1993 Bank Resolutions:
FDIC Further Improved Its Resolution Process
GGD-95-118, Jun 9, 1995
Pursuant to a legislative requirement, GAO reviewed the Federal Deposit Insurance Corporation's (FDIC) compliance with the Federal Deposit Insurance Corporation Improvement Act's (FDICIA) least-cost provisions for resolving troubled depository institutions.
GAO found that: (1) FDIC has improved its resolution process and consistently makes decisions based on the least costly resolution alternatives; (2) FDIC adequately documented its valuations of failed banks' assets, deposits, and other liabilities and the bids received from potential acquirers in 6 of the 10 resolutions reviewed; (3) FDIC made improvements in communicating with potential bidders and monitoring its prior resolution experience, including previous arrangements with acquirers to share with FDIC in the losses of certain failed bank assets; (4) FDIC was unable to conform to its standard resolution process in 4 of the 10 resolutions reviewed because it had to move quickly to resolve liquidity problems without the benefit of on-site asset valuations; (5) FDIC cannot identify assets tainted by fraud or other legal problems or available resolution alternatives without on-site asset valuations; (6) FDIC expects the relative number of failing banks with liquidity problems to increase, so it is taking action to improve its resolution process; and (7) FDIC will be unable to conduct on-site asset valuations unless it can get earlier access to banks with liquidity problems.