Contact at 404.572.6810 or robert.klingler@bryancave.com.
Rob Klingler is the founder and editor of BankBryanCave.com. Mr. Klingler concentrates on advising financial institutions on all aspects of their business, with a particular focus on capital raising and public company securities compliance. Mr. Klingler advises public companies, including those listed on the New York Stock Exchange and the NASDAQ Stock Market, as well as private companies, on a wide variety of securities-related issues, including raising capital, the preparation and filing of annual, quarterly and current reports, Section 16 compliance, proxy solicitations and going private transactions. Mr. Klingler also advises public and private companies on corporate governance issues, including compliance with the Sarbanes-Oxley Act of 2002.
Rob Klingler's Official Firm Biography
On Friday, February 19, 2010, Jerry Blanchard will be presiding at the annual Banking and Finance Law CLE co-sponsored by the Institute for Continuing Legal Education in Georgia and the Business Law Section of the State Bar of Georgia. Early registration is $160, while on-site registration will be $180. The program is targeted towards attorneys licensed in Georgia, but other attorneys and bankers are welcome as well. You can view the program brochure or register online.
Jerry will also be speaking about recent lender liability decisions and Rob Klingler will be presenting a regulatory and legislative update. Presentations are also scheduled on the state of banking in Georgia, failing bank liquidations, an analysis of the deal conducted by State Bank & Trust Company, and preparing for director and officer litigation. A panel of regulators from the state and FDIC will also address current issues.
On February 3, 2010, the Treasury Department announced enhancements to the TARP Capital Purchase Program for Community Development Financial Institutions (CDFIs). In addition to significant improvements for CDFIs, for the first time the Treasury Department has formally announced that it will consider private matching investments to determine bank viability – which could be a significant signal of how the Treasury might treat community banks under the proposed $30 billion Small Business Lending Fund.
Basic Program Terms
- CDFI’s can apply for capital equal to up to 5 percent of their total risk weighted assets.
- The dividend rate on the preferred stock will be 2% for eight years (as opposed to 5% for five years under the original Capital Purchase Program) before increasing to 9%.
- CDFI’s with existing TARP Capital Purchase Program investments will be eligible to transfer those investments into this program (effectively lowering the carrying costs of the capital and potentially providing additional capital, if desired).
- Consistent with the previous terms for CDFI’s, CDFI’s will not be required to issue any warrants or other additional equity kickers to the Treasury Department under the program.
Matching Capital
As noted above, for the first time the Treasury Department has formally recognized the possibility of institutions raising matching private capital to become eligible for TARP capital. Specifically, the new plan contemplates that if a CDFI might not otherwise be approved by its regulator, it will be eligible to participate “so long as it can raise enough private capital that – when matched with the Treasury capital up to 5 percent of risk-weighted assets – it can reach viability.” The new private capital will have to be junior to the TARP investment (i.e. common stock or preferred stock with lower preferences – although potentially higher dividend rates – than the TARP preferred stock).
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Carrying through with his announcement in the State of the Union, on February 2, 2010, President Obama provided the outlines of a proposed $30 billion Small Business Lending Fund to provide capital to community banks, with incentives to increase small business lending. As proposed, the program will require Congressional approval to move the funds outside of TARP, which should remove the applicability of the executive compensation and governance restrictions and is also hoped to remove the stigma associated with TARP funds.
Based on the initial fact sheet, the terms appear generally comparable to the financial terms under the Capital Purchase Program, with reductions in the dividend rate for the first five years triggered by increases in small business lending. Every 2.5% increase in small business lending through December 31, 2011 over 2009 levels would trigger a 1% decrease in dividend rate, down to a minimum rate of 1%.
Banks with less than $1 billion in assets would be eligible to receive a capital investment of up to 5% of their risk-weighted assets. Banks with between $1 and $10 billion in assets would be eligible to receive a capital investment of up to 3% of their risk-weighted assets. Participation in the program will require approval by the bank’s primary federal regulator, although no details are available as to the standards that will be employed.
