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US Regulatory Changes Pave Way for Private Equity Funds to Acquire Failing Banks

US private equity funds fleeing a dismal buyout scene with piles of uninvested cash have received a shot in the arm from regulatory changes enacted on November 28 which could feed their appetite for acquiring banks. Investment funds were previously limited by federal regulations to a 25% stake in banks but were prevented from owning them. Now the US Office of the Comptroller of the Currency (OCC) has skirted this by creating a "shelf charter" which would permit non-bank investors to form a bank holding company to become eligible for bidding on a full ownership stake in failing banks. The funds, after acquiring all the stock, could then run the banks the way they run their portfolio companies - with no shareholders to stand in the way.

While the OCC's head counsel declared that "Not just anybody can come in and get a charter", one investment group - Hilltop Holdings, backed by three private equity funds - has already received the first charter.