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) | |