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 may include secured creditors, unsecured creditors (including
general trade creditors), subordinate debt holders, shareholders
of the institution, uninsured depositors, and the DIF (as subrogee).
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.
with growing globalization, international outsourcing, and the
interconnections of financial markets, the FDIC enters into international
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.
Resolutions are orderly
and receiverships are managed effectively.
||Receiverships are managed to maximize net return and terminated in an orderly and timely manner.
||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
Receiverships are managed to maximize net return and terminated in
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
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,
and legal specialists in support of the receivership.
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.
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
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.
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.
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.