Today, the FDIC Board is considering additional conditions and procedures regarding FDIC Board consultation to be imposed in connection with the sale out of resolution of a failing large insured depository institution with total assets of at least $50 billion.
These procedures largely formalize a consultative process that has been typical in past failures involving large banks. Importantly, from a corporate governance standpoint, these procedures provide for meaningful FDIC Board engagement at a time when the FDIC may need to proceed expeditiously to ensure an orderly resolution and that depositors have access to their insured deposits “as soon as possible” as required by law.1
More specifically, the process would require the Director of the Division of Resolutions and Receiverships (“DRR”) or the Director of Complex Institution Supervision and Resolution (“CISR”), depending on the size of the failing bank, to provide to each Board member information on the marketing process, the potential qualified bidders, the bids received, and the least cost resolution transaction. In addition, if the least cost resolution involves acquisition by another insured depository institution, the relevant Division Director would be required to consult with each Board member as to whether a Board vote should be held on the approval of the proposed acquisition of the failed bank by the acquiring bank (“Resolution Transaction”).
If a majority of the Board were to indicate that a vote should be held, then the acquisition would not proceed until approved by the Board. If a majority of the Board members do not indicate that a vote should be held, the acquisition would proceed.
Finally, I would like to take this opportunity to acknowledge Director McKernan who first raised the question of whether the Board should formalize a process for consideration of these Resolution Transactions. While there may be some differences on the approach to be taken, I appreciate his thoughtful and constructive efforts as we considered these issues. I would also like to thank FDIC staff for their thoughtful work on this matter.
1 12 USC 1821(f).