FDIC Adopts Interim Rule Extending TLGP
March 17, 2009
Earlier today, the Board of Directors of the Federal Deposit Insurance Corporation (the "FDIC") adopted an Interim Rule that amends the Temporary Liquidity Guarantee Program (the "TLGP"). With this amendment, the FDIC intends to provide for an "orderly phase-out period" of the TLGP that will minimize the risk of market disruption as institutions become more reliant on private, non-guaranteed debt markets. There are three elements to the Interim Rule: (1) an extension of the term of the TLGP, (2) an imposition of new surcharges on participating institutions, and (3) new authority to issue non-guaranteed debt.
Under the existing TLGP, senior unsecured debt issued by participating entities through June 30, 2009 is guaranteed until the earlier of the maturity of the debt or June 30, 2012. The Interim Rule extends the term of the TLGP to debt issued through October 31, 2009. The guarantee will extend through the earlier of the maturity of the debt and December 31, 2012 for debt issued on or after April 1, 2009.
The Interim Rule imposes surcharges on entities that issue guaranteed debt under the extended TLGP. Insured depository institutions will be charged an additional 10bps assessment rate for debt issued between April 1, 2009 and June 30, 2009 with a maturity date after June 30, 2012. All other entities eligible to participate in the TLGP, including bank holding companies, savings and loan holding companies and entities approved as eligible entities by special action of the FDIC, will be charged an additional 20 bps on the assessment rate for similar debt. For debt issued after June 30, 2009 and on or before October 31, 2009 the surcharge will be 25 bps for insured depository institutions and 50bps for all other eligible entities. These surcharges will be deposited in the deposit insurance fund rather than being reserved for the TLGP fund.
The Interim Rule permits TLGP participants to apply to issue non-guaranteed debt after June 30, 2009. Such an approved issuance of non-guaranteed debt would not be subject to a fee.
Please feel free to contact any of your regular contacts at the firm or any of our partners and counsel listed under Banking and Financial Institutions, Capital Markets, or Structured Finance on this website if you have any questions. For a description of the TLGP, please see the Cleary Gottlieb alert memo of November 25, 2008, "Issuing FDIC-Guaranteed Debt under the TLGP."