|
|
Receivership Management Program
When an insured institution fails, the FDIC is ordinarily appointed as
receiver. In its receivership capacity, the FDIC assumes responsibility
for efficiently recovering the maximum amount possible from the disposition
of the receivership’s assets and the pursuit of the receivership’s
claims. Funds collected from the sale of assets and the dispositions of
valid claims are distributed to the receivership’s creditors in accordance
with the priorities set by law.
The FDIC focuses its receivership management efforts on four goals:
- Resolving institutions in the least costly manner.
- Managing and marketing failed institution assets to maximize return.
- Pursuing monies due to the failed institution.
- Resolving the debts of the institution fairly.
The FDIC assesses and values the assets and liabilities of the
failing institution to determine an accurate valuation. Using this information,
the FDIC markets and sells various parts of the institution to acquiring
institutions and investors. The FDIC markets failed institutions broadly,
ensuring that all qualified parties are provided an opportunity to present
bids. When the institution fails, the institution is closed, and the FDIC
is appointed receiver. After paying the insured depositors their funds
(if another institution has not assumed the deposits), the FDIC inventories
and values any remaining assets, and uses various strategies to quickly
sell the assets. Disposition of certain assets can be a very lengthy process.
In the interim, the FDIC performs required asset servicing (such as building
maintenance and the processing of loan payments) in order to maintain the
value of these assets until they are sold.
Throughout the asset valuation and selling processes, the FDIC also seeks
payment from the debtors of the failed institution. FDIC staff identifies
and investigates claims due to the receivership, and pursues the claims
on behalf of the receivership when it is cost effective to do so and/or
when public policy dictates that the FDIC pursue legal action against a
debtor (e.g., certain negligence or fraud cases).
The FDIC also works to ensure that legitimate claims against the receivership
are satisfied fairly. The FDIC notifies likely claimants of the failed
institution and provides them instructions on how to properly file their
claims. Once the FDIC receives and validates the information, the claimants
are paid, as appropriate.
Following the resolution of receivership claims, disposition of most assets,
payment of eligible creditor claims, and allocation of any other
funds on behalf of the receivership, the FDIC proceeds with the termination
of
the receivership.
This
involves preparation of final accounting statements and can require approval
through the legal system that the obligations of the FDIC as receiver have
been met.
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
|
Resolutions are orderly and receiverships are managed effectively.
|
Receiverships
are managed to maximize net return and terminated in an orderly
and timely manner.
|
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 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:
Resolutions are orderly and receiverships are managed effectively.
Strategic
Objective 4.1
Receiverships are managed to maximize net
return and terminated in an orderly and timely manner.
Annual
Performance Goal 4.1-1
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
- For at least 95 percent of insured institution failures,
market at least 90 percent of the book value of the institution’s
marketable assets within 90 days of the failure date (for cash sales)
or 120 days of the failure date (for structured sales).
- Enhancements to contract management program
- Implement enhanced reporting capabilities
from the Automated Procurement System.
- Ensure that all newly designated oversight managers
and technical monitors receive training in advance of performing
contract administration responsibilities
- Optimize the effectiveness of oversight managers
and technical monitors by restructuring work assignments,
providing enhanced technical support, and improving supervision
Means
and
Strategies
Operational
Processes (initiatives and strategies):
By quickly returning the assets of a failed institution to the private
sector, the FDIC maximizes net recoveries and minimizes disruption
to the local community. During the past two years, whole bank loss-share
transactions have been used extensively as a vehicle to sell most
of the assets of a failed bank to an acquiring bank. 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 as many of the institution’s
assets at resolution or shortly thereafter. The FDIC markets most
of these remaining assets within a 120-day period after an insured
institution fails.
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 failed institution’s assets are grouped into
pools that will be most appealing to acquirers and are 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.
Where appropriate, the FDIC manages and disposes 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 institution. The 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.
The FDIC will continue to update and refine its marketing strategies
in order to market assets as quickly and efficiently as possible.
Human
Resources (staffing and training):
The FDIC maintains a permanent staffing platform to carry
out its receivership management functions. When workload increases,
as it has during the last two years, these resources are augmented
by adding non-permanent staff and contractor resources. On an interim
basis, these resources may also be expanded by the deployment of
cross-trained employees from elsewhere within the Corporation. Current
and projected workload is continually assessed to ensure that adequate
staff and contractor resources are available to fulfill the FDIC’s
receivership management responsibilities.
Authorized staffing for the FDIC’s Division of Resolutions
and Receiverships (DRR) increased from 847 to 1,356 in 2009 and
was further increased to 2,310 in 2010. Three new temporary satellite
offices have been established since the beginning of 2009 to address
the recent sharp increase in workload. Additional staff has also
been authorized in other FDIC organizations to support this work.
