August 20, 2009

FDIC to relax bank auction proposals

Regulators in Washington are fiddling with proposals to make it easier for private equity firms to buy failed banks, sources close to the discussions said.

Federal Deposit Insurance Corp. officials are working through changes in proposals submitted in July in advance of a board meeting Wednesday, The Wall Street Journal reported.

Changes to the proposals could include smaller mandates for capital cushions and relaxing requirements that would have put equity firms in a position of supporting bank subsidiaries, the Journal said Thursday.

The point is to make it encourage bidding on failed banks taken over by the FDIC.

Seventy-seven U.S. banks have failed so far this year, up from 25 in all of 2008.

But bidding at some recent bank auctions has been flat, the Journal said.

A proposed mandate for buyout firms to keep bank charters for three years is expected to remain intact. The proposal seeks to prevent firms from turning over the banks quickly for a fast profit.