Federal Deposit Insurance Corporation - Resolution of Insolvent Banks

Resolution of Insolvent Banks

The two most common methods employed by FDIC in cases of insolvency or illiquidity are:

  • Purchase and Assumption Method (P&A), in which all deposits (liabilities) are assumed by an open bank, which also purchases some or all of the failed bank's loans (assets). Other failed assets are auctioned online, primarily through The Debt Exchange and First Financial Network.
  • Payout Method, in which insured deposits are paid by the FDIC, which attempts to recover its payments by liquidating the receivership estate of the failed bank. These are straight deposit payoffs and are only executed if the FDIC doesn’t receive a bid for a P&A transaction or for an insured deposit transfer transaction. In a straight deposit payoff, no liabilities are assumed and no assets are purchased by another institution. Also, the FDIC determines the insured amount for each depositor and pays that amount to him or her. In calculating each customer’s total deposit amount, the FDIC includes all the interest accrued up to the date of failure under the contractual terms of the depositor’s account.

Read more about this topic:  Federal Deposit Insurance Corporation

Famous quotes containing the words resolution and/or banks:

    We often see malefactors, when they are led to execution, put on resolution and a contempt of death which, in truth, is nothing else but fearing to look it in the face—so that this pretended bravery may very truly be said to do the same good office to their mind that the blindfold does to their eyes.
    François, Duc De La Rochefoucauld (1613–1680)

    The wide wonder of Broadway is disconsolate in the daytime; but gaudily glorious at night, with a milling crowd filling sidewalk and roadway, silent, going up, going down, between upstanding banks of brilliant lights, each building braided and embossed with glowing, many-coloured bulbs of man-rayed luminance. A glowing valley of the shadow of life. The strolling crowd went slowly by through the kinematically divine thoroughfare of New York.
    Sean O’Casey (1884–1964)