banks and thrifts in which they have invested. The 
FDIC also considered the important policy issues raised by the 
structure of investments in insured depository institutions, 
particularly with respect to their compliance with the requirements 
applied by the FDIC in its decision on the granting of deposit 
insurance and with the statutes and regulations aimed at assuring the 
safety and soundness of insured depository institutions and protecting 
the Deposit Insurance Fund (``DIF'').
    In the Introduction to the Proposed Policy Statement, the FDIC set 
forth its reasons for adopting a policy on private capital 
participating in the acquisition of or investment in failed insured 
depository institutions. In part, the Introduction stated:

Capital investments by individuals and limited liability companies 
acting through holding companies operating within a well developed 
prudential framework has long been the dominant form of ownership of 
insured depository institutions. From the perspective of the FDIC's 
interest as insurer and supervisor of insured depository 
institutions, this framework has included, in particular, measures 
aimed at maintaining well capitalized bank and thrift institutions, 
support for these banks when they face difficulties, and protections 
against insider transactions. The ability of the owners to provide 
financial support to depository institutions with adequate capital 
and management expertise are essential safeguards. These safeguards 
are particularly appropriate for owners of insured depository 
institutions given the important benefits conferred on depository 
institutions by deposit insurance.
    * * * The FDIC is also aware that new banks, regardless of their 
investor composition, pose an elevated risk to the deposit insurance 
fund since they generally lack a core base of business, a proven 
track record in the banking industry, and are vulnerable to 
significant losses in the early years of incorporation.
    The FDIC is of the view that private capital participation in 
the acquisition of the deposit liabilities, or both such liabilities 
and assets, from a failed depository institution in receivership 
should be consistent with the foregoing basic elements of insured 
depository institution ownership. * * *

[[Page 45441]]

    * * * The FDIC is particularly concerned that owners of banks 
and thrifts, whether they are individuals, partnerships, limited 
liability companies, or corporations, accept the responsibility to 
serve as responsible custodians of the public interest that is 
inherent in insured depository institutions and will devote the 
efforts to assuring that banks or thrifts acquired with assistance 
from the deposit insurance fund do not return to the category of 
troubled institutions.

    These same reasons underlie the need to adopt the Final Statement 
described below.
    The Proposed Policy Statement described the terms and conditions 
that private capital investors would be expected to satisfy to obtain 
bidding eligibility for a proposed acquisition structure. These 
standards would apply to (1) private capital investors in certain 
companies that sought to assume deposit liabilities or both such 
deposit liabilities and assets from a failed insured depository 
institution and (2) private capital investors involved in applications 
for deposit insurance in conjunction with de novo charters issued in 
connection with the resolution of failed insured depository 
institutions (hereinafter ``Investors''). As more fully summarized 
below, the Proposed Policy Statement provided, among other measures, 
standards for capital support of an acquired depository institution; an 
agreement to a cross guarantee over substantially commonly-owned 
depository institutions; limits on transactions with affiliates; 
maintenance of continuity of ownership; and avoidance of secrecy law 
jurisdictions as investment channels, absent consolidated home country 
supervision.

Capital Commitment

    The Proposed Policy Statement required private investors to agree 
to cause an insured depository institution acquiring a failed bank's 
deposit liabilities, or both such deposit liabilities and assets, to 
have a Tier 1 leverage ratio of 15 percent for the first three years of 
operation, subject to further extensions by the FDIC. Thereafter, such 
investors would be required to cause the insured depository 
institution's capital to remain at ``well capitalized'' levels for the 
duration of their ownership. The FDIC explained that failing to meet 
those standards could cause the insured depository institution to be 
considered ``undercapitalized'' for purposes of Prompt Corrective 
Action and other supervisory measures.

Source of Strength

    The FDIC would require Investors covered by its Proposed Policy 
Statement to agree to serve as a source of strength for subsidiary 
depository institutions. As necessary, the Proposed Policy Statement 
required depository institution holding companies in which such 
Investors held interests to sell equity or to engage in capital 
qualifying borrowing.

Cross Guarantees

    If Investors had an individual or collective investment that 
constituted a majority interest in more than one insured depository 
institution, the Proposed Policy Statement required them to pledge to 
the FDIC their interest in each institution to cover losses to the 
Deposit Insurance Fund caused by the failure of such insured depository 
institution(s) or by the FDIC's provision of assistance to such 
institutions.

Transactions With Affiliates

    The Proposed Policy Statement prohibited extensions of credit to an 
Investor by an insured depository institution acquired or controlled by 
the Investor. According to the Proposed Policy Statement, this 
prohibition also applied to related investment funds, any affiliates 
(that is, any company in which an Investor owns 10 percent or more), 
and to any companies in which the Investor or its affiliates invested.

Secrecy Law Jurisdictions

    The Proposed Policy Statement prohibited investors in entities 
domiciled in bank secrecy jurisdictions from making a direct or 
indirect investment in an insured depository institution unless the 
investors are subsidiaries of companies subject to comprehensive 
consolidated supervision, as recognized by the Board of Governors of 
the Federal Reserve System. Among other things, such investors also 
would be required to agree to provide information to their primary 
Federal regulator, abide by statutes and regulations administered by 
U.S. banking agencies, consent to U.S. jurisdiction, and cooperate with 
the FDIC.

Continuity of Ownership

    Absent the FDIC's prior approval, the Proposed Policy Statement 
would prohibit covered Investors from selling or transferring 
securities of their holding company or insured depository institution 
for three years following acquisition. The FDIC indicated that it did 
not expect to approve such transfers within the initial three-year 
period unless the buyer agreed to be bound by the same conditions of 
the Proposed Policy Statement that were applicable to the Investor.

Disclosures

    The Proposed Policy Statement provided for disclosures of certain 
specified information (and other non specified information deemed 
necessary by the FDIC) from Investors and other entities in their 
ownership chains.

