Canadian banks may face weaker competition in bidding for troubled U.S. financial institutions, as American regulators push rules that make private equity takeovers more expensive.
The Federal Deposit Insurance Corp. (or FDIC) is expected to announce new bank takeover rules on Thursday that force buyers to pledge more funds should the lenders falter, according to Bloomberg.
The FDIC would take this step to avoid new leverage being injected into a banking system that's been crippled by using too much leverage in the first place.
If Bloomberg's got it right - they usually do - and new rules are in the offing, then private equity buyers face putting more capital into deals. That's going to make bank purchases less attractive for these funds, and could open a door for Canadian bidders.
These regulatory moves follow the FDIC-administered auction of Florida-based BankUnited Financial Corp. in May. That bank drew the attention of Toronto-Dominion Bank . But after a hotly-contested bidding war, BankUnited went to a collection of private equity firms that included Blackstone Group and Carlyle Group.
Private equity funds spent $1-billion (U.S.) on investments in banks in May, according to Bloomberg. The FDIC has closed 45 U.S. banks so far this year.
Andrew Willis