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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Resolutions Handbook

The Federal Deposit Insurance Corporation (FDIC) learned many lessons about resolving failing financial institutions as it managed the banking crisis of the 1980's and 1990's. The number of failing institutions, their varied businesses, and asset sizes afforded the FDIC a wide range of resolution experiences. Because the crisis lasted a relatively long time, the FDIC had to conduct resolutions at all phases of various economic cycles. Following is a handbook which is a compilation of the lessons learned by the FDIC during those crisis years.

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Table of Contents
CHAPTERS PAGE#
Chapter 1 - Introduction (PDF file - 21 kb) 1
Chapter 2 - The Resolutions Process (PDF file - 44 kb) 5
Resolution Strategies 6
Marketing a Failing Institution 9
Bid Submission 13
Least Cost Analysis 13
Calculation of Cash Amount Due to Acquirer 15
FDIC Board of Directors Approval 16
Closing the Institution 16
Resolution Timeline 17
Resolution Process Calendar
Chapter 3 - Purchase and Assumption Transactions (PDF file - 44 kb) 19
Structure of a Purchase Assumption Transaction 19
Types of Purchase and Assumption Transactions 23
Chapter 4 - Deposit Payoffs (PDF file - 35 kb) 41
Structure of a Deposit Payoff 41
Straight Deposit Payoff 41
Insured Deposit Transfer 45
Chapter 5 - Open Bank Assistance Transactions (PDF file - 43 kb) 47
Structure of an Open Bank Assistance Transaction 47
Assistance to Continental Illinois National Bank and Trust Company 51
Results of Open Bank Assistance 53
Chapter 6 - Other Resolution Alternatives (PDF file - 32 kb) 57
Net Worth Certificate Program 57
Income Maintenance Agreements 60
Capital Forbearance Program and Loan Loss Amortization Program 61
Resolution of Savings and Loan Associations Prior to FIRREA 62
Management Control 65
Chapter 7 - The FDIC's Role as Receiver (PDF file - 35 kb) 67
Comparison with Bankruptcy Law 67
Why the FDIC Acts as Receiver 68
How the FDIC Becomes a Receiver 69
The FDIC's Functions as Receiver 70
The FDIC's Closing Function 71
Resolution of Claims against the Failed Institution 71
Payment of Claims 72
Special Receivership Powers 73
Settlement with the Assuming Institution 75
Disposal of Assets and Termination of Receivership 75
Chapter 8 - Other Significant Issues (PDF file - 14 kb) 77
Maintaining Public Confidence in the Banking System 77
Adequacy of Insurance Funds 77
Other Resolution Concerns 77
Receivership Issues 79
Overview - The Resolutions Handbook at a Glance (PDF file - 14 kb) 81
The Resolutions Process 81
Purchase and Assumption Transactions 82
Deposit Payoffs 83
Open Bank Assistance Transactions 83
Other Resolution Alternatives 83
The FDIC's Role as Receiver 84
Other Significant Issues 87
Glossary (PDF file- 33 kb)