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from Rolfe Winkler:
FDIC lowers capital rule, but there’s a twist
FDIC concluded its quarterly board meeting earlier this afternoon and the big news is it approved lower capital requirements for private equity shops looking to buy failed banks.*
But the weaker requirements come with a silver lining.
The previous proposal was that banks in the hands of private equity would have to maintain Tier 1 capital of 15%, triple the standard of 5% that is currently considered "well-capitalized."Â [Your humble columnist thinks that threshold is way too low, but that's another discussion].
Under the rule that was adopted, such banks will have to maintain a 10% capital ratio, but the definition of capital isn't Tier 1, it's Tier 1 common equity.
Tier 1 common equity is close to tangible common equity, which is a stronger measure of capital than simple Tier 1.
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The Wall
