On December 18, 2013, the Board of Directors of the Federal Deposit Insurance Corporation (“FDIC”) published a widely anticipated notice in the Federal Register (the “Notice”) setting forth the FDIC’s single point of entry strategy (“SPOE”) for resolutions under the Orderly Liquidation Authority (“OLA”) contained in Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and requesting comment. The FDIC has viewed SPOE as a preferred resolution strategy for over a year. The release provides greater detail regarding the strategy as well as issues that have been identified with respect to it.
Purpose of the Strategy.
OLA was designed to deal with the “too big to fail” problem that became apparent in the wake of the 2008 financial crisis. In essence, OLA provides a back-up authority to place systemically important financial institutions (“SIFI”) into an FDIC receivership process if there is no private sector alternative to prevent the SIFI’s default and if the SIFI’s resolution under the US Bankruptcy Code would have serious adverse effects on the financial stability of the United States. Although the Dodd-Frank Act does not specify how the resolution of a SIFI should be structured, it does establish certain policy goals and parameters, including that taxpayers not make payments for losses and that management and board members be held accountable for the failure.
Please see full memo below for more information.
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