[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Rules and Regulations]
[Pages 41626-41647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17397]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 380


Certain Orderly Liquidation Authority Provisions under Title II 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act

AGENCY: Federal Deposit Insurance Corporation (``FDIC'').

ACTION: Final rule.

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SUMMARY: The FDIC is issuing a final rule (``Final Rule'') to implement 
certain provisions of its authority to resolve covered financial 
companies under Title II of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (the ``Dodd-Frank Act'' or the ``Act''). The 
Final Rule will establish a more comprehensive framework for the 
implementation of the FDIC's orderly liquidation authority and will 
provide greater transparency to the process for the orderly liquidation 
of a systemically important financial institution under the Dodd-Frank 
Act.

DATES: The effective date of the Final Rule is August 15, 2011.

FOR FURTHER INFORMATION CONTACT: R. Penfield Starke, Senior Counsel, 
Legal Division, (703) 562-2422; or Marc Steckel, Associate Director, 
Division of Insurance and Research, (202) 898-3618. For questions to 
the Legal Division concerning the following parts of the Final Rule 
contact:
    Avoidable transfer provisions: Phillip E. Sloan, Counsel (703) 562-
6137.
    Compensation recoupment: Patricia G. Butler, Counsel (703) 516-
5798.
    Subpart B--Priorities of Claims: Elizabeth Falloon, Counsel (703) 
562-6148.
    Subpart C--Receivership Administrative Claims Procedures: Thomas 
Bolt, Supervisory Counsel (703) 562-2046.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Act (Pub. L. 111-203, 12 U.S.C. 5301 et seq., July 
21, 2010) was enacted on July 21, 2010. Title II of the Act provides 
for the appointment of the FDIC as receiver of a nonviable financial 
company that poses significant risk to the financial stability of the 
United States (a ``covered financial company'') following the 
prescribed recommendation, determination, and judicial review process 
set forth in the Act. Title II outlines the process for the orderly 
liquidation of a covered financial company following the FDIC's 
appointment as receiver and provides for additional implementation of 
the orderly liquidation authority by rulemaking. The Final Rule is 
being promulgated pursuant to section 209 of the Act, which authorizes 
the FDIC, in consultation with the Financial Stability Oversight 
Council, to prescribe such rules and regulations as the FDIC considers 
necessary or appropriate to implement Title II; section 210(s)(3), 
which directs the FDIC to promulgate regulations to implement the 
requirements of the Act with respect to recoupment of compensation from 
senior executives or directors materially responsible for the failed 
condition of a covered financial company, which regulation is required 
to include a definition of the term ``compensation;'' section 
210(a)(7)(D), with respect to the establishment of a post-insolvency 
interest rate; and section 210(b)(1)(C)-(D), with respect to the index 
for inflation applied to certain employee compensation and benefit 
claims. While it is not expected that the FDIC will be appointed as 
receiver for a covered financial company in the near future, it is 
important for the FDIC to have rules in place in a timely manner so 
that stakeholders may plan transactions going forward.

[[Page 41627]]

    The Final Rule represents a culmination of an initial phase of 
rulemaking under Title II of the Dodd-Frank Act with respect to the 
implementation of its authority to undertake the orderly liquidation of 
a covered financial company. On October 19, 2010, the FDIC published in 
the Federal Register a notice of proposed rulemaking (75 FR 64173, 
October 19, 2010). Following consideration of comments received, that 
proposed rule was implemented as an Interim Final Rule (``IFR'') issued 
on January 25, 2011, and was codified at 12 CFR part 380, consisting of 
Sec. Sec.  380.1-380.6 (76 FR 4207, January 25, 2011). The IFR 
addressed discrete topics that were critical for initial guidance for 
the financial industry, including the payment of similarly situated 
creditors, the honoring of personal service agreements, the recognition 
of contingent claims, the treatment of any remaining shareholder value 
in the case of a covered financial company that is a subsidiary of an 
insurance company and limitations on liens that the FDIC may take on 
the assets of a covered financial company that is an insurance company 
or a covered subsidiary of an insurance company. The FDIC requested 
additional general comments on the IFR as well as comments relating to 
specific provisions. The comment period for the IFR ended on March 28, 
2011.
    On March 15, 2010, the FDIC issued a notice of proposed rulemaking 
covering additional subjects pertinent to an orderly liquidation under 
Title II of the Act (76 FR 16324, March 23, 2011). The purpose of the 
proposed rule (the ``Proposed Rule'') that was the subject of this 
second notice was to continue to build on the framework initially begun 
with the IFR. The Proposed Rule addressed the recoupment of 
compensation from senior executives and directors of a covered 
financial company; further clarified the definition of ``financial 
company'' in section 201 of the Dodd-Frank Act by detailing what it 
means to be ``predominantly engaged in activities that are financial or 
incidental thereto;'' clarified the receiver's powers to avoid 
fraudulent and preferential transfers by a covered financial company; 
addressed the order of priority for the payment of claims, which 
included clarifying the meaning of ``administrative expenses'' and 
``amounts owed to the United States,'' the priority for setoff claims, 
how post-insolvency interest is to be paid, the payment of claims for 
contracts and agreements expressly assumed by a bridge financial 
company; and addressed the receivership administrative claims process, 
including the treatment of secured claims. The notice of proposed 
rulemaking published in the Federal Register requested comments on all 
aspects of the Proposed Rule as well as comments relating to specific 
provisions. The comment period ended May 23, 2011.

II. Summary of Comments on the IFR and the Proposed Rule

    The FDIC received 10 comments in response to the IFR and 21 
comments in response to the Proposed Rule. Almost all of the comments 
were submitted by financial industry trade associations, with others 
submitted by insurance trade associations, clearing and settlement 
companies, a foundation for research and advocacy, a committee of 
bankruptcy attorneys, a group of law and business school faculty, and a 
group of law school students.
    The general themes of comments that did not directly relate to the 
text of the IFR and Proposed Rule were wide-ranging. Commenters 
simultaneously urged prompt and comprehensive rulemaking to increase 
transparency with respect to the implementation of the orderly 
liquidation authority and certainty in the implementation of ongoing 
and future financial transactions, while counseling a deliberate pace 
to allow input from industry representatives and the benefit of the 
review of resolution plans prior to the implementation of rules 
governing the orderly liquidation process.
    Many comments urged the greatest possible harmony with bankruptcy 
laws, rules and processes. These comments sought, among other things: 
Increased input from creditors and creditor committees, deference to 
bankruptcy case law, adoption of bankruptcy reporting processes, and 
earlier and broader judicial input and review. In this connection, 
comments requested greater clarity with respect to the procedures that 
the FDIC will follow in determining claims and valuations of collateral 
and assets, as well as an appeals procedure for disputed valuations of 
property. Commenters also urged clarification with respect to the 
implementation of the so-called ``Chapter 7 minimum'' payment to 
creditors pursuant to section 210(a)(7)(B) of the Act.\1\
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    \1\ Section 210(a)(7)(B) provides that ``a creditor shall, in no 
event, receive less than the amount that such creditor is entitled 
to receive'' under a chapter 7 liquidation of such covered financial 
company in bankruptcy.
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    Commenters from the insurance industry similarly urged the greatest 
possible deference to state regulators and to state laws, rules and 
regulations governing insurance companies. One commenter has repeatedly 
requested clarification that mutual insurance holding companies will be 
treated as insurance companies for the purposes of the Dodd-Frank Act.
    Comments emphasized the importance of maximizing the going concern 
value of the business and assets of the covered financial company and 
suggested establishment of standards for the conduct of sales of assets 
and collateral. A specific concern was the need for clarification of 
the treatment of custodial assets held by non-banks in an orderly 
liquidation.
    Another broad theme was the importance of clarifying the process 
and criteria for designating systemically important financial companies 
that may be subject to orderly liquidation. These comments generally 
sought to limit the scope of such a designation. In addition to general 
comments on this theme, one commenter took the position that money 
managers should never be considered systemically important. Another 
commenter took the same position with respect to money funds. 
Additional clarification also was sought with respect to the process 
for the designation of covered financial companies and the appointment 
of the receiver.
    The implementation of special assessments and the clawback of 
preferential payments made to similarly situated creditors has been a 
recurring theme in comments to the IFR and the Proposed Rule. 
Commenters sought clarity with respect to the designation of 
preferential payments deemed necessary to essential operations that are 
exempt from the clawback under section 210(o) of the Dodd-Frank Act. 
Other comments urged restraint in making preferential payments and 
suggested additional procedural safeguards with respect to this 
process. Comments also urged careful consideration of any need for 
special assessments on the industry to avoid undue burden on well-run 
companies.
    Commenters requested additional clarification of the implementation 
of the authority to create bridge financial companies, including the 
processes and procedures for creating and terminating bridge financial 
companies, the treatment of assets transferred to bridge financial 
companies, and the treatment of claims against bridge financial 
companies. One commenter suggested a rule clarifying that all qualified 
financial contracts will be transferred to a bridge financial company.
    Commenters also expressed concern about the process for resolving 
an

[[Page 41628]]

international financial company and stressed the need for international 
cooperation and coordination.
    Finally, one commenter argued that the IFR and the Proposed Rule 
are unconstitutionally broad and usurp the legislative function 
constitutionally delegated to Congress.
    Comments beyond the scope of the IFR and the Proposed Rule will be 
considered in connection with future rulemakings. Comments relating to 
specific provisions of the IFR and Proposed Rule are discussed below in 
the analysis of the relevant sections of the Final Rule.

III. The Final Rule

A. Overview

    The Final Rule will divide Part 380 into subparts A, B, and C. In 
subpart A, Sec.  380.1 provides definitions of general applicability in 
part 380. Section 380.3 provides that services rendered by employees to 
the covered financial company after the FDIC has been appointed as 
receiver, or during the period where some or all of the operations of 
the covered financial company are continued by a bridge financial 
company, will be compensated according to the terms and conditions of 
any applicable personal service agreements and that such payments will 
be treated as an administrative expense. Section 380.5 provides that if 
the FDIC acts as receiver for a direct or indirect subsidiary of an 
insurance company and that subsidiary is not an insured depository 
institution or an insurance company itself, the value realized from the 
liquidation of the subsidiary will be distributed according to the 
order of priorities set forth in the Dodd-Frank Act. Section 380.6 
provides that the FDIC will avoid taking a lien on some or all of the 
assets of a covered financial company that is an insurance company or a 
subsidiary that is an insurance company unless it determines that 
taking such a lien is necessary for the orderly liquidation of the 
covered financial company and will not unduly impede or delay the 
liquidation or rehabilitation of the insurance company or the recovery 
by its policyholders. Section 380.7 provides that the FDIC as receiver 
of a covered financial company may recover from senior executives and 
directors who were substantially responsible for the failed condition 
of the covered financial company any compensation they received during 
the two-year period preceding the date on which the FDIC was appointed 
as receiver, or for an unlimited period in the case of fraud.
    The Proposed Rule included Sec.  380.8, implementing section 201(b) 
of the Act. Section 201(b) of the Act requires the FDIC, in 
consultation with the Secretary of the U.S. Treasury, to establish by 
regulation criteria for determining, for the purposes of Title II, if a 
company is predominantly engaged in activities that are financial in 
nature or incidental thereto as determined by the Board of Governors of 
the Federal Reserve System (``Board of Governors'') under section 4(k) 
of the Bank Holding Company Act (``BHC Act''). A company that is 
predominantly engaged in such activities is a ``financial company'' 
under Title II (unless expressly excluded by section 201(a)(11)(C) of 
the Act) and may be subject to the orderly liquidation provisions of 
the Dodd-Frank Act. On February 11, 2011, the Board of Governors 
published a notice of proposed rulemaking entitled ``Definitions of 
`Predominantly Engaged in Financial Activities' and `Significant' 
Nonbank Financial Company and Bank Holding Company'' (76 FR 7731, 
February 11, 2011) (``Board of Governors' NPR'').
    The Board of Governors' NPR proposed criteria for determining 
whether a company is ``predominantly engaged in financial activities'' 
for purposes of determining if the company is a nonbank financial 
company under Title I of the Act. There are substantial similarities 
between the provisions in Title I of the Act, which the Board of 
Governors' NPR implements, and section 201(b) of the Act, which Sec.  
380.8 of the FDIC's Proposed Rule would implement. In light of those 
similarities, the FDIC staff coordinated with the staff of the Board of 
Governors, to the extent practicable, on the proposed criteria in Sec.  
380.8. The FDIC staff is continuing to coordinate with the staff of the 
Board of Governors on this issue and intends to finalize the criteria 
for determining if a company is predominantly engaged in activities 
that are financial in nature or incidental thereto through a separate 
notice in the Federal Register. Consequently, Sec.  380.8 is reserved 
in the Final Rule.
    Section 380.9 in subpart A clarifies the interpretation of 
provisions of the Act authorizing the FDIC as receiver of a covered 
financial company to avoid fraudulent or preferential transfers in a 
manner comparable to the relevant provisions of the Bankruptcy Code so 
that transferees will have the same treatment in a liquidation under 
the Act as they would have in a bankruptcy proceeding.
    Subpart B of the Final Rule addresses the priorities for expenses 
of the receiver of a covered financial company and other unsecured 
claims against the covered financial company or the receiver. Subpart B 
integrates and harmonizes the various provisions of the Dodd-Frank Act 
that determine the nature and priority of payments. In particular, the 
subpart integrates the various statutory references to administrative 
expenses throughout the Act. It also provides additional context with 
respect to the definition of ``amounts owed to the United States'' to 
clarify that unsecured obligations advanced to provide funds for the 
orderly liquidation of a covered financial company or to avoid or 
mitigate adverse effects on the financial stability of the United 
States in the liquidation of the covered financial company are included 
among the class of claims paid at the higher statutory level accorded 
to amounts owed to the United States, while unsecured obligations to 
the United States that were incurred by the covered financial company 
in the ordinary course of its business prior to the appointment of the 
receiver will be paid at the priority of general unsecured or senior 
liabilities of the covered financial company. Additionally, subpart B 
confirms the statutory treatment of claims arising out of the loss of 
setoff rights at a priority ahead of other general unsecured creditors 
if the loss of the setoff is due to the receiver's sale or transfer of 
an asset, finalizes the methodology for calculating post-insolvency 
interest on unsecured claims and clarifies the payment of obligations 
of bridge financial companies and the rights of receivership creditors 
to any remaining value upon termination of a bridge financial company. 
For a more logical organizational flow, subpart B also now includes at 
Sec.  380.27 the rule originally found at Sec.  380.2 of the IFR, 
clarifying that the FDIC will not use its discretion to differentiate 
among similarly situated creditors under section 210 of the Act to give 
preferential treatment to certain long-term senior debt with a term 
longer than 360 days, and that subordinated debt and equity never will 
qualify for preferential treatment.
    Subpart C sets forth the administrative process for the 
determination of claims against a covered financial company as 
established by relevant provisions of the Dodd-Frank Act. This process 
will not apply to any liabilities or obligations assumed by a bridge 
financial company or other entity or to any extension of credit from a 
Federal reserve bank or the FDIC to a covered financial company. Under 
the claims procedures, the receiver will publish and mail a notice

[[Page 41629]]

to advise creditors to file their claims by a bar date that is not less 
than 90 days after the date of the initial publication. The receiver 
will have up to 180 days to determine whether to allow or disallow the 
claim, subject to any extension agreed to by the claimant. The claimant 
will have 60 days from the earlier of any disallowance of the claim or 
the end of the 180-day period (or any period extended by agreement) to 
file a lawsuit in federal court for a judicial determination. No court 
has jurisdiction over any claim, however, unless the claimant has 
exhausted its administrative remedies through the claims process.
    Subpart C also includes provisions concerning contingent claims and 
secured claims. With respect to claims based on a contingent obligation 
of a covered financial company, the receiver will estimate the value of 
the contingent claim at the end of either the 180-day claim 
determination period or any extended period agreed to by the claimant. 
If the claim becomes fixed before it has been estimated, it may be 
allowed in the fixed amount; otherwise, the estimated value will be 
used to calculate the claimant's pro rata distribution. With respect to 
secured claims, subpart C provides that property of a covered financial 
company that secures a claim will be valued at the time of the proposed 
use or disposition of the property. Secured claimants may request the 
consent of the receiver to obtain possession of or exercise control 
over their collateral. The Final Rule provides that the receiver will 
grant consent unless it decides to use, sell or lease the property, in 
which case it must provide adequate protection of the claimant's 
security interest in the property. This provision will not apply in a 
case where the receiver repudiates or disaffirms a secured contract, 
however.

