On Wednesday, May 13, 2009, Treasury Secretary Timothy Geithner announced at the ICBA Annual Washington Policy Summit that the Treasury Department will reopen the TARP Capital Purchase Program (CPP) window for community banks, including Subchapter S banks and bank holding companies. Banks with total assets of under $500 million will be eligible to apply, or reapply, for CPP funds for six months. Current CPP participants that reapply will have an expedited approval process. In addition, the limit on the amount for which banks can apply will be increased from 3% of risk-weighted assets to 5% of risk-weighted assets.

Mr. Geithner indicated that Treasury extended the application window to six months in part to allow stand-alone banks to form bank holding companies. Under the CPP for Subchapter S institutions, Treasury investments in Subchapter S banks without a bank holding company structure are treated as Tier 2 capital for regulatory capital purposes. However, Treasury investments in Subchapter S bank holding companies are expected to be treated as Tier 1 capital, subject to the Federal Reserve publishing an interim final rule designating CPP funds as Tier 1 capital.

According to Mr. Geithner, Treasury’s additional CPP investments will be funded “using the proceeds of the repayments [Treasury] expects to receive from some of the largest banks.”