Chillin' out till it needs to be funded
No one is sure how closely the Fed watched the line items even as it told the acquirer Cap One to take a close look at its kending and collection practices, rebuild the risk management framework and thus allowed the $ 9 bln deposit deal with NG Direct to be completed. Cap one also got a few notes on store brands for its $#2 bln del with HSBC, the rsk framework between the Card lending and Deposits a perfect match to make it the Darling of the Fed on any bank measures, no longer depending on maret borrowings to support its unsecured individual lending operations
Cap One Deposits of $210 bln are a 2.3% of the Insured Deposits in FDIC, and one fifth of Chase and Bank Am and one fourth of the Global strength of Citigroup, also big enough for us to follow regularly for results and strategy update at the Initiative.
Fair lending and Consumer Protection Laws , specifically the FICO score minimum required by the FHA has Cap one in the cross hairs, thus instigating the warning note from the Fed. ING has a 10% stake in the company from a $2.8 bln cosideration paid in Cap One stock
Incidentally, in case you wondered what everyone else knew about Sub prime, they are supposedly all easily discernable froma cut off FICO score above the FHA minimum at 660. Ofourse defns like these would have onaly added to the confusion in the naturing phase of the home loans ABS dealing rooms since 2006, from where arise the considerable collateral practices’ confusion of the last two years..and so on
One would feel right to aver that the FEd gave the approval probably on the strengtht he deposits bring to the balance sheet after the HSBC cards deal gets approved as the credit card assets are large enough in size to be cause for unstability unless Cap One had these Deposits on account to finance the loan assets. Fed notes the same in its order as such: ..though Cap One was not required to report its pending approval deal with the OCC for HSBC cards the same was taken into consideration as Cap One provided the details voluntarily to the Fed
A note on the Fed’s due diligence publicly on display in three hearings, from the order today(Dealbook):
In a 40-page order, the Fed detailed its standards for systemically risky acquisitions.
The Fed analyzed the size and complexity of Capital One and ING Direct, the interconnectedness between the banks and the broader economy, and whether competitors could easily step in to replace the bank should it encounter “severe financial distress.”
The Fed also examined how difficult it would be to unwind the combined banks should they show signs of collapsing.
The order itself is available here