II. Overview of the Comments

    The FDIC requested public comment on all aspects of the Proposed 
Policy Statement and set forth nine specific questions for 
consideration by commenters. The issues presented by the specific 
questions included the definition of the ``investors'' to whom the 
policies would apply; the bidding eligibility of so-called ``silo'' 
structures; the appropriate capital levels for failed insured 
depository institutions acquired by private capital investors; whether 
source of strength commitments should be required and the scope of such 
commitments; whether cross guarantee commitments should be required and 
the scope of such commitments; the bidding eligibility of entities 
established in bank secrecy jurisdictions; whether a three-year 
continuity of ownership rule is the appropriate period of time; the 
bidding eligibility of investors that directly or indirectly hold 10 
percent or more of the equity of a bank or thrift in receivership; and 
whether the proposed limitations should be lifted after a certain 
number of years of successful operation of a bank or thrift holding 
company.
    The FDIC received 61 individual comment letters.\2\ The comment 
letters were sent by private investment firms, investment advisory 
firms, law firms, insured depository institutions, advocacy 
organizations, financial services trade associations, 4 United States 
Senators, a labor union, research organizations, academics, and 6 
individuals. Most of the commenters were private capital firms or their 
representatives that would be affected by the Proposed Policy 
Statement. The FDIC also received 3,190 form letter comments in support 
of the Proposed Policy Statement.
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    \2\ See https://www.fdic.gov/regulations/laws/federal/2009/09comAD47.html.
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    Many commenters expressed the general view that limitations and 
restrictions contained in the Proposed Policy Statement would deter 
many private capital investors and inhibit the flow of capital into 
failed banks, resulting in greater costs to the DIF. On the other hand, 
some commenters stated that they did not have confidence in the motives 
of private equity investors because of their short-term investment 
objectives and limited regulatory

[[Page 45442]]

oversight. These commenters argued that private capital firms should be 
subject to strict regulation or excluded altogether from participating 
in the ownership of insured depository institutions. The form letter 
comments strongly supported the FDIC's Proposed Policy Statement on 
grounds that private equity firms engage in inherently risky behavior 
in order to extract large profits in short periods of time.
    Three specific areas of the Proposed Policy Statement--the 15 
percent Tier 1 leverage ratio, the source of strength commitment, and 
the cross guarantee provision--generated considerable comment. 
Commenters opposed to the 15 percent Tier 1 leverage ratio argued that 
setting the required initial capitalization level at such a high level 
would place private capital investors at a competitive disadvantage 
relative to strategic acquirers, make it difficult for private capital 
investors to realize a reasonable return on investment, and encourage 
risky post-acquisition investments and business strategies. These 
commenters noted that the 15 percent Tier 1 leverage level was three 
times the high-end range for ``well-capitalized'' depository 
institutions and double the industry average. With respect to source of 
strength commitments and cross guarantees, these commenters were 
opposed to any direct financial commitment or support obligations 
beyond an investor's initial contribution. The commenters argued that 
the imposition of source of strength commitments would introduce 
substantial uncertainty for investors and potentially expose them to 
unlimited liability. Commenters also stated that the cross guarantee 
requirement would deter private capital investment in failed insured 
depository institutions because private capital investors in unrelated 
banks would not agree to a cross guarantee commitment that places their 
legally separate investments at risk. Lastly, the commenters contended 
that source of strength and cross guarantee commitments were generally 
prohibited by private equity fund agreements. A summary of the comments 
by issue follows.

Summary of the Comments by Issue

1. Bidding Eligibility of ``Silo'' Structures

    In the Proposed Policy Statement, the FDIC noted that, because of 
their often complex and opaque organizational arrangements, so-called 
``silo'' ownership structures would be considered inappropriate 
vehicles for acquiring insured depository institutions. Some 
commenters, including a few private equity firms, endorsed the proposed 
prohibition of ``silo'' structures, citing the FDIC's need to ascertain 
beneficial ownership, clearly identify the parties responsible for 
making management decisions, and ensure that ownership and control are 
not separated.
    Other commenters stated that they recognized the FDIC's need for 
transparency, but opposed a blanket prohibition of ``silo'' structures 
as acquisition vehicles. These commenters believe that the FDIC would 
eliminate many otherwise suitable investors who would be willing to 
provide full disclosures with respect to beneficial ownership, decision 
making responsibility, and ownership and control issues, and to provide 
additional disclosures as necessary--even submitting to regulation as a 
bank holding company under the Bank Holding Company Act--in order to be 
eligible to bid on failed insured depository institutions. They did not 
view an absolute prohibition of ``silo'' structures as necessary for 
the advancement of the FDIC's important interest in transparency. Some 
private investors involved in ``silo'' organizations indicated that 
they had been part of acquisitions approved pursuant to existing legal 
standards through the application processes of the Office of Thrift 
Supervision and the Board of Governors of the Federal Reserve System.
    One group of private equity investors noted that separation of 
ownership and control is characteristic of many categories of 
institutional investors, including mutual funds, pension plans, and 
endowments, and argued that bifurcated ownership and control is not a 
reason to disqualify a potential bidder for a failed bank or thrift. 
Other commenters, including several law firms, argued against the 
categorical prohibition in part because ``there is no agreed-upon 
definition in the private equity industry or elsewhere on what 
constitutes a `silo' structure.''

