Contact at 404.572.6819 or kkoops@pogolaw.com.
Katherine M. Koops is a Partner in the Financial Institutions Group at Powell Goldstein. Ms. Koops concentrates in securities and corporate law, with a focus on assisting clients in the financial services industry.
On June 30, 2010, the House passed the Dodd-Frank regulatory reform bill in the form agreed upon by the Conference Committee the day before. The bill, as passed, was identical to the version approved previously by the Committee except that the so-called “pay-for” amendment, which would require banks with over $50 billion in assets to cover the $19 billion cost of the financial reform legislation, was replaced by early termination of the Troubled Asset Relief Program and a 20 basis-point increase in required FDIC reserves from 1.15% to 1.35% of insured deposits by 2020.
According to Senate Banking Committee Chairman Chris Dodd, immediate TARP termination would save approximately $11 billion, an estimate of the incremental amount that would not be repaid if all remaining allocated TARP funds were spent during the three months left under its current term. According to the Treasury’s May 2010 monthly report to Congress (issued on June 10, 2010), TARP’s projected deficit impact was estimated at $105.4 billion, with less than $550 billion of the authorized $700 billion having been spent.
The legislation allocates the funding based on increased FDIC reserves among a broader base of banks than would have been subject to the $19 billion assessment. Banks with more than $10 billion in assets would support the FDIC reserve increase through their deposit insurance premiums, while the $19 billion assessment would have only applied to banks with over $50 billion in assets. The Independent Community Bankers of America estimates that based on March 31, 2010 call report data, 68 banks between $10 billion and $50 billion would be subject to the higher premiums, in addition to 36 banks with over $50 billion in assets. On the other hand, approximately 7,600 smaller banks would be exempt from the funding requirement.
Email This Content Posted in Dodd-Frank Act. Tagged with Financial Regulatory Reform.By Katherine Koops - Thursday, July 1, 2010First, a couple new jokes:
Q. What giant beasts are currently stalking the financial markets?
A. TARPosaurus and T-Reas.
Q. What is their favorite meal?
A. Lame duck.
Q. What’s the next car coming off the U.S. assembly line?
A. The new GMC TARP…gets one mile per 25 billion gallons.
And just in time for Thanksgiving—a simple potluck dish that’s easy to make and feeds billions.
TARP Casserole
Makes enough to lend to your neighbors. Goes great with Warrant Surprise.
Email This Content Posted in Humor. Tagged with Humor.By Katherine Koops - Sunday, November 23, 2008On November 7, 2008, Katherine Koops presented The Shifting Boundaries of the TARP Capital Purchase Program at the Georgia Bankers Association’s Economic Stabilization Act and Bank Capital Workshop. The presentation addresses the following questions:
Email This Content Posted in Presentations, TARP Capital. Tagged with Capital Purchase Program, Presentation.By Katherine Koops - Sunday, November 9, 2008Q. What did Treasury use to put the Capital Purchase Program together?
A. Duct TARP.
Q. What do you call a bank that’s been turned down by Treasury?
A. TARPooned!
Q. What is a banker’s favorite breakfast food?
A. PopTARPs.
Q. What do you use to remove a bad loan from your books?
A. TARPentine.
Q. Knock Knock
A. Who’s There?
Q. TARP
A. [DOOR SLAMMED IN FACE]
Email This Content Posted in Humor. Tagged with Capital Purchase Program, Humor.By Katherine Koops - Thursday, November 6, 2008We’ve received some inquiries regarding the circumstances under which a bank with no or limited senior unsecured debt outstanding at September 30, 2008 might be eligible to issue guaranteed senior unsecured debt under the FDIC’s Temporary Liquidity Guarantee program through June 30, 2009. Based on the FDIC’s interim rule relating to the program and informal discussions with FDIC representatives, we believe that this will be possible, but that prior FDIC approval will be necessary in order for the guarantee to apply.
At this time, there is no application form or specific procedural guidance, but we have been told that you should contact your primary FDIC regulatory contact to request coverage if you plan to issue senior unsecured debt, would like for it to be guaranteed, but did not have any outstanding at September 30, 2008 or did not have sufficient debt outstanding to guarantee the full amount of the new proposed issuance. The FDIC will review each request individually and may want you to show how guaranteeing your new debt will be consistent with the FDIC’s public policy of supporting the strength and liquidity of the banking system through next June.
We believe this guidance applies both to banks with a temporary zero balance at September 30, 2008 (i.e., those with a Fed Funds purchased position that day but with sold positions on other days) and to those with a zero balance that they have sustained for a long period of time. We’ll publish more specific guidance as it becomes available.
Email This Content Posted in Liquidity Guarantee. Tagged with FDIC, Liquidity Guarantee Program.By Katherine Koops - Wednesday, October 29, 2008What Should be Confidential?
Although the TARP Capital application form itself is simple and does not generally request information that is not otherwise publicly available or that is sensitive in nature, there are some aspects that you should consider for confidential treatment. A few examples are listed below. The first item listed (M&A and capital plan) is requested in the application, and the regulators may request the others supplementally.
