August 25, 2009

Joseph T. Lynyak quoted in Bloomberg story on upcoming FDIC bank acquisition policy reform

2 min

Venable Banking and Financial Services partner Joseph T. Lynyak was quoted in an August 25, 2009 story on upcoming changes to Federal Deposit Insurance Corp. (FDIC) requirements for private-equity bidders interested in acquiring failing banks.

The FDIC is poised to make it easier for private-equity firms to buy banks after the fastest pace of bank closings in 17 years cost the agency's insurance fund more than $21 billion.

According to the article, the FDIC board will probably lower the requirements for private investors to buy failed lenders after a proposal made in July sparked opposition from the industry. The agency needs new bidders as bankers avoid buying failed lenders, forcing the FDIC to share losses or take other steps that deplete its insurance fund.

The FDIC also may drop the cross-guarantee provision, which would require a private-equity firm with investments in more than one failed bank to provide guarantees for losses based on its level of investment in each of the institutions, said Lynyak.

"It's an open-ended loss guarantee that I don't think anybody is willing to accept," Lynyak said of the proposal.

Even with the changes, private-equity firms may be reluctant to participate out of concern the government could modify the rules later, Lynyak said.