2. Definition of ``Investors''/Applicability of Standards

    The limitations and restrictions contained in the Proposed Policy 
Statement would apply to more than de minimis investments by: ``(a) 
private capital investors in a company (other than a bank or thrift 
holding company that has come into existence or has been acquired by an 
Investor at least 3 years prior to the date of this policy statement), 
that is proposing to directly or indirectly assume deposit liabilities, 
or such liabilities and assets, from a failed insured depository 
institution in receivership, and to (b) applicants for insurance in the 
case of de novo charters issued in connection with the resolution of 
failed insured depository institutions.'' The FDIC asked commenters 
whether some other definition of applicability was more appropriate.
    Many of the comments received from representatives of private 
investment firms indicated that the limitations and restrictions 
contained in the Proposed Policy Statement should be imposed only when 
an investor or group of investors would exercise control over the 
failed institution. Some proposed that investors owning 9.9 percent or 
less of a failed institution should not be subject to the limitations 
contained in the Proposed Policy Statement. Other private equity firms 
argued that private investment funds should not be treated differently 
from other passive investors.
    Some commenters argued that the proposed definition of ``investor'' 
is ambiguous and that a clearer definition of applicability is needed. 
These commenters, which include both law firms and representatives of 
private equity firms, believed that the scope of the definition was 
unclear because the term ``private capital investor'' does not have any 
generally understood meaning and the Proposed Policy Statement fails to 
define it. They noted that if the Proposed Policy Statement primarily 
is concerned with private equity funds, the FDIC should clarify that 
fact.
    Several private investment firm commenters disagreed with that part 
of the definition that would make the Proposed Policy Statement 
applicable to private investors in bank or thrift holding companies 
that came into existence or were acquired by the investor within the 
three years prior to the date of the Proposed Policy Statement. Some of 
these commenters proposed that the three-year period be measured prior 
to the date of the bid for a failed depository institution rather than 
from the date of issuance of the Proposed Policy Statement. A number of 
commenters mistakenly asserted that this provision is retroactive in 
nature and viewed it as arbitrary.
    One commenter looked to the definition of control contained in the 
Bank Holding Company Act and Regulation Y to determine to whom the 
Proposed Policy Statement might apply. Using that definition, the 
commenter suggested that the Proposed Policy Statement should apply to 
private capital investors and applicants for insurance in cases of de 
novo charters who seek to act as a controlling company or influence 
over a failed

[[Page 45443]]

insured depository institution in receivership.

3. Capital Commitment

    Several commenters supported a Tier 1 leverage ratio requirement of 
at least 15 percent (as provided in the Proposed Policy Statement) 
because of the higher risk profile of the failed institutions investors 
would be buying, the higher risk appetite of private equity investors, 
and the financial challenges facing banking institutions today. Another 
commenter encouraged the FDIC to maintain a Tier 1 leverage ratio 
requirement of at least 12 percent.
    A majority of the commenters objected to the proposed capital 
requirements, arguing that such requirements would; disadvantage 
private capital firms relative to other bidders and publicly-owned 
institutions; discourage private capital investment in failed 
institutions; result in less competitive bids for failing institutions 
from private equity investors; and create a separate Prompt Corrective 
Action framework for institutions acquired by private capital 
investors.
    Several commenters in opposition to the proposal expressed concern 
that the capital requirement would result in excessive risk-taking to 
realize a sufficient return on the investment, with one commenter 
noting that the proposed capital requirement also could hinder an 
institution's ability to lend. A number of commenters opposed the 
proposed capital requirement because they believe it disregards other 
factors that are determinative of an institution's financial condition, 
such as the proposed business plan, the risk of on-balance sheet 
assets, and the qualifications of the management team.
    Comments varied with respect to recommendations on an appropriate 
capital requirement. One commenter was of the view that a 7.5 percent 
Tier 1 leverage ratio is appropriate because the assets of a resolved 
bank are marked-to-market and the riskiest assets are subject to loss-
sharing agreements with the FDIC. Another commenter supported an 8 
percent Tier 1 leverage ratio requirement, as well as a 15 percent 
total risk-based capital ratio or a lower capital requirement for 
assets covered in loss-sharing agreements. Another commenter proposed a 
10 percent Tier 1 leverage ratio or, alternatively, an incremental 
reduction in the 15 percent requirement to between 7 and 8 percent over 
the first three years following the acquisition, while other commenters 
suggested various ranges between 5 and 10 percent, with 8 percent being 
the most frequently suggested level. Several other commenters supported 
a case-by-case approach based on the risk profile of the institution.
    One commenter took the position that the capital requirement should 
be based on the Tier 1 risk-based capital ratio rather than the Tier 1 
leverage ratio to avoid penalizing institutions holding low-risk, 
highly-liquid assets. Under this proposal, private investment firms 
would have to meet a ``common'' Tier 1 risk-based capital ratio 
requirement of 8 percent. Two commenters recommended moving to a 
tangible common equity measure, with a minimum requirement of 6 
percent.

4. Source of Strength

    Four commenters generally supported the proposed source of strength 
requirement, with one supporting an enhanced source of strength 
requirement that explicitly requires individual private capital 
investors or beneficial fund managers to ensure the financial strength 
of the depository institution through direct capital injections. 
Another commenter expressed limited support for the source of strength 
requirement to the extent that it would require investors to serve as a 
source of managerial strength for the institution.
    Many commenters expressed general opposition to the proposed source 
of strength requirement. Specifically, seven commenters criticized the 
proposal as potentially creating unlimited liability for private 
capital investors. Although the Proposed Policy Statement limited the 
source of strength requirement to raising new capital by selling new 
shares or engaging in capital qualifying borrowing by the bank's or 
thrift's holding company, several commenters indicated that the 
proposed source of strength requirement is not feasible because, as a 
practical matter, many private capital investors are limited by the 
terms of their fund documents from providing capital support or making 
follow-on investments in their portfolio companies. Several other 
commenters indicated that the proposed source of strength requirement 
would likely discourage investments by private capital investors in 
failing institutions, with a number of them viewing the requirement as 
unnecessary given the FRB and OTS holding company requirements. Two 
commenters viewed the source of strength requirement as altogether 
unnecessary because the interests of private capital investors are 
aligned with those of the insured depository institutions in their 
investment portfolios, and that sufficient financial incentives exist 
for investors to protect such investments. Other commenters noted that 
the source of strength requirement for bank and savings and loan 
holding companies was not effective in preventing bank failures, and 
another commenter objected to making individual investors responsible 
for the actions of the institution, absent the ability to influence 
policies or decision-making.
    At least ten commenters supported the imposition of a ``control'' 
threshold for purposes of the source of strength requirement, and 
another commenter suggested that parties with ``substantial ownership 
stakes'' and board representation should either be required to provide 
capital under source of strength commitments or not use their limited 
corporate governance rights to block capital from other sources. One 
commenter expressed concern that the imposition of a source of strength 
requirement on a non-controlling investor could be perceived by the FRB 
and OTS as an indication of control, potentially making the investor 
subject to holding company supervision.
    A number of these commenters presented alternatives to the source 
of strength requirement. These commenters suggested that a more 
appropriate alternative would be for regulators to obtain commitments 
from investors that, under certain circumstances, they will not use 
whatever limited corporate governance rights they have to block capital 
raising efforts. One commenter suggested an alternative under which the 
investor is required to hold as a reserve at the partnership level a 
percentage of the transaction value for future capital investment in 
the bank. Still another commenter proposed making private equity 
investors capitalize failed insured depository institutions with all 
common stock equity, leaving available the option of issuing hybrid 
securities and thereby providing financial flexibility. One more 
commenter supported applying the source of strength requirement 
selectively, and only to the banking silo of a private fund.

