OCC Conditional Approval of First “Shelf Charter” National Bank
Corporate & Finance Alert
December 9, 2008
On November 21, 2008, the Office of the Comptroller of the Currency (“OCC”) announced that it had granted preliminary approval for the first ever national bank “shelf charter,” which aims to encourage private equity investment in troubled depository institutions, including those institutions held by the Federal Deposit Insurance Corporation (“FDIC”) as a receiver. A copy of the first OCC order granted to establish the Ford Group Bank, National Association is attached below.
Prior to the new shelf charter rule, only federally chartered depository institutions or their holding companies were eligible to bid on FDIC auctions of failed banks and trusts. Under the new rule, the OCC may grant preliminary approval to investor groups for a national bank charter, which remains inactive or “on the shelf” until the investor group is prepared to acquire a troubled institution.
During the initial review process for preliminary approval, the OCC will evaluate the qualifications of the proposed management team, the sources and amount of capital that would be available to the bank and a streamlined business plan detailing how the acquired bank would be operated. Upon grant of preliminary approval, the investor group will be eligible to view the FDIC’s list of troubled institutions and submit bids for the acquisition of such institutions.
Once a target institution is identified and the FDIC approves the bid, the OCC may provide final approval upon the fulfillment of certain conditions, including submission of a comprehensive business plan acceptable to the OCC, which provides detailed information regarding the proposed business and operations of the institution. In the event the FDIC does not approve the investor group’s bid, the shelf-charter will remain available for a period of eighteen (18) months from the date of conditional approval, during which the conditional charter may be used to make bids on other troubled institutions.
Although potential investors will still have substantial requirements for closing an approved bid (including approval and oversight of the Federal Reserve if a bank holding company is to be organized for the acquisition), the OCC’s “shelf charter” preliminary approval is an important step towards increasing the pool of available bidders for troubled banks and trusts and provides new and significant investment opportunities for private equity groups.
If you have questions regarding the OCC’s “shelf charter” process, please contact Michael J. Lubben of our Corporate Department.