[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Rules and Regulations]
[Pages 35487-35488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16671]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 360
RIN 3064-AB25
Receivership Rules
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The final rule interprets a provision of an amendment, enacted
on August 10, 1993, to section 11(d)(11) of the Federal Deposit
Insurance Act (FDI Act) providing for a national depositor preference
for amounts realized from the liquidation or other resolution of any
depository institution insured by the Federal Deposit Insurance
Corporation (FDIC). The regulation describes the expenses that are
includable under the priority in the new statutory amendment for
administrative expenses of the receiver. The intended effect of the
final rule is to clarify that post-closing and certain pre-closing
expenses may be paid as administrative expenses of the receiver in
connection with the liquidation or other resolution of FDIC-insured
institutions. The final rule replaces an interim rule that has been in
effect since August 13, 1993, and is essentially unchanged from the
interim provisions.
EFFECTIVE DATE: The final rule is effective July 10, 1995.
FOR FURTHER INFORMATION CONTACT: Stephen N. Graham, Associate Director,
Division of Depositor and Asset Services (202/898-7377), Rodney D. Ray,
Senior Counsel, Legal Division (202/736-0348), Joseph A. DiNuzzo,
Acting Senior Counsel, Legal Division (202/898-7349), Federal Deposit
Insurance Corporation, Washington, DC, 20429.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
No collections of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this
final rule. Consequently, no information has been submitted to the
Office of Management and Budget for review.
Regulatory Flexibility Act
The Board hereby certifies that the final rule will not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). It will not impose burdens on depository institutions of any
size and will not have the type of economic impact addressed by the
Act. Accordingly, the Act's requirements regarding an initial and final
regulatory flexibility analysis (Id. at 603 & 604) are not applicable
here.
Background
A. National Depositor Preference Legislation
On August 10, 1993, the President signed into law a bill that
amended section 11(d)(11) of the FDI Act (12 U.S.C. 1821(d)(11)) to
provide for a national depositor preference for amounts realized from
the liquidation or other resolution of FDIC-insured depository
institutions. Pub. L. 103-66, 107 Stat. 312 (1993).
Generally, the amendment provides that distributions shall be made
from all future receivership estates in the following order:
1. Administrative expenses of the receiver;
2. Deposit liability claims;
3. Other general or senior liabilities of the institution, other
than subordinated obligations or shareholder claims;
4. Subordinated obligations; and
5. Shareholder claims.
The legislation applies to all receiverships of insured
institutions established after its enactment date and supersedes any
inconsistent state or other federal distribution provisions. As noted,
the first priority encompasses ``administrative expenses of the
receiver''. The language of the statute explicitly covers post-
appointment obligations incurred by a receiver as part of the
liquidation of an institution. The FDIC Board of Directors (Board of
Directors) has determined that this priority also covers certain
expenses incurred prior to the appointment of the receiver. Such
expenses include obligations which may have been incurred prior to the
closing of the institution but which the receiver determines should be
paid by the receiver to facilitate the smooth and orderly transfer of
banking operations to a purchasing institution or to obtain an
accounting and orderly disposition of the assets of the institution.
These expenses may include, but are not limited to, for example, the
payment of the institution's last payroll, guard services, data
processing services, utilities and expenses related to leased
facilities. Generally, they do not include expenses such as severance
pay claims, golden parachute claims and claims arising from contract
repudiations. The final rule limits the inclusion of expenses within
the scope of ``administrative expenses'' to those that the receiver
determines are necessary and appropriate for the orderly liquidation or
resolution of the institution. This general language is necessitated by
the variety of such expenses ordinarily incurred by a receiver for a
particular failed depository institution.
The legislative history of the statute is explicit on the coverage
of certain pre-receivership obligations within the scope of the
``administrative expenses'' priority of the receivership. The House/
Senate Conference Report on the legislation notes that: ``it is the
conferees' intent that the FDIC interpret the depositor preference
provision for the payment of administrative expenses of the receiver as
including ordinary and necessary expenses of the institution that are
unpaid at the time of failure, but only those that the receiver
determines are necessary to maintain services and facilities to effect
an orderly resolution of the institution''. H.R. Rep. No. 213,
Sec. 3001, Omnibus Budget Reconciliation Act of 1993, 103rd Cong., 1st
Sess. (1993). The conferees noted that such coverage of expenses is the
FDIC's current practice (in its role as receiver of failed insured
[[Page 35488]]
institutions): ``the conferees intend that the FDIC continue its
current practice of paying these expenses prior to paying deposits or
other expenses if it determines such payment is required for an orderly
resolution of the institution''. Id.