5. Cross Guarantees

    Ten commenters supported the cross guarantee provision as a means 
of limiting risk to the DIF, noting that, without it, private capital 
investors would have no exposure beyond their initial investment in the 
failed bank or thrift if the institution later experienced difficulties 
and the investors owned another bank or thrift.
    In contrast, a majority of the commenters opposed the proposed 
cross

[[Page 45444]]

guarantee provision in that it would deter private capital investment 
in failed insured depository institutions; place the other investments 
of private capital investors at risk; result in less competitive bids 
for failing institutions; and inhibit a private equity manager from 
investing in two different depository institutions through two 
different funds with two distinct groups of private capital investors.
    Other commenters objected to imposing a cross guarantee requirement 
on non-controlling investors. Specifically, a number of law firms 
argued that the Federal Deposit Insurance Act does not authorize the 
FDIC to impose cross-guarantee liability on institutions that are not 
commonly controlled, as their owners are not in a position to control 
the management or policies of both institutions and should not be held 
responsible, directly or indirectly, if a non-controlled depository 
institution fails. Other commenters expressed similar concerns that the 
proposal goes beyond long-standing principles of corporate law and 
existing federal statutes by imposing obligations on a class of 
shareholder, without regard to whether they actually control the 
underlying institution. Two commenters requested clarification that a 
non-controlling investor would not be subject to the cross guarantee 
requirement.
    Several commenters contended that the cross guarantee requirement 
is inconsistent with the realities of private equity investments, which 
are generally passive in nature, and will only complicate club 
investments in failed institutions. Other commenters noted that this 
provision would limit diversification of private equity portfolios and 
questioned the FDIC's intentions with respect to its pledged ownership 
interest in the event it acquired a majority interest in an 
institution, and what effect this would have on minority investors. 
Other commenters took the position that an investor would not make an 
investment where they have all the risks that come with accountability 
but neither the ability to affect nor control those risks.
    A number of commenters suggested providing an 80 percent ownership 
threshold for purposes of the cross guarantee provision. To encourage 
capital investments in failed institutions, one commenter proposed a 
``special dispensation'' approach for private capital investors holding 
only one bank investment in which the ownership limit would be 
increased from 24.9 percent to a level of controlling interest, 
encouraging the investor to strengthen the bank for future growth. For 
investors holding multiple bank investments, however, the commenter 
proposed adhering to existing regulations.

6. Transactions With Affiliates

    The Proposed Policy Statement proposed a prohibition of certain 
extensions of credit by an insured depository institution to certain 
related parties. Several private investment firms, a few law 
professors, some legislators, and a banking trade association supported 
the proposed prohibition on all extensions of credit to affiliates. The 
professors suggested that the FDIC strengthen its stance by prohibiting 
an insured depository institution from engaging with an affiliate in 
any ``covered transaction'' as defined in the Federal Reserve Act and 
its implementing regulations.
    Most of the commenters who registered opinions about this section 
offered alternatives for dealing with transactions with affiliates. 
Some commenters noted that the absolute prohibition went farther than 
the limitations contained in Sections 23A and 23B of the Federal 
Reserve Act and their implementing regulations. Rather than proposing a 
new standard, many of the commenters recommended that the Proposed 
Policy Statement instead rely on the current restrictions on 
transactions with affiliates contained in sections 23A and 23B of the 
Federal Reserve Act and the FRB's Regulation W.
    Some suggested other alternatives. For example, one group of 
private investors suggested that all extensions of credit by an insured 
depository institution to related parties be subject to regulatory 
approval for a period of three years concurrent with that of the 
capital requirement under the Proposed Policy Statement. After that 
period, the investor group suggested, the restrictions in sections 23A 
and 23B of the Federal Reserve Act would apply.
    One commenter suggested that the FDIC implement a de minimis 
exception for an ownership threshold of at least 10 percent before an 
investor's affiliates would be covered by the prohibition and that the 
prohibition on transactions with affiliates should exclude existing 
extensions of credit. One commenter requested guidance as to how the 
new test would apply to the lower tier holdings of a 10 percent owned 
portfolio company. Finally, one commenter urged the FDIC to prohibit or 
strictly limit the ability of private capital investors to effect 
dividend recapitalizations--that is, transactions in which a private 
capital investor borrows money on behalf of a company under its 
management and uses the proceeds to pay dividends to investors and 
investment managers.

