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2008-2013 Strategic Plan
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Appendices

Receivership Management Program

Program Description
When an insured institution fails, the FDIC is ordinarily appointed as receiver. In that capacity, it assumes responsibility for efficiently recovering the maximum amount possible from the disposition of the receivership’s assets and the pursuit of the receivership’s claims. Funds collected from the sale of assets and the disposition of valid claims are distributed to the receivership’s creditors in accordance with the priorities set by law.

The FDIC seeks to terminate receiverships in an orderly and expeditious manner. Once the FDIC has completed the disposition of the receivership’s assets and has resolved all obligations, claims, and other legal impediments, the receivership is terminated, and a final distribution is made to its creditors. Receivership creditors may include secured creditors, unsecured creditors (including general trade creditors), subordinate debt holders, shareholders of the institution, uninsured depositors, and the DIF (as subrogee). The FDIC is often the largest creditor of the receivership.

In addition, the FDIC works closely with other regulators and with the industry to stay abreast of capital markets and financial markets developments to be prepared for potential resolutions involving complex financial instruments. Further, with growing globalization, international outsourcing, and the interconnections of financial markets, the FDIC enters into international agreements, through cross border memoranda of understanding, to facilitate closer cooperation with key foreign authorities on the analysis of emerging issues, improved understanding of national legal and policy structures, and contingency planning for potential resolutions.

Strategic Goal 4
Resolutions are orderly and receiverships are managed effectively.

Strategic Objectives

  4.1 Receiverships are managed to maximize net return and terminated in an orderly and timely manner.
     
  4.2 Potential recoveries, including claims against professionals, are investigated and resolved in a fair and cost-effective manner.
     

The means and strategies used to achieve these strategic objectives and the external factors that could impact their achievement are described below.

4.1 Receiverships are managed to maximize net return and terminated in an orderly and timely manner.

    Means & Strategies:
    As noted above, the FDIC in its receivership capacity manages the assets of a receivership to preserve or enhance their value and disposes of them as quickly as possible, consistent with the objective of maximizing the net return on those assets. The oversight and prompt termination of the receivership preserves value for the uninsured depositors and other receivership claimants by reducing overhead and other holding costs. After being appointed as receiver, the FDIC establishes for the receivership an action plan that is executed by a team of asset, marketing, finance and legal specialists in support of the receivership.

    In fulfilling its responsibilities to creditors of failed institutions, the FDIC, as receiver, manages and sells the receivership assets using a variety of strategies and identifies and collects monies due to the receivership. Contractors are often used for this purpose. The FDIC also uses a number of information technology applications, including Internet auctions, to facilitate the management and marketing of assets. While many of the receivership processes are the result of statutory authorities that most likely will not change, the FDIC will continue to watch for ways to improve the process through technology and other efficiencies. The FDIC will continue to closely monitor contractors employed in supporting its resolutions activities to ensure compliance with all legal requirements and promote efficient operations.

    With respect to complex financial instruments, the FDIC will finalize a proposed regulation to require insured depository institutions with substantial portfolios of qualified financial contracts to provide specific information, upon request, that is essential to an orderly resolution of such contracts after appointment of the FDIC as conservator or receiver. This regulation, along with further coordinated work with other regulators, will significantly improve the FDIC’s ability to respond effectively to troubled institutions with such portfolios in order to minimize the costs of any resolution and limit disruption to the financial markets.

    The FDIC will continue to foster more effective international mechanisms for addressing cross border banking and deposit insurance issues. Part of this effort will involve activities in the Basel Committee on Banking Supervision, the International Association of Deposit Insurers, the Financial Stability Forum, and other international bodies.

    External Factors:
    A severe economic downturn could lead to an increased number of institution failures and experienced staff may need to be diverted from other work to handle bank closings on a priority basis. Such a diversion of staff might result in a greater reliance on contractors and could affect the pace at which the FDIC markets assets and terminates receiverships. Economic and other factors, such as extended litigation and problems resolving environmentally tainted receivership properties, might also delay the termination of a receivership.

4.2 Potential recoveries, including claims against professionals, are investigated and resolved in a fair and cost-effective manner.

Means & Strategies:
When an insured depository institution fails, the FDIC, as receiver, acquires a group of legal rights, titles and privileges generally known as professional liability claims. The FDIC's attorneys and investigators work together to assure that valid claims arising from a failure of an insured institution are properly pursued. The team conducts a factual investigation of the events that contributed to losses at the institution as well as legal research and analysis of the facts and potential claims. For each potential claim, the team makes a recommendation on whether the claim should be pursued, based on an assessment of the likelihood of a recovery exceeding the estimated cost of pursuing the claim. The prompt investigation and evaluation of potential claims against professionals who may have caused losses to the institution promotes fairness and leads to more cost-effective results.

External Factors:
Each potential claim has a statute of limitations that establishes a time limit for the claim to be filed. A substantial increase in the number of failures could make it difficult to complete investigations of all potential claims and make decisions within the established time limit on whether to pursue a claim. The same problem could occur with very complex investigations or claims. In such cases, the FDIC will generally seek to enter into a tolling agreement with the potential defendant to extend the allowable time frame for the claim to be filed.





Last Updated 11/21/2008 Finance@fdic.gov