When Private Equity Meets Banks: The Impact of Banking Regulations on Private Equity Investment

Private-equity investment in banking organizations presents a unique opportunity for the private-equity fund to diversify its investment portfolio through entry into the banking industry and for banking organizations to gain access to additional sources of capital. A properly structured investment transaction can result in tremendous benefits to the parties involved and can strengthen the financial position of both the private-equity firm and the banking organization. However, given the highly regulated nature of the banking industry, multiple considerations must be taken into account by both the private-equity firm and the banking organization in order to ensure that the investment transaction is in compliance with these state and federal regulations while at the same time still meeting the business needs and objectives of both parties.