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FDIC Law, Regulations, Related Acts

[Main Tabs]     [Table of Contents - 4000]     [Index]     [Previous Page]     [Next Page]     [Search] 4000 - Advisory Opinions Application of Section 11 of the RTC Completion Act FDIC--94--9 February 10, 1994 Walter P. Doyle, Counsel   Thank you for your January 25 letter inquiring whether the prohibition against using FDIC insurance funds "in any manner to benefit any shareholder" of a failing insured institution in section 11 of last year's RTC Completion Act applies to the insurance of shareholder deposits in such institutions or only to their investments in the stock thereof.   While on its face this new statutory provision quoted in your letter (12 U.S.C. 1821(a)(4)(B)) seems broad enough to cover shareholder deposits, we feel certain that was not the provision's intent. An earlier version of this provision expressly stated that FDIC insurance funds should be "used only for the purposes of protecting insured depositor" and not "in any manner to benefit shareholders." The report of the House Banking Committee stated in two different places that the provision in question would require that such funds be used only to protect insured depositors or for administrative expenses and not to benefit shareholders in any manner (H. Rep. No. 103--103 at pages 28 and 48). Moreover, in the House debates on this legislation, Representative Leach stated as follows at page H10898 of the November 22, 1993 Congressional Record: {{8-31-94 p.4838}}   To ensure that the funds authorized for the RTC and the SAIF are used to protect only depositors, I would like to point out that the conference committee agreed to a House amendment I authored which prohibits RTC funds and FDIC funds to be used in any manner to benefit shareholders of failed or failing depository institutions. Under my amendment, the FDIC, in administering both the Bank Insurance Fund and Savings Association Insurance Fund, and the RTC are prohibited from providing open bank or thrift assistance, facilitating in an early resolution assisted merger or participating in any other assisted transaction, unless existing shareholders of a failed or failing depository institution are wiped out. Except for instances of systemic risk, my amendment overrides all other statutory mandates imposed on the FDIC and RTC in its resolution of a depository institution, including the least cost resolution requirement imposed under section 13(c)(4) of the Federal Deposit Insurance Act.   While the conference committee made editorial revisions in the provision, as noted by Representative Leach, those revisions seem not to have retained the clarity that existed under the earlier version of the Leach amendment on the point you now raise. Nevertheless, I would conclude that 12 U.S.C. 1821(a)(4)(B), as amended by the 1993 RTC Completion Act, does not preclude insurance of shareholder deposits in failing institutions to the same extent as if such depositors were not shareholders.   Please let us know if we can be of any further assistance. [Main Tabs]     [Table of Contents - 4000]     [Index]     [Previous Page]     [Next Page]     [Search]

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