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Treasury releases details of its Capital Purchase Program

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Published October 14, 2008 at 9:39 AM
The Treasury Department released details of its voluntary Capital Purchase Program Tuesday morning. Key provisions included in the program are that the management of the banks must decide by Nov. 14 to participate or not. Additionally the terms of the program include:

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  • The senior preferred shares will pay a cumulative dividend rate of 5% annually for the first five years that will reset to a rate of 9% annually after that.
  • The government's shares will be nonvoting.
  • The maximum amount the government will invest is $25 billion or 3% of risk-weighted assets.
  • The minimum amount the government will take is 1% of risk-weighted assets.
  • Treasury will buy the senior preferred shares by year-end 2008.
  • The government's senior preferred shares will qualify as Tier 1 capital and will rank equally with existing preferred shares and be senior to common stock.
  • The program is available to qualifying U.S. controlled banks, savings associations, and certain bank and savings and loan holding companies. The Treasury will determine eligibility and allocations for interested parties after consultation with the appropriate federal banking agency.
  • Treasury may transfer the shares to a third party at any time.
  • Treasury will receive warrants to purchase common stock with an aggregate market price equal to 15% of its investment.
  • Participating banks must adopt Treasury's standards for executive compensation.
- George White  

See Treasury statement



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