I. Management's Discussion and Analysis - The Year in Review
The FDIC has the unique mission of protecting depositors of insured banks and
savings associations. No insured depositor has ever experienced a loss in
a FDIC-insured institution due to a failure.
Once an institution is
closed by its chartering authority – the state
for state-chartered institutions, the Office of the Comptroller of the Currency
(OCC) for national banks and the Office of Thrift Supervision (OTS) for federal
savings associations – the FDIC is responsible for resolving that failed
bank or savings association. The FDIC staff gathers data about the troubled
institution, estimates the potential loss to the insurance fund(s) from various
resolution alternatives, solicits and evaluates bids from potential acquirers,
and recommends the least-costly resolution method to the FDIC's Board
Resolving Financial Institutions Failures During 2005, there were no institution failures. This is the first calendar
year in the history of the FDIC during which no insured institutions failed.
Liquidation Highlights 2003-2005
Dollars in billions (except where noted)
Total Resolved Banks
Assets of Resolved Banks
Total Resolved Savings Associations
Assets of Resolved Savings Associations
Net Collections from Assets in Liquidation*
Total Assets in Liquidation*
Total Dividends Paid*
Savings Over Cost of Liquidation#
*No failures in 2005.
*Includes activity from thrifts resolved by the former Federal Savings and Loan Insurance Corporation and the Resolution Trust Corporation.
#Least Cost Test Savings.
Protecting Insured Depositors Although
the focus of the FDIC in recent years has shifted from resolving large numbers
of failed institutions to addressing existing and emerging risks
in insured depository institutions, the FDIC continues to protect deposits
in those institutions that fail. The FDIC's ability to attract healthy
institutions to assume deposits and purchase assets of failed banks and savings
associations minimizes the disruption to customers and allows some assets to
be returned to the private sector immediately. Assets remaining after resolution
are liquidated by the FDIC in an orderly manner and the proceeds are used to
pay creditors, including depositors whose accounts exceeded the insured $100,000
limit. During 2005, the FDIC paid dividends of 77.9 percent of the deposit
amount exceeding the insured limit. These dividends paid in 2005 are up 4.9
percent from 2004.
Receivership Management Activities
The FDIC, as receiver,
manages the failed banks and their subsidiaries with the goal of expeditiously
winding up their affairs. The oversight and prompt
termination of receiverships help to preserve value for the uninsured depositors
and other creditors by reducing overhead and other holding costs. Once the
assets of the failed institutions have been sold and the final distribution
of any proceeds are made, the FDIC terminates the receivership estates. In
2005, the number of receiverships under management was reduced by 31 percent
(from 94 to 65), while the book value of assets under management was reduced
by 28 percent (from $615 million to $441 million).
Professional Liability Recoveries The
FDIC staff works to identify potential claims against directors and officers,
accountants, appraisers, attorneys and other professionals who may have contributed
to the failure of an insured financial institution. Once a claim is deemed
viable and cost effective to pursue, FDIC initiates legal action against the
appropriate parties. During the year, the FDIC recovered approximately $65
million from these professional liability suits. In addition, as part of the
sentencing process for those convicted of criminal wrongdoing against failed
institutions, the court may order a defendant to pay restitution to the receivership.
The FDIC, working in conjunction with the U.S. Department of Justice, collected
more than $6 million in criminal restitution during the year. The FDIC's
caseload at the end of 2005 included investigations, lawsuits and ongoing settlement
collections involving 21 claims and 106 other active collections, down from
233 at the beginning of 2005. At the end of 2005, there were 995 pending restitution
orders, down from 1,181. This includes RTC orders that the FDIC inherited on
January 1, 1996.