7. Secrecy Law Jurisdictions

    The FDIC received 15 comments addressing secrecy law jurisdictions. 
A majority of those comments opposed the ban on offshore investment 
vehicles in secrecy law jurisdictions in the Proposed Policy Statement. 
A number of comments expressed the belief that the FDIC's concerns in 
the area of secrecy law jurisdictions can be addressed through the 
information requests and other aspects of the ``Disclosure'' provisions 
of the Proposed Policy Statement. Similarly, one commenter expressed 
the belief that verifiable regulatory standards could be developed to 
assure compliance of offshore entities with basic anti-money laundering 
policies and practices and to ensure jurisdictional certainty with 
regard to U.S. enforcement interests. A small number of commenters 
suggested that the FDIC adopt a review of secrecy law jurisdiction 
cases on a case-by-case approach.
    Other commenters expressed concerns that the Proposed Policy 
Statement will result in a practical bar on investment by many fund 
organizations with non-U.S. investors. These commenters suggested that 
the Proposed Policy Statement would restrict private capital investors 
bidding on depository institutions from using traditional funding 
structures that provide tax and other efficiencies.
    A number of commenters noted that by prohibiting offshore vehicles 
from making investments, the Proposed Policy Statement would 
unintentionally prohibit a parallel domestic vehicle from investing. 
Commenters also pointed out that the comprehensive consolidated 
supervision exception would likely not be applicable to fund investors 
because that concept applies only to regulated banking organizations in 
other countries. Additionally, the FDIC also received a number of 
comments requesting clarification of the Proposed Policy Statement on 
what is meant by ``bank secrecy jurisdiction'' and what types of 
specific situations are covered by the Proposed Policy Statement. One 
comment recommended that offshore funds established prior to the date 
of the Proposed Policy Statement be exempt from the restrictions.
    The FDIC also received comments, including one from 3 Senators, 
supporting the treatment of secrecy jurisdictions in the Proposed 
Policy Statement. The Senators' comments urged the FDIC to eliminate 
the ability

[[Page 45445]]

of investors domiciled in secrecy jurisdictions to invest in failed 
U.S. banks and thrifts based on the history of association offshore 
structures have with financial fraud, money laundering, tax evasion, 
and other misconduct.

8. Continuity of Ownership

    The FDIC received a number of comments supporting the proposed 
three-year continuity of ownership rule. One commenter pointed out that 
it would take management at least three years to resolve problem assets 
and restore the failed insured depository institution to health. 
Commenters also expressed the belief that a three-year continuity of 
ownership rule was necessary to prevent speculative investors from 
``flipping'' banks for short-term profits. One commenter opined that 
the holding period should be longer than three years to protect against 
private investors focused on short term profits at the expense of long 
term financial stability.
    In contrast, the FDIC also received comments expressing concern 
that a three-year period is too long. A number of these commenters 
proposed an 18-month period as an alternative. Commenters opposing the 
required holding period also pointed out that such a requirement could 
chill the interest of private equity investors in failed institutions. 
One commenter expressed concern that the three-year holding period 
might prevent a private equity investor from conducting a public 
offering of the stock of a depository institution. Two commenters noted 
that a three-year time period overstates the time required to stabilize 
the operations of a failed institution. Another commenter argued that 
the sale or transfer of ownership can, in some instances, enhance the 
overall safety and soundness of an insured depository institution. One 
commenter recommended that the holding period requirement only pertain 
to the first acquisition of a failed institution.
    Other commenters suggested that the continuity of ownership 
requirement is not necessary because most private capital investors 
considering a failed bank acquisition have a long-term investment 
horizon. One such commenter suggested a de minimis exception to the 
holding period requirement. Two commenters recommended eliminating the 
holding period requirement and imposing, in its place, a requirement 
that investors obtain prior approval of acquisitions from the Federal 
Reserve Board. Another commenter recommended applying the holding 
period requirement to only ``controlling'' private equity investors.
    The FDIC also received comments expressing concern about the 
justification of the holding period requirement. Two commenters argued 
that the three-year continuity period could be viewed as arbitrary and/
or ambiguous. Another commenter added that new regulatory burdens and 
requirements for bank acquisitions were being imposed through the 
holding period requirement without formal or informal processing 
timeframes. A number of commenters noted that the required holding 
period could chill the interest of private equity investors in failed 
institutions.
    Many commenters stated that precluding an initial public offering 
during the holding period, even where the proceeds of the offering go 
the bank itself, is counter to the objective of increasing capital of 
banks. Other commenters suggested that holding companies in which 
investors invest, or their subsidiaries, should be able to conduct 
initial public offerings and follow-on offerings of their own 
securities without FDIC approval.

9. Special Owner Bid Limitation

    The FDIC received a number of comments expressing the opinion that 
investors that owned 10 percent or more of a failed insured depository 
institution should not be eligible to bid on the liabilities, or both 
such liabilities and assets, of that failed institution in 
receivership. One commenter urged the FDIC to go farther, suggesting 
that any private capital investor that held a 10 percent or greater 
equity interest in three or more failed depository institutions be 
permanently banned from bidding on the deposits, or both such deposits 
and liabilities, of any failed insured depository institution.
    One private equity firm expressed concern about the general ban and 
instead proposed that such investors be evaluated on a case-by-case 
basis. A national industry advocacy organization agreed with the case-
by-case approach, and suggested that a blanket limitation on 10 percent 
investors may deprive the FDIC of the ability to effect a least-cost 
resolution. Similarly, another commenter suggested that investors 
owning 10 percent or more of a failed insured depository institution 
should be eligible to bid ``in exceptional circumstances.''

10. Disclosure

    The FDIC received 4 comments addressing the Proposed Policy 
Statement's disclosure requirements. One comment supporting the 
disclosure requirement stated that transparency is essential to ensure 
effective and prudent oversight and regulation by U.S. regulators. 
Another commenter requested clarification of whether information 
submitted by private capital investors to the agency as part of a 
bidding process would be kept confidential. Two law firms commented 
that the disclosure requirement is overly broad. These commenters noted 
that any entity formed for the purpose of acquiring control of a bank 
or savings association would be required to submit detailed information 
to the FRB or the OTS. They also sought clarification on whether this 
requirement would apply to all private capital investors without regard 
to their percentage ownership.