B. Summary of Changes From the IFR and the Proposed Rule

    The Final Rule contains substantive revisions and technical 
corrections to the provisions of the IFR and the Proposed Rule 
responsive to the comments received. The changes are discussed in more 
detail in the section-by-section analysis of the Final Rule. In 
summary, the substantive revisions in the Final Rule are as follows:
    (1) In the Proposed Rule, Sec.  380.2(c) provided that collateral 
securing claims against the covered financial company would be valued 
as of the date of the appointment of the receiver. This provision has 
been moved to Sec.  380.50(b) of the Final Rule, which states that such 
property will be valued at the time of the proposed use or disposition 
of the property. This approach to the valuation of collateral follows 
the comparable provision of the Bankruptcy Code.
    (2) Section 380.4 of the IFR concerning contingent claims has been 
moved to Sec.  380.39 of the Final Rule. The original text of this 
section has been retained and new provisions have been added to provide 
that the receiver will estimate the value of a contingent claim no 
later than 180 days after the claim is filed or any extended period 
agreed to by the claimant.
    (3) Section 380.7 addresses the recoupment of compensation from 
former and current senior executives and directors who are 
substantially responsible for the failed condition of the covered 
financial company. The Proposed Rule provided a standard of conduct in 
which, among other things, a senior executive or director would be 
deemed ``substantially responsible'' if he or she failed to conduct his 
or her responsibilities with the requisite degree of skill and care 
required by that position. The Final Rule clarifies the standard and 
provides that a senior executive or director would be deemed 
``substantially responsible'' if he or she failed to conduct his or her 
responsibilities with the degree of skill and care an ordinarily 
prudent person in a like position would exercise under similar 
circumstances. The revision clarifies that the standard of care that 
will trigger section 210(s) is a negligence standard; a higher 
standard, such as gross negligence, is not required. The Final Rule was 
also revised to reflect that the FDIC as receiver may commence an 
action to seek recoupment and has a ``savings clause'' to preserve the 
rights of the FDIC as receiver to recoup compensation under all 
applicable laws.
    (4) As discussed, the provision in Sec.  380.8 of the Proposed Rule 
regarding the criteria for determining if a company is predominantly 
engaged in activities that are financial in nature or incidental 
thereto will be the subject of future rulemaking. Section 380.8 is 
reserved in the Final Rule.
    (5) Section 380.21 of the Proposed Rule enumerated the priorities 
of payments to unsecured creditors. A new sentence is added in the 
Final Rule to provide that contractual subordination agreements will be 
respected, which is consistent with the practice in bankruptcy.
    (6) The Proposed Rule contained a definition of ``amounts owed to 
the United States'' that would be entitled to the priority of claims 
immediately following administrative expenses, that included all 
amounts of any kind owed to any department, agency or instrumentality 
of the United States. Under the Final Rule, the definition of ``amounts 
owed to the United States'' in Sec.  380.23 has been revised to clarify 
that the obligations entitled to the priority afforded to ``amounts 
owed to the United States'' include only amounts advanced to the 
covered financial company to promote the orderly resolution of the 
covered financial company or to avoid or mitigate adverse effects on 
the financial stability of the United States in the resolution of the 
covered financial company. Consistent with the goal of the Dodd-Frank 
Act to end any taxpayer bail-out of a nonviable financial company, 
unpaid unsecured federal income tax obligations also are repaid at the 
priority afforded to amounts owed to the United States. In response to 
comments and to provide clearer guidance, this section also sets forth 
a non-exclusive list of included types of advances, and a similar list 
of excluded types of advances. The level of priority afforded to 
amounts owed to the United States is not applicable to administrative 
expenses, which are dealt with in Sec.  380.22, nor to secured 
obligations, which are dealt with in Sec. Sec.  380.50-53 regarding 
secured claims.
    (7) Section 380.24, which addresses the priority granted to 
creditors who have lost setoff rights due to the exercise of the 
receiver's right to sell or transfer assets free and clear of such 
rights, has been modified to make clear that the provisions of that 
section do not affect the provisions of the Dodd-Frank Act relating to 
rights of netting with respect to qualified financial contracts.
    (8) Section 380.31 addresses the scope and applicability of the 
receivership administrative claims process by providing that the claims 
process does not apply to claims against a bridge financial company or 
involving its assets or liabilities, or extensions of credit from a 
Federal reserve bank or the FDIC to a covered financial company.
    (9) Section 380.35(b)(2)(i) of the Final Rule permits the receiver 
to consider a claim filed after the claims bar date if the claimant did 
not have notice of the appointment of the receiver in time to file its 
claim because the claim is based on an act or omission of the receiver 
that occurs after the claims bar date. The Proposed Rule addressed 
claims that did not ``accrue'' until after the claims bar date. It was 
decided, however, that this was too broad because it could cover 
contingent claims, which are addressed in Sec.  380.39 of the Final 
Rule.
    (10) Sections 380.50-380.53 of the Proposed Rule have been 
extensively modified to more fully protect the rights of secured 
claimants. Property of a

[[Page 41630]]

covered financial company will be valued at the time of any proposed 
disposition or use of the property. A secured claimant may request the 
receiver's consent to exercise its rights against its collateral, which 
the receiver will grant unless it decides to use, sell or lease the 
collateral, in which case the receiver must provide adequate protection 
of the claimant's security interest in the property.

C. Section-by-Section Analysis of the Final Rule

1. Subpart A--General and Miscellaneous Provisions
    Definitions. Section 380.1 of the Final Rule contains definitions 
of the following terms of general applicability to part 380: ``allowed 
claim,'' ``Board of Governors,'' ``bridge financial company,'' 
``compensation,'' ``corporation,'' ``covered financial company,'' 
``covered subsidiary,'' ``director,'' ``Dodd-Frank Act,'' ``employee 
benefit plan,'' ``insurance company,'' and ``senior executive.'' Some 
of these terms are terms that are defined in the Act which were not 
included in the IFR or the Proposed Rule, and others had been included 
among the substantive provisions of those rules but are now moved to 
Sec.  380.1 because those terms are, or may be, used on more than one 
occasion throughout part 380. All of the definitions are consistent 
with the language of the Dodd-Frank Act. By and large, definitions that 
had been included in the IFR and the Proposed Rule have not been 
changed. The terms ``Board of Governors,'' ``Dodd-Frank Act'' and 
``employee benefits plan'' were added for ease of reference and the 
avoidance of doubt. A clarifying change was made to the definition of 
``director'' to make clear that the term includes individuals serving 
entities that may have a different legal form than a corporation, such 
as a limited liability company, in a capacity similar to a director for 
a corporation.
    Few comments were received on these definitions. One commenter 
argued that the definition of ``compensation'' should use only the 
precise language of section 210(s)(3) of the Act, and not include any 
additional language. The Proposed Rule provided greater clarity to the 
industry by providing a non-exclusive list of the types of compensation 
that would be subject to recoupment that is consistent with the intent 
of section 210(s). Accordingly, no change to this definition is being 
made in the Final Rule.
    Section 380.2 is reserved; the content of Sec.  380.2 of the IFR 
has been moved to Sec.  380.27 of the Final Rule and is discussed 
below.
    Personal service agreements. Section 380.3 of the Final Rule 
assures that an employee who provides services to the covered financial 
company after appointment of the receiver, or to the bridge financial 
company, will be paid for such services according to the terms of any 
applicable personal service agreement, and such payment shall be 
treated as an administrative expense of the receiver. This provision 
does not restrict the receiver's ability to repudiate a personal 
services agreement, nor does it impair the ability of the receiver to 
negotiate different terms of employment by mutual agreement. Section 
380.3 does not apply to senior executives or directors of a covered 
financial company and it does not limit the power to recover 
compensation previously paid to senior executives or directors under 
section 210(s) of the Dodd-Frank Act and the regulations promulgated 
thereunder.
    Only one comment addressed the treatment of personal service 
agreements under Sec.  380.3 of the IFR. That comment pointed out that 
the reference to covered subsidiaries in the IFR was confusing, because 
covered subsidiaries are, by definition, not in receivership and 
therefore contracts to which the subsidiary is a party cannot be 
repudiated by the FDIC as receiver pursuant to section 210(c) of the 
Act. Section 380.3 of the IFR was intended to address the possibility 
that an agreement entered into by a parent company may cover employees 
of an affiliate or subsidiary of the covered financial company. It is 
the intent of the Final Rule that employees be paid for work performed 
under a contract with a covered financial company or, if applicable, a 
bridge financial company, in accordance with the terms of the agreement 
until such time as the contract is assumed by a third party or 
repudiated by the FDIC as receiver. To the extent that the FDIC as 
receiver for the covered financial company has the power to exercise 
control over a subsidiary, it will ensure that employees of the 
subsidiary continue to be paid in accordance with the personal services 
agreement. However, the reference to covered subsidiaries has been 
deleted from Sec.  380.3 in the Final Rule to clarify that this section 
does not imply that the FDIC as receiver has the power to repudiate a 
contract entered into by a covered subsidiary nor does it have the 
power to enforce the terms of such a contract except by virtue of its 
role as parent to such subsidiary, unless or until the FDIC is 
appointed as receiver of a subsidiary.
    As a technical revision to the IFR, Sec.  380.3 of the Final Rule 
does not include the definition of the term ``senior executive'' as the 
IFR had. The definition of that term has been moved into the general 
definitions of Sec.  380.1. In addition, a reference is included in the 
last sentence of Sec.  380.3(c) to the rule regarding recoupment of 
executive compensation included in this Final Rule at Sec.  380.7.
    Section 380.4 is reserved as the content of that Proposed Rule has 
been moved to Sec.  380.39 and is discussed below.
    Insurance company subsidiaries. The IFR provides at Sec.  380.5 
that where the FDIC acts as receiver for a direct or indirect 
subsidiary of an insurance company, the value realized from the 
liquidation of the subsidiary will be distributed according to the 
priorities established in the Dodd-Frank Act and will be available to 
the policy holders of the parent insurance company. No comments were 
received recommending changes to Sec.  380.5 of the IFR. The sole 
revision to that section in the Final Rule is to include a reference to 
the regulations promulgated under section 210(b)(1) of the Act that are 
included in subpart B of this Final Rule.
    Liens on insurance company assets. Section 380.6 of the IFR limits 
the ability of the FDIC to take liens on insurance company assets and 
assets of the insurance company's covered subsidiaries under certain 
circumstances after the FDIC has been appointed as receiver. As 
discussed in the preamble of the notice of proposed rulemaking with 
respect to this rule, section 204 of the Dodd-Frank Act provides that 
in the event that the FDIC as receiver of a covered financial company 
determines it to be necessary or appropriate, it may provide funding 
for the orderly liquidation of covered financial companies and covered 
subsidiaries by, among other things, making loans, acquiring debt, 
purchasing assets or guaranteeing them against loss, assuming or 
guaranteeing obligations, making payments, or entering into certain 
transactions. In particular, pursuant to section 204(d)(4) of the Dodd-
Frank Act, the FDIC is authorized to take liens ``on any or all assets 
of the covered financial company or any covered subsidiary, including a 
first priority lien on all unencumbered assets of the covered financial 
company or any covered subsidiary to secure repayment'' of any advances 
made.
    Commenters to the IFR questioned the reference to liens on assets 
of an affiliate of a covered financial company as well

[[Page 41631]]

as assets of a covered subsidiary. The FDIC as receiver has clear 
authority under section 204(d)(4) of the Act to take a lien on the 
``assets of the covered financial company or any covered subsidiary to 
secure repayment of any transactions conducted'' under that section. 
While section 203(e) of the Act contemplates that the FDIC could be 
appointed as receiver for an affiliate of an insurance company that is 
not itself a subsidiary, it is clear that upon appointment, the 
affiliate would become a covered financial company, rendering the 
reference to ``affiliates'' in Sec.  380.6 superfluous. The Final Rule 
has been revised accordingly to eliminate the reference to 
``affiliates'' of the covered financial company and to make clear that 
the rule applies only to covered subsidiaries of insurance companies.
    Recoupment of Compensation. Section 380.7 of the Final Rule 
implements section 210(s) of the Dodd-Frank Act, which authorizes the 
FDIC as receiver to recoup compensation when a current or former senior 
executive or director is ``substantially responsible'' for the failed 
condition of a covered financial company. The Final Rule provides, in 
pertinent part, that a senior executive or director would be deemed 
``substantially responsible'' if he or she failed to conduct his or her 
responsibilities with the degree of skill and care required by that 
position. Comments received on Sec.  380.7 of the Proposed Rule sought 
clarification or made recommendations regarding this standard. Some 
comments took the position that substantial responsibility should be 
based on state law or established legal standards. One commenter took 
the position that substantial responsibility should exist based solely 
on the failure of the covered financial company with no inquiry into 
conduct. In response to the comments, the Final Rule clarifies the 
standard and provides that a senior executive or director would be 
deemed ``substantially responsible'' if he or she failed to conduct his 
or her responsibilities with the degree of skill and care an ordinarily 
prudent person in a like position would exercise under similar 
circumstances. The revision clarifies that the standard of care that 
will trigger section 210(s) is a negligence standard; a higher 
standard, such as gross negligence, is not required. In the event that 
a covered financial company is liquidated under Title II, the FDIC as 
receiver will undertake an analysis of whether the individual has 
breached his or her duty of care, including an assessment of whether 
the individual exercised his or her business judgment. The burden of 
proof, however, will be on the former senior executive or director to 
establish that he or she exercised his or her business judgment. State 
``business judgment rules'' and ``insulating statutes'' will not shift 
the burden of proof to the FDIC or increase the standard of care under 
which the FDIC as receiver may recoup compensation.
    The Final Rule provides that, in certain limited circumstances, a 
senior executive or director would be presumed to be substantially 
responsible for the failed condition of the covered financial company. 
Some commenters objected to the use of the rebuttable presumption of 
substantial responsibility that was based on the position or the duties 
of the current or former senior executive or director. Those commenters 
argued that a presumption based solely on an individual's position in a 
company would be a disincentive for any individual to take that 
position and would be detrimental to the financial industry. Other 
commenters objected to the presumption of substantial responsibility 
that was based on an individual's removal from his or her position 
under section 206 of the Act. One commenter argued that the presumption 
exception for ``white knights'' was too narrow and would serve as a 
disincentive for individuals to take positions with financially 
impaired companies. The statutory language of the Dodd-Frank Act 
provides for the recoupment of compensation from current or former 
senior executives or directors of covered financial companies when they 
have not performed their duties and responsibilities. The use of 
rebuttable presumptions for those individuals under the limited 
circumstances described in the Proposed Rule is aligned with the intent 
shown in the statutory language; thus, the presumptions remain 
unchanged in the Final Rule.
    Some comments requested clarification of the procedure that would 
be used for pursuing recoupment of compensation. The FDIC anticipates 
that it will seek recoupment of compensation through the court system 
using a procedure similar to the procedure that it currently uses when 
it seeks recovery from individuals whose negligent actions have caused 
losses to failed financial institutions. In those situations, the FDIC 
as receiver undertakes an investigation to determine if there are 
meritorious and cost-effective claims and, if so, staff requests 
authority to sue from the FDIC Board of Directors or the appropriate 
delegated authority. Similarly, under section 210(s) of the Act, the 
FDIC anticipates that it will investigate whether the statutory 
criteria for compensation recoupment are met and, if so, staff will 
request authorization of a suit for recoupment. The Final Rule reflects 
this procedure by indicating that the FDIC as receiver may file an 
action to seek recoupment of compensation.
    The Final Rule has a ``savings clause'' to preserve the rights of 
the FDIC as receiver to recoup compensation under all applicable laws.
    Treatment of fraudulent and preferential transfers. Section 380.9 
of the Proposed Rule addressed the powers granted to the FDIC as 
receiver in section 210(a)(11) of the Dodd-Frank Act to avoid certain 
fraudulent and preferential transfers and sought to harmonize the 
application of these powers with the analogous provisions of the 
Bankruptcy Code so that the transferees of assets will have the same 
treatment in a liquidation under Title II as they would in a bankruptcy 
proceeding.
    One commenter noted that Sec.  380.9(b)(2) of the Proposed Rule 
provided that the term ``fixture'' shall be interpreted in accordance 
with federal bankruptcy law, and stated that a bankruptcy court would 
look to applicable non-insolvency law when determining what constitutes 
a fixture. The commenter pointed out that typically under non-
insolvency law, the law of the state in which a fixture is located 
would govern the determination of what constitutes a fixture, and 
suggested that the FDIC need not apply a federal rule to determine what 
a fixture is for preference purposes. By providing in the Proposed Rule 
that the term ``fixture'' is to be interpreted in accordance with 
federal bankruptcy law, it was intended that the term be interpreted in 
the same manner as under federal bankruptcy law. Thus, to the extent 
that bankruptcy courts continue to define ``fixture'' by reference to 
applicable non-insolvency law, including state law, the same analysis 
would be applied to define ``fixture'' under Sec.  380.9. Therefore, 
the provision does not create a new federal rule to define ``fixture,'' 
and no clarifying change to the Final Rule is necessary.
2. Subpart B--Priorities
    Subpart B addresses the priority for expenses and unsecured claims 
established under section 210(b) of the Act. It organizes and clarifies 
provisions throughout the Act dealing with the relative priorities of 
various creditors with unsecured claims against a failed financial 
company.

