On Wednesday, the FDIC established a process to qualify parties interested in bidding on deposits and assets of failing institutions - a process designed to expand the pool of qualified bidders to which the FDIC markets a failing institution’s deposits and assets. Traditionally, only insured depository institutions and their holding companies were eligible to bid. As opposed to the lengthy deposit insurance application process which may take as long as a year, potential bidders may participate in a truncated application process that involves abbreviated information submissions. Upon review and approval of an abbreviated application, the FDIC may grant “conditional approval” for deposit insurance, thereby qualifying the party to bid on deposits and assets of a failing bank. The FDIC approval, of course, also requires conditional approval of a bank charter from a chartering agency (which may the OCC, the OTS or a state banking regulator). Considerations for approval include (i) available capital; (ii) an appropriate management team; and (iii) a business plan that addresses CRA compliance.
This announcement, coupled with the OCC’s recent “shelf charter” approval, is intended to provide a streamlined method for non banks to participate in the bidding process “in a manner that will result in the least cost to the Deposit Insurance Fund and minimal disruption to the financial system.”