FDIC Loss-Sharing Agreements: A Primer
As the current banking crisis evolved, the FDIC increasingly has
used an indemnification structure known as a loss-sharing agreement (LSA).
LSAs are viewed favorably from a supervisory perspective as they can
significantly reduce loss exposure for an acquirer of failed bank assets.
This article discusses key supervisory considerations for LSAs, including
a summary of loss-sharing structures, an overview of examination procedures
for reviewing assets covered by LSAs, important accounting issues, and
guidelines for establishing adverse classifications.