[[Page 41632]]

    Priorities. Section 380.21 lists each of the eleven priority 
classes of claims established under the Dodd-Frank Act in the order of 
its relative priority. In addition to the specified priorities listed 
in section 210(b) of the Act, the Final Rule integrates additional 
levels of priority established under section 210(b)(2) (certain post-
receivership debt); section 210(a)(13) (claims for loss of setoff 
rights); and section 210(a)(7)(D) (post-insolvency interest).
    Section 380.21(b) conforms the method of adjusting certain payments 
for inflation to the similar provisions of the Bankruptcy Code. Section 
380.21(c) provides that each class will be paid in full before payment 
of the next priority, and that if funds are insufficient to pay any 
class of creditors, the funds will be allocated among creditors in that 
class, pro rata.
    Section 380.21 of the Final Rule contains four changes from the 
language of the Proposed Rule. The introduction to paragraph (a) now 
uses the defined term ``allowed claims'' for consistency and to clarify 
that this rule applies only to unsecured claims, including the 
unsecured portion of under-secured claims. This change is in response 
to the request of several commenters that this important point be made 
even clearer and more express in recognition of the mandate of section 
210(b)(5) that section 210 of the Act shall not affect a secured claim 
except to the extent that the security is insufficient to satisfy the 
claim. Also, Sec.  380.21(a)(3) was modified to clarify that the class 
of claims for ``amounts owed to the United States'' does not include 
obligations that meet the definition of administrative expenses in 
Sec.  380.22. A corresponding clarification has been made to Sec.  
380.23. A technical change to Sec.  380.21(a)(4) and (5) substitutes 
the word ``within'' for the phrase ``not later than'' to make clear 
that the relevant employees' claims must arise during the time period 
within 180 days before the date of the appointment of the receiver.
    A comment also requested clarification of the impact of contractual 
agreements on priorities. The last sentence of Sec.  380.21(c) is added 
in response to that comment, to make clear that enforceable contractual 
subordination agreements will be respected. This is consistent with 
section 510(a) of the Bankruptcy Code, which provides that 
subordination agreements enforceable under applicable non-bankruptcy 
law will be respected by the trustee in bankruptcy.
    Administrative expenses of the receiver. Section 380.22 of the 
Proposed Rule expanded and clarified the statutory definition of the 
term ``administrative expenses of the receiver'' by consolidating 
various statutory references to administrative expenses in a single 
section and by making clear that administrative expenses of the 
receiver can include costs and expenses incurred by the FDIC prior to 
the appointment as receiver, as well as post-appointment expenses if 
the expenses are necessary and appropriate to facilitate the smooth and 
orderly liquidation of the covered financial company.\2\
---------------------------------------------------------------------------

    \2\ Claims for certain expenses incurred in connection with the 
liquidation of a covered broker or dealer that qualify for 
administrative expense priority are not addressed in the Proposed or 
Final Rule because matters relating to the liquidation of a covered 
broker-dealer under section 205(f) of the Act are required to be 
addressed in a separate rule being prepared jointly with the U.S. 
Securities and Exchange Commission.
---------------------------------------------------------------------------

    The changes to Sec.  380.22 of the Proposed Rule are intended 
solely to provide clarity. A commenter questioned how expenses of the 
receiver might pre-date the appointment of the receiver. The change to 
``pre- and post-failure costs and expenses of the FDIC in connection 
with its role as receiver'' clarifies that costs incurred in 
anticipation of and preparation for the role as receiver are 
administrative expenses of the receiver. Similarly, comments revealed 
some confusion about debt accorded super-priority status ahead of 
administrative expenses under Sec.  380.21(a)(1) of the Proposed Rule. 
The language of the Final Rule more closely tracks the statutory 
language with respect to debt that qualifies for super-priority status.
    Amounts owed to the United States. Section 380.23 of the Proposed 
Rule established a definition of ``amounts owed to the United States'' 
that are entitled to be paid at the level of priority immediately 
following administrative expenses. It defined that class of claims to 
include amounts advanced by the U.S. Treasury, or by any other 
department, instrumentality or agency of the United States, whether 
such sums are advanced before or after the appointment of the receiver. 
It expressly included advances by the FDIC for funding of the orderly 
liquidation of the covered financial company pursuant to section 
204(d)(4) of the Act but also included other sums advanced by 
departments, agencies and instrumentalities of the United States such 
as payments on FDIC corporate guarantees, including the Temporary 
Liquidity Guarantee Program and unsecured claims for net realized 
losses by a federal reserve bank in connection with loans made under 
section 13(3) of the Federal Reserve Act, 12 U.S.C. 343, and unsecured 
accrued and unpaid taxes owed to the United States.
    Several comments requested clarification with respect to the 
relationship between pre- and post-receivership administrative expenses 
incurred by the FDIC that were described in Sec.  380.22 of the 
Proposed Rule and are included in the administrative expense class of 
claims under Sec.  380.21(a)(2). For the sake of clarity, Sec.  380.23 
of the Final Rule states that amounts owed to the United States do not 
include any amounts included in the administrative expense classes of 
claims at Sec.  380.21(a)(1) and (a)(2).
    All of the comments specifically addressing Sec.  380.23 of the 
Proposed Rule reflected concerns that expressly including amounts owed 
to all ``departments, agencies and instrumentalities'' of the United 
States in the regulatory definition of ``amounts owed to the United 
States'' was vague and potentially overbroad. Clarification was 
requested with respect to specific examples of amounts that might be 
deemed to be included in the broad definition under the Proposed Rule, 
such as amounts owed to the Pension Benefit Guaranty Corporation 
arising out of underfunded pension obligations, amounts owed to the 
Environmental Protection Agency arising out of superfund cleanup 
obligations, and fees payable to the Securities and Exchange Commission 
or other regulatory agencies, to name a few. In the Final Rule, the 
phrase ``departments, agencies and instrumentalities'' of the United 
States found in the Proposed Rule is omitted in favor of the simpler 
statutory reference to the ``United States.'' This change is not 
intended to limit the definition strictly to amounts owed to the U.S. 
Treasury and the Final Rule expressly provides in Sec.  380.23(a) that 
amounts owed to agencies or instrumentalities other than the U.S. 
Treasury for certain purposes will be included as ``amounts owed to the 
United States.''
    Section 380.23(a) adds language to make clear that the priority for 
amounts owed to the United States relates to amounts advanced in 
connection with the purposes and mandates of Title II of the Act, 
namely, to conduct the orderly resolution of a covered financial 
company, to avoid or mitigate adverse consequences to the financial 
stability of the United States arising out of the failure of the 
covered financial company and to ensure that outstanding tax 
obligations to the U.S. Treasury are repaid to protect the taxpayers. 
These include obligations such as advances under the Temporary 
Liquidity Guaranty Program that was created by

[[Page 41633]]

the FDIC to address a systemic liquidity crisis, repayment of the 
amount of any debt owed to a Federal reserve bank related to loans made 
through programs or facilities authorized under the Federal Reserve 
Act, 12 U.S.C. 221 et seq., as well as payment of unpaid unsecured 
federal income tax obligations of the covered financial company.
    Although the language of the Dodd-Frank Act does not elaborate on 
the intent of the phrase ``amounts owed to the United States,'' it is 
clear that it is not intended to include all amounts owed to the United 
States of any kind or nature. The fact that the Act specifically 
mentions the inclusion of some obligations,\3\ suggests that others 
must be excluded, and that it is not the intent of the Act to elevate 
liabilities for unsecured amounts due to government departments, 
agencies or instrumentalities arising in the covered financial 
company's ordinary course of business over other general or senior 
liabilities. Thus, the Final Rule includes a new paragraph (b) to 
establish the general rule that obligations incurred prior to the 
appointment of the receiver that are unrelated to the particular 
mandates of the Dodd-Frank Act will not be included among the class of 
claims described in Sec.  380.21(a)(3). The Final Rule expressly 
provides that unsecured obligations such as any unsecured portion of a 
Federal Home Loan Bank advance or payments due under guarantees from 
government sponsored entities such as the Federal National Mortgage 
Association or the Federal Home Loan Mortgage Corporation are not 
included among ``amounts owed to the United States.'' These exclusions 
were identified in the preamble to the Proposed Rule. Similarly, the 
Final Rule provides that unsecured unpaid filing or registration fees 
due to any federal agency would not be classified as ``amounts owed to 
the United States'' because they are unrelated to the mandates of the 
Dodd-Frank Act. These unsecured amounts would be included among the 
priority class otherwise applicable to such claims under Sec.  
380.21(a)(7).
---------------------------------------------------------------------------

    \3\ For example, section 204(d)(4) (funding for orderly 
liquidation), section 210(c)(6)(C) (certain advances from the SIPC 
Fund), and section 1101(a)(6)(E) (net realized losses on certain 
loans by a Federal reserve bank) all are specifically designated as 
receiving the priority for ``amounts owed to the United States.''
---------------------------------------------------------------------------

    New paragraph (a)(5) in Sec.  380.23 was added to clarify that 
government departments, agencies, and instrumentalities may, for 
avoidance of doubt, expressly designate amounts advanced as amounts 
intended to be included as amounts owed to the United States for the 
purpose of the priorities established in Sec.  380.21. Such designation 
would be used in the case of advances to a financial company to avoid 
or mitigate adverse effects on the financial stability of the United 
States or to liquidate a covered financial company.\4\ Any such 
designation would be in writing by the appropriate department, agency 
or instrumentality in a form acceptable to the FDIC.
---------------------------------------------------------------------------

    \4\ Although not expressly stated in this rule, amounts paid to 
customers of a covered broker dealer or to the Securities Investors 
Protection Corporation (SIPC) pursuant to section 205(f) are 
entitled to the same priority as amounts owed to the United States 
pursuant to section 210(b)(6). These issues will be addressed in a 
joint rulemaking with the SEC as required by section 205(h) of the 
Act.
---------------------------------------------------------------------------

    In addition, some commenters requested clarification that the Final 
Rule does not affect the rights of secured creditors. No change to the 
rule is necessary to clarify that point. The priorities established 
under section 210(b) of the Act relate only to unsecured claims and do 
not affect the rights of secured creditors, which are addressed in 
Sec. Sec.  380.50-380.53 of the Final Rule. To underscore this point, 
the reference to ``secured or unsecured'' amounts advanced under 
section 204(d) of the Act in Sec.  380.23(a)(1) of the Proposed Rule 
has been deleted in the Final Rule. Although the text of section 204(d) 
of the Act refers both to the priorities under section 210(b) and to 
taking liens to secure amounts advanced, it is a clearer, more 
consistent approach to treat all secured claims under the rules 
applicable to such claims and not under the priorities applicable to 
unsecured claims.
    Finally, some commenters expressed concern that the definition of 
``amounts owed to the United States'' may have the effect of increasing 
the amount of risk-based assessments that may be charged by the FDIC 
under section 210(o)(1)(B) of the Dodd-Frank Act. That provision 
authorizes and directs the FDIC to impose risk-based assessments on 
eligible financial companies ``if such assessments are necessary to pay 
in full the obligations issued by the [FDIC] to the Secretary [of the 
U.S. Treasury] under [Title II] within 60 months of the date of 
issuance of such obligations.'' The priority of payments applied by the 
receiver in the liquidation of the assets of the covered financial 
company is independent of the assessments imposed by FDIC in its 
corporate capacity in exercising its authority under section 210(o) of 
the Act. While only the obligations that are expressly included in 
section 210(a)(1)(B) of the Act are entitled to the benefit of the 
assessments, this does not constitute a preferential payment to a 
similarly situated creditor because it is imposed pursuant to a 
statutory requirement and cannot be subject to clawback under section 
210(o)(1)(D)(i).
    Paragraph (c) of Sec.  380.23 is unchanged. It acknowledges that 
the United States may subordinate its right to repayment behind any 
class of creditors by express written consent, provided that in any 
event all amounts due to the United States must be paid prior to any 
payment to equity holders of the covered financial company. Absent such 
express written subordination, all amounts owed to the United States 
will be paid at the priority under Sec.  380.21(a)(3), regardless of 
whether they are characterized as debt or equity on the books of the 
covered financial company.
    Claims for loss of setoff rights. Section 380.24 of the Final Rule 
addresses the claims of creditors who have lost a right of setoff due 
to the exercise of the receiver's right to sell or transfer assets of 
the covered financial company free and clear in a manner consistent 
with the express provisions of the Act. Any claim for the loss of 
setoff rights is given a priority above other general unsecured 
creditors but below administrative claims, amounts owed to the United 
States and certain employee-related claims.
    Several comments to Sec.  380.24 pointed out that the treatment of 
setoff under the Proposed Rule is different from the practice in 
bankruptcy and took issue with the statement in the preamble to the 
Proposed Rule that treatment of setoff claims under the Dodd-Frank Act 
``should normally provide value to setoff claimants equivalent to the 
value of setoff under the Bankruptcy Code.'' These commenters agreed 
with the statement in the preamble that in bankruptcy setoff rights are 
functionally equivalent to a secured claim and pointed out that this is 
a significantly higher place in the preference scheme than the super-
priority general unsecured creditor status that claims arising out of 
loss of setoff rights are granted under the Dodd-Frank Act. In context, 
the quoted sentence points out that it is anticipated that in most 
cases there will be sufficient funds to pay creditors with claims 
arising out of loss of setoff rights in a Title II orderly liquidation, 
Dodd-Frank orderly resolution, not that the outcome is certain to be 
identical under either priority scheme. The Dodd-Frank Act provides 
that a creditor who has lost a right of setoff due to the exercise of 
the receiver's right to sell or transfer assets of the covered 
financial company free

