ABA, Groups Seek Changes to Support Sub S, Mutual Banks Receiving ECIP Investments

With the Treasury Department investing $8.7 billion in community development financial institutions and minority depository institutions through its Emergency Capital Investment Program, the American Bankers Association and several other trade groups this week urged the Federal Reserve to revise quickly its regulatory treatment of ECIP investments to support the program’s success.

“We strongly urge the Board to amend the Debt to Equity / Leverage Ratio and Double Leverage Ratio for Subchapter S and Mutual bank ECIP recipients, and to clarify its position as soon as possible,” the groups said. With Subchapter S structures common among CDFI banks and MDIs, including one-third of ECIP bank recipients, “this amendment is necessary to ECIP’s success,” the groups added.

“If the Board does not make these amendments at this time to acknowledge ECIP and exclude ECIP Sub Debt from the overall debt calculation for the purposes of calculating these ratios, S Corp and Mutual CDFI banks and MDIs will be forced to limit the ECIP capital they accept, or terminate their S election or Mutual status which will have a negative effect on their shareholders, their banks and the communities they serve,” the groups noted, urging the Fed to act swiftly as Treasury is expected to move toward closing ECIP investments shortly after the new year.