[Federal Register Volume 62, Number 89 (Thursday, May 8, 1997)]
[Notices]
[Pages 25191-25192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11966]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Statement of Policy on Assistance to Operating Insured Depository 
Institutions; Rescission of Policy Statement

AGENCY: Federal Deposit Insurance Corporation (the FDIC).

ACTION: Rescission of policy statement.

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SUMMARY: As part of the FDIC's systematic review of its regulations and 
written policies under section 303(a) of the Riegle Community 
Development and Regulatory Improvement Act of 1994, the FDIC is 
rescinding its Statement of Policy on Assistance to Operating Insured 
Depository Institutions (the Policy Statement). The Policy Statement, 
which reflects various statutory requirements of the Federal Deposit 
Insurance Act (the FDI Act), provides criteria for the FDIC's 
consideration of proposals it receives for assistance to operating 
insured depository institutions under section 13(c) of the FDI Act 
(assistance proposals). The FDIC is rescinding the Policy Statement, as 
it is duplicative of statutory requirements in the FDI Act, it is not 
required by the FDI Act or necessary for purposes of the FDIC's 
consideration of assistance proposals it receives. The FDIC does not 
anticipate receiving many viable assistance proposals in the future, as 
it is unlikely that any assistance proposals will meet the statutory 
requirements.

DATES: This Policy Statement is rescinded May 8, 1997.

FOR FURTHER INFORMATION CONTACT: Herbert J. Held, Assistant Director, 
Division of Resolutions and Receiverships, (202) 898-7329; Sean 
Forbush, Resolutions Specialist, Division of Resolutions and 
Receiverships, (202) 898-8506; Barbara I. Taft, Assistant General 
Counsel, Legal Division, (202) 736-0183, Michael B. Phillips, Counsel, 
Legal Division, (202) 898-3581, FDIC, 550 17th Street, N.W., 
Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION: The FDIC is conducting a systematic review 
of its regulations and written policies. Section 303(a) of the Riegle 
Community Development and Regulatory Improvement Act of 1994 (CDRI) 
1 requires the FDIC, the Office of the Comptroller of the 
Currency, the Board of Governors of the Federal Reserve System, and the 
Office of Thrift Supervision each to streamline and modify its 
regulations and written policies in order to improve efficiency, reduce 
unnecessary costs, and eliminate unwarranted constraints on credit 
availability. Section 303(a) of CDRI also requires each of the federal 
banking agencies to remove inconsistencies and outmoded and duplicative 
requirements from its regulations and written policies.
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    \1\ 12 U.S.C. 4803(a).
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    The current Statement of Policy on Assistance to Operating Insured 
Depository Institutions, which was adopted by the Board of Directors of 
the FDIC, was published in the Federal Register on December 18, 
1992.2 The Policy Statement, which reflects various 
statutory requirements of the FDI Act, provides criteria for the FDIC's

[[Page 25192]]

consideration of proposals it receives for assistance to operating 
insured depository institutions under section 13(c) of the FDI Act. The 
FDIC published for comment in the Federal Register on July 3, 1996, a 
proposed revision to the Policy Statement, which updated and revised 
the Policy Statement.3 The proposed revision to the Policy 
Statement resulted from the FDIC's systematic review of its regulations 
and written policies under section 303(a) of CDRI. The following 
primary changes to the Policy Statement were reflected in the proposed 
revision to the Policy Statement: (i) Deletion of references to the 
Resolution Trust Corporation, which statutorily ``sunset'' on December 
31, 1995; and (ii) the incorporation of the requirements of section 11 
of the Resolution Trust Corporation Completion Act of 1993,4 
which revised section 11(a)(4) of the FDI Act, 12 U.S.C. 1821(a)(4), to 
prohibit the use of the Bank Insurance Fund or the Savings Association 
Insurance Fund to benefit shareholders of a failed or failing insured 
depository institution, except in cases of systemic risk determined in 
accordance with section 13(c)(4)(G) of the FDI Act.5
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    \2\ See 57 FR 60203 (December 18, 1992).
    \3\ See 61 FR 34814 (July 3, 1996).
    \4\ Pub. L. 103-204 (1993).
    \5\ In pertinent part, section 13(c)(4)(G) of the FDI Act, 12 
U.S.C. 1823(c)(4)(G) provides that the FDIC has the authority to 
provide to an operating insured institution assistance that does not 
meet the requirements of section 13(c)(4)(A) of the FDI Act only if 
the Secretary of the Treasury (in consultation with the President 
and upon the written recommendations of two-thirds of the Board of 
Directors of the FDIC and two-thirds of the Board of Governors of 
the Federal Reserve System) determines that the FDIC's compliance 
with section 13(c)(4)(A) of the FDI Act would have serious adverse 
effects on economic conditions or financial stability and the 
assistance to the operating insured institution would avoid or 
mitigate such adverse effects.
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    The only comment received on the proposed revision to the Policy 
Statement was a letter dated November 25, 1996, from Representative 
James A. Leach (R-Iowa), Chairman, Committee on Banking and Financial 
Services, U.S. House of Representatives. Chairman Leach indicated his 
strong opposition to providing any assistance which benefits 
shareholders of a failed or failing institution, except in cases of 
systemic risk as provided in section 13(c)(4)(G) of the FDI Act.
    As part of its ongoing review under section 303(a) of CDRI, the 
FDIC has determined that the FDIC's written policies can be streamlined 
by rescinding the Policy Statement. The Policy Statement, which is 
duplicative of statutory provisions of the FDI Act, is not required by 
the FDI Act. It is not necessary for consideration by the FDIC of 
assistance proposals it receives. Assistance proposals the FDIC 
receives will be evaluated against the applicable provisions of the FDI 
Act.
    The Policy Statement has not been utilized much in recent years. As 
section 13(c)(4) of the FDI Act requires the FDIC to select the 
resolution alternative that involves the least cost to the relevant 
deposit insurance fund, any open assistance proposal must be evaluated 
on a competitive basis with other available resolution alternatives. 
Because of the cost savings inherent in FDIC-assisted transactions 
involving the appointment of a receiver for an institution, it is 
unlikely that an open assistance proposal will be more cost effective 
than an available closed institution resolution.6 Further, 
it will be extremely difficult for assistance proposals to meet the 
least-cost test, the requirements of section 11(a)(4), and other 
applicable statutory requirements. The FDIC has not approved any 
assistance proposals since 1992, when two proposals were approved. 
During the period 1993-1996, the FDIC received only two assistance 
proposals which were not approved, as they did not meet the applicable 
statutory requirements.
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    \6\ Among the cost advantages favoring a resolution transaction 
following appointment of a receiver for an institution are the 
effect of the receivership on the contingent liabilities of the 
failed institution, the potential for uninsured depositors and other 
unsecured creditors to share in the loss incurred on the institution 
and the ability of the FDIC as receiver to repudiate burdensome 
contracts.
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    For the above reasons, the Policy Statement is rescinded.

    By order of the Board of Directors.

    Dated at Washington, D.C. this 29th day of April, 1997.

Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97-11966 Filed 5-7-97; 8:45 am]
BILLING CODE 6714-01-P