[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Rules and Regulations]
[Pages 35487-35488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16671]



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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AB25


Receivership Rules

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The final rule interprets a provision of an amendment, enacted 
on August 10, 1993, to section 11(d)(11) of the Federal Deposit 
Insurance Act (FDI Act) providing for a national depositor preference 
for amounts realized from the liquidation or other resolution of any 
depository institution insured by the Federal Deposit Insurance 
Corporation (FDIC). The regulation describes the expenses that are 
includable under the priority in the new statutory amendment for 
administrative expenses of the receiver. The intended effect of the 
final rule is to clarify that post-closing and certain pre-closing 
expenses may be paid as administrative expenses of the receiver in 
connection with the liquidation or other resolution of FDIC-insured 
institutions. The final rule replaces an interim rule that has been in 
effect since August 13, 1993, and is essentially unchanged from the 
interim provisions.

EFFECTIVE DATE: The final rule is effective July 10, 1995.

FOR FURTHER INFORMATION CONTACT: Stephen N. Graham, Associate Director, 
Division of Depositor and Asset Services (202/898-7377), Rodney D. Ray, 
Senior Counsel, Legal Division (202/736-0348), Joseph A. DiNuzzo, 
Acting Senior Counsel, Legal Division (202/898-7349), Federal Deposit 
Insurance Corporation, Washington, DC, 20429.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    No collections of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this 
final rule. Consequently, no information has been submitted to the 
Office of Management and Budget for review.

Regulatory Flexibility Act

    The Board hereby certifies that the final rule will not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). It will not impose burdens on depository institutions of any 
size and will not have the type of economic impact addressed by the 
Act. Accordingly, the Act's requirements regarding an initial and final 
regulatory flexibility analysis (Id. at 603 & 604) are not applicable 
here.

Background

A. National Depositor Preference Legislation

    On August 10, 1993, the President signed into law a bill that 
amended section 11(d)(11) of the FDI Act (12 U.S.C. 1821(d)(11)) to 
provide for a national depositor preference for amounts realized from 
the liquidation or other resolution of FDIC-insured depository 
institutions. Pub. L. 103-66, 107 Stat. 312 (1993).
    Generally, the amendment provides that distributions shall be made 
from all future receivership estates in the following order:
    1. Administrative expenses of the receiver;
    2. Deposit liability claims;
    3. Other general or senior liabilities of the institution, other 
than subordinated obligations or shareholder claims;
    4. Subordinated obligations; and
    5. Shareholder claims.
    The legislation applies to all receiverships of insured 
institutions established after its enactment date and supersedes any 
inconsistent state or other federal distribution provisions. As noted, 
the first priority encompasses ``administrative expenses of the 
receiver''. The language of the statute explicitly covers post-
appointment obligations incurred by a receiver as part of the 
liquidation of an institution. The FDIC Board of Directors (Board of 
Directors) has determined that this priority also covers certain 
expenses incurred prior to the appointment of the receiver. Such 
expenses include obligations which may have been incurred prior to the 
closing of the institution but which the receiver determines should be 
paid by the receiver to facilitate the smooth and orderly transfer of 
banking operations to a purchasing institution or to obtain an 
accounting and orderly disposition of the assets of the institution. 
These expenses may include, but are not limited to, for example, the 
payment of the institution's last payroll, guard services, data 
processing services, utilities and expenses related to leased 
facilities. Generally, they do not include expenses such as severance 
pay claims, golden parachute claims and claims arising from contract 
repudiations. The final rule limits the inclusion of expenses within 
the scope of ``administrative expenses'' to those that the receiver 
determines are necessary and appropriate for the orderly liquidation or 
resolution of the institution. This general language is necessitated by 
the variety of such expenses ordinarily incurred by a receiver for a 
particular failed depository institution.
    The legislative history of the statute is explicit on the coverage 
of certain pre-receivership obligations within the scope of the 
``administrative expenses'' priority of the receivership. The House/
Senate Conference Report on the legislation notes that: ``it is the 
conferees' intent that the FDIC interpret the depositor preference 
provision for the payment of administrative expenses of the receiver as 
including ordinary and necessary expenses of the institution that are 
unpaid at the time of failure, but only those that the receiver 
determines are necessary to maintain services and facilities to effect 
an orderly resolution of the institution''. H.R. Rep. No. 213, 
Sec. 3001, Omnibus Budget Reconciliation Act of 1993, 103rd Cong., 1st 
Sess. (1993). The conferees noted that such coverage of expenses is the 
FDIC's current practice (in its role as receiver of failed insured 

[[Page 35488]]
institutions): ``the conferees intend that the FDIC continue its 
current practice of paying these expenses prior to paying deposits or 
other expenses if it determines such payment is required for an orderly 
resolution of the institution''. Id.

