New York plan to offer bank shelf charters on hold

July 2, 2009

   By Paritosh Bansal
   NEW YORK, July 1 (Reuters) – A New York plan to offer pre-approved bank charters is on hold after a bill did not make it through the state’s legislature, in a setback to private equity and other investors looking to buy banks.
   The New York State Banking Department had hoped the so-called “shelf charters” would boost the pool of potential bidders for weak banks.
   The bill, introduced by New York Sen. Brian Foley earlier this year, would have allowed regulators to waive a time restriction on how quickly a group must have a bank up and running after being granted a charter. But a standoff in the state’s senate has left the matter unresolved.
   The plans are now on hold and it is unclear whether it would still be possible for this year, a banking department spokeswoman told Reuters on Wednesday.
   The development comes as the U.S. Federal Deposit Insurance Corp (FDIC) is expected to propose new guidelines on Thursday for private-equity investors seeking to buy failed banks, in a move that could see strict new rules imposed. 
   The Office of the Comptroller of the Currency already offers a national bank shelf-charter. The charter remains inactive, or “on the shelf,” until the investor group is in a position to acquire a bank.
   But a New York charter would have given non-bank players more options to bid on failed banks, whose numbers are increasing.
   Several private equity firms had approached regulators in New York and other states for such a charter, a state official told Reuters previously. [ID:nN06409548]
   Private equity, hedge funds and other investors have increasingly turned their attention to banks, which look cheap amid the financial crisis.
   Firms including WL Ross & Co, Carlyle Group [CYL.UL], Blackstone Group <BX.N> and Centerbridge Partners recently agreed to buy Florida’s BankUnited Financial Corp <BKUNQ.PK> in an FDIC-assisted deal.
   In another recent deal, three private equity firms — Fortress Investment Group LLC <FIG.N>, Crestview Partners LP and Lightyear Capital — agreed to invest in First Southern Bancorp, also in Florida.

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