The Receivership Management Program ensures that recovery to creditors
of receiverships is achieved in the least-costly manner for all failed
insured depository institutions. The FDIC is proactive in identifying
troubled insured depository institutions and generally begins its resolution
efforts,
such as valuing assets and identifying potential purchasers of these
institutions, before an institution fails. At failure, the FDIC is appointed
receiver
and succeeds to the rights, powers and privileges of the insured
depository institution and its stockholders, officers and directors.
Once the FDIC is appointed as receiver for an insured depository institution,
the FDIC marshals the institution's assets for the benefit of the creditors.
The FDIC is often the largest creditor after fulfilling its obligations
as deposit insurer. The Corporation immediately works to identify and notify
potential creditors of the failed insured depository institution of its
failure and the process for submitting claims against the receivership.
The FDIC reviews all claims and provides certificates to creditors with
valid claims, entitling them to a share in the net assets of the receivership
(to the extent funds are available) in accordance with priorities mandated
by statute and applicable regulations.
To fulfill its responsibilities to creditors of the failed institution,
the FDIC, as receiver, manages and sells the failed institution’s
assets through a variety of strategies and identifies and collects monies
due to the receivership. In addition, the receiver may have valid claims
against former directors, officers, attorneys, accountants or other professionals
who may have caused harm to the institution. Funds collected through the
management and sale of assets and the pursuit of valid claims are distributed
according to priorities set by law.
To ensure that receiverships are managed effectively toward an orderly
and timely termination, the FDIC has an active receivership oversight
program. The program fosters an efficient and responsible business approach
to receivership
management. This approach focuses on the economics of each receivership
by establishing a unique business plan, monitoring performance and
terminating the receivership in a timely manner. Once the FDIC sells the
assets of
the receivership and resolves the receivership obligations, claims
and any legal impediments, the receivership is terminated and a final distribution
is made to its creditors.
The following table depicts the strategic goal, strategic objectives and
annual performance goals for the Receivership Management Program.
Strategic
Goal
|
Strategic
Objectives
|
Annual
Performance Goals
|
Recovery to creditors of receiverships
is achieved
|
The FDIC resolves failed insured depository institutions in the
least-costly manner.
|
Market failing institutions to all known qualified and interested
potential bidders.
|
Receiverships are managed to maximize net return toward an orderly and timely
termination.
|
Value, manage and market assets of failed institutions and their subsidiaries
in a timely manner to maximize net return.
|
|
Manage the receivership estate and its subsidiaries
toward an orderly termination.
|
Potential recoveries, including claims against professionals, are
investigated and are pursued and resolved in a fair and cost
effective manner.
|
Conduct investigations into all potential professional liability
claim areas for all failed insured depository institutions,
and decide as promptly as possible to close or pursue each
claim, considering the size and complexity of the institution. |
Strategic
Goal 4:
Recovery to creditors of receiverships is achieved.
Strategic
Objective 4.1
The FDIC resolves failed insured depository
institutions in the least-costly manner.
Annual
Performance Goal 4.1-1
Market failing institutions to all known
qualified and interested potential bidders.
Indicator
and Target
Scope of qualified and interested bidders solicited
- Contact all known qualified and interested bidders.
Means
and
Strategies
Operational
Processes (initiatives and strategies):
The FDIC markets the deposits and assets of the failing institution
to all known qualified and interested potential bidders to stimulate
as much competition as possible. The FDIC maintains an inventory
of qualified financial institutions that may potentially be interested
in bidding to purchase a failing institution. In preparing a list
of potential bidders for each failing institution, the FDIC takes
into account the failed institution’s geographic location,
competitive environment, minority-owned status, financial condition,
asset size, capital level and regulatory ratings. The FDIC contacts
these potential bidders and holds an informational meeting and/or
uses the Internet to provide information on the failing institution.
Potential bidders are then given the opportunity to perform due diligence
on the failing institution’s assets and liabilities before
determining whether to submit bids.
Human
Resources (staffing and training):
Staffing requirements will continually be assessed within
the context of workload fluctuations to ensure that the FDIC has
enough staff to successfully carry out its receivership management
responsibilities. The FDIC has established policies and procedures
to allow for the temporary assignment of resources from throughout
the Corporation to meet workload demands and mission responsibilities
in this area. In addition, the Corporate Employee Program is expanding
the FDIC's knowledge base in the areas of resolutions and receiverships
and will ensure a continual level of readiness within the workforce.
The Corporation is also in the midst of developing a new Resolutions
and Receiverships Commissioning Program and a franchise and asset
marketing certificate program to ensure the availability of qualified
personnel to handle the Corporation’s receivership management
workload.
