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Michael Krebs and Robert Keller publish "FDIC's private equity roadblock"

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TheDeal Magazine
07.22.2009

Michael Krebs, co-chair of the firm’s Banking and Financial Services practice, and Robert Keller, the former president and CEO of New Dartmouth Bank and current co-head of Triumph Investment Funds, private funds investing exclusively in the banking sector, published “FDIC’s private equity roadblock” in TheDeal Magazine on July 22. The article discusses the Federal Deposit Insurance Corporation's Proposed Statement of Policy on Qualifications for Failed Bank Acquisitions.  Mike and Bob argue that the policy would impose significant burdens on bidders for failed banks that are backed by private equity investors and would likely squelch the interest those funds have in injecting new capital into the banking system to fund acquisitions of failed banks.  They contend that these burdens would both be inconsistent with the FDIC's mandate to resolve failed banks at "the least possible cost to the deposit insurance fund" and disregard the FDIC's positive experience with private equity-backed bidders during the last banking crisis. Mike and Robert point out four aspects of the proposed policy statement that are especially problematic - namely, the enhanced leverage ratio commitment, the expanded source of strength doctrine, the expanded cross guarantees and the three-year holding period.

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