The FDIC makes extensive use of contractors in managing and selling
the assets of failed institutions. It has in place broad policies
and procedures related to contracting and the use of contractors
to provide services. These policies cover every phase of the contracting
process. Individual FDIC divisions and offices must apply these
guidelines and establish controls and internal processes to ensure
that these policies and procedures are being strictly followed.
The number of contractors supporting the receivership management
function increased dramatically in 2009 and is likely to continue
to increase in 2010. In 2010, the number of Receivership Assistance
Contractors (RAC) could grow substantially if the number of failures
continues at the 2009 level.
In order to ensure that these resources are effectively managed,
the FDIC will add a substantial number of dedicated contract oversight
and management positions to its workforce in 2010. These employees
will be fully trained before being deployed to ensure that they
are knowledgeable about the FDIC’s contracting policies and
procedures and fully understand their contract oversight or technical
monitoring responsibilities.
In addition, oversight management assignments will be restructured,
based upon the type and complexity of individual contracts, to
ensure that each oversight manager has a reasonable number of
contracts to manage. In addition, enhanced technical support
will be provided to oversight managers for regular and recurring
tasks, and additional managerial positions will be established
to ensure effective supervision of the contract management function.
Information
Technology:
The FDIC will continue to use new and refined technologies
to make its asset management/servicing, sale strategies and other
business 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.
The 4C application is the comprehensive source of information related
to the resolution of financial institutions and the management, valuation,
marketing and sale of assets. In 2010, improvements will be made
to 4C to address scalability, high availability, and data throughput.
These improvements will ensure future capacity to store and process
the increased data volume from failed institutions.
In addition, the
Corporation’s Automated Procurement System will be modified
in 2010 to provide enhanced reporting in support of contract management.
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. In addition, new
monthly and quarterly reporting requirements will be established to ensure that
the Corporation is managing its contracts effectively.
2009
Performance Results
This annual
performance goal and the first two performance indicators are unchanged
from 2009. The performance targets for those indicators have been
updated for 2010. The third performance indicator and its associated
performance target are new for 2010. The FDIC successfully met
the 2009 performance targets for this goal.
Annual
Performance Goal 4.1-2
Manage the receivership estate and its subsidiaries
toward an orderly termination.
Indicator
and Target
- Timely termination of new receiverships
- Terminate within three years of the
date of failure at least 75 percent of new receiverships that
are not subject to loss share agreements, structured sales,
or other legal 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 as receiver, a unique action plan is established
for each receivership. That plan is executed by various asset,
liability, finance, and legal staff assigned to the receivership.
Receivership staff oversees and monitors the execution of each
action plan, including goals and milestones. In addition, an oversight
committee, consisting of senior FDIC managers, meets periodically
to review and evaluate the quarterly progress on 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. To the extent that significant,
unresolved impediments remain for a substantial number of receiverships,
the FDIC may be unable to achieve this goal.
The FDIC continues to work on the resolution of impediments to
the termination of its remaining open receiverships. During 2009,
140 new receiverships were added to the FDIC’s inventory
of receiverships and two were inactivated, leaving a total of 187
active receiverships at the end of 2009.
Human
Resources (staffing and training):
The FDIC has substantially increased its authorized staffing
for the receivership management function over the past year.
Workload and staffing requirements are assessed on an ongoing
basis to ensure that the FDIC has enough staff to successfully
carry out its receivership management responsibilities. As noted
earlier, the FDIC utilizes contractor resources and engages in
temporary hiring initiatives to supplement resolutions and receivership
management staff as workload increases.
Information
Technology:
Existing technology will be used to accomplish this goal.
New technology or automated tools may be developed in support
of this goal in 2010.
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. Results are reported through established
management processes.
2009
Performance Results
This annual
performance goal and its associated performance indicator are
unchanged from 2009. The performance target has been revised
to reflect the large number of receiverships currently being
managed by the FDIC, and the longer duration of loss share
agreements and structured asset sales. The FDIC successfully
met the 2009 performance target.
Strategic
Objective 4.2
Potential recoveries, including claims
against professionals, are investigated and resolved in a fair
and cost-effective manner.
Annual
Performance Goal 4.2-1
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 makes recommendations to senior FDIC
management on whether a claim should be pursued or the investigation
closed.
Human Resources
(staffing and training):
Dedicated
staff in the Division of Resolutions and Receiverships and the
Legal Division are responsible for the investigations and pursuit
of professional liability claims. Workload requirements are regularly
reassessed to ensure that staffing is sufficient to fulfill these
responsibilities. The FDIC utilizes contractor resources (including
outside legal counsel) and engages in temporary hiring initiatives
to supplement staff, as needed.
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. Progress in meeting this goal is reported through established management
processes.
2009
Performance Results
This annual
performance goal and its associated performance indicator and target
are unchanged from 2009. The FDIC successfully met this performance
target for this goal for the one receivership that reached the
18-month mark during 2009.
|