This article was originally published 19 March, 2009
On March 17, 2009, the Federal Deposit Insurance Corporation ("FDIC") issued an interim rule (the "Interim Rule") which extends its Temporary Liquidity Guarantee Program ("TLGP") from June 30, 2009 to October 31, 2009 for all insured depository institutions participating in the debt guarantee program of the TLGP ("IDIs") and other participating entities; however other participating entities that have not issued senior unsecured debt guaranteed by the FDIC under the TLGP ("TLGP debt") before April 1, 2009 are required to submit an application to and obtain approval from the FDIC to participate in the extended TLGP. The Interim Rule imposes a surcharge on all TLGP debt with a maturity of one year or more issued on or after April 1, 2009. The Interim Rule also permits IDIs and other entities participating in the extended TLGP to apply to the FDIC to issue non-FDIC-guaranteed senior unsecured debt ("non-TLGP debt") during the extension period.
The FDIC's stated intent for extending the TLGP is to facilitate an orderly transition period for participating institutions to return to non-FDIC-guaranteed funding, and to reduce the potential for market disruption when the program ends; enhance bank liquidity while the elements of the Treasury's proposed Financial Stability Plan are implemented; and address potential competitive disparities with similar programs in other countries. The FDIC's extension is consistent with extensions of other liquidity programs recently announced by the Board of Governors of the Federal Reserve System.
Extension of the TLGP
The Interim Rule extends the period during which TLGP debt may be issued from June 30, 2009 to October 31, 2009. The extension applies to all IDIs and to other participating entities (such as bank holding companies) that have issued TLGP debt prior to April 1, 2009.
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