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Bank Eligibility to Bid for Loss Sharing Arrangements

We have advised a number of banks on the feasibility of bidding to acquire the assets of failed institutions.  The loss sharing arrangements currently being offered by the FDIC can be an attractive means to increase market presence or to expand into new markets.

The specific criteria used by the FDIC will vary from project to project based on the characteristics of the troubled institution, the time available for marketing, and other factors.  However, the FDIC has indicated the following base criteria:

Supervisory Criteria:

  • Total Risk Based Capital ratio of 10% or higher
  • Tier 1 Risk Based Capital ratio of 6% or higher
  • Tier 1 Leverage Capital ratio of 4% or higher
  • CAMELS composite rating of 1 or 2
  • CAMELS Management component rating of 1 or 2
  • Compliance rating of 1 or 2
  • RFI/C rating of 1 or 2
  • CRA rating of at least Satisfactory
  • Satisfactory AML Record
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FDIC Expands Bidder List for Troubled Institutions

On November 26, 2008, the FDIC issued a press release outlining a new plan to allow parties that do not have a bank charter to bid on failing institutions.  We will keep you up to date as additional details emerge on this new plan.  Below is the complete text of the FDIC’s press release.

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