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Regulators offer guidance on NCUA- and FDIC-assisted acquisitions
WASHINGTON (6/8/10)--In a joint statement released on Monday, federal financial regulators said that the approval of financial acquisitions should be “conditioned on the acquiring institution's commitment to maintain specified levels of capital to address the risk of significant retrospective adjustments to the bargain purchase gain or other risks.” The release, entitled “Interagency Supervisory Guidance on Bargain Purchases and [Federal Deposit Insurance Corporation (FDIC)]- and [National Credit Union Administration (NCUA)]-Assisted Acquisitions,” aims to “address supervisory considerations related to business combinations that result in bargain purchase gains and the impact such gains have on the acquisition approval process.” Specifically, the release recommends that so-called “acquiring institutions” should “apply the acquisition method of accounting to all business combinations, including bargain purchase transactions and assisted acquisitions.” “Any estimated bargain purchase gain will be affected by retrospective adjustments made during the accounting measurement period to the acquisition-date fair values of assets acquired and liabilities assumed in the combination,” the release adds. According to the release, federal regulatory agencies may “impose capital preservation and other conditions in their approvals of acquisitions of institutions” due to concerns regarding the “quality and composition of capital” when bargain purchase gains are “expected to result from a business combination” and any associated fair value estimates “have not yet been validated.” For the full release, use the resource link.
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