Receivership Management Program

Program Description
The Receivership Management Program is designed to ensure that claims against the receiverships are satisfied consistent with applicable laws and the resources of individual receivership estates. When an institution fails, the FDIC is appointed receiver and assumes responsibility to recover, as quickly as it can, the maximum amount possible on the receivership's claims. Having fulfilled its obligations as deposit insurer, the FDIC is often the largest creditor.

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 pursuit of valid claims and the sale of assets are distributed to the creditors according to priorities set by law. Once the FDIC sells the receivership’s assets and resolves its obligations, claims and any legal impediments, the receivership is terminated and a final distribution is made to its creditors.

Three strategic objectives support the receivership management strategic goal:

The means and strategies used to achieve the receivership management strategic goal and its associated objectives are described below.

FDIC resolves failed insured depository institutions in the least-costly manner

Means & Strategies:
When an institution fails, the FDIC facilitates an orderly and least-cost resolution.⁵ The FDIC obtains an accurate valuation of the failing institution by valuing and assessing its assets and liabilities. Using this information, the FDIC markets the institution to potential bidders. The FDIC analyzes the bids received, conducts a least-cost test determination and selects the least-cost strategy to pursue.

External Factors:
Industry consolidation presents both benefits and risks. While the risks to the deposit insurance funds are diminished because the risks are diversified through consolidation (along both geographic and product lines), the concentration of deposits into fewer insured depository institutions increases the risks to the funds in the event one of these larger insured depository institutions fails. In accordance with law, if a failure threatens serious adverse effects on economic conditions or financial stability, resolution strategies other than the least-cost resolution may be employed.

⁵In resolving a failing institution, the FDIC calculates the estimated cost of various resolution options and selects the option resulting in the lowest total estimated cost to the insurance funds.

Receiverships are managed to maximize net return toward an orderly and timely termination

Means & Strategies:
The oversight and prompt termination of the receivership preserves value for the uninsured depositors and other receivership claimants by reducing overhead and other holding costs. When the FDIC is appointed receiver, the FDIC establishes an action plan for each receivership that is executed by a team of asset, marketing, finance and legal staff in support of the receivership.

Once appointed receiver, the FDIC immediately works to identify and notify potential creditors of the failed insured depository institution about the failure and the process for submitting claims against the receivership. Receivership liabilities include, for example, secured creditors, unsecured creditors (including general trade creditors), subordinated debt holders, shareholders of the institution, uninsured depositors, and the insurance fund as subrogee. The FDIC reviews the validity of each claim and determines a suitable resolution.

In order to fulfill its responsibilities to creditors of the failed institution, the FDIC, as receiver, manages and sells the assets through a variety of strategies and identifies and collects monies due to the receivership. The FDIC’s goal is to expedite the return of assets to the private sector by marketing most of the assets soon after an insured institution fails. Returning assets to the private sector quickly allows the FDIC to maximize net recoveries and to minimize any disruption to the local community. The FDIC uses a number of information technology applications, including Internet auctions, to facilitate the management and marketing of assets. A list of loans and real estate for sale is available on the FDIC ’s Web site, www.fdic.gov.

Receivership staff provides oversight and monitors the execution of individual receivership action plans. Once all assets have been disposed of, all liabilities resolved, and no material financial or legal risks to the FDIC remain, a final distribution to the receivership’s creditors is made and the receivership is terminated.

External Factors:
A severe economic downturn could lead to an increased number of institution failures, and experienced staff might have to be diverted from other work to handle closings on a priority basis. Such a diversion of staff might affect the pace at which the FDIC markets assets and terminates receiverships.

Economic and other factors could affect the achievement of specific targets expressed in annual performance plans. For example, factors such as litigation and receivership properties being tainted by environmental contamination could delay the termination of a receivership.

Potential recoveries, including claims against professionals, are investigated and are pursued and resolved in a fair and cost-effective manner

Means & Strategies:
When an insured depository institution fails, the FDIC, as receiver, acquires a group of legal rights, titles and privileges generally known as professional liability claims. The FDIC's attorneys and investigators work together to assure that valid claims arising from a failure of an insured institution are properly pursued. The team conducts a factual investigation of the events that contributed to losses at the institution as well as legal research and analysis of the facts and potential claims. The team prepares additional analysis to determine the likelihood of a recovery exceeding the estimated costs of pursuing claims. Finally, the team prepares a memorandum recommending that claims be pursued or that an investigation be closed.

The FDIC believes that the prompt investigation and evaluation of potential claims against professionals who may have caused losses to the institution (such as directors, officers, attorneys and accountants) enhance the fairness of the process and lead to more cost-effective results.

External Factors:
No external factors were identified that could affect the accomplishment of this objective.