[[Page 41634]]

and clear of the claims of third parties pursuant to section 
210(a)(12)(F) is entitled to a claim senior to all unsecured 
liabilities other than those described in section 210(b)(A)-(D) of the 
Act (i.e., immediately behind the class of general unsecured creditors 
and senior liabilities described in Sec.  380.21(a)(7)). The language 
of the Proposed Rule respected this clear expression of intent by the 
legislature, and no change to this language is made in the Final Rule 
with respect to the priority accorded to claims arising from loss of 
setoff rights.
    Commenters also sought clarification that Sec.  380.24 does not 
affect the contractual rights of netting with respect to qualified 
financial contracts that are protected under the Dodd-Frank Act. 
Section 210(c)(8) of the Act provides that qualified financial 
contracts are exempt from provisions of the Act limiting any right to 
offset in certain circumstances. Accordingly, a new paragraph (c) was 
added to Sec.  380.24 in the Final Rule to clarify that the provisions 
of this section are not intended to disturb such rights with respect to 
qualified financial contracts. If a qualified financial contract is 
subject to a master agreement, such master agreement will be treated as 
a single agreement as provided in section 210(c)(8)(D)(viii).
    Post-insolvency interest. Section 380.25 of the Final Rule 
establishes a post-insolvency interest rate, as required by section 
210(a)(7)(D) of the Dodd-Frank Act. That rate is based upon the coupon 
equivalent yield of the average discount rate set on the three-month 
U.S. Treasury bill, which is consistent with the post-insolvency 
interest rate applied to claims under section 11(d)(10)(C) of the 
Federal Deposit Insurance Act (the ``FDI Act''), 12 U.S.C. 
1821(d)(10)(C). (See 12 CFR 360.7.)
    Six comments pertaining to Sec.  380.25 of the Proposed Rule were 
received. Commenters variously suggested the use of the federal rate as 
is the practice in some bankruptcy cases, or the contract rate where 
one is specified, or any specified contract rate other than a default 
rate. Two commenters agreed that the use of a post-insolvency interest 
rate based on the average discount rate for the three-month Treasury 
bill is appropriate, at least where no contract rate is provided. One 
commenter pointed out that given the fact that post-insolvency interest 
is paid only after all creditors have been fully paid, the provision 
will rarely, as practical matter, materially affect creditors. As was 
recognized by some commenters, there is no express rule for treatment 
of post-insolvency interest under the Bankruptcy Code and applicable 
case law is not uniform. The Final Rule adopts the language of the 
Proposed Rule with respect to the method of calculating the post-
insolvency interest rate for unsecured claims without change, in favor 
of the consistency and ease of administration of the rate that has been 
applied by the FDIC with respect to claims under the FDI Act.
    Bridge financial companies. Section 380.26 was included in the 
Proposed Rule during the early stages of the rulemaking process because 
of the importance of addressing two issues that were the subject of 
several requests for clarification. First, it made clear that any 
contract or agreement purchased and assumed or entered into de novo by 
the bridge financial company becomes the obligation of the bridge 
financial company and that the bridge financial company shall enforce 
and observe the terms of any such contract or agreement. Secondly, it 
stated that any remaining assets or proceeds of the bridge financial 
company after payment of all administrative expenses and other claims 
shall be distributed to the receiver of the related covered financial 
company for the benefit of the creditors of that covered financial 
company.
    Commenters have continued to call for additional clarifications 
with respect to the treatment of bridge financial companies and their 
assets and liabilities. A more expansive treatment of this topic is 
beyond the scope of the Final Rule and will be the topic of a future 
rulemaking. Accordingly, other than two minor changes to the language 
intended simply to clarify the text, the Final Rule is unchanged from 
the Proposed Rule. The two minor changes are the use of the indefinite 
``any'' in lieu of the definite article ``a'' before ``contract or 
agreement giving rise to such asset or liability'' in paragraph (a), 
and the use of the defined term ``allowed claim'' in place of the word 
``claim'' in the same paragraph. No substantive changes to the Final 
Rule are intended by these corrections.
    Similarly situated creditors. Section 380.27 contains the provision 
found at Sec.  380.2 of the IFR addressing the treatment of similarly 
situated creditors. This provision makes clear that certain categories 
of creditors, including creditors holding unsecured debt with a term of 
more than 360 days, will not be given additional payments compared to 
other general trade creditors or any general or senior liability of the 
covered financial company nor will exceptions be made for favorable 
treatment of holders of subordinated debt, shareholders or other equity 
holders. Although some commenters have supported this rule, others have 
consistently objected to it through two rounds of comments. These 
comments reiterated the objections to this rule that were considered in 
implementing the IFR. Accordingly, the Final Rule contains no change to 
the language of the IFR now set forth in Sec.  380.27(a) and (b). These 
provisions are clearly consistent with the mandate of the Dodd-Frank 
Act expressed in sections 204(a) and 210(a)(1)(M) that the orderly 
resolution of covered financial companies is to be undertaken in a 
manner that ensures that the creditors and shareholders of a covered 
financial company will bear the losses of the covered financial 
company.
    Paragraph (c) of Sec.  380.2 of the IFR has been deleted in its 
entirety from Sec.  380.27 of the Final Rule, and is moved to Sec.  
380.50(b), as the subject of the treatment of secured creditors is 
addressed in Sec. Sec.  380.50-380.53.
    Although not impacting the text of the Final Rule, one new topic 
was addressed in a joint comment letter from two trade associations 
representing the banking and securities industries. This letter 
suggested an alternative approach for the orderly resolution of 
systemically important financial institutions that would provide for 
the exchange of certain subordinated debt for equity. The joint working 
paper prepared by these trade associations describes a recapitalization 
plan that the FDIC could implement following its appointment as 
receiver of a covered financial company via the transfer of the viable 
assets and businesses of a failed institution into a bridge financial 
company established after failure and a conversion of certain creditors 
of the failed institution into equity holders in the bridge financial 
company. In the view of the commenters, this approach would neither be 
considered a traditional ``bail-in'' recapitalization nor contingent 
capital, nor would it require a taxpayer-funded bailout. The commenters 
suggested that this approach might also facilitate the discussion of 
the resolution of a failed cross-border financial institution. No 
change to the Final Rule is made in connection with this proposal, as 
any exchange of debt for equity in the bridge financial company would 
be accomplished pro rata and in accordance with the priorities 
established under Sec.  380.21. Furthermore, although this approach may 
prove to be useful in conducting an orderly liquidation of a covered 
financial company in certain circumstances, comment on this particular 
approach is outside the scope of the Final Rule. This letter may,

[[Page 41635]]

however, be seen as an example of the value generated by constructive 
dialogue between the private financial markets and the federal 
government on topics such as this one.
3. Subpart C--Receivership Administrative Claims Process
    Subpart C of the Final Rule adopts and interprets where necessary 
the administrative claims determination process provided for in the 
Act.
    Receivership administrative claims process. Section 380.30 of the 
Final Rule reflects the authorization under the Dodd-Frank Act that the 
FDIC as receiver of the covered financial company shall determine all 
claims in accordance with the statutory procedures set forth in 
sections 210(a)(2)-(5) of the Act and with the regulations promulgated 
by the FDIC.
    Scope & Applicability. Section 380.31 of the Final Rule addresses 
the scope of the claims process. It clarifies that the claims process 
will not apply to a bridge financial company or to any extension of 
credit from a Federal reserve bank or the FDIC to a covered financial 
company. Commenters sought clarification that the claims process does 
not affect the contractual rights of netting and setoff with respect to 
qualified financial contracts that are protected under the Dodd-Frank 
Act. This concern is addressed in Sec.  380.51(g) of the Final Rule, 
which excepts qualified financial contracts from the requirement to 
seek the consent of the receiver before exercising contractual rights 
against property of the covered financial company. If a party to a 
qualified financial contract has an unsecured claim after terminating 
the contract and liquidating any collateral, such claim would be 
subject to the claims process.
    The definitions in Sec.  380.31 of the Proposed Rule have been 
moved into the general definitions of Sec.  380.1 of the Final Rule.
    Claims bar date. Section 380.32 of the Final Rule follows section 
210(a)(2)(B) of the Dodd-Frank Act authorizing the receiver to 
establish a ``claims bar date'' by which creditors of the covered 
financial company are to file their claims with the receiver. The 
claims bar date must be identified in both the published notices and 
the mailed notices required by the statutory procedures. Section 380.32 
clarifies that the claims bar date is calculated from the date of the 
first published notice to creditors, not from the date of appointment 
of the receiver.
    Notice requirements. Section 380.33 of the Final Rule follows the 
statutory procedures for notice to creditors of the covered financial 
company. As required by the statute, upon its appointment as receiver 
of a covered financial company, the FDIC as receiver will promptly 
publish a notice; subsequently, the receiver will publish a second and 
third notice one month and two months, respectively, after the first 
notice is published. The notices must inform creditors to present their 
claims to the receiver, together with proof, by no later than the 
claims bar date. The Final Rule provides that the notices shall be 
published in one or more newspapers of general circulation in the 
market where the covered financial company had its principal place of 
business. In recognition of the public's growing reliance on 
communication using the Internet as well as the prevalence of online 
commerce, the FDIC may also post the notice on its public website. 
Several comments suggested that notices be published in certain 
specific financial news media both domestically and abroad. The Final 
Rule does not adopt this suggestion; the FDIC will provide notices in 
specific media that will be appropriate under the particular 
circumstances.
    Discovered claimants. In addition to publishing the notice 
described in Sec.  380.33(a), the receiver also must mail a notice that 
is similar to the publication notice to each creditor appearing on the 
books and records of the covered financial company. The mailed notice 
will be sent at the same time as the first publication notice to the 
last address of the creditor appearing on the books or in any claim 
filed by a claimant. The Final Rule supplements this procedure by 
providing that after sending the initial mailed notice, the receiver 
may communicate by electronic media (such as email) with any claimant 
who agrees to such means of communication. This provision will 
facilitate the filing of claims electronically if a claimant chooses to 
do so.
    Section 380.33(d) of the Final Rule clarifies the treatment of 
creditors that are discovered after the initial publication and mailing 
has taken place. The FDIC as receiver will mail a notice similar to the 
publication notice to any claimant not appearing on the books and 
records of the covered financial company no later than 30 days after 
the date that the name and address of such claimant is discovered. If 
the name and address of the claimant is discovered prior to the claims 
bar date, such claimant will be required to file the claim by the 
claims bar date. There may be instances when notice to the discovered 
claimant is sent too close before the claims bar date to reasonably 
permit timely filing, however. In such a case, the claimant may invoke 
the statutory exception for late-filed claims set forth in section 
210(a)(3)(C)(ii) of the Dodd-Frank Act in order to have its claim 
considered by the receiver.
    Because section 210(a)(2)(C) of the Dodd-Frank Act does not 
distinguish between claimants discovered before and claimants 
discovered after the claims bar date, the statute literally would 
require the receiver to mail a notice of the claims bar date to a 
claimant discovered after such date. However, such a discovered 
claimant cannot file a claim timely if the claims bar date has already 
passed. Therefore, the Final Rule provides that a claimant discovered 
after the claims bar date will be given 90 days to file a claim. This 
time frame is consistent with the time frame set forth in section 
210(a)(2)(B) of the Dodd-Frank Act, which provides for the claims bar 
date to be not less than 90 days after the first publication of the 
notice to creditors. The receiver will disallow any claim filed by such 
a ``late-discovered'' claimant after the 90-day period, however.
    Some comments suggested that claimants discovered within 30 days 
before the claims bar date should not be required to submit a claim by 
the claims bar date but given additional time to file a claim. This 
suggestion is unnecessary because the Dodd-Frank Act's late-filed claim 
exception (see section 210(a)(3)(C)(ii)) encompasses claimants who are 
notified before the claims bar date but do not have sufficient time to 
prepare and file a claim before such date. In such a case, the claimant 
must show that it did not have notice of the appointment of the 
receiver in time to file by the claims bar date.
    Procedures for filing claims. Section 380.34 of the Final Rule 
provides guidance to potential claimants regarding certain aspects of 
filing a claim. The FDIC as receiver has determined to provide 
creditors with instructions on how to file a claim in several different 
formats. These will include providing FDIC contact information in the 
publication notice, providing a proof of claim form and filing 
instructions with the mailed notice, and posting a link to the FDIC's 
non-deposit claims processing web site. A claim will be deemed filed 
with the receiver as of the date of postmark if the claim is mailed or 
as of the date of successful transmission if the claim is submitted by 
facsimile or electronically.
    This section also confirms that each individual claimant must 
submit its own claim and that no single party may assert a claim on 
behalf of a class of litigants. On the other hand, a trustee named or 
appointed in connection with

[[Page 41636]]

a structured financial transaction or securitization is permitted to 
file a claim on behalf of the investors as a group because in such a 
case the trustee legally owns the claim. The suggestion that an agent 
bank in a syndicated loan arrangement be permitted to file a claim on 
behalf of the lender group was rejected because each lender in a 
syndication arrangement has contractual privity with the borrower and 
therefore should be required to file a claim on its own behalf. The 
Final Rule follows the statutory provision that the filing of a claim 
constitutes the commencement of an action for purposes of any 
applicable statute of limitations and does not prejudice a claimant's 
right to continue any legal action filed prior to the date of the 
receiver's appointment. The Final Rule also clarifies that the claimant 
cannot continue its legal action until after the receiver determines 
the claim.
    Determination of claims. Section 380.35 of the Final Rule follows 
the requirements of section 210(a)(3) of the Dodd-Frank Act authorizing 
the receiver to allow and disallow claims. The FDIC has added a 
clarifying clause in the Final Rule to be consistent with section 
210(a)(3)(D)(iii) of the Act, which excludes any extension of credit 
from a Federal reserve bank or the FDIC to a covered financial company.
    Late-filed claim exception. Section 210(a)(3)(C) of the Dodd-Frank 
Act instructs the receiver to disallow any claim that is filed after 
the claims bar date, subject to an exception for certain late-filed 
claims. Under this exception, a claim filed after the claims bar date 
may be considered by the receiver if (i) the claimant did not have 
notice of the appointment of the receiver in time to file by the claims 
bar date and (ii) the claim is filed in time to permit payment by the 
receiver. As in the Proposed Rule, Sec.  380.35(b)(2) of the Final Rule 
incorporates the statutory exception.
    Some comments suggested that an ``excusable neglect'' exception to 
late-filed claims similar to the Bankruptcy Code should be used. This 
suggestion is inapposite because, as discussed, the Dodd-Frank Act's 
late-filed claim exception encompasses claimants who are notified 
before the claims bar date but do not have sufficient time to prepare 
and file a claim before such date. In such a case, the claimant may 
show that it did not have notice of the appointment of the receiver in 
time to file by the claims bar date. Congress intended for late-filed 
claims to be disallowed unless the claimant qualifies for the late-
filed claim exception. (See section 210(a)(3)(C) of the Act.)
    One comment noted that under section 726(a) of the Bankruptcy Code, 
late-filed claims are paid ahead of claims for post-petition interest 
and distributions to the holders of equity interests. It was suggested 
that a similar treatment be adopted for the payment of late-filed 
claims in covered financial company receiverships. This suggestion 
cannot be adopted because Congress has established the order of 
priority of claims in the Dodd-Frank Act and the FDIC has not been 
given the authority to alter that priority scheme.
    Section 380.35(b)(2)(i) has been revised in the Final Rule in order 
to accommodate specifically claims based on an act or omission of the 
receiver, such as a repudiation or breach of a contract, that occurs 
after the claims bar date. Section 210(a)(9)(D)(ii) of the Dodd-Frank 
Act deprives a court of jurisdiction over any claim relating to any act 
or omission of the FDIC as receiver unless the claimant first complies 
with the receivership administrative claims process. A party to a 
contract that is repudiated or breached by the receiver after the 
claims bar date, however, would be unable to timely file a claim and 
would not technically qualify for the statutory late-filed claim 
exception because it would be unable to show that it did not have 
notice of the appointment of the receiver prior to the claims bar date; 
accordingly, this party could neither comply with the claims process 
nor have a court determine its claim. In order to provide relief to a 
party in this situation, the Final Rule permits the receiver to 
consider a claim filed after the claims bar date if the claim is based 
on an act or omission of the receiver that occurs after the claims bar 
date. In the Proposed Rule, the late-filed claim exception had been 
expanded to encompass any claim that did not accrue until after the 
claims bar date. After consideration, it was determined that this 
provision would have been too broad because it could be read to 
encompass contingent claims which are addressed separately in Sec.  
380.39.
    Decision period. Section 380.36 of the Final Rule provides that 
under the statute the receiver must notify a claimant of its decision 
to allow or disallow a claim prior to the 180th day after the claim is 
filed. The Final Rule also provides that the claimant and the receiver 
may extend the claims determination period by mutual agreement in 
writing. In accordance with the statute, the receiver must notify the 
claimant regarding its determination of the claim prior to the end of 
the extended claims determination period.
    Notification of determination. As required by section 
210(a)(3)(A)(i) of the Dodd-Frank Act, Sec.  380.37 of the Final Rule 
provides that the receiver will notify the claimant that the claim is 
allowed or disallowed. The notification will be mailed to the claimant 
as set forth in section 210(a)(3)(A)(iii) of the Act, unless the 
claimant has filed its claim electronically, in which case the receiver 
may use electronic media for the notification. If the receiver 
disallows the claim, the notification will provide the reason(s) for 
the disallowance and also advise the claimant of the procedure for 
filing or continuing an action in court.
    The Final Rule reiterates the provisions of section 
210(a)(3)(A)(ii) of the Dodd-Frank Act that if the receiver fails to 
notify the claimant of any disallowance within 180 days after the claim 
is filed, or the end of any extension agreed to by the claimant, the 
claim will be deemed to be disallowed. The claimant may then file or 
continue an action in court as provided in section 210(a)(4) of the 
Act. The Final Rule has been revised to cite the statutory authority 
for this provision. Comments on this aspect of the rule suggested that 
after 180 days the claim should be deemed to be allowed instead of 
disallowed. Other comments suggested that the receiver should provide 
affirmative notification of the disallowance of a claim at the end of 
the claims determination period. These suggestions cannot be adopted 
because they are contrary to the provisions of the Act. In section 
210(a)(3)(D)(ii) of the Act, Congress adopted the approach that the 
failure to notify the claimant of a disallowance within 180 days after 
the claim is filed is deemed to be a disallowance of the claim in order 
to impose a clear and reasonable time limit on the receiver's 
consideration of claims. Without such a time limit, the claims 
procedure would be inadequate and not subject to exhaustion as a 
prerequisite for judicial determination, which would be contrary to the 
intent of Congress. Once the claimant enters the receivership claims 
process by filing a claim, the claimant is on notice of the statutory 
provisions governing that process and will bear the responsibility to 
monitor the claims determination period in order to timely file or 
continue a lawsuit with respect to the claim.
    Procedures for seeking judicial review of disallowed claim. Section 
380.38 of the Final Rule implements the statutory procedures for a 
claimant to seek a judicial determination of its claim after the claim 
has been disallowed or partially disallowed by the FDIC as receiver. 
Consistent with section 210(a)(4) of the Dodd-Frank Act, a claimant may 
(a) file a lawsuit on its disallowed claim in the district court