B. The Interim Rule

    To prevent any ambiguity on the coverage of administrative expenses 
of the institution/receiver that were incurred by the institution prior 
to the appointment of a receiver, the FDIC issued an interim rule 
published in the Federal Register on August 13, 1993 (58 FR 43069). The 
interim rule clarified that receivers have the authority to pay certain 
pre-closing obligations of the failed institution as an 
``administrative expense'' under the statute.
    The Board of Directors had determined that, in order to ensure an 
orderly continuation of the handling of closed institutions, it was 
necessary to clarify the requirements of the statutory amendment 
relative to the definition and treatment of administrative expenses of 
the receiver of such institutions. In the preamble to the interim rule 
the Board of Directors explained the necessity to apply the interim 
rule to all receiverships subject to the new statutory amendment. The 
interim rule was amended by a final rule which redesignated Secs. 360.1 
through 360.3 as Secs. 360.2 through 360.4, respectively (58 FR 67662 
(Dec. 22, 1993)).

The Final Rule

    The final rule retains the section added by the interim rule to 
Part 360 of the FDIC's regulations (12 CFR Part 360) to clarify the 
priority for administrative expenses contained in the depositor 
preference statute.
    As provided for in the statute, all FDIC-insured institutions for 
which a receiver is appointed after the date of enactment of the 
statute will be subject to the priorities provided therein. Pre-
appointment expenses that the receiver determines are within the scope 
of the ``administrative expenses'' priority will be included within 
that priority after the enactment date of the statute. As the conferees 
noted in House/Senate Conference Report, ``[p]rior to the 
implementation of such regulations [to clarify the meaning of the term 
administrative expenses], it is the conferees' intent that the FDIC 
continue its current practice of paying these expenses before paying 
depositors''. Id.
    The current Sec. 360.3 of the FDIC's regulations (12 CFR 360.3) 
specifies receivership priorities for failed savings associations. 
These provisions will continue to apply to such savings associations 
for which a receiver was appointed on or prior to the effective date of 
the statutory amendment, August 10, 1993. Liquidations or other 
resolutions of all insured depository institutions (including savings 
associations) for which a receiver is appointed after that date are 
subject to the statutory amendments and interim rule and will be 
subject to the final rule.
    The FDIC received one public comment on the interim rule. The 
comment was from a national banking and thrift industry trade group who 
expressed full support for the interim rule.
    Because the final rule is unchanged from the interim rule, which 
became effective on its issuance date of August 13, 1993, the Board of 
Directors has determined that good cause exists for waiving the 30-day 
delayed effective date ordinarily required by the Administrative 
Procedure Act (5 U.S.C. 553). The Board of Directors also has 
determined that section 302 of the Riegle Community Development and 
Regulatory Improvement Act of 1994 (Pub. L. 103-325, 108 Stat. 2160) 
(1994) (RCDRIA) does not apply to the issuance of the final rule.1 
Thus, the final rule will become effective upon its publication date in 
the Federal Register. On that same date, the interim rule will be 
replaced.

    \1\ Section 302 of RCDRIA provides that any new regulations and 
amendments to existing regulations which impose reporting, 
disclosure or other requirements on insured depository institutions 
may only take effect on the first day of a calendar quarter unless 
certain exceptions are satisfied.
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List of Subjects in 12 CFR Part 360

    Banks, banking, Savings associations.

    For the reasons set out in the preamble, part 360 of chapter III of 
title 12 of the Code of Federal Regulations is amended as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

    1. The authority citation for Part 360 is revised to read as 
follows:

    Authority: 12 U.S.C. 1821(d)(11), 1823(c)(4); Sec. 401(h), Pub. 
L. 101-73, 103 Stat. 357.
    2. Section 360.3 is amended by revising paragraph (f) to read as 
follows:


Sec. 360.3  Priorities.

* * * * *
    (f) Under the provisions of section 11(d)(11) of the Act (12 U.S.C. 
1821(d)(11)), the provisions of this Sec. 360.3 do not apply to any 
receivership established and liquidation or other resolution occurring 
after August 10, 1993.
    3. Section 360.4 is revised to read as follows:


Sec. 360.4  Administrative expenses.

    The priority for ``administrative expenses of the receiver'', as 
that term is used in section 11(d)(11) of the Act (12 U.S.C. 
1821(d)(11), shall include those necessary expenses incurred by the 
receiver in liquidating or otherwise resolving the affairs of a failed 
insured depository institution. Such expenses shall include pre-failure 
and post-failure obligations that the receiver determines are necessary 
and appropriate to facilitate the smooth and orderly liquidation or 
other resolution of the institution.

    Dated at Washington, D.C., this 27th day of June, 1995.

    By order of the Board of Directors.

    Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 95-16671 Filed 7-7-95; 8:45 am]
BILLING CODE 6714-01-P