Deposit Insurance

FDIC to Ease Entry for Private-Equity Firms Buying Failed Banks

(Bloomberg) — The Federal Deposit Insurance Corp., 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.

The FDIC board meets tomorrow in Washington and probably will 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.

“There are a lot of private-equity bidders that have been waiting to see how this rule plays out,” Mark Tenhundfeld, senior vice president at the American Bankers Association, said yesterday in a telephone interview. “As modified, I think private equity is likelier to want to get back in the game.”

Banks are collapsing at the fastest pace since 1992, with 81 failures so far this year, as losses mount on unpaid real- estate debt. The failures have cost the FDIC’s deposit insurance fund an estimated $21.5 billion this year. The agency may impose an emergency fee in the third quarter — sooner than planned — to replenish the fund, the second such assessment this year.

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