Resolutions Handbook
The Federal Deposit Insurance Corporation (FDIC) is responsible for the resolution of failing financial institutions. Past financial crises have taught the FDIC a great deal about how best to resolve a failing financial institution and, in its role as receiver, how best to fulfill its fiduciary obligation to creditors of the receivership. Following is a handbook which describes the FDIC’s resolution and receivership process.
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| Table of Contents | |
|---|---|
| CHAPTERS | PAGE# |
| Chapter 1 - Introduction | 1 |
| Chapter 2 - Resolution Handbook at a Glance | 5 |
| Resolution Process | 5 |
| Resolution Transaction Methods | 6 |
| FDIC’s Role as Receiver | 6 |
| Chapter 3 - Resolution Process | 8 |
| Resolution Timeline | 8 |
| Determining the Resolution Strategy | 9 |
| Financial Institution Information | 10 |
| Asset Valuation Review (AVR) | 10 |
| Marketing the Institution | 11 |
| Virtual Data Room (VDR) | 11 |
| On-site Due Diligence | 11 |
| Bid Submission | 12 |
| Least Cost Analysis | 12 |
| FDIC Board of Directors Approval | 14 |
| Bid Approval Memorandum | 14 |
| Closing the Institution | 14 |
| Chapter 4 - Types of Resolution Transactions | 16 |
| Purchase and Assumption Transactions | 16 |
| Basic P&As | 16 |
| Whole Bank P&As | 17 |
| P&As with Optional Shared Loss | 18 |
| Bridge Bank P&As | 18 |
| Deposit Payoffs | 19 |
| Straight Deposit Payoff | 20 |
| Insured Deposit Transfer (IDT) | 20 |
| Deposit Insurance National Bank (DINB) | 20 |
| Historical Resolution Methods | 20 |
| Open Bank Assistance (OBA) | 21 |
| Net Worth Certificate Program | 21 |
| Income Maintenance Agreements | 21 |
| Capital Forbearance Program | 22 |
| Loan Loss Amortization Program | 22 |
| Branch Breakup | 22 |
| Chapter 5 - Receivership Process - Post-closing Activities | 23 |
| Comparison with Bankruptcy Law | 23 |
| Why the FDIC Acts as Receiver | 24 |
| How the FDIC Becomes a Receiver | 25 |
| The FDIC’s Functions as Receiver | 26 |
| The FDIC’s Closing Function | 27 |
| Resolution of Claims against the Failed Institution | 27 |
| Payment of Claims | 27 |
| Special Receivership Powers | 28 |
| Repudiation of Contracts | 28 |
| Enforcement of Contracts | 29 |
| Placing Litigation on Hold | 29 |
| Avoiding Fraudulent Conveyances | 30 |
| Special Defenses | 30 |
| Improperly Documented Agreements are not Binding on the Receiver | 30 |
| Courts May Not Enjoin the Receiver | 30 |
| Settlement with the AI | 30 |
| Glossary | 23 |