Business Recovery Solutions Team: A Summary of the TARP Capital Purchase Plan
December 3, 2008
On October 14, the U.S. Treasury Department (“Treasury”) announced the establishment of a Capital Purchase Program (“CPP”) as part of Treasury’s Troubled Asset Relief Program (“TARP”) under the provisions of the Emergency Economic Stabilization Act of 2008 (“Act”), to enhance the overall capital bases of domestic financial institutions. CPP participation contemplates financial institution access to TARP funds upon Treasury’s approval of the institution’s application and the institution’s acceptance of the terms of Treasury’s corresponding investment in the institution. Under the CPP, Treasury purchases an institution’s preferred stock (“Preferred Stock”) and warrants (subject to various terms and restrictions) in exchange for TARP funds.
As of mid-October, only a publicly traded qualifying financial institution (“PQFI”) was eligible for CPP participation. PQFIs include (i) any U.S. bank or U.S. savings association not controlled by a bank holding company (“BHC”) or a savings and loan holding company (“SLHC”), (ii) any top-tier U.S. BHC, (iii) any top-tier U.S. SLHC engaging solely or primarily in financial holding company (“FHC”) permitted activities, and (iv) any U.S. bank or U.S. savings association controlled by a SLHC that does not engage solely or primarily in FHC permitted activities.
On November 17, Treasury invited any non-publicly traded qualifying financial institution (“NPQFI”) to become a CPP participant. NPQFIs include (i) any privately held top-tier BHC or top-tier SLHC engaging solely or predominantly in FHC permitted activities, (ii) any privately held U.S. bank or U.S. savings association organized in stock form and not controlled by a BHC or SLHC, and (iii) any U.S. Bank or U.S. savings association not publicly traded and controlled by a privately held SLHC that does not engage solely or primarily in FHC permitted activities. Excluded from qualification as a NPQFI (at least for now) are Subchapter S corporations and mutually owned thrifts or mutual holding companies. (Read more)
As of mid-October, only a publicly traded qualifying financial institution (“PQFI”) was eligible for CPP participation. PQFIs include (i) any U.S. bank or U.S. savings association not controlled by a bank holding company (“BHC”) or a savings and loan holding company (“SLHC”), (ii) any top-tier U.S. BHC, (iii) any top-tier U.S. SLHC engaging solely or primarily in financial holding company (“FHC”) permitted activities, and (iv) any U.S. bank or U.S. savings association controlled by a SLHC that does not engage solely or primarily in FHC permitted activities.
On November 17, Treasury invited any non-publicly traded qualifying financial institution (“NPQFI”) to become a CPP participant. NPQFIs include (i) any privately held top-tier BHC or top-tier SLHC engaging solely or predominantly in FHC permitted activities, (ii) any privately held U.S. bank or U.S. savings association organized in stock form and not controlled by a BHC or SLHC, and (iii) any U.S. Bank or U.S. savings association not publicly traded and controlled by a privately held SLHC that does not engage solely or primarily in FHC permitted activities. Excluded from qualification as a NPQFI (at least for now) are Subchapter S corporations and mutually owned thrifts or mutual holding companies. (Read more)
