[Federal Register Volume 63, Number 161 (Thursday, August 20, 1998)]
[Notices]
[Pages 44764-44766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21490]


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FEDERAL DEPOSIT INSURANCE CORPORATION


Liability of Commonly Controlled Depository Institutions

AGENCY: Federal Deposit Insurance Corporation (FDIC).


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ACTION: Statement of policy.

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SUMMARY: The FDIC is revising its Statement of Policy on Liability of 
Commonly Controlled Depository Institutions (Statement of Policy) which 
sets forth the procedures and guidelines the FDIC uses in assessing or 
waiving liability against commonly controlled depository institutions 
under section 5(e) of the Federal Deposit Insurance Act. The revised 
Statement of Policy removes the application procedures for requesting a 
conditional waiver of the cross-guaranty liability from the Statement 
of Policy and incorporates those same procedures into Sec. 303.245 of 
the FDIC's Rules published elsewhere in today's Federal Register.

EFFECTIVE DATE: October 1, 1998.

FOR FURTHER INFORMATION CONTACT: Jesse G. Snyder, Assistant Director, 
Division of Supervision (202) 898-6915, or Grovetta N. Gardineer, 
Counsel, Legal Division, (202) 898-3728, Federal Deposit Insurance 
Corporation, 550 17th Street, N.W., Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION: In accordance with section 303(a) of the 
Riegle Community Development and Regulatory Improvement Act of 1994 (12 
U.S.C. 4803(a)), the FDIC conducted a systematic review of its 
regulations and written policies and determined that it was appropriate 
to revise the Statement of Policy. As a result of this review, the 
Board of Directors of the FDIC revised the Statement of Policy 
Regarding Liability of Commonly Controlled Depository Institutions to 
move the application procedures for requesting a conditional waiver of 
cross guaranty liability from the Statement of Policy to part 303 (12 
CFR part 303). Specifically, the contents of an application for 
requesting a conditional waiver of liability will be located in 
Sec. 303.245. The purpose of this revision is to place virtually all of 
FDIC's application procedures into one regulation to facilitate ease of 
use.
    The FDIC received two comments regarding the revision to the 
Statement of Policy. Both of the commenters supported the FDIC's 
proposal to revise the Statement of Policy.
    For the above reasons, the FDIC is adopting the following revision 
to the Statement of Policy:

Liability of Commonly Controlled Depository Institutions

Introduction

    Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. 
1815(e)), as added by section 206(a)(7) of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989, creates liability for 
commonly controlled insured depository institutions for losses incurred 
or reasonably anticipated by the Federal Deposit Insurance Corporation 
(FDIC) in connection with (i) the default of a commonly controlled 
insured depository institution; or (ii) any assistance provided by the 
FDIC to any commonly controlled insured depository institution in 
danger of default. In addition to certain statutory exceptions and 
exclusions contained in sections 5(e)(6), (7) and (8), the FDI Act also 
permits the FDIC, in its discretion, to exempt any insured depository 
institution from this liability if it determines that such exemption is 
in the ``best interests of the Bank Insurance Fund or the Savings 
Association Insurance Fund.''
    The liability of an insured depository institution attaches at the 
time of default of a commonly controlled institution. It is completely 
within the discretion of the FDIC whether or not to issue a notice of 
assessment to the liable institution for the estimated amount of the 
loss incurred or reasonably anticipated to be incurred by the FDIC.

Guidelines for Conditional Waiver of Liability

    The FDIC may, in its discretion, choose not to assess liability 
based upon analysis of a particular situation, and it may entertain 
requests for waivers from affiliated or unaffiliated parties of an 
institution in default or in danger of default. The determination of 
whether an exemption is in the best interests of either insurance fund 
rests solely with the Board of Directors of the FDIC (Board). Should 
the Board make such a determination, a waiver will be issued setting 
forth terms and conditions that must be met in order to receive an 
exemption from liability (conditional waiver of liability). The 
following guidelines apply to conditional waivers of liability under 
the provisions of this section:
    (1) A conditional waiver of liability will be considered in those 
cases where the waiver facilitates an alternative that would be in the 
best interests of the FDIC. For example, a conditional waiver may be 
granted when requisite additional capital and managerial resources are 
being provided which substantially lessen the exposure of the affected 
insurance fund. When a conditional waiver is granted to an unaffiliated 
acquirer of an institution in default or in danger of default it will 
be granted for a fixed period, generally not to exceed a period of time 
reasonably required for existing problems to be identified and 
resolved.
    (2) If one or more institutions in a commonly controlled 
relationship is otherwise solvent, well-managed and viable, it may be 
in the best interest of the FDIC to waive or reduce claims against such 
entities. In determining whether a conditional waiver is appropriate, 
consideration will be given to actions of a holding company which may 
contribute to or diminish the FDIC's losses, as well as proposals to 
strengthen other weakened institutions, if any.
    (3) Procedures to request a conditional waiver of liability are 
contained in Sec. 303.245 of the FDIC's Rules and Regulations, 12 CFR 
303.245.
    (4) In cases where an insured depository institution is sold to an 
acquirer with no financial interest, directly or indirectly, in the 
institution prior to the acquisition, it is the general policy of the 
FDIC to forego the issuance of a notice of assessment to the acquirer 
and its affiliated institutions in the event of a default of an insured 
depository institution formerly affiliated with the acquired 
institution. The FDIC will review all such transactions prior to making 
a final determination to forego the issuance of the notice of 
assessment.

Guidelines for Assessment of Liability

    Whenever the FDIC determines that assessment of liability in 
connection with a commonly controlled insured depository institution(s) 
is appropriate, a Notice of Assessment of Liability, Findings of Fact 
and Conclusions of Law, Order to Pay, and Notice of Hearing (Notice of 
Assessment) will be served upon the liable institution. In assessing 
the amount of the FDIC's loss and the liable institution(s'') method of 
payment, the following guidelines shall apply:
    (1) A good faith estimate of the amount of loss the FDIC shall 
incur shall be based upon (a) the actual sale or calculation of loss 
from a review by the FDIC of the assets and liabilities of the 
institution prior to default or the granting of assistance; or (b) any 
other cost estimate bases as explained in the Notice of Assessment.
    (2) If there is more than one commonly controlled depository 
institution to be assessed, each such institution is jointly and 
severally liable for all losses; however, the FDIC shall make a good 
faith estimate of the liability of each institution as determined by 
(a) first assessing an initial amount on a pro rata capital basis that 
brings about parity in the capital ratios of the liable institutions, 
and (b) then apportioning any residual assessment on a pro-rata size 
basis utilizing the most recent Report of

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Condition. Any final assessment can be based on the estimated liability 
of each institution by the FDIC and/or negotiations with the liable 
institutions.
    (3) In the event that any liable institution is closed prior to 
paying an assessment, the amount assessed or to have been assessed 
against that institution may be assessed against the remaining liable 
institution(s).
    (4) The FDIC, after consulting with the appropriate Federal and 
State financial institutions regulatory agencies, shall establish in 
each case a schedule for payment which may include a lump sum 
reimbursement, as well as procedures for receipt of such payment.
    (5) Once liability has attached, the FDIC will consider information 
similar to that provided with a request for a conditional waiver of 
liability in determining the amount of the estimated loss to be 
assessed. Such information may also include suggested payment plans.

    By order of the Board of Directors.

    Dated at Washington, D.C. this 7th day of July, 1998.

Federal Deposit Insurance Corporation.
James LaPierre,
Deputy Executive Secretary.
[FR Doc. 98-21490 Filed 8-19-98; 8:45 am]
BILLING CODE 6714-01-P