How Do I Keep Information Confidential?
The TARP Capital program application form contains the following instructions:
Any applicant desiring confidential treatment of specific portions of the application must submit a request in writing with the application. The request must discuss the justification for the requested treatment. The applicant’s reasons for requesting confidentiality should specifically demonstrate the harm (for example, loss of competitive position, invasion of privacy) that would result from public release of information (5 U.S.C. 552). Information for which confidential treatment is requested should be: (1) specifically identified in the public portion of the application (by reference to the confidential section); (2) separately bound; and (3) labeled “Confidential.” The applicant should follow the same procedure when requesting confidential treatment for the subsequent filing of supplemental information to the application.
The applicant should contact the appropriate regulatory agency for specific instructions regarding requests for confidential treatment. The appropriate regulatory agency will determine whether the information will be treated as confidential and will advise the applicant of any decision to make available to the public information labeled as ‘Confidential.’
What Should My Request Include?
When requesting confidential treatment, a separate letter dealing with that issue specifically should be attached to the application. The letter should:
How Do I Support My Request?
While the specific issues will vary depending on each bank’s situation, the typical grounds for confidential treatment involve competitive harm, adverse legal or regulatory consequences, or violations of privacy that could be suffered if the information were disclosed. Examples include:
Acquisition discussions: Disclosure would result in competitive harm because a fundamental competitive aspect of the bank’s strategic plan would be made public. Third parties could interfere in the negotiations, and premature disclosure could adversely affect both parties’ ability to consummate the transaction and/or the market for their stock. Disclosure will in any event likely be prohibited under a confidentiality agreement or terms of a letter of intent or definitive agreement.
Capital transactions: Disclosure would result in competitive harm because competitors would be in a position to evaluate the bank’s current and prospective capital position and future performance prospects. Competitive harm could also result from public disclosure of privately negotiated transaction terms with identified investors. Additionally, a prior public announcement of a private placement could trigger “general solicitation” concerns under federal securities laws.
Projections: Disclosure would result in competitive harm because this information reflects the bank’s own internal evaluation of its resources, future prospects and operating and growth strategies.
Use of Proceeds: Disclosure would result in competitive harm because the bank’s intended use of capital provides valuable insight into its future plans regarding acquisitions, branching, product and service expansion, and other elements of its strategic plan.
CAMELS and Exam Information: This information is required to be kept confidential under banking regulations.
Customer or Account Data: Disclosure would violate existing statutory and regulatory privacy protections and would also damage the bank’s existing and potential customer relationships.
These are just general illustrations—the key is to think about the harm that disclosure could do and describe it briefly.
Is this Really Necessary?
Applications submitted in draft form are not available publicly, so the confidential treatment request is not as critical at that stage. For final applications, it’s possible that all information will be treated as confidential under the regulators’ supervisory powers (as opposed to the applications process), but until this is confirmed, it would be prudent to request confidential treatment.
Email This Content Posted in TARP Capital. Tagged with Application, Capital Purchase Program, TARP Application.By Katherine Koops - Wednesday, October 29, 2008(See Update on Later Regulatory Guidance.)
No topic has been discussed more around our offices today then whether an institution interested in receiving TARP Capital should go ahead and file an application now. For banks that fit squarely within the parameters of the proposed program (i.e., exchange-listed, publicly traded institutions), it’s best to apply now. For a smaller public, private, or S corp institution with “structural” difficulties with the program as currently designed, it may also be in the bank’s best interest to go ahead and submit an application now–especially if its regulator has encouraged it to do so. If it does, however, the bank needs to keep in mind that it will need to identify the participation difficulties now (see TARP Capital Issues) and supplement/amend the application later, with the extent of the required amendment being currently unknown.
If it applies now, even with several “structural” compliance issues noted in its application, the bank might get formal regulatory feedback more quickly, which would help with capital planning. In other words, “First come, first served” is not the same as “first come, first look.” For example, a bank may be able to meet its capital needs solely with TARP and prefer to do that, but if it receives definitive word that TARP is not available, it’ll need to move forward with alternative financing and plan accordingly.
In a best case scenario, an amendment to the application would just involve reviewing the investment documents when they’re available and certifying that the bank has no issues with them that haven’t been previously noted in its application. On the other hand, the entire program for private/S corp/smaller public companies could change significantly (for example, from equity to debt), and the bank could need to revise projections, review other potential issues presented (i.e., third party or regulatory restrictions on debt issuance) under the new program and submit a significant amendment to its application. If we knew that a new program would be unveiled this week, it would make sense to hold off on the application, but if it won’t be developed until a later date (or at all), it’s best to apply for the program in its current form and note any difficulties that the bank will experience in complying with its terms.
Email This Content Posted in TARP Capital. Tagged with Application Timing, Capital Purchase Program, Regulatory Guidance.By Katherine Koops - Monday, October 27, 2008