Information
Technology:
During 2008, the Division of Resolutions and Receiverships
(DRR) Marketing System initiative will be implemented as an enhancement
to the Asset Servicing Technology Enhancement Project (4-C). This
new technology will integrate the franchise and asset marketing functions
and will replace several standalone applications that are now used
to support those functions.
Verification
and Validation
The franchise marketing process is currently tracked through the FDIC’s
Overarching Automation System (OASIS). The tracking process will migrate to 4-C
as that new system is developed and implemented.
2007
Performance Results
This annual
performance goal and its associated performance indicator and target
are unchanged from 2007. The 2007 performance target was successfully
met. There were three failures of insured financial institutions
during 2007, and all known qualified and interested bidders were
offered an opportunity to participate in the FDIC’s marketing
efforts for each failure.
Strategic
Objective 4.2
Receiverships are managed to maximize net
return toward an orderly and timely termination.
Annual
Performance Goal 4.2-1
Value, manage and market assets of failed
institutions and their subsidiaries in a timely manner to maximize
net return.
Indicator
and Target
Percentage of failed institution’s assets marketed
- 90 percent of the book value of a failed institution’s
marketable assets is marketed within 90 days of failure.
Means
and
Strategies
Operational
Processes (initiatives and strategies):
By quickly returning private assets to the private sector, the FDIC
maximizes net recoveries and minimizes disruption to the local community.
The FDIC expedites the return of the assets of the failed institution
to the private sector by marketing most assets soon after an insured
institution fails. Given adequate time, the FDIC prepares an information
package and an asset valuation review for each failing insured depository
institution to assist in the solicitation of bidders, analysis of
bids received for the assumption of deposits and sale of assets at
resolution or shortly thereafter. For asset sales, the failed institution’s
assets are grouped into pools that will be most appealing to acquirers
and are then marketed via the Internet. Potential asset purchasers
are allowed the opportunity to view all sales information electronically
prior to electronic bid submission. The FDIC also complements electronic
due diligence with hard-copy due diligence by allowing potential
bidders to view all hard-copy sale information at the actual sales
site.
After the resolution of the failed institution, the FDIC collects
and manages the remaining assets in a cost-effective manner to
maximize recoveries and preserve value until the assets can be
marketed. The FDIC will continue to update and refine its marketing
strategies in order to market assets as quickly and efficiently
as possible. Where appropriate, the FDIC will manage and dispose
of most of the remaining assets from the failed bank location.
The FDIC uses the Standard Asset Valuation Estimation (SAVE) methodology
to value and make marketing and disposition decisions regarding
most of the assets of the failed institutions. SAVE methodology
uses standard assumptions and market information to ensure consistency
in valuing assets. The valuation process, methodology and assumptions
used to value assets are continually reviewed and, where necessary,
updated.
Human Resources
(staffing and training):
Workload
and staffing requirements are regularly reassessed to ensure that
staffing is sufficient to meet the FDIC’s receivership management
responsibilities. The FDIC has established policies and procedures
to allow for the temporary assignment of resources to meet mission
responsibilities during unexpected workload increases. As noted
previously, the Corporation implemented the Corporate Employee
Program in 2005, which has expanded the FDIC's knowledge base in
the areas of resolutions and receiverships and will help to ensure
a continual level of readiness.
Information Technology:
The FDIC will continue to use new and refined technology to make its asset
management/servicing, sale strategies and processes more efficient and to keep
pace with changing market and business practices. The Corporation will continue
to use the Internet to deliver asset marketing information to potential investors
and to auction/sell assets received from failed institutions. In late 2007,
the FDIC implemented the first phase of its new 4-C system, which uses adaptable
technology that is compatible with industry standards to provide the FDIC with
a single data source for asset reporting, thereby eliminating data redundancies
and related data reconciliation efforts.
Verification
and Validation
Asset-marketing information is compiled from the actual sale initiatives that
are offered by the FDIC to bidders prior to and/or within 90 days of failure.
The offerings are compared to the beginning inventory of marketable assets prepared
by the FDIC at the time of the institution’s failure.
2007
Performance Results
This annual
performance goal and its associated performance indicator and target
are unchanged from 2007. There were three failures of insured financial
institutions during 2007, and all marketable assets were marketed
within 90 days for each failed institution.
Annual
Performance Goal 4.2-2
Manage the receivership estate and its
subsidiaries toward an orderly termination.
Indicator
and Target
Timely termination of new receiverships
- Terminate all receiverships within 90 days of the resolution
of all impediments.
