Qualified insured depository institutions may be offered opportunities to acquire potentially failing institutions marketed by the FDIC. After executing a confidentiality agreement, interested bidders are granted access to failing institution information to conduct due diligence and review the FDIC transaction terms. The FDIC conducts a sealed, competitive bid process and evaluates bids against the FDIC’s cost of liquidation and the cost of other bids.
The FDIC does not publish lists of potentially failing institutions, as this information is a confidential regulatory matter. Invitations to access information about a specific acquisition opportunity are extended only to qualified institutions that meet regulatory, total asset, and geographic criteria.
The FDIC resolves failing financial institutions in the least costly manner to the Deposit Insurance Fund (DIF) while minimizing disruption to depositors and customers of failed institutions.
Chartering Authority Role
The decision to close an institution is determined primarily by its chartering authority, not the FDIC. For institutions offered as acquisition opportunities, not all of these institutions fail. These open institutions and operating entities can improve their condition and prevent failure during the marketing process.
The FDIC does not publish lists of potentially failing institutions, as this information is a confidential regulatory matter. Invitations to access information about a specific acquisition opportunity are extended only to qualified institutions that meet regulatory, total assets, and geographic criteria.
Marketing Process Duration
The marketing process begins when qualified institutions are notified of an acquisition opportunity. It generally lasts between 50 to 70 days in cases of capital failures, but may conclude more rapidly if the chartering authority determines the institution must be closed sooner.
Liquidity issues, or other situations affecting a bank’s viability, may result in an accelerated failure that occurs in a matter of days.
Provided sufficient marketing time, interested bidders may conduct due diligence to value assets and formulate bids. All parties performing due diligence have equal time and access to the failing institution’s information and personnel.
Qualified insured depository institutions must also obtain regulatory approval to bid on a failing institution and are encouraged to seek regulatory approval early in the marketing process. The FDIC notifies regulators of institutions interested in bidding, and verifies regulatory approval.