[[Page 41637]]

where the covered financial company's principal place of business is 
located, or (b) continue a previously pending lawsuit.
    The Final Rule clarifies that if the claimant continues a 
previously filed action, the claimant may continue such action in the 
court in which the case was pending before the appointment of the 
receiver, resolving any uncertainty whether the action should be 
``continued'' in the district court where the covered financial 
company's principal place of business is located. (In the case of an 
action pending in state court, the receiver would have the authority to 
remove the action to federal court if it chose to do so.) Some comments 
suggested that the FDIC should designate the district court where the 
covered financial company's principal office is located as the 
exclusive forum for judicial review of claims. The FDIC must decline to 
adopt this suggestion; as discussed, the FDIC must follow the 
established statutory scheme and cannot alter court jurisdiction or 
venue when these issues have been decided by Congress.
    As provided by statute, Sec.  308.38(c) of the Final Rule provides 
that the claimant has 60 days to commence or continue an action 
regarding the disallowed claim. The time period for commencing or 
continuing a lawsuit would be calculated, as applicable, from the date 
of the notification of disallowance, the end of the 180-day claims 
determination date, or the end of the extended determination date, if 
any. If a claimant fails to file suit on a claim (or continue a pre-
receivership lawsuit) before the end of the 60-day period, the claimant 
will have no further rights or remedies with respect to the claim. This 
time period is not subject to a tolling agreement between the FDIC and 
the claimant. The Final Rule affirms that exhaustion of the 
administrative claims process is a jurisdictional prerequisite for any 
court to adjudicate a claim against a covered financial company or the 
receiver, as provided in section 210(a)(9)(D) of the Dodd-Frank Act.
    Provability of claims based on contingent obligations. Section 
380.39 of the Final Rule addresses contingent claims, which was 
previously the subject of Sec.  380.4 of the IFR. The holder of a 
contingent claim against the covered financial company will be required 
to file its claim by the claims bar date. Section 380.39(a) provides 
that the receiver will not disallow a claim solely because the claim is 
based on a contingent obligation. Instead, the receiver will estimate 
the value of a contingent claim as of the date of the appointment of 
the receiver. If the receiver repudiates a contingent obligation, 
repudiation damages shall be no less than the estimated value of the 
claim as of the date of the receiver's appointment. Comments suggested 
that any estimation of the value of a contingent claim be delayed until 
just prior to a final distribution by the receiver. This approach would 
be inconsistent with the statute because section 210(a)(3)(A) of the 
Dodd-Frank Act instructs the receiver to determine whether to allow a 
claim no later than 180 days after the claim is filed, subject to any 
extension agreed to by the claimant. Therefore, in accordance with the 
statute, the receiver will estimate the value of a contingent claim 
before the end of either the 180-day period beginning on the date the 
claim is filed or any mutually agreed-upon extension of this time 
period. Unless the contingency becomes absolute and fixed prior to the 
receiver's determination of the estimated value, the estimated value 
will be recognized as the allowed amount of the claim. The estimated 
value of the contingent claim will represent the receiver's 
determination of the claim for purposes of the exhaustion of 
administrative remedies by the claimant prior to seeking a judicial 
determination of the claim.
    Secured claims. Because section 210(b)(5) of the Dodd-Frank Act 
provides that section 210 of the Dodd-Frank Act, which sets forth the 
powers and duties of the FDIC acting as receiver of a covered financial 
company, ``shall not affect secured claims or security entitlements in 
respect of assets or property held by the covered financial company,'' 
the Final Rule has been revised to more effectively safeguard the 
rights of secured claimants. The approach taken in the Final Rule 
should provide more legal certainty for the secured lenders of a 
systemically important financial institution.
    A number of comments regarding the Proposed Rule expressed concerns 
about the valuation of property used as collateral, the ability of a 
secured claimant to exercise its rights against its collateral or to 
obtain adequate protection of its interest and the need for expedited 
judicial review of actions by the receiver affecting a secured 
claimant. The Final Rule contains several revised provisions to address 
those concerns, satisfy the statutory directive not to affect secured 
claims and harmonize with the relevant provisions of the Bankruptcy 
Code. With respect to judicial review, however, harmonization with the 
Bankruptcy Code is not possible. In contrast to a case under the 
Bankruptcy Code, in which a debtor's or trustee's actions are subject 
to prior approval by a court, a receivership of a covered financial 
company is an administrative process conducted by the FDIC as receiver. 
Under the Act, court jurisdiction is limited and subject to exhaustion 
of the receivership claims process. A claimant may have its day in 
court but only after the receiver has first made a determination 
regarding the claim or the claimant's rights.
    Determination of secured claims. Section 380.50 has been revised in 
the Final Rule to model Bankruptcy Code section 506. Section 380.50(a) 
affirms that under section 210(a)(3)(D)(ii) of the Dodd-Frank Act, a 
claim is secured to the extent of the value of the property securing 
the claim by incorporating the principle that a claim that is secured 
by property of the covered financial company may be treated as an 
unsecured claim to the extent that the claim exceeds the fair market 
value of the property. Section 380.50(b) provides that the fair market 
value of such property shall be determined in light of the purpose of 
the valuation and of the proposed disposition or use of the property 
and at the time of the proposed disposition or use. To illustrate, if a 
secured claimant requests the receiver's consent to obtain possession 
of or exercise control over property that secures the claim, the 
receiver would value the property at the time of the request. If the 
receiver proposes to sell property that is subject to a security 
interest, the property will be valued at the time of the sale. By not 
specifying a particular point in time (such as the date of appointment 
of the receiver) when property will be valued, the problem of potential 
windfalls to either the secured claimant or the receiver should be 
avoided. The approach taken should provide more accurate valuations, 
protect the rights of secured creditors, and provide flexibility for 
the receiver.
    Recovery of fees, etc. Section 380.50(c) provides that the receiver 
may recover from property subject to a security interest any reasonable 
and necessary costs and expenses of preserving or disposing of the 
property to the extent the claimant is benefited thereby. When provided 
for by agreement or State law, claims for interest, fees, costs, and 
charges are secured claims to the extent that the property has 
sufficient value to cover them. Section 380.50(d) recognizes that if 
the value of property subject to a security interest is greater than 
the amount of the claim, the claimant will be allowed, to the extent of 
the value of the property, interest and any reasonable fees, costs, or 
charges

[[Page 41638]]

provided for under the agreement or State statute under which the claim 
arose.
    Consent to certain actions. Section 380.51 of the Final Rule 
addresses relief for a secured claimant from the effect of section 
210(c)(13)(C) of the Dodd-Frank Act. Section 210(c)(13)(C) would delay 
any claimant holding a security interest or other lien against any 
property of a covered financial company from exercising its rights to 
obtain possession or control of the property for a period of 90 days 
beginning on the date of the appointment of the receiver for the 
company, unless the receiver consents. Secured claims that are not 
transferred to a bridge financial company or other acquiring entity but 
are retained in the receivership can be resolved either by the receiver 
selling the collateral and remitting the proceeds to the secured 
claimant up to the amount of the claim, or by the claimant liquidating 
any collateral itself. In either case, the claimant may file a claim 
with the receiver for any deficiency that exists after the value of the 
collateral is applied to the claim. The claimant may obtain judicial 
review if the receiver disallows the claim in whole or in part. 
Accordingly, Sec.  380.51 has been revised in the Final Rule to 
facilitate this process by implementing a procedure for a secured 
claimant to obtain the receiver's consent to the claimant's taking 
possession or control of collateral. Under this procedure, a secured 
claimant may request the consent of the receiver for relief. The 
request for consent must be in writing and state the amount of the 
claim, a description of the property that secures the claim, the value 
of the property, the proposed disposition of the property by the 
claimant, including the expected date of such disposition, along with 
supporting documentation for each item, including an appraisal or other 
evidence establishing the value of the property. The receiver will 
grant its consent if the receiver determines that it will not use, sell 
or lease the property and therefore will not need to provide adequate 
protection of the claimant's interest. (Section 380.52 of the Final 
Rule describes the different ways that adequate protection may be 
provided.) If the receiver has not acted on the request for consent 
within 30 days after the request is made, consent will be deemed to 
have been granted. Section 380.51(d) affirms that regardless of whether 
the receiver has decided to withhold consent, the stay of section 
210(c)(13)(C) will terminate 90 days after the appointment of the FDIC 
as receiver. The provisions of Sec.  380.51 shall not apply to a 
director or officer liability contract, a financial institution bond, 
the rights of parties to qualified financial contracts or netting 
contracts, any extension of credit from a Federal reserve bank or the 
FDIC, or in a case where the receiver repudiates a secured contract.
    The other provision of the Dodd-Frank Act that may affect secured 
claimants is section 210(q)(1)(B), pursuant to which property of a 
covered financial company in the hands of the FDIC as receiver is not 
subject to levy, attachment, garnishment, foreclosure, or sale without 
the consent of the receiver. While this statutory provision was 
addressed in the consent provision that appeared in the Proposed Rule, 
the FDIC believes that it would be more appropriate to address this 
provision with a Statement of Policy that would be issued in the future 
by the FDIC. This approach was taken by the FDIC to address the 
comparable provision in the FDI Act, 12 U.S.C. 1825(b).
    Adequate protection. Section 380.52 of the Final Rule addresses 
adequate protection for the interest of a secured claimant if the 
receiver decides to use or sell property subject to a security 
interest. If the receiver determines that it will use, sell, or lease 
such property, the receiver must provide adequate protection by (1) 
Making a cash payment or periodic cash payments to the claimant if the 
sale, use, or lease of the property or the grant of a security interest 
or other lien against the property by the receiver results in a 
decrease in the value of such claimant's security interest in such 
property; (2) providing to the claimant an additional or replacement 
lien to the extent that the sale, use, or lease of the property or the 
grant of a security interest against the property by the receiver 
results in a decrease in the value of the claimant's security interest 
in the property; or (3) providing any other relief that will result in 
the realization by the claimant of the indubitable equivalent of the 
claimant's security interest in such property. Adequate protection of 
the claimant's security interest will be presumed if the value of the 
property is not depreciating or is sufficiently greater than the amount 
of the claim so that the claimant's security interest is not impaired.
    The text of Sec.  380.53 of the Proposed Rule, which reiterated 
section 210(a)(5) of the Dodd-Frank Act concerning an expedited 
procedure for the determination of a claim of a secured creditor 
alleging irreparable harm if the ordinary claims procedure was 
followed, has been deleted from the Final Rule as unnecessary for 
purposes of the regulation. The expedited procedure is fully set forth 
in section 210(a)(5) of the Act.
    Repudiation of secured contract. Section 380.53 of the Final Rule 
contains the text of Sec.  380.52 of the Proposed Rule. This section 
confirms that under section 210(c)(12)(A) of the Dodd-Frank Act, the 
authority of the receiver to repudiate a contract of the covered 
financial company will not have the effect of avoiding any legally 
enforceable and perfected security interests in the property (except 
those avoidable as fraudulent or preferential transfers under section 
210(a)(11)). This section also provides that after repudiation the 
security interest would no longer secure the contract but would instead 
secure any claim for repudiation damages. Accordingly, the receiver may 
consent to the claimant's liquidation of the collateral and application 
of the proceeds to the claim for repudiation damages. Comments 
supported the inclusion of this provision in the Final Rule.
    The text of Sec.  380.54 of the Proposed Rule, which concerned the 
sale of secured property by the receiver, has been deleted from the 
Final Rule. This subject is addressed in Sec.  380.52 of the Final 
Rule.
    The text of Sec.  380.55 of the Proposed Rule, which provided that 
the receiver may redeem property of the covered financial company from 
a lien held by a secured creditor by paying the creditor in cash the 
fair market value of the property up to the value of its lien, has been 
deleted as unnecessary. The receiver already has the inherent ability 
to pay a secured claim anytime because such claims are excluded from 
the statutory order of priority for the payment of unsecured claims.

IV. Regulatory Analysis and Procedure

A. Paperwork Reduction Act

    The Final Rule would not involve any new collections of information 
pursuant to the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). 
Consequently, no information has been submitted to the Office of 
Management and Budget for review.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
agency that is issuing a final rule to prepare and make available a 
regulatory flexibility analysis that describes the impact of the final 
rule on small entities. (5 U.S.C. 603(a)). The Regulatory Flexibility 
Act provides that an agency is not required to prepare and publish a 
regulatory flexibility analysis if the agency certifies

[[Page 41639]]

that the final rule will not have a significant economic impact on a 
substantial number of small entities. Pursuant to section 605(b) of the 
Regulatory Flexibility Act, the FDIC certifies that the Final Rule will 
not have a significant economic impact on a substantial number of small 
entities. The Final Rule will clarify rules and procedures for the 
liquidation of a nonviable systemically important financial company, 
which will provide internal guidance to FDIC personnel performing the 
liquidation of such a company and will address any uncertainty in the 
financial system as to how the orderly liquidation of such a company 
would operate. As such, the Final Rule will not have a significant 
economic impact on small entities.

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the Final 
Rule is not a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (SBREFA), (5 U.S.C. 801 et 
seq.) As required by the SBREFA, the FDIC will file the appropriate 
reports with Congress and the General Accounting Office so that the 
Final Rule may be reviewed.

D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the Final Rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

E. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471) requires the Federal banking agencies to use plain 
language in all proposed and final rules published after January 1, 
2000. The FDIC has sought to present the Final Rule in a simple and 
straightforward manner.

List of Subjects in 12 CFR Part 380

    Holding companies, Insurance companies.

    For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation amends part 380 of title 12 of the Code 
of Federal Regulations as follows:

PART 380--ORDERLY LIQUIDATION AUTHORITY

0
1. The authority citation for part 380 is revised to read as follows:

    Authority:  12 U.S.C. 5389; 12 U.S.C. 5390(s)(3); 12 U.S.C. 
5390(b)(1)(C); 12 U.S.C. 5390(a)(7)(D).


0
2. Sections 380.1 through 380.9 are designated under a new subpart A, 
and the heading for new subpart A is added to read as follows:

Subpart A--General and Miscellaneous Provisions

Sec.
380.1 Definitions.
380.2 [Reserved]
380.3 Treatment of personal service agreements.
380.4 [Reserved]
380.5 Treatment of covered financial companies that are subsidiaries 
of insurance companies.
380.6 Limitation on liens on assets of covered financial companies 
that are insurance companies or covered subsidiaries of insurance 
companies.
380.7 Recoupment of compensation from senior executives and 
directors.
380.8 [Reserved]
380.9 Treatment of fraudulent and preferential transfers.
380.10-380.19 [Reserved]

0
3. Revise Sec.  380.1 to read as follows:


Sec.  380.1  Definitions.

