Maryland Legal Alert for Financial Services

MARYLAND LEGAL ALERT keeps you updated on Maryland legal developments affecting financial services providers. If you would like more information about the items in this issue, please click on the specified links or contact any member of the Financial Services Practice Group. Learn more about Gordon Feinblatt by clicking here.

NOVEMBER DEADLINES FOR FINANCIAL INSTITUTIONS

A reminder that 2 important deadlines loom for eligible depository financial institutions and their eligible affiliates:

1. Eligible institutions must opt-out of the federal Temporary Liquidity Guarantee Program for unsecured loans and/or transaction accounts by November 12, 2008. Eligible institutions are automatically enrolled in both programs and both programs are provided without charge for 30 days. Unless the institution opts out by November 12, it will remain enrolled and may not opt-out later. Forms for opting out will be posted on the FDIC's website.

2. Eligible institutions must opt-in to the Treasury Department's Capital Purchase Program by November 14, 2008.
Details of both of these programs are being hammered out. In a nutshell, the Temporary Liquidity Guarantee Program guarantees:

a. All newly issued senior unsecured debt issued by eligible institutions on or before June 30, 2009. The amount of debt covered is limited to 125 percent of debt that was outstanding as of September 30, 2008 that was scheduled to mature before June 30, 2009. Guarantee coverage on any debt issued on or before June 30, 2009 will not extend beyond June 30, 2012, even if the debt has not matured; and
b. Funds in non-interest-bearing transaction deposit accounts held by FDIC-insured banks until December 31, 2009.

After November 12, unless the institution opts out, it will be assessed, respectively, an annualized fee of 75 basis points on all newly issued senior unsecured debt, and a 10 basis point surcharge on all amounts in non-interest-bearing transaction deposit accounts exceeding the existing deposit insurance limit of $250,000. Institutions that opt-out will be listed on the FDIC's website. The FDIC is finalizing the details of the program and has stated that it will issue proposed regulations. More information is available at the FDIC's website.

The Treasury Department's Capital Purchase Program is a voluntary program designed to complement the FDIC's Temporary Liquidity Guarantee Program. Under the Capital Purchase Program, eligible institutions can sell equity interests to the Treasury Department in amounts equal to 1-3 percent of the institution's risk-weighted assets. More details on the Capital Purchase Program are available at the Treasury Department's website.
Eligible institutions include FDIC-insured depository institutions; U.S. bank holding companies; U.S. financial holding companies; and U.S. savings and loan holding companies that engage only in activities that are permissible for financial holding companies.

If you have any questions about these programs, please email Carla Witzel, Andrew Bulgin, or John Morton.