11. Lifting of Restrictions After a Certain Time Period of Successful 
Operation of a Bank

    The FDIC received 10 comments addressing this issue. Commenters 
generally suggested a three-year period as an appropriate time frame. 
One commenter noted that the limitations should be removed after three 
years of successful operation, similar to the practice for de novo 
institutions. Another commenter recommended that the limitations in the 
Proposed Policy Statement should be lifted ``as the FDIC and the 
primary regulator increasingly gain comfort with a bank's risks and 
business plan.'' Two commenters requested that the FDIC abandon the 
initiative entirely, but recommended that such a time period not extend 
beyond three years if adopted. Another commenter defined the term 
``successful operation'' as involving the same criteria as those that 
are applied to qualification for and maintenance of financial holding 
company status under 12 CFR Section 225.81. One law firm recommended 
lifting the restrictions after 18 months, noting that a shorter holding 
period would prevent a situation where private equity investors in a 
failed depository institution are operating at a competitive 
disadvantage.
    One individual commenter suggested that the effective period of the 
Proposed Policy Statement should be the earlier of either the 
completion of two examinations that result in satisfactory ratings or 
three years. Similarly, an insured depository institution suggested 
that a two-year period would provide the FDIC with the opportunity to 
evaluate the competency of the management team in place at the acquired 
institution. One private equity firm supported the notion that an 
institution, once it has been recapitalized with new management 
installed, should not be distinguished

[[Page 45446]]

from any other institution with respect to risk management.
    One comment the FDIC received recommended extending the 
restrictions of the Policy Statement to a four-or-five-year period, 
with the source of strength, cross guarantee, and bank secrecy 
restrictions continuing for perpetuity.

III. Final Statement

    After consideration of the comments described above the FDIC has 
made various amendments in the text of the Final Statement. These 
changes are summarized below with the explanation organized around each 
of the basic elements of the Final Statement.

Definition of ``Investors''/Applicability of Standards

    Many investors asked for greater precision in the definition of the 
types of firms to be covered by this policy statement. The FDIC notes 
that the policy statement is just that--a policy statement and not a 
statutory provision imposing civil or criminal penalties and that the 
requirements it imposes on investors only apply to investors that agree 
to its terms. Moreover, the FDIC finds it exceedingly difficult to use 
precisely defined terms to deal with the relatively new phenomenon of 
private capital funds joining together to purchase the assets and 
liabilities of failed banks and thrifts where the investors all are 
less than 24.9 percent owners but supply almost all of the capital to 
capitalize the new depository institution. The FDIC, in only a short 
period of time, has seen multiple variations in the structures that 
have been employed by private capital firms to own banks and thrifts. 
The FDIC also notes that under some structures the investors are not 
subject to the Bank Holding Company Act, are not subject to the Change 
in Bank Control Act, not subject to Prompt Corrective Action, are not 
institution affiliated parties, are not subject to cross guarantees, 
and are not subject to Section 23A or Section 23B of the Federal 
Reserve Act. The FDIC Board will review the operation and impact of 
this Final Statement within 6 months of its approval date and shall 
make adjustments as it deems necessary.
    In the Final Statement, the exclusion for private capital investors 
in bank or thrift holding companies that were created or acquired by 
the investor at least three years prior to the date of the Policy 
Statement has been deleted. In response to comments that the Policy 
Statement should specify a date after which it would no longer apply, 
the FDIC has added a provision that that upon application and approval 
by the FDIC's Board of Directors the Final Statement will no longer 
apply to an Investor in a bank or thrift, or bank or thrift holding 
company of an insured institution that was covered by the Final 
Statement if the bank or thrift has maintained a CAMELS 1 or 2 rating 
continuously for seven years. The Final Statement also makes clear that 
the Final Statement would not apply to Investors in partnerships or 
similar ventures with depository institution holding companies 
(excluding shell holding companies) where the latter have a strong 
majority interest in the acquired bank or thrift and an established 
record for successful operation of insured banks or thrifts. Such 
partnerships are strongly encouraged by the FDIC. In response to 
comments that the Policy Statement should define ``de minimis 
investments'', a provision has been added that provides that the Final 
Statement shall not apply to Investors with 5 percent or less of the 
total voting power of an acquired depository institution or its bank or 
thrift holding company provided there is no evidence of concerted 
action by these Investors. Finally, a provision has been added to make 
clear that the FDIC Board of Directors may waive one or more provisions 
of the Final Statement if such exemption is in the best interests of 
the Deposit Insurance Fund and the goals and objectives of the Final 
Statement can be accomplished by other means.

Capital

    After consideration of the comments presented, the Final Statement 
revises the capital commitment to provide for a level of initial 
capitalization sufficient to establish a ratio of Tier 1 common equity 
to total assets of at least 10 percent throughout the first 3 years. 
Some commenters suggested that capital requirements should be adjusted 
based on the facts of individual cases. The FDIC adopted this 
suggestion in so far as it provides that capital requirements may be 
increased above 10 percent Tier 1 common equity to total assets ratio 
if warranted. The specific language in the proposed text authorizing an 
extension of the 3-year period has been eliminated. After 3 years, as 
in the proposed text, the depository institution must remain ``well 
capitalized'', as that term is defined in Section 325.103(b)(1) of the 
FDIC Rules and Regulations, as long as the Investors' ownership 
continues. In response to comments that a source of strength provision 
would be difficult for private investors to apply as a practical 
matter, the FDIC decided to delete the provision. Further, as in the 
proposed text, if at any time the depository institution fails to meet 
this standard, immediate action would have to be taken to restore the 
institution to the at least 10 percent Tier 1 common equity ratio or 
the ``well capitalized'' standard, as applicable.
    The FDIC believes that heightened capital levels are necessary in 
view of the higher risk profile of what are de novo institutions being 
acquired and for the protection of the DIF from losses. Depository 
institutions insured less than 7 years are overrepresented in the list 
of institutions that have failed in 2008 and 2009 with most of the 
failures occurring between the fourth and seventh years of operation, 
particularly where they have pursued early changes in business plans 
and inadequate controls and risk management practices.
    Regarding the appropriate method for measuring capital in the Final 
Statement, staff considered the strong concerns that have been raised 
about the quality of bank capital (for example, whether banks have 
sufficient common equity as compared to debt-like or other instruments 
that qualify as regulatory capital), and the adequacy of the risk-based 
capital rules. Therefore, in the Final Statement, the FDIC has adopted 
Tier 1 common equity in the capital ratio because it provides a 
stronger measure of the capital available to absorb losses than 
alternative measures.
    The FDIC also asked in the Proposed Policy Statement whether there 
should be a further requirement that if capital declines below the 
required capital level, the institution would be treated as 
``undercapitalized'' for purposes of Prompt Corrective Action. 
Commenters argued that depository institutions in which private capital 
investors have invested should not be subject to the higher capital 
standards of the Proposed Policy Statement but to the same Prompt 
Corrective Action standards as other institutions. They argue that a 
separate and unequal Prompt Corrective Action regime for a bank that is 
backed directly or indirectly by private capital investors provides no 
supervisory benefits. As noted above, de novo depository institutions 
are subject to a considerably higher rate of failure. Accordingly, the 
FDIC is of the view that the higher capital standards applicable under 
the Proposed Policy Statement are extremely important in order to 
preserve the safety and soundness of these de novo institutions and to 
protect the Deposit Insurance Fund. Therefore, the special prompt 
corrective action requirements have been retained in the Final 
Statement.