    For purposes of this part, the following terms are defined as 
follows:
    Allowed claim. The term ``allowed claim'' means a claim against the 
covered financial company or receiver that is allowed by the 
Corporation as receiver or upon which a final non-appealable judgment 
has been entered in favor of a claimant against a receivership by a 
court with jurisdiction to adjudicate the claim.
    Board of Governors. The term ``Board of Governors'' means the Board 
of Governors of the Federal Reserve System.
    Bridge financial company. The term ``bridge financial company'' 
means a new financial company organized by the Corporation in 
accordance with 12 U.S.C. 5390(h) for the purpose of resolving a 
covered financial company.
    Claim. The term ``claim'' means any right to payment from either 
the covered financial company or the Corporation as receiver, whether 
or not such right is reduced to judgment, liquidated, unliquidated, 
fixed, contingent, matured, unmatured, disputed, undisputed, legal, 
equitable, secured, or unsecured.
    Compensation. The term ``compensation'' means any direct or 
indirect financial remuneration received from the covered financial 
company, including, but not limited to, salary; bonuses; incentives; 
benefits; severance pay; deferred compensation; golden parachute 
benefits; benefits derived from an employment contract, or other 
compensation or benefit arrangement; perquisites; stock option plans; 
post-employment benefits; profits realized from a sale of securities in 
the covered financial company; or any cash or non-cash payments or 
benefits granted to or for the benefit of the senior executive or 
director.
    Corporation. The term ``Corporation'' means the Federal Deposit 
Insurance Corporation.
    Covered financial company. The term ``covered financial company'' 
means (a) a financial company for which a determination has been made 
under 12 U.S.C. 5383(b) and (b) does not include an insured depository 
institution.
    Covered subsidiary. The term ``covered subsidiary'' means a 
subsidiary of a covered financial company other than:
    (1) An insured depository institution;
    (2) An insurance company; or
    (3) A covered broker or dealer.
    Creditor. The term ``creditor'' means a person asserting a claim.
    Director. The term ``director'' means a member of the board of 
directors of a company or of a board or committee performing a similar 
function to a board of directors with authority to vote on matters 
before the board or committee.
    Dodd-Frank Act. The term ``Dodd-Frank Act'' shall mean the Dodd-
Frank Wall Street Reform and Consumer Protection Act, Public Law 111-
203, 12 U.S.C. 5301 et seq. (2010).
    Employee benefit plan. The term ``employee benefit plan'' has the 
meaning set forth in the Employee Retirement Income Security Act, 29 
U.S.C. 1002(3).
    Insurance company. The term ``insurance company'' means any entity 
that is:
    (1) Engaged in the business of insurance,
    (2) Subject to regulation by a State insurance regulator, and
    (3) Covered by a State law that is designed to specifically deal 
with the rehabilitation, liquidation or insolvency of an insurance 
company.
    Senior executive. The term ``senior executive'' means any person 
who participates or has authority to participate (other than in the 
capacity of a director) in major policymaking functions of the company, 
whether or not: The person has an official title; the title designates 
the officer an assistant; or the person is serving without salary or 
other compensation. The chairman of

[[Page 41640]]

the board, the president, every vice president, the secretary, and the 
treasurer or chief financial officer, general partner and manager of a 
company are considered senior executives, unless the person is 
excluded, by resolution of the board of directors, the bylaws, the 
operating agreement or the partnership agreement of the company, from 
participation (other than in the capacity of a director) in major 
policymaking functions of the company, and the person does not actually 
participate therein.


Sec.  380.2  [Removed and reserved]


0
4. Remove and reserve Sec.  380.2.
0
5. Revise Sec.  380.3 to read as follows:


Sec.  380.3  Treatment of personal service agreements.

    (a) For the purposes of this section, the term ``personal service 
agreement'' means a written agreement between an employee and a covered 
financial company or a bridge financial company setting forth the terms 
of employment. This term also includes an agreement between any group 
or class of employees and a covered financial company, or a bridge 
financial company, including, without limitation, a collective 
bargaining agreement.
    (b)(1) If before repudiation or disaffirmance of a personal service 
agreement, the Corporation as receiver of a covered financial company, 
or a bridge financial company accepts performance of services rendered 
under such agreement, then:
    (i) The terms and conditions of such agreement shall apply to the 
performance of such services; and
    (ii) Any payments for the services accepted by the Corporation as 
receiver shall be treated as an administrative expense of the receiver.
    (2) If a bridge financial company accepts performance of services 
rendered under such agreement, then the terms and conditions of such 
agreement shall apply to the performance of such services.
    (c) No party acquiring a covered financial company or any 
operational unit, subsidiary or assets thereof from the Corporation as 
receiver or from any bridge financial company shall be bound by a 
personal service agreement unless the acquiring party expressly assumes 
the personal service agreement.
    (d) The acceptance by the Corporation as receiver for a covered 
financial company, or by any bridge financial company or the 
Corporation as receiver for a bridge financial company of services 
subject to a personal service agreement shall not limit or impair the 
authority of the receiver to disaffirm or repudiate any personal 
service agreement in the manner provided for the disaffirmance or 
repudiation of any agreement under 12 U.S.C. 5390(c).
    (e) Paragraph (b) of this section shall not apply to any personal 
service agreement with any senior executive or director of the covered 
financial company or covered subsidiary, nor shall it in any way limit 
or impair the ability of the receiver to recover compensation from any 
senior executive or director of a covered financial company under 12 
U.S.C. 5390 and the regulations promulgated thereunder.


Sec.  380.4  [Removed and reserved]


0
6. Remove and reserve Sec.  380.4.
0
7. Revise Sec.  380.5 to read as follows:


Sec.  380.5  Treatment of covered financial companies that are 
subsidiaries of insurance companies.

    The Corporation as receiver shall distribute the value realized 
from the liquidation, transfer, sale or other disposition of the direct 
or indirect subsidiaries of an insurance company, that are not 
themselves insurance companies, solely in accordance with the order of 
priorities set forth in 12 U.S.C. 5390(b)(1) and the regulations 
promulgated thereunder.


0
8. Revise Sec.  380.6 to read as follows:


Sec.  380.6  Limitation on liens on assets of covered financial 
companies that are insurance companies or covered subsidiaries of 
insurance companies.

    (a) In the event that the Corporation makes funds available to a 
covered financial company that is an insurance company or to any 
covered subsidiary of an insurance company, or enters into any other 
transaction with respect to such covered entity under 12 U.S.C. 
5384(d), the Corporation will exercise its right to take liens on any 
or all assets of the covered entities receiving such funds to secure 
repayment of any such transactions only when the Corporation, in its 
sole discretion, determines that:
    (1) Taking such lien is necessary for the orderly liquidation of 
the entity; and
    (2) Taking such lien will not either unduly impede or delay the 
liquidation or rehabilitation of such insurance company, or the 
recovery by its policyholders.
    (b) This section shall not be construed to restrict or impair the 
ability of the Corporation to take a lien on any or all of the assets 
of any covered financial company or covered subsidiary in order to 
secure financing provided by the Corporation or the receiver in 
connection with the sale or transfer of the covered financial company 
or covered subsidiary or any or all of the assets of such covered 
entity.


0
9. Add Sec.  380.7 to subpart A to read as follows:


Sec.  380.7  Recoupment of compensation from senior executives and 
directors.

    (a) Substantially responsible. The Corporation, as receiver of a 
covered financial company, may file an action to recover from any 
current or former senior executive or director substantially 
responsible for the failed condition of the covered financial company 
any compensation received during the 2-year period preceding the date 
on which the Corporation was appointed as the receiver of the covered 
financial company, except that, in the case of fraud, no time limit 
shall apply. A senior executive or director shall be deemed to be 
substantially responsible for the failed condition of a covered 
financial company that is placed into receivership under the orderly 
liquidation authority of the Dodd-Frank Act if he or she:
    (1) Failed to conduct his or her responsibilities with the degree 
of skill and care an ordinarily prudent person in a like position would 
exercise under similar circumstances, and
    (2) As a result, individually or collectively, caused a loss to the 
covered financial company that materially contributed to the failure of 
the covered financial company under the facts and circumstances.
    (b) Presumptions. The following presumptions shall apply for 
purposes of assessing whether a senior executive or director is 
substantially responsible for the failed condition of a covered 
financial company:
    (1) It shall be presumed that a senior executive or director is 
substantially responsible for the failed condition of a covered 
financial company that is placed into receivership under the orderly 
liquidation authority of the Dodd-Frank Act under any of the following 
circumstances:
    (i) The senior executive or director served as the chairman of the 
board of directors, chief executive officer, president, chief financial 
officer, or in any other similar role regardless of his or her title if 
in this role he or she had responsibility for the strategic, 
policymaking, or company-wide operational decisions of the covered 
financial company prior to the date that it was placed into 
receivership under the orderly liquidation authority of the Dodd-Frank 
Act;
    (ii) The senior executive or director is adjudged liable by a court 
or tribunal of competent jurisdiction for having

[[Page 41641]]

breached his or her duty of loyalty to the covered financial company;
    (iii) The senior executive was removed from the management of the 
covered financial company under 12 U.S.C. 5386(4); or
    (iv) The director was removed from the board of directors of the 
covered financial company under 12 U.S.C. 5386(5).
    (2) The presumption under paragraph (b)(1)(i) of this section may 
be rebutted by evidence that the senior executive or director conducted 
his or her responsibilities with the degree of skill and care an 
ordinarily prudent person in a like position would exercise under 
similar circumstances. The presumptions under paragraphs (b)(1)(ii), 
(b)(1)(iii) and (b)(1)(iv) of this section may be rebutted by evidence 
that the senior executive or director did not cause a loss to the 
covered financial company that materially contributed to the failure of 
the covered financial company under the facts and circumstances.
    (3) The presumptions do not apply to:
    (i) A senior executive hired by the covered financial company 
during the two years prior to the Corporation's appointment as receiver 
to assist in preventing further deterioration of the financial 
condition of the covered financial company; or
    (ii) A director who joined the board of directors of the covered 
financial company during the two years prior to the Corporation's 
appointment as receiver under an agreement or resolution to assist in 
preventing further deterioration of the financial condition of the 
covered financial company.
    (4) Notwithstanding that the presumption does not apply under 
paragraphs (b)(3)(i) and (ii) of this section, the Corporation as 
receiver still may pursue recoupment of compensation from a senior 
executive or director in paragraphs (b)(3)(i) or (ii) if they are 
substantially responsible for the failed condition of the covered 
financial company.
    (c) Savings Clause. Nothing in this section shall limit or impair 
any rights of the Corporation as receiver under other applicable law, 
including any rights under Title II of the Dodd-Frank Act to pursue any 
other claims or causes of action it may have against senior executives 
and directors of the covered financial company for losses they cause to 
the covered financial company in the same or separate actions.


Sec.  380.8  [Added and reserved]


0
10. Add and reserve Sec.  380.8.
0
11. Add Sec.  380.9 to subpart A to read as follows:


Sec.  380.9  Treatment of fraudulent and preferential transfers.

    (a) Coverage. This section shall apply to all receiverships in 
which the FDIC is appointed as receiver under 12 U.S.C. 5382(a) or 
5390(a)(1)(E) of a covered financial company or a covered subsidiary, 
respectively, as defined in 12 U.S.C. 5381(a)(8) and (9).
    (b) Avoidance standard for transfer of property. (1) In applying 12 
U.S.C. 5390(a)(11)(H)(i)(II) to a transfer of property for purposes of 
12 U.S.C. 5390(a)(11)(A), the Corporation, as receiver of a covered 
financial company or a covered subsidiary, which is thereafter deemed 
to be a covered financial company pursuant to 12 U.S.C. 
5390(a)(1)(E)(ii), shall determine whether the transfer has been 
perfected such that a bona fide purchaser from such covered financial 
company or such covered subsidiary, as applicable, against whom 
applicable law permits such transfer to be perfected cannot acquire an 
interest in the property transferred that is superior to the interest 
in such property of the transferee.
    (2) In applying 12 U.S.C. 5390(a)(11)(H)(i)(II) to a transfer of 
real property, other than fixtures, but including the interest of a 
seller or purchaser under a contract for the sale of real property, for 
purposes of 12 U.S.C. 5390(a)(11)(B), the Corporation, as receiver of a 
covered financial company or a covered subsidiary, which is thereafter 
deemed to be a covered financial company pursuant to 12 U.S.C. 
5390(a)(1)(E)(ii), shall determine whether the transfer has been 
perfected such that a bona fide purchaser from such covered financial 
company or such covered subsidiary, as applicable, against whom 
applicable law permits such transfer to be perfected cannot acquire an 
interest in the property transferred that is superior to the interest 
in such property of the transferee. For purposes of this section, the 
term fixture shall be interpreted in accordance with U.S. Federal 
bankruptcy law.
    (3) In applying 12 U.S.C. 5390(a)(11)(H)(i)(II) to a transfer of a 
fixture or property, other than real property, for purposes of 12 
U.S.C. 5390(a)(11)(B), the Corporation, as receiver of a covered 
financial company or a covered subsidiary which is thereafter deemed to 
be a covered financial company pursuant to 12 U.S.C. 5390(a)(1)(E)(ii), 
shall determine whether the transfer has been perfected such that a 
creditor on a simple contract cannot acquire a judicial lien that is 
superior to the interest of the transferee, and the standard of whether 
the transfer is perfected such that a bona fide purchaser cannot 
acquire an interest in the property transferred that is superior to the 
interest in such property of the transferee of such property shall not 
apply to any such transfer under this paragraph (b)(3).
    (c) Grace period for perfection. In determining when a transfer 
occurs for purposes of 12 U.S.C. 5390(a)(11)(B), the Corporation, as 
receiver of a covered financial company or a covered subsidiary, which 
is thereafter deemed to be a covered financial company pursuant to 12 
U.S.C. 5390(a)(1)(E)(ii), shall apply the following standard:
    (1) Except as provided in paragraph (c)(2) of this section, a 
transfer shall be deemed to have been made
    (i) At the time such transfer takes effect between the transferor 
and the transferee, if such transfer is perfected at, or within 30 days 
after, such time, except as provided in paragraph (c)(1)(ii) of this 
section;
    (ii) At the time such transfer takes effect between the transferor 
and the transferee, with respect to a transfer of an interest of the 
transferor in property that creates a security interest in property 
acquired by the transferor:
    (A) To the extent such security interest secures new value that 
was:
    (1) Given at or after the signing of a security agreement that 
contains a description of such property as collateral;
    (2) Given by or on behalf of the secured party under such 
agreement;
    (3) Given to enable the transferor to acquire such property; and
    (4) In fact used by the transferor to acquire such property; and
    (B) That is perfected on or before 30 days after the transferor 
receives possession of such property;
    (iii) At the time such transfer is perfected, if such transfer is 
perfected after the 30-day period described in paragraph (c)(1)(i) or 
(ii) of this section, as applicable; or
    (iv) Immediately before the appointment of the Corporation as 
receiver of a covered financial company or a covered subsidiary which 
is thereafter deemed to be a covered financial company pursuant to 12 
U.S.C. 5390(a)(1)(E)(ii), if such transfer is not perfected at the 
later of--
    (A) The earlier of
    (1) The date of the filing, if any, of a petition by or against the 
transferor under Title 11 of the United States Code; and
    (2) The date of the appointment of the Corporation as receiver of 
such covered financial company or such covered subsidiary; or

[[Page 41642]]

    (B) Thirty days after such transfer takes effect between the 
transferor and the transferee.
    (2) For the purposes of this paragraph (c), a transfer is not made 
until the covered financial company or a covered subsidiary, which is 
thereafter deemed to be a covered financial company pursuant to 12 
U.S.C. 5390(a)(1)(E)(ii), has acquired rights in the property 
transferred.
    (d) Limitations. The provisions of this section do not act to 
waive, relinquish, limit or otherwise affect any rights or powers of 
the Corporation in any capacity, whether pursuant to applicable law or 
any agreement or contract.


Sec. Sec.  380.10-380.19  [Reserved]

0
11a. Add and reserve Sec. Sec.  380.10-380.19 in subpart A.

0
12. New subpart B is added to read as follows:
Subpart B--Priorities
Sec.
380.20 [Reserved]
380.21 Priorities.
380.22 Administrative expenses of the receiver.
380.23 Amounts owed to the United States.
380.24 Priority for loss of setoff rights.
380.25 Post-insolvency interest.
380.26 Effect of transfer of assets and obligations to a bridge 
financial company.
380.27 Treatment of similarly situated claimants.
380.28-380.29 [Reserved]

Subpart B--Priorities


Sec.  380.20  [Reserved]


Sec.  380.21  Priorities.

