Financial Markets in Crisis: Overview of FDIC’s Authority With Respect to Bank Failures

My firm has issued a memo entitled “Financial Markets in Crisis: Overview of FDIC’s Authority With Respect to Bank Failures,” which focuses on the receivership and conservatorship authority of the Federal Deposit Insurance Corporation. It is an executive summary of a longer document available here. The memo provides a brief overview of key issues and background on the legal framework governing FDIC resolutions and the FDIC’s methods for handling receiverships. The longer summary goes into greater detail, comparing six distinctive aspects of the FDIC approach with the bankruptcy law provisions; and illustrating issues and uncertainties in the FDIC resolutions process by discussing in greater depth two examples – treatment of loan securitizations and participations, and standby letters of credit. The materials underscore the importance of credit analysis and rigor of documentation and legal risk mitigation in connection with potentially troubled financial institution counterparties.

The memo is available here and the longer summary is available here.