Laying the Groundwork for Private Equity Investment in Failed Banks

On March 23, 2026, the Federal Deposit Insurance Corporation (the “FDIC”) (the “Policy Rescission”) its (the “2009 Policy”). The 2009 Policy was originally issued to provide a roadmap to private equity (PE) investors who were interested in acquiring the deposit liabilities (or both the deposit liabilities and assets) of failed banks, including the terms and conditions that the FDIC required for PE investors to be eligible to bid on failed banks. In operation, the 2009 Policy included “onerous and highly prescriptive measures” which stifled the ability of PE investors to effectively bid on failed deposit institutions on the same level playing field as established depository institutions. Recognizing that these measures ended up limiting the ability of an important sector to bid on failed institutions (and minimize losses to the FDIC’s Deposit Insurance Fund), the FDIC’s rescission of the 2009 Policy lays the groundwork for the next wave of failing banks, whenever that may come.

The most recent bank failures of note occurred in 2023, with the rapid demise of Silicon Valley Bank, First Republic Bank and Signature Bank. The FDIC states in the Policy Rescission that while nonbanks participated in the auctions for these failed banks, the 2009 Policy, which imposed, among other requirements, cross-guarantee provisions with respect to commonly owned depositories, affiliate transaction restrictions and extensive continuity of ownership requirements, effectively limited the scope and breadth of PE investors’ ability to participate in the failed-bank bidding process.

As a result, and in an effort to lay the groundwork for a robust category of bidders with access to extensive amounts of capital, the FDIC has rescinded the 2009 Policy. Whether or not the Policy Rescission will have the intended effect of increasing the pool of available bidders for failed banks will not be known until the banking industry experiences the inevitable next cycle of failed banks. At the very least, the FDIC is signaling to PE investors that they should be prepared to participate in the failed-bank bidding process on the same relative terms as established depositories and that their capital will be welcomed to resolve failed-bank acquisitions.

Elimination of the impediments of the 2009 Policy is one piece of the PE bidding puzzle. In a speech by Chairman Hill he indicated that in addition to easing restrictions on nonbank investors, the banking agencies are exploring the possibility of establishing procedures for facilitating quickly shelf charters to bid on a failed institution. This additional prong will further enhance the ability of PE investors to compete with established depositories in the inevitable economic cycle that promulgates failed banks.