    (a) The unsecured amount of allowed claims shall be paid in the 
following order of priority:
    (1) Repayment of debt incurred by or credit obtained by the 
Corporation as receiver for a covered financial company, provided that 
the receiver has determined that it is otherwise unable to obtain 
unsecured credit for the covered financial company from commercial 
sources.
    (2) Administrative expenses of the receiver, as defined in Sec.  
380.22, other than those described in paragraph (a)(1) of this section.
    (3) Any amounts owed to the United States, as defined in Sec.  
380.23 (which is not an obligation described in paragraphs (a)(1) or 
(2) of this section).
    (4) Wages, salaries, or commissions, including vacation, severance, 
and sick leave pay earned by an individual (other than an individual 
described in paragraph (a)(9) of this section), but only to the extent 
of $11,725 for each individual (as adjusted for inflation in accordance 
with paragraph (b) of this section) earned within 180 days before the 
date of appointment of the receiver.
    (5) Contributions owed to employee benefit plans arising from 
services rendered within 180 days before the date of appointment of the 
receiver, to the extent of the number of employees covered by each such 
plan multiplied by $11,725 (as adjusted for inflation in accordance 
with paragraph (b) of this section); less the sum of (i) the aggregate 
amount paid to such employees under paragraph (a)(4) of this section, 
plus (ii) the aggregate amount paid by the Corporation as receiver on 
behalf of such employees to any other employee benefit plan.
    (6) Any amounts due to creditors who have an allowed claim for loss 
of setoff rights as described in Sec.  380.24.
    (7) Any other general or senior liability of the covered financial 
company (which is not a liability described under paragraphs (a)(8), 
(9) or (11) of this section).
    (8) Any obligation subordinated to general creditors (which is not 
an obligation described under paragraphs (a)(9) or (11) of this 
section).
    (9) Any wages, salaries, or commissions, including vacation, 
severance, and sick leave pay earned, that is owed to senior executives 
and directors of the covered financial company.
    (10) Post-insolvency interest in accordance with Sec.  380.25, 
provided that interest shall be paid on allowed claims in the order of 
priority of the claims set forth in paragraphs (a)(1) through (9) of 
this section.
    (11) Any amount remaining shall be distributed to shareholders, 
members, general partners, limited partners, or other persons with 
interests in the equity of the covered financial company arising as a 
result of their status as shareholders, members, general partners, 
limited partners, or other persons with interests in the equity of the 
covered financial company, in proportion to their relative equity 
interests.
    (b) All payments under paragraphs (a)(4) and (a)(5) of this section 
shall be adjusted for inflation in the same manner that claims under 11 
U.S.C. 507(a)(1)(4) are adjusted for inflation by the Judicial 
Conference of the United States pursuant to 11 U.S.C. 104.
    (c) All unsecured claims of any category or priority described in 
paragraphs (a)(1) through (a)(10) of this section shall be paid in full 
or provision made for such payment before any claims of lesser priority 
are paid. If there are insufficient funds to pay all claims of a 
particular category or priority of claims in full, then distributions 
to creditors in such category or priority shall be made pro rata. A 
subordination agreement is enforceable with respect to the priority of 
payment of allowed claims within any creditor class or among creditor 
classes to the extent that such agreement is enforceable under 
applicable non-insolvency law.


Sec.  380.22  Administrative expenses of the receiver.

    (a) The term ``administrative expenses of the receiver'' includes 
those actual and necessary pre- and post-failure costs and expenses 
incurred by the Corporation in connection with its role as receiver in 
liquidating the covered financial company; together with any 
obligations that the receiver for the covered financial company 
determines to be necessary and appropriate to facilitate the smooth and 
orderly liquidation of the covered financial company. Administrative 
expenses of the Corporation as receiver for a covered financial company 
include:
    (1) Contractual rent pursuant to an existing lease or rental 
agreement accruing from the date of the appointment of the Corporation 
as receiver until the later of
    (i) The date a notice of the dissaffirmance or repudiation of such 
lease or rental agreement is mailed, or
    (ii) The date such disaffirmance or repudiation becomes effective; 
provided that the lesser of such lease is not in default or breach of 
the terms of the lease.
    (2) Amounts owed pursuant to the terms of a contract for services 
performed and accepted by the receiver after the date of appointment of 
the receiver up to the date the receiver repudiates, terminates, 
cancels or otherwise discontinues such contract or notifies the 
counterparty that it no longer accepts performance of such services;
    (3) Amounts owed under the terms of a contract or agreement 
executed in writing and entered into by the Corporation as receiver for 
the covered financial company after the date of appointment, or any 
contract or agreement entered into by the covered financial company 
before the date of appointment of the receiver that has been expressly 
approved in writing by the receiver after the date of appointment; and
    (4) Expenses of the Inspector General of the Corporation incurred 
in carrying out its responsibilities under 12 U.S.C. 5391(d).
    (b) Obligations to repay any extension of credit obtained by the 
Corporation as

[[Page 41643]]

receiver through enforcement of any contract to extend credit to the 
covered financial company that was in existence prior to appointment of 
the receiver pursuant to 12 U.S.C. 5390(c)(13)(D) shall be treated as 
administrative expenses of the receiver. Other unsecured credit 
extended to the receivership shall be treated as administrative 
expenses except with respect to debt incurred by, or credit obtained 
by, the Corporation as receiver for a covered financial company as 
described in Sec.  380.21(a)(1).


Sec.  380.23  Amounts owed to the United States.

    (a) The term ``amounts owed to the United States'' as used in Sec.  
380.21(a)(3) includes all unsecured amounts owed to the United States, 
other than expenses included in the definition of administrative 
expenses of the receiver under Sec.  380.22 that are related to funds 
provided for the orderly liquidation of a covered financial company, 
funds provided to avoid or mitigate adverse effects on the financial 
stability of the United States or unsecured amounts owed to the U.S. 
Treasury on account of tax liabilities of the covered financial 
company, without regard for whether such amounts are included as debt 
or capital on the books and records of the covered financial company. 
Such amounts shall include obligations incurred before and after the 
appointment of the Corporation as receiver. Without limitation, 
``amounts owed to the United States'' include all of the following, 
which all shall have equal priority under Sec.  380.21(a)(3):
    (1) Unsecured amounts owed to the Corporation for any extension of 
credit by the Corporation, including any amounts made available under 
12 U.S.C. 5384(d);
    (2) Unsecured amounts owed to the U.S. Treasury on account of 
unsecured tax liabilities of the covered financial company;
    (3) Unsecured amounts paid or payable by the Corporation pursuant 
to its guarantee of any debt issued by the covered financial company 
under the Temporary Liquidity Guaranty Program, 12 CFR part 370, any 
widely available debt guarantee program authorized under 12 U.S.C. 
5612, or any other debt or obligation of any kind or nature that is 
guaranteed by the Corporation;
    (4) The unsecured amount of any debt owed to a Federal reserve bank 
including loans made through programs or facilities authorized under 
the Federal Reserve Act, 12 U.S.C. 221 et seq.; and
    (5) Any unsecured amount expressly designated in writing in a form 
acceptable to the Corporation by the appropriate United States 
department, agency or instrumentality that shall specify the particular 
debt, obligation or amount to be included as an ``amount owed to the 
United States'' for the purpose of this rule at the time of such 
advance, guaranty or other transaction.
    (b) Other than those amounts included in paragraph (a) of this 
section, unsecured amounts owed to a department, agency or 
instrumentality of the United States that are obligations incurred in 
the ordinary course of the business of the covered financial company 
prior to the appointment of the receiver generally will not be in the 
class of claims designated as ``amounts owed to the United States'' 
under section 380.21(a)(3), including, but not limited to:
    (1) Unsecured amounts owed to government sponsored entities 
including, without limitation, the Federal Home Loan Mortgage 
Corporation and the Federal National Mortgage Corporation;
    (2) Unsecured amounts owed to Federal Home Loan Banks; and
    (3) Unsecured amounts owed as satisfaction of filing, registration 
or permit fees due to any government department, agency or 
instrumentality.
    (c) The United States may, in its sole discretion, consent to 
subordinate the repayment of any amount owed to the United States to 
any other obligation of the covered financial company provided that 
such consent is provided in writing in a form acceptable to the 
Corporation by the appropriate department, agency or instrumentality 
and shall specify the particular debt, obligation or other amount to be 
subordinated including the amount thereof and shall reference this 
paragraph (c) or 12 U.S.C. 5390(b)(1); and provided further that 
unsecured claims of the United States shall, at a minimum, have a 
higher priority than liabilities of the covered financial company that 
count as regulatory capital on the books and records of the covered 
financial company.


Sec.  380.24  Priority of claims arising out of loss of setoff rights.

    (a) Notwithstanding any right of any creditor to offset a mutual 
debt owed by such creditor to any covered financial company that arose 
before the date of appointment of the receiver against a claim by such 
creditor against the covered financial company, the Corporation as 
receiver may sell or transfer any assets of the covered financial 
company to a bridge financial company or to a third party free and 
clear of any such rights of setoff.
    (b) If the Corporation as receiver sells or transfers any asset 
free and clear of the setoff rights of any party, such party shall have 
a claim against the receiver in the amount of the value of such setoff 
established as of the date of the sale or transfer of such assets, 
provided that the setoff rights meet all of the criteria established 
under 12 U.S.C. 3590(a)(12).
    (c) Any allowed claim pursuant to 12 U.S.C. 5390(a)(12) shall be 
paid prior to any other general or senior liability of the covered 
financial company described in section 380.21(a)(7). In the event that 
the setoff amount is less than the amount of the allowed claim, the 
balance of the allowed claim shall be paid at the otherwise applicable 
level of priority for such category of claim under Sec.  380.21.
    (d) Nothing in this section shall modify in any way the treatment 
of qualified financial contracts under Title II of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act.


Sec.  380.25  Post-insolvency interest.

    (a) Date of accrual. Post-insolvency interest shall be paid at the 
post-insolvency interest rate calculated on the principal amount of an 
allowed claim from the later of (i) the date of the appointment of the 
Corporation as receiver for the covered financial company; or (ii) in 
the case of a claim arising or becoming fixed and certain after the 
date of the appointment of the receiver, the date such claim arises or 
becomes fixed and certain.
    (b) Interest rate. Post-insolvency interest rate shall equal, for 
any calendar quarter, the coupon equivalent yield of the average 
discount rate set on the three-month U.S. Treasury bill at the last 
auction held by the United States Treasury Department during the 
preceding calendar quarter. Post-insolvency interest shall be computed 
quarterly and shall be computed using a simple interest method of 
calculation.
    (c) Principal amount. The principal amount of an allowed claim 
shall be the full allowed claim amount, including any interest that may 
have accrued to the extent such interest is included in the allowed 
claim.
    (d) Post-insolvency interest distributions. (1) Post-insolvency 
interest shall only be distributed following satisfaction of the 
principal amount of all creditor claims set forth in Sec.  380.21(a)(1) 
through 380.21(a)(9) and prior to any distribution pursuant to Sec.  
380.21(a)(11).
    (2) Post-insolvency interest distributions shall be made at such 
time as the Corporation as receiver determines that such distributions 
are appropriate and only to the extent of

[[Page 41644]]

funds available in the receivership estate. Post-insolvency interest 
shall be calculated on the outstanding principal amount of an allowed 
claim, as reduced from time to time by any interim distributions on 
account of such claim by the receiver.


Sec.  380.26  Effect of transfer of assets and obligations to a bridge 
financial company.

    (a) The purchase of any asset or assumption of any asset or 
liability of a covered financial company by a bridge financial company, 
through the express agreement of such bridge financial company, 
constitutes assumption of any contract or agreement giving rise to such 
asset or liability. Such contracts or agreements, together with any 
contract the bridge financial company may through its express agreement 
enter into with any other party, shall become the obligation of the 
bridge financial company from and after the effective date of the 
purchase, assumption or agreement, and the bridge financial company 
shall have the right and obligation to observe, perform and enforce 
their terms and provisions. In the event that the Corporation shall act 
as receiver of the bridge financial company any allowed claim arising 
out of any breach of such contract or agreement by the bridge financial 
company shall be paid as an administrative expense of the receiver of 
the bridge financial company.
    (b) In the event that the Corporation as receiver of a bridge 
financial company shall act to dissolve the bridge financial company, 
it shall wind up the affairs of the bridge financial company in 
conformity with the laws, rules and regulations relating to the 
liquidation of covered financial companies, including the laws, rules 
and regulations governing priorities of claims, subject however to the 
authority of the Corporation to authorize the bridge financial company 
to obtain unsecured credit or issue unsecured debt with priority over 
any or all of the other unsecured obligations of the bridge financial 
company, provided that unsecured debt is not otherwise generally 
available to the bridge financial company.
    (c) Upon the final dissolution or termination of the bridge 
financial company whether following a merger or consolidation, a stock 
sale, a sale of assets, or dissolution and liquidation at the end of 
the term of existence of such bridge financial company, any proceeds 
that remain after payment of all administrative expenses of the bridge 
financial company and all other claims against such bridge financial 
company will be distributed to the receiver for the related covered 
financial company.


Sec.  380.27  Treatment of similarly situated claimants.

    (a) For the purposes of this section, the term ``long-term senior 
debt'' means senior debt issued by the covered financial company to 
bondholders or other creditors that has a term of more than 360 days. 
It does not include partially funded, revolving or other open lines of 
credit that are necessary to continuing operations essential to the 
receivership or any bridge financial company, nor to any contracts to 
extend credit enforced by the receiver under 12 U.S.C. 5390(c)(13)(D).
    (b) In applying any provision of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act permitting the Corporation as receiver to 
exercise its discretion, upon appropriate determination, to make 
payments or credit amounts, pursuant to 12 U.S.C. 5390(b)(4), (d)(4), 
or (h)(5)(E) to or for some creditors but not others similarly situated 
at the same level of payment priority, the receiver shall not exercise 
such authority in a manner that would result in the following 
recovering more than the amount established and due under 12 U.S.C. 
5390(b)(1), or other priorities of payment specified by law:
    (1) Holders of long-term senior debt who have a claim entitled to 
priority of payment at the level set out under 12 U.S.C. 5390(b)(1)(E);
    (2) Holders of subordinated debt who have a claim entitled to 
priority of payment at the level set out under 12 U.S.C. 5390(b)(1)(F);
    (3) Shareholders, members, general partners, limited partners, or 
other persons who have a claim entitled to priority of payment at the 
level set out under 12 U.S.C. 5390 (b)(1)(H); or
    (4) Other holders of claims entitled to priority of payment at the 
level set out under 12 U.S.C. 5390(b)(1)(E) unless the Corporation, 
through the affirmative vote of a majority the members of the Board of 
Directors then serving, and in its sole discretion, specifically 
determines that additional payments or credit amounts to such holders 
are necessary and meet all of the requirements under 12 U.S.C. 
5390(b)(4), (d)(4), or (h)(5)(E), as applicable. The authority of the 
Board to make the foregoing determination cannot be delegated.


Sec. Sec.  380.28-380.29  [Reserved]


0
13. New subpart C is added to read as follows:

Subpart C--Receivership Administrative Claims Process
Sec.
380.30 Receivership administrative claims process.
380.31 Scope.
380.32 Claims bar date.
380.33 Notice requirements.
380.34 Procedures for filing claim.
380.35 Determination of claims.
380.36 Decision period.
380.37 Notification of determination.
380.38 Procedures for seeking judicial review of disallowed claim.
380.39 Contingent claims.
380.40-380.49 [Reserved]
380.50 Determination of secured claims.
380.51 Consent to certain actions.
380.52 Adequate protection.
380.53 Repudiation of secured contract.

Subpart C--Receivership Administrative Claims Process


Sec.  380.30  Receivership administrative claims process.

    The Corporation as receiver of a covered financial company shall 
determine claims against the covered financial company and the receiver 
of the covered financial company in accordance with the procedures set 
forth in 12 U.S.C. 5390(a)(2)-(5) and the regulations promulgated by 
the Corporation.


Sec.  380.31  Scope.