Means
and
Strategies
Operational
Processes (initiatives and strategies):
The oversight and prompt termination of a receivership preserves
value for the uninsured depositors and other receivership claimants
by reducing overhead and other holding costs. When the FDIC is appointed
receiver, a unique action plan is established for each receivership
that is executed by various asset, liability, finance and legal staff
assigned to that receivership. Receivership staff provides oversight
and monitors the execution of each action plan, including the goals
and milestones established in each plan. In addition, an oversight
committee, consisting of senior FDIC managers, meets periodically
to review and evaluate the quarterly progress of each receivership
action plan.
To be eligible for termination, a receivership must be free of
impediments that represent material financial or legal risks to
the FDIC. These impediments may include outstanding contractual
liabilities, outstanding offensive or defensive litigation, potential
representation and warranty asset sale claims, open employee benefit
plans, open subsidiary corporations where articles of dissolution
have not yet been approved and known or potential environmental
contamination liabilities. Once the FDIC has disposed of all of
the assets of the receivership, resolved all liabilities and ensured
that no material financial or legal risks to the FDIC remain, a
final distribution is made to the creditors of the receivership
and the receivership entity is terminated.
The FDIC continues to work on the resolution of impediments to
the termination of the remaining open receiverships. These impediments
are closely monitored by oversight staff and reviewed by senior
management. As the impediments are cleared, the open receiverships
will be terminated. During 2007, three new receiverships were added
to the FDIC inventory of receiverships and 15 were inactivated,
leaving a total of 43 active receiverships at the end of 2007.
Human
Resources (staffing and training):
Based on workload fluctuations, staffing requirements will be continually
assessed to ensure that the FDIC has enough staff to successfully
carry out its receivership management responsibilities.
Information
Technology:
Existing technology will be used to accomplish this goal. Aside from technology
developments noted under Annual Performance Goal 4.1-1, no new technology or
automated tools will be developed in support of this 2008 annual performance
goal.
Verification
and Validation
The process of inactivating a receivership is tracked in FDIC systems. Monthly
reports of deactivations are reviewed for accuracy. System users validate the
data, and any discrepancies are reconciled.
2007
Performance Results
This annual
performance goal and its associated performance indicator and target
are unchanged from 2007. The 2007 performance target was successfully
met. The FDIC terminated 15 receiverships in 2007, all within 90
days of the resolution of the last impediment(s).
Strategic
Objective 4.3
Potential recoveries, including claims
against professionals, are investigated and are pursued and resolved
in a fair and cost-effective manner.
Annual
Performance Goal 4.3-1
Conduct investigations into all potential
professional liability claim areas for all failed insured depository
institutions, and decide as promptly as possible to close or
pursue each claim, considering the size and complexity of the
institution.
Indicator
and Target
Percentage of investigated claim areas for which a decision has been made
to close or pursue the claim
- For 80 percent of all claim areas, a decision is made to
close or pursue claims within 18 months of the failure date.
Means
and
Strategies
Operational
Processes (initiatives and strategies):
The FDIC investigates potential claims against professionals (e.g.,
directors, officers, attorneys and others) whose actions may have
contributed to losses at the failed institution and assesses the
viability of insurance policies and the carriers that provide fidelity
insurance to the failed institution. Once the investigation is complete,
the FDIC determines whether it has viable, cost effective claims
and whether it should pursue such claims. Most professional liability
investigations must be completed and viable claims filed within a
three-year statute of limitations period.
The FDIC's attorneys and investigators work together to ensure
that valid claims arising from the failure of an insured institution
are fully evaluated within the prescribed time period. The team
conducts a factual investigation of the events that contributed
to losses at the institution as well as legal research and analysis
of potential claims. The team prepares additional analysis to determine
the likelihood of a recovery exceeding the estimated cost of pursuing
each claim. The team then prepares a memorandum, reviewed and approved
by senior FDIC management, recommending that a claim be pursued
or that an investigation be closed.
Human
Resources (staffing and training):
Workload requirements are regularly reassessed to ensure that
staffing is sufficient to meet the FDIC’s receivership management
responsibilities. The FDIC has established policies and procedures
to allow for the temporary assignment of resources to meet mission
responsibilities during unexpected workload spikes. The Corporate
Employee Program will also help over time to expand the FDIC's knowledge
base in the areas of resolutions and receiverships and ensure a continual
level of readiness.
Information
Technology:
Data necessary to track failure dates of insured institutions,
potential statutes of limitation expiration dates and other pertinent
dates are routinely collected and stored in FDIC systems. Status
information and decision events are also tracked.
Verification
and Validation
Periodic data scrubs and audits are conducted to ensure accuracy and currency
of information from FDIC systems. Consistent maintenance of these systems ensures
that accurate data needed to measure compliance with the annual goal are readily
available.
2007
Performance Results
This annual
performance goal and its associated performance indicator and
target are unchanged from 2007. There were no reportable performance
results for this goal in 2007. Although three institutions
failed during the year, no receivership reached the 18-month
point after failure.