Cross Support

    The Proposed Policy Statement provided that Investors that owned 
two

[[Page 45447]]

or more depository institutions, including one covered by this policy 
statement, would have an obligation to commit their bank or thrift 
investments to support one or more of these institutions if they 
failed, provided there was sufficient common ownership as provided in 
the Proposed Policy Statement. Commenters stated that the cross 
guarantee requirement would deter private capital investment in failed 
insured depository institutions because private capital investors in 
unrelated banks would not agree to a cross guarantee commitment that 
places their legally separate investments at risk.
    The Final Statement scales back the circumstances in which what is 
now referred to as ``cross support'' would be required. A cross support 
obligation would apply if two or more depository institutions are owned 
by a group of Investors covered by the Final Statement if both 
depository institutions are at least 80 percent owned by common 
investors. Further, the FDIC may waive the cross support obligation if 
enforcing the obligation would not reduce the cost of the bank or 
thrift failure to the DIF.

Transactions With Affiliates

    A number of commenters argued that the restrictions under sections 
23A and 23B of the Federal Reserve Act and the Federal Reserve's 
Regulation W and Regulation O are sufficient to prevent inappropriate 
affiliate and insider transactions. Under some common private capital 
investment structures for investments in banks and thrifts, the 
investors would not meet the standards that trigger the applicability 
of sections 23A and 23B. The FDIC is of the view that a special 
situation is presented with respect to transactions with affiliates by 
private capital investors who are not subject to the activities 
restrictions of the Bank Holding Company Act with a resultant 
temptation to cause the de novo bank they have purchased to lend to 
companies in which they have invested. Moreover, the FDIC notes that 
the prohibitions on insider lending are among the most crucial 
requirements for maintaining a safe and sound banking system and for 
protecting the Deposit Insurance Fund. Accordingly, limited changes 
were made to the scope of this provision in the Final Statement.
    The Final Statement modifies the definition of the term 
``affiliate'' to mean ``any company in which the Investor owns, 
directly or indirectly, at least 10 percent of the equity of such 
company and has maintained such ownership for at least 30 days.'' This 
change is designed to make compliance easier and is based on the 
assumption that very short term investments do not provide a reason for 
extensions of credit. Also added is an expectation that Investors will 
provide regular reports to the insured depository institution 
identifying all affiliates. Lastly, a provision has been added that 
exempts from the prohibition existing extensions of credit.

Bidding Eligibility of ``Silo'' Structures

    Commenters acknowledged the FDIC's need to ascertain beneficial 
ownership, clearly identify the parties responsible for making 
management decisions, and ensure that ownership and control are not 
separated but objected to the blanket prohibition on ``silo'' 
structures, arguing that such a prohibition would eliminate many 
investors who would be willing to meet the FDIC's disclosure and 
transparency requirements. In the Final Statement, the FDIC has 
clarified that it would not approve ownership structures that typically 
involve a private equity firm (or its sponsor) that create multiple 
investment vehicles funded and apparently controlled by the private 
equity firm (or its sponsor) to acquire ownership of an insured 
depository institution. The FDIC is concerned that the purpose of these 
structures is to artificially separate the non-financial activities of 
the firm from its banking activities so that the private equity firm is 
not required to become a bank or savings and loan holding company. This 
type of structure also raises serious concerns about the sufficiency of 
the financial and managerial support to the acquired institution, even 
in those instances where the investing fund(s) agrees to be regulated 
as a bank or savings and loan holding company.

Secrecy Law Jurisdictions

    Many commenters stated that a prohibition on having any offshore 
entities in an ownership structure could restrict private capital 
investors from using traditional funding structures that provide tax 
and other efficiencies, thereby hampering their ability to bid for 
failed depository institutions.
    In evaluating a proposal involving an investment in an insured 
depository institution, it is important that the FDIC have adequate 
assurances that it will have access to reliable information on the 
operations or activities of the investor and its affiliates. Entities 
organized in secrecy law jurisdictions can make it difficult for the 
FDIC as a regulator to obtain information about a company's owners and 
its affiliates. Therefore, the FDIC believes that the Final Statement's 
provisions requiring transparent ownership and full disclosure are 
reasonable and prudent and that investors can organize efficient and 
functional ownership structures in the U.S.
    In response to commenters' request that the FDIC clarify the 
meaning of ``bank secrecy jurisdiction'' in the Final Statement, the 
FDIC provides a definition of bank secrecy jurisdiction as ``a country 
that applies a bank secrecy law that limits U.S. bank regulators from 
determining compliance with U.S. laws or prevents them from obtaining 
information on the competence, experience and financial condition of 
applicants and related parties, lacks authorization for exchange of 
information with U.S. regulatory authorities, does not provide for a 
minimum standard of transparency for financial activities, or permits 
off shore companies to operate shell companies without substantial 
activities within the host country.''