    Nothing in this subpart C shall apply to any liability or 
obligation of a bridge financial company or its assets or liabilities, 
or to any extension of credit from a Federal reserve bank or the 
Corporation to a covered financial company.


Sec.  380.32  Claims bar date.

    Upon its appointment as receiver for a covered financial company, 
the Corporation as receiver shall establish a claims bar date by which 
date creditors of the covered financial company shall present their 
claims, together with proof, to the receiver. The claims bar date shall 
be not less than 90 days after the date on which the notice to 
creditors to file claims is first published under Sec.  380.33(a).


Sec.  380.33  Notice requirements.

    (a) Notice by publication. Promptly after its appointment as 
receiver for a covered financial company, the Corporation as receiver 
shall publish a notice to the creditors of the covered financial 
company to file their claims with the receiver no later than the claims 
bar date. The Corporation as receiver shall republish such notice 1 
month and 2 months, respectively, after the date the notice is first 
published. The notice to creditors shall be

[[Page 41645]]

published in one or more newspapers of general circulation where the 
covered financial company has its principal place or places of 
business. In addition to such publication in a newspaper, the 
Corporation as receiver may post the notice on the FDIC's Web site at 
www.fdic.gov.
    (b) Notice by mailing. At the time of the first publication of the 
notice to creditors, the Corporation as receiver shall mail a notice to 
present claims no later than the claims bar date to any creditor shown 
in the books and records of the covered financial company. Such notice 
shall be sent to the last known address of the creditor appearing in 
the books and records or appearing in any claim found in the records of 
the covered financial company.
    (c) Notice by electronic media. After publishing and mailing notice 
as required by paragraphs (a) and (b) of this section, the Corporation 
as receiver may communicate by electronic media with any claimant who 
expressly agrees to such form of communication.
    (d) Discovered claimants. Upon discovery of the name and address of 
a claimant not appearing in the books and records of the covered 
financial company, the Corporation as receiver shall, not later than 30 
days after the discovery of such name and address, mail a notice to 
such claimant to file a claim no later than the claims bar date. Any 
claimant not appearing on the books and records that is discovered 
before the claims bar date shall be required to file a claim before the 
claims bar date, subject to the exception of Sec.  380.35(b)(2). If a 
claimant not appearing on the books and records is discovered after the 
claims bar date, the Corporation as receiver shall notify the claimant 
to file a claim by a date not later than 90 days from the date 
appearing on the notice that is mailed to such creditor. Any claim 
filed after such date shall be disallowed, and such disallowance shall 
be final.


Sec.  380.34  Procedures for filing claim.

    (a) In general. The Corporation as receiver shall provide, in a 
reasonably practicable manner, instructions for filing a claim, 
including by the following means:
    (1) Providing contact information in the publication notice;
    (2) Including in the mailed notice a proof of claim form that has 
filing instructions; or
    (3) Posting filing instructions on the Corporation's public Web 
site at www.fdic.gov.
    (b) When claim is deemed filed. A claim that is mailed to the 
receiver in accordance with the instructions established under 
paragraph (a) of this section shall be deemed to be filed as of the 
date of postmark. A claim that is sent to the receiver by electronic 
media or fax in accordance with the instructions established under 
paragraph (a) shall be deemed to be filed as of the date of 
transmission by the claimant.
    (c) Class claimants. If a claimant is a member of a class for 
purposes of a class action lawsuit, whether or not the class has been 
certified by a court, each claimant must file its claim with the 
Corporation as receiver separately.
    (d) Indenture trustee. A trustee appointed under an indenture or 
other applicable trust document related to investments or other 
financial activities may file a claim on behalf of the persons who 
appointed the trustee.
    (e) Legal effect of filing. (1) Pursuant to 12 U.S.C. 
5390(a)(3)(E)(i), the filing of a claim with the receiver shall 
constitute a commencement of an action for purposes of any applicable 
statute of limitations.
    (2) No prejudice to continuation of action. Pursuant to 12 U.S.C. 
5390(a)(3)(E)(ii) and subject to 12 U.S.C. 5390(a)(8), the filing of a 
claim with the receiver shall not prejudice any right of the claimant 
to continue, after the receiver's determination of the claim, any 
action which was filed before the date of appointment of the receiver 
for the covered financial company.


Sec.  380.35  Determination of claims.

    (a) In general. The Corporation as receiver shall allow any claim 
received by the receiver on or before the claims bar date if such claim 
is proved to the satisfaction of the receiver. Except as provided in 12 
U.S.C. 5390(a)(3)(D)(iii), the Corporation as receiver may disallow any 
portion of any claim by a creditor or claim of a security, preference, 
setoff, or priority which is not proved to the satisfaction of the 
receiver.
    (b) Disallowance of claims filed after the claims bar date. (1) 
Except as otherwise provided in this section, any claim filed after the 
claims bar date shall be disallowed, and such disallowance shall be 
final, as provided by 12 U.S.C. 5390(a)(3)(C)(i).
    (2) Certain exceptions. Paragraph (b)(1) of this section shall not 
apply with respect to any claim filed by a claimant after the claims 
bar date and such claim shall be considered by the receiver if:
    (i) The claimant did not receive notice of the appointment of the 
receiver in time to file such claim before the claims bar date, or the 
claim is based upon an act or omission of the Corporation as receiver 
that occurs after the claims bar date has passed, and
    (ii) The claim is filed in time to permit payment. A claim is 
``filed in time to permit payment'' when it is filed before a final 
distribution is made by the receiver.


Sec.  380.36  Decision period.

    (a) In general. Prior to the 180th day after the date on which a 
claim against a covered financial company or the Corporation as 
receiver is filed with the receiver, the receiver shall notify the 
claimant whether it allows or disallows the claim.
    (b) Extension of time. The 180-day period described in paragraph 
(a) of this section may be extended by a written agreement between the 
claimant and the Corporation as receiver executed not later than 180 
days after the date on which the claim against the covered financial 
company or the receiver is filed with the receiver. If an extension is 
agreed to, the Corporation as receiver shall notify the claimant 
whether it allows or disallows the claim prior to the end of the 
extended claims determination period.


Sec.  380.37  Notification of determination.

    (a) In general. The Corporation as receiver shall notify the 
claimant by mail of the decision to allow or disallow the claim. Notice 
shall be mailed to the address of the claimant as it last appears on 
the books, records, or both of the covered financial company; in the 
claim filed by the claimant with the Corporation as receiver; or in 
documents submitted in the proof of the claim. If the claimant has 
filed the claim electronically, the receiver may notify the claimant of 
the determination by electronic means.
    (b) Contents of notice of disallowance. If the Corporation as 
receiver disallows a claim, the notice to the claimant shall contain a 
statement of each reason for the disallowance, and the procedures 
required to file or continue an action in court.
    (c) Failure to notify deemed to be disallowance. If the Corporation 
as receiver does not notify the claimant before the end of the 180-day 
claims determination period, or before the end of any extended claims 
determination period, the claim shall be deemed to be disallowed, and 
the claimant may file or continue an action in court pursuant to 12 
U.S.C. 5390(a)(4)(A).


Sec.  380.38  Procedures for seeking judicial determination of 
disallowed claim.

    (a) In general. In order to seek a judicial determination of a 
claim that has been disallowed, in whole or in

[[Page 41646]]

part, by the Corporation as receiver, the claimant, pursuant to 12 
U.S.C. 5390(a)(4)(A), may either:
    (1) File suit on such claim in the district or territorial court of 
the United States for the district within which the principal place of 
business of the covered financial company is located; or
    (2) Continue an action commenced before the date of appointment of 
the receiver, in the court in which the action was pending.
    (b) Timing. Pursuant to 12 U.S.C. 5390(a)(4)(B), a claimant who 
seeks a judicial determination of a claim disallowed by the Corporation 
as receiver must file suit on such claim before the end of the 60-day 
period beginning on the earlier of:
    (1) The date of any notice of disallowance of such claim;
    (2) The end of the 180-day claims determination period; or
    (3) If the claims determination period was extended with respect to 
such claim under Sec.  380.36(b), the end of such extended claims 
determination period.
    (c) Statute of limitations. Pursuant to 12 U.S.C. 5390(a)(4)(C), if 
any claimant fails to file suit on such claim (or to continue an action 
on such claim commenced before the date of appointment of the 
Corporation as receiver) prior to the end of the 60-day period 
described in 12 U.S.C. 5390(a)(4)(B), the claim shall be deemed to be 
disallowed (other than any portion of such claim which was allowed by 
the receiver) as of the end of such period, such disallowance shall be 
final, and the claimant shall have no further rights or remedies with 
respect to such claim.
    (d) Jurisdiction. Pursuant to 12 U.S.C. 5390(a)(9)(D), unless the 
claimant has first exhausted its administrative remedies by obtaining a 
determination from the receiver regarding a claim filed with the 
receiver, no court shall have jurisdiction over:
    (1) Any claim or action for payment from, or any action seeking a 
determination of rights with respect to, the assets of any covered 
financial company for which the Corporation has been appointed 
receiver, including any assets which the Corporation may acquire from 
itself as such receiver; or
    (2) Any claim relating to any act or omission of such covered 
financial company or the Corporation as receiver.


Sec.  380.39  Contingent claims.

    (a) The Corporation as receiver shall not disallow a claim based on 
an obligation of the covered financial company solely because the 
obligation is contingent. To the extent the obligation is contingent, 
the receiver shall estimate the value of the claim, as such value is 
measured based upon the likelihood that such contingent obligation 
would become fixed and the probable magnitude thereof.
    (b) If the receiver repudiates a contingent obligation of a covered 
financial company consisting of a guarantee, letter of credit, loan 
commitment, or similar credit obligation, the actual direct 
compensatory damages for repudiation shall be no less than the 
estimated value of the claim as of the date the Corporation was 
appointed receiver of the covered financial company, as such value is 
measured based upon the likelihood that such contingent claim would 
become fixed and the probable magnitude thereof.
    (c) The Corporation as receiver shall estimate the value of a claim 
under paragraphs (a) or (b) of this section no later than 180 days 
after the claim is filed, unless such period is extended by a written 
agreement between the claimant and the receiver.
    (d) Except for a contingent claim that becomes absolute and fixed 
prior to the receiver's determination of the estimated value, such 
estimated value of a contingent claim shall be recognized as the 
allowed amount of the claim for purposes of distribution.
    (e) The estimated value of a contingent claim shall constitute the 
receiver's determination of the claim for purposes of Sec.  380.38(d) 
and 12 U.S.C. 5390(a)(9)(D).


Sec.  380.40-380.49  [Reserved]


Sec.  380.50  Determination of secured claims.

    (a) In the case of a claim against a covered financial company that 
is secured by any property of the covered financial company, the 
Corporation as receiver shall determine the amount of the claim, 
whether the claimant's security interest is legally enforceable and 
perfected, the priority of the claimant's security interest, and the 
fair market value of the property that is subject to the security 
interest. The Corporation as receiver may treat the portion of the 
claim which exceeds an amount equal to the fair market value of such 
property as an unsecured claim.
    (b) The fair market value of any property of a covered financial 
company that secures a claim shall be determined in light of the 
purpose of the valuation and of the proposed disposition or use of such 
property and at the time of such proposed disposition or use.
    (c) The Corporation as receiver may recover from any property of a 
covered financial company that secures a claim the reasonable and 
necessary costs and expenses of preserving or disposing of such 
property to the extent of any benefit to the claimant, including the 
payment of all ad valorem property taxes with respect to such property.
    (d) To the extent that a claim is secured by property of a covered 
financial company and the value of such property, after any recovery 
under paragraph (c) of this section, is greater than the amount of such 
claim, there shall be allowed to the claimant a secured claim for 
interest on such claim and any reasonable fees, costs, or charges 
provided for under the agreement or State statute under which the claim 
arose to the extent of the value of such property.


Sec.  380.51  Consent to certain actions.

    (a) In general. Any claimant alleging a legally valid and 
enforceable or perfected security interest in property of a covered 
financial company or control of any legally valid and enforceable 
security entitlement in respect of any asset held by the covered 
financial company for which the Corporation has been appointed receiver 
may seek the consent of the receiver for relief from the provisions of 
12 U.S.C. 5390(c)(13)(C).
    (b) Contents of request. A request for consent of the Corporation 
as receiver for relief from the provisions of 12 U.S.C. 5390(c)(13)(C) 
shall be in writing and contain the following information:
    (1) The amount of the claim, with supporting documentation;
    (2) A description of the property that secures the claim, with 
supporting documentation of the claimant's interest in the property;
    (3) The value of the property, as established by an appraisal or 
other supporting documentation; and
    (4) The proposed disposition of the property by the claimant, 
including the expected date of such disposition.
    (c) Determination by receiver. The Corporation as receiver shall 
grant its consent to a request for relief from the provisions of 12 
U.S.C. 5390(c)(13)(C) if it determines that the claimant has a legally 
valid and enforceable or perfected security interest or other lien 
against the property of a covered financial company and the receiver 
will not use, sell, or lease the property. If the Corporation as 
receiver determines that it will use, sell, or lease such property and 
that adequate protection is necessary and appropriate, the receiver may 
provide adequate protection instead of granting consent.
    (d) Consent deemed granted. If the Corporation as receiver has not 
notified the claimant of the determination whether to grant or withhold 
consent under this section within 30 days after

[[Page 41647]]

a request for consent has been submitted, consent shall be deemed to be 
granted.
    (e) Expiration by operation of law. Notwithstanding any 
determination by the Corporation as receiver to withhold consent under 
this section, the prohibitions described in 12 U.S.C. 5390(c)(13)(C)(i) 
are no longer applicable 90 days after the appointment of the receiver.
    (f) Limitations. Any consent granted by the Corporation as receiver 
under this section shall not act to waive or relinquish any rights 
granted to the Corporation in any capacity, pursuant to any other 
applicable law or any agreement or contract, and shall not be construed 
as waiving, limiting or otherwise affecting the rights or powers of the 
Corporation as receiver to take any action or to exercise any power not 
specifically mentioned, including but not limited to any rights, powers 
or remedies of the receiver regarding transfers taken in contemplation 
of the covered financial company's insolvency or with the intent to 
hinder, delay or defraud the covered financial company or the creditors 
of such company, or that is a fraudulent transfer under applicable law.
    (g) Exceptions. (1) This section shall not apply in the case of a 
contract that is repudiated or disaffirmed by the Corporation as 
receiver.
    (2) This section shall not apply to a director or officer liability 
insurance contract, a financial institution bond, the rights of parties 
to certain qualified financial contracts pursuant to 12 U.S.C. 
5390(c)(8), the rights of parties to netting contracts pursuant to 12 
U.S.C. 4401 et seq., or any extension of credit from any Federal 
reserve bank or the Corporation to any covered financial company or any 
security interest in the assets of a covered financial company securing 
any such extension of credit.


Sec.  380.52  Adequate protection.

    (a) If the Corporation as receiver determines that it will use, 
sell, or lease or grant a security interest or other lien against 
property of the covered financial company that is subject to a security 
interest of a claimant, the receiver shall provide adequate protection 
by any of the following means:
    (1) Making a cash payment or periodic cash payments to the claimant 
to the extent that the sale, use, or lease of the property or the grant 
of a security interest or other lien against the property by the 
Corporation as receiver results in a decrease in the value of such 
claimant's security interest in the property;
    (2) Providing to the claimant an additional or replacement lien to 
the extent that the sale, use, or lease of the property or the grant of 
a security interest against the property by the Corporation as receiver 
results in a decrease in the value of the claimant's security interest 
in the property; or
    (3) Providing any other relief that will result in the realization 
by the claimant of the indubitable equivalent of the claimant's 
security interest in the property.
    (b) Adequate protection of the claimant's security interest will be 
presumed if the value of the property is not depreciating or is 
sufficiently greater than the amount of the claim so that the 
claimant's security interest is not impaired.


Sec.  380.53  Repudiation of secured contract.

    To the extent that a contract to which a covered financial company 
is a party is secured by property of the covered financial company, the 
repudiation of the contract by the Corporation as receiver shall not be 
construed as permitting the avoidance of any legally enforceable and 
perfected security interest in the property, and the security interest 
shall secure any claim for repudiation damages.

    By order of the Board of Directors.

    Dated at Washington, DC, this 6th day of July 2011.

    Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2011-17397 Filed 7-14-11; 8:45 am]
BILLING CODE 6714-01-P