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The Federal Reserve has published an online reference site for directors titled the Bank Director’s Desktop. The site includes training and reference materials for new and experienced bank directors from all of the federal regulators.
In his January 27, 2010 State of the Union address, President Obama renewed his call for using some of the TARP money for community banks in an effort to drive small business lending.
So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.
This proposal would be consistent with President Obama’s speech last October in which he stated the broad outlines of a new program to provide additional capital to community banks in an effort to spur lending to smaller business, as well as Secretary Geithner’s extension of the TARP program.
We understand that government officials have indicated that additional details on the program will be rolled out by Treasury officials in the coming days. We have previously analyzed the known terms of such an expansion, based on the guidance provided last October.
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With attorneys and staff worldwide, attorneys in Bryan Cave’s financial institutions practice often make the news. Sometimes media mentions highlight the firm’s involvement with notable clients, sometimes the individual accomplishments of attorneys and staff. Recent media mentions include:
Andreassen, Rinearson in Business Lawyer
New York Partner Judith Rinearson and DC Associate Kristine Andreassen co-authored an article in the November issue of the ABA’s The Business Lawyer on the impact of state money transmitter licensing laws on prepaid payment products.
Garrett in MarketWatch
Kansas City Counsel Karen Garrett was quoted Dec. 23 by MarketWatch on a bill before Congress that would require big banks to pay into a $150 billion fund to be used to dismantle a failing bank thought so big or so interconnected that if it collapsed suddenly it would threaten the economy’s stability. The piece was picked up Dec. 27 by McClatchy News Service.
Klingler on National Public Radio
Atlanta Associate Robert Klingler was interviewed Dec. 29 on National Public Radio regarding bank failures, with a particular focus on Georgia banks.
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On December 7, 2009, the Treasury Department published corrections to the preamble and certain provisions of the interim final rules regarding TARP Standards for Compensation and Corporate Governance.
The amendments are generally technical in nature and are designed to clarify certain ambiguities in the original interim final rule and to conform the certification language to reflect the deadlines generally set forth in the regulation and to correct certain cross-references.
The two most important clarifications relate to the identification of most highly compensated employees and the applicability of the “say on pay” requirements.
With regard to the identification of the most highly compensated employees, the correcting amendments make clear that the senior executive officers should NOT be excluded from determinations of the most highly compensated employees. The rule also makes clear that senior executive officers should not be double-counted; if a provision is applicable to the senior executive officers and a certain number of the most highly compensated employees of the TARP recipient, the senior executive officers (because they are already subject to the provision) are excluded for purposes of determining the most highly compensated employees that are also subject to the provision. Accordingly, for TARP recipients that received less than $25 million in Capital Purchase Program funding, the prohibition on the payment or accrual of bonus will apply only to the most highly compensated employee (regardless of whether such employee is a senior executive officer).
The correcting amendments also make clear that private companies are not subject to the requirement to provide shareholders a “say on pay.” Only TARP recipients otherwise subject to SEC regulation are required to provide shareholders with a nonbinding resolution on executive compensation.
Our London office just published an alert on the United Kingdom’s new 50% Bank Payroll Tax. While not directly relevant for most U.S. banks (although it does apply to U.S. banks with U.K offices), it does serve as a strong reminder of the international focus on bank compensation. We understand that France has announced that it intends to introduce a similar tax.
The U.K. Government announced on December 9, 2009, that the award of bonuses to bank employees will render the bank liable to a new “bank payroll tax” through April 5, 2010. The amount of the tax will be equal to 50% of the amount by which the bonus (or aggregate bonuses) awarded to the particular employee, in that period, exceeds £25,000. The tax referable to all such awards will be payable in one lump sum on 31 August 2010. The Government has however reserved the right to extend the period of the charge, and keep the tax in place until certain regulatory changes affecting banks have come into force.
Miscellaneous TARP Stories
We’ve identified a number of stories that or posts that never quite made it into individual BankBryanCave.com posts. Rather than continuing to hold on to them, I’ve assembled them here.
The Simpsons
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