1992 Bank Resolutions:

FDIC Chose Methods Determined Least Costly, but Needs to Improve Process

GGD-94-107: Published: May 10, 1994. Publicly Released: May 10, 1994.

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Pursuant to a legislative requirement, GAO reviewed the Federal Deposit Insurance Corporation's (FDIC): (1) compliance with the least-cost provisions of the Federal Deposit Insurance Act; and (2) resolution process.

GAO found that: (1) FDIC generally complied with the cost calculation and documentation requirements for resolving failed thrifts; (2) FDIC procedures to estimate the net realizable value of a failed bank's assets and to document cost evaluations improved in the second half of 1992; (3) some factors in FDIC cost estimates were more uncertain than others, including estimates of insured and uninsured deposits, future losses from loss-sharing agreements, and the future market value of bridge banks; and (4) FDIC consistently chose the resolution alternative that was the least costly compared to the other alternatives considered.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOR completed the updating of its internal operating procedures to require compliance with this recommendation, and GAO's review of 1993 resolutions found that DOR documented the rationale for its marketing decisions.

    Recommendation: The Acting Chairman, FDIC, should require the Division of Resolutions (DOR) to document the rationale for its marketing strategies for resolving all failing or failed banks.

    Agency Affected: Federal Deposit Insurance Corporation

  2. Status: Closed - Implemented

    Comments: DOR completed the updating of its internal operating procedures to require compliance with this recommendation.

    Recommendation: The Acting Chairman, FDIC, should require DOR to submit the documented record of the marketing strategies to the FDIC Board for its consideration in making the least-cost resolution decisions.

    Agency Affected: Federal Deposit Insurance Corporation

 

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