Continuity of Ownership

    The FDIC received comments questioning the justification for the 
proposed three-year holding period. The FDIC also received comments 
that indicated the three-year period was an appropriate amount of time 
required to stabilize the operations of a failed bank or thrift. The 
FDIC continues to take the position that it is important to encourage 
long term investment to promote the stability of a de novo previously 
failed bank or thrift. In particular, the FDIC has a direct interest in 
stability of management on which it depends for appropriate management 
of any agreements it may have with a bank or thrift concerning losses 
at that bank or thrift. Therefore, the Final Statement has largely left 
unchanged this prohibition absent prior FDIC approval, but has added a 
statement that in the case of transfers to affiliates FDIC approval 
shall not be unreasonably withheld provided the affiliate agrees to be 
subject to the same requirements that are applicable under this policy 
statement to the transferring Investor. In the Final Statement, the 
three-year holding period does not apply to mutual funds defined as an 
open-ended investment company registered under the Investment Company 
Act of 1940 that issues redeemable securities that allow investors to 
redeem on demand.

Disclosures

    The FDIC believes that this feature could likely be implemented 
without significantly deterring private capital investments. In an 
effort to address commenters' concerns about confidentiality, in the 
Final Statement

[[Page 45448]]

the FDIC provides that confidential business information will be 
treated as such and not disclosed except in accordance with applicable 
law.

V. Regulatory Analysis and Procedure

Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA), 44 U.S.C. Ch. 3501 et seq., the FDIC may not conduct or 
sponsor, and the respondent is not required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (OMB) control number. The Final Policy contains 
reporting and recordkeeping requirements that constitute a collection 
of information as contemplated by the PRA. Specifically, the Final 
Policy sets forth the expectation that investors subject to the policy 
will provide regular reports that identify all affiliates (as that term 
is defined in the Final Policy) of the investor; that investors that 
own an interest in an insured depository institution and that employ 
ownership structures utilizing entities that are domiciled in bank 
secrecy jurisdictions (as that term is defined in the Final Policy) 
will maintain business books and records (or duplicates thereof) in the 
U.S.; and that investor will submit information to the FDIC regarding 
the investors and all entities in the ownership chain, including 
information on the size of capital funds, diversification, return 
profile, marketing documents, the management team, business model, and 
such other information required by the FDIC. The FDIC has submitted to 
OMB a request for approval, by August 28, 2009, of the information 
collection under emergency clearance procedures. The estimated burden 
is as follows:
    Title: Qualifications for Failed Bank Acquisitions.
    OMB Number: 3064-[new].
    Estimated Number of Respondents:
    Investor Reports on Affiliates: 20.
    Maintenance of Business Records: 5.
    Disclosures Regarding Investors and Entities in Ownership Chain: 
20.
    Frequency of Response:
    Investor Reports on Affiliates: 12.
    Maintenance of Business Records: 4.
    Disclosures Regarding Investors and Entities in Ownership Chain: 4.
    Average hours per response:
    Investor Reports on Affiliates: 2.
    Maintenance of Business Records: 2.
    Disclosures Regarding Investors and Entities in Ownership Chain: 4.
    Total annual burden--840 hours
    If approved by OMB under emergency authority, the FDIC will proceed 
with a request for approval under normal clearance procedures, 
including an initial 60-day request, and subsequent 30-day request, for 
comments on: (1) Whether this collection of information is necessary 
for the proper performance of the FDIC's functions, including whether 
the information has practical utility; (2) the accuracy of the 
estimates of the burden of the information collection, including the 
validity of the methodologies and assumptions used; (3) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (4) ways to minimize the burden of the information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology. Pending 
publication of the initial 60-day notice, interested parties are 
invited to submit written comments on the estimated burden herein by 
any of the following methods:
     https://www.FDIC.gov/regulations/laws/federal/propose.html.
     E-mail: comments@fdic.gov.
     Mail: Leneta Gregorie (202-898- 3719), Counsel, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.
     Hand Delivery: Comments may be hand-delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street), on business days between 7 a.m. and 5 p.m.
    A copy of the comment may also be submitted to the OMB Desk Officer 
for the FDIC, Office of Information and Regulatory Affairs, Office of 
Management and Budget, New Executive Office Building, Room 3208, 
Washington, DC 20503. All comments should refer to the name of the 
collection.
    The text of the Final Statement of Policy on Qualifications for 
Failed Bank Acquisitions follows:

Final Statement of Policy on Qualifications for Failed Bank 
Acquisitions

In order to provide guidance about the standards for more than de 
minimis investments in acquirers of deposit liabilities and the 
operations of failed insured depository institutions, the FDIC has 
adopted this Statement of Policy (``SOP''). It is the intent of the 
FDIC Board of Directors that this Statement of Policy applies to 
investors and is not intended to interfere with or supplant the 
preexisting regulation of holding companies. The Board of Directors 
will review the operation and impact of this SOP within 6 months of 
its approval date and shall make adjustments, as it deems necessary.
    Applicability. Except as provided below, this SOP will apply 
prospectively to:
    (a) private investors in a company, including any company 
acquired to facilitate bidding on failed banks or thrifts that is 
proposing to, directly or indirectly, (including through a shelf 
charter) assume deposit liabilities, or such liabilities and assets, 
from the resolution of a failed insured depository institution; and
    (b) applicants for insurance in the case of de novo charters 
issued in connection with the resolution of failed insured 
depository institutions (hereinafter ``Investors'').
    This SOP shall not apply to acquisitions of failed depository 
institutions completed prior to its approval date.
    Following application to and approval by the FDIC Board of 
Directors, taking into consideration whether the ownership structure 
of such bank, thrift or holding company is consistent with the 
objectives of this SOP, this SOP shall not apply to an Investor in a 
bank or thrift, or bank or thrift holding company where the bank or 
thrift has maintained a composite CAMELS 1 or 2 rating continuously 
for seven (7) years.
    This SOP shall not apply to:
    (a) investors in partnerships or similar ventures with bank or 
thrift holding companies or in such holding companies (excluding 
shell holding companies) where the holding company has a strong 
majority interest in the resulting bank or thrift and an established 
record for successful operation of insured banks or thrifts. Such 
partnerships are strongly encouraged; or
    (b) investors with 5 percent or less of the total voting power 
of an acquired depository institution or its bank or thrift holding 
company provided there is no evidence of concerted action by these 
Investors.
    Under expedited procedures established by the Cha