B. The Interim Rule
To prevent any ambiguity on the coverage of administrative expenses
of the institution/receiver that were incurred by the institution prior
to the appointment of a receiver, the FDIC issued an interim rule
published in the Federal Register on August 13, 1993 (58 FR 43069). The
interim rule clarified that receivers have the authority to pay certain
pre-closing obligations of the failed institution as an
``administrative expense'' under the statute.
The Board of Directors had determined that, in order to ensure an
orderly continuation of the handling of closed institutions, it was
necessary to clarify the requirements of the statutory amendment
relative to the definition and treatment of administrative expenses of
the receiver of such institutions. In the preamble to the interim rule
the Board of Directors explained the necessity to apply the interim
rule to all receiverships subject to the new statutory amendment. The
interim rule was amended by a final rule which redesignated Secs. 360.1
through 360.3 as Secs. 360.2 through 360.4, respectively (58 FR 67662
(Dec. 22, 1993)).
The Final Rule
The final rule retains the section added by the interim rule to
Part 360 of the FDIC's regulations (12 CFR Part 360) to clarify the
priority for administrative expenses contained in the depositor
preference statute.
As provided for in the statute, all FDIC-insured institutions for
which a receiver is appointed after the date of enactment of the
statute will be subject to the priorities provided therein. Pre-
appointment expenses that the receiver determines are within the scope
of the ``administrative expenses'' priority will be included within
that priority after the enactment date of the statute. As the conferees
noted in House/Senate Conference Report, ``[p]rior to the
implementation of such regulations [to clarify the meaning of the term
administrative expenses], it is the conferees' intent that the FDIC
continue its current practice of paying these expenses before paying
depositors''. Id.
The current Sec. 360.3 of the FDIC's regulations (12 CFR 360.3)
specifies receivership priorities for failed savings associations.
These provisions will continue to apply to such savings associations
for which a receiver was appointed on or prior to the effective date of
the statutory amendment, August 10, 1993. Liquidations or other
resolutions of all insured depository institutions (including savings
associations) for which a receiver is appointed after that date are
subject to the statutory amendments and interim rule and will be
subject to the final rule.
The FDIC received one public comment on the interim rule. The
comment was from a national banking and thrift industry trade group who
expressed full support for the interim rule.
Because the final rule is unchanged from the interim rule, which
became effective on its issuance date of August 13, 1993, the Board of
Directors has determined that good cause exists for waiving the 30-day
delayed effective date ordinarily required by the Administrative
Procedure Act (5 U.S.C. 553). The Board of Directors also has
determined that section 302 of the Riegle Community Development and
Regulatory Improvement Act of 1994 (Pub. L. 103-325, 108 Stat. 2160)
(1994) (RCDRIA) does not apply to the issuance of the final rule.1
Thus, the final rule will become effective upon its publication date in
the Federal Register. On that same date, the interim rule will be
replaced.
\1\ Section 302 of RCDRIA provides that any new regulations and
amendments to existing regulations which impose reporting,
disclosure or other requirements on insured depository institutions
may only take effect on the first day of a calendar quarter unless
certain exceptions are satisfied.
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List of Subjects in 12 CFR Part 360
Banks, banking, Savings associations.
For the reasons set out in the preamble, part 360 of chapter III of
title 12 of the Code of Federal Regulations is amended as follows:
PART 360--RESOLUTION AND RECEIVERSHIP RULES
1. The authority citation for Part 360 is revised to read as
follows:
Authority: 12 U.S.C. 1821(d)(11), 1823(c)(4); Sec. 401(h), Pub.
L. 101-73, 103 Stat. 357.
2. Section 360.3 is amended by revising paragraph (f) to read as
follows:
Sec. 360.3 Priorities.
* * * * *
(f) Under the provisions of section 11(d)(11) of the Act (12 U.S.C.
1821(d)(11)), the provisions of this Sec. 360.3 do not apply to any
receivership established and liquidation or other resolution occurring
after August 10, 1993.
3. Section 360.4 is revised to read as follows:
Sec. 360.4 Administrative expenses.
The priority for ``administrative expenses of the receiver'', as
that term is used in section 11(d)(11) of the Act (12 U.S.C.
1821(d)(11), shall include those necessary expenses incurred by the
receiver in liquidating or otherwise resolving the affairs of a failed
insured depository institution. Such expenses shall include pre-failure
and post-failure obligations that the receiver determines are necessary
and appropriate to facilitate the smooth and orderly liquidation or
other resolution of the institution.
Dated at Washington, D.C., this 27th day of June, 1995.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 95-16671 Filed 7-7-95; 8:45 am]
BILLING CODE 6714-01-P
