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Tag Archives: Regulatory Guidance

Regulators Adamant – File Draft Applications ASAP and Now!

In conversations this morning with all of the federal regulators, we have been advised in no uncertain terms that draft applications should be submitted as soon as possible.  More details to follow as we get them…

Email This Content Email This Content Posted in TARP Capital. Tagged with , . By Rob Klingler - Tuesday, October 28, 2008

Should You File an Application Early?

(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 Email This Content Posted in TARP Capital. Tagged with , , . By Katherine Koops - Monday, October 27, 2008

New FDIC Guidance on Application Timing

The Field Office Manager for the FDIC’s Atlanta Office recently encouraged a client to go ahead and file the application.  The Manager specifically inquired about whether the client had a “corrective plan” in place to address declining asset quality.  The FDIC plans to follow-up after receiving the application with any questions.

The Field Office Manager said that the goal of the TARP Capital plan was to stabilize banks that have taken action to correct their situation with regard to real estate problems, had a viable plan and could show how the capital would assist them in achieving that plan. He said they were looking for “added value” above and beyond the just waiting for the government to act.  He also confirmed that they were injecting capital in healthy banks to provide liquidity into the market, and that they did not plan to inject capital into banks where the capital would not help.

He asked that the application be emailed to the bank’s Case Manager with a copy to the Field Office Manager.

In light of this guidance from the FDIC, we are slightly revising our advice.  For banks with no issues, we would still recommend waiting.  However, now that the local offices appear to be getting their arms around the TARP Capital program, banks with issues may want to make contact and file.  We are meeting directly with the Atlanta office of the FDIC tomorrow, and will follow up.

Email This Content Email This Content Posted in TARP Capital. Tagged with , , . By Rob Klingler - Monday, October 27, 2008

Additional Guidance on Troubled Bank Eligibility

FDIC Chairman Sheila Bair has informed the Florida Bankers Association that higher CAMELS rated banks can apply for the Treasury Capital Program, but it will subject those banks to further regulatory scrutiny.

Another regulator with a federal banking agency informed the Florida Bankers Association as follows:

CAMELS ratings are not the sole determinant and each situation will be looked at individually. Based on what we know thus far, we think many 3-rated banks will meet the standards as long as there are no mounting deficiencies that suggest future prospects are poor or that additional downgrades are likely. Further, it is possible that certain 4-rated banks will qualify, as long as conditions are stable or improving. We also think that a larger number of troubled banks might warrant TARP approval if there is an accompanying injection of private capital.

In addition to the above, banks with less than satisfactory CRA ratings are not likely to be approved. Further, banks with certain risk factors such as high concentrations of construction and development loans will be subject to closer scrutiny, although that will not necessarily disqualify them.

Although ultimate approval for troubled banks remains unlikely, it is very clear that regulators want troubled banks to present proposals for consideration under the TARP Capital plan, and that no regulator wants to be blamed for erroneously pushing a struggling bank out of the program.

Email This Content Email This Content Posted in TARP Capital. Tagged with , , , . By Rob Klingler - Friday, October 24, 2008

Further Regulatory Focus Changes

We have heard from several federal and state banking regulators that the factors that may be determinative in a bank’s application for TARP Capital are continuing to change.  We understand that federal regulators now want a “with” and “without” projection for each application, and want larger banks to indicate a willingness to buy failed and failing banks (to this end we’ve been told of large client that was given a physical list of potential banks to be bought).

One of our clients has a residual Fair Lending issue, but was told that since they have a Satisfactory CRA rating, the Fair Lending issue would not prevent the bank from receiving TARP Capital.  That client was also told that the projections should show a CRE concentration of less than 300%. Finally, the client was told to file its Application as a “Confidential Draft” to avoid public scrutiny.

Email This Content Email This Content Posted in TARP Capital. Tagged with , . By Rob Klingler - Wednesday, October 22, 2008