Failure Acquisitions

Failure Acquisitions

Expansionary Activities

Comptroller’s Corporate Manual

Washington, DC
April 1998

Table of Contents

Failure Acquisitions
Introduction
Applicability
Definitions
Key Policies
General
Decision Criteria
Standards of Review
Specific Requirements
Public Notice
Competitive Factors
Background Investigations
Other Requests
Legal Considerations
Negative Premium Acquisitions
Branch Closings
Summary of Process
Bid List
Bid Information Meeting
Bid Submission

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3
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5
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6
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Documents
General Instructions
Instructions for New National Banks
Instructions for Purchase and Assumption

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13
14
17

Procedures

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References

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Introduction

Failure Acquisitions

This booklet should be used together with other booklets of the Comptroller’s
Corporate Manual (manual). Users of this booklet should refer to the
”General Policies and Procedures” (GPP) booklet for discussion of general
filing instructions and procedures. They should also refer to the following
booklets as appropriate: ”Charters,” ”Branches and Relocations,” ”Business
Combinations,” ”Corporate Organization,” ”Background Investigations,”
”Investment in Bank Premises,” ”Investment in Subsidiaries and Equities,”
”Fiduciary Powers,” and ”Management Interlocks.”

Applicability
The Comptroller of the Currency’s (OCC) approval is required when the
resulting bank in a failure acquisition is a national bank. Failure acquisitions
may be structured in many ways; however, the procedures in this booklet
apply to only two typical types of failure acquisitions, involving OCCregulated banks. They are the:
C

Purchase of assets and assumption of liabilities of an insured failed
institution by an existing national bank.

C

Establishment of a new national bank to purchase the assets and
assume the liabilities of an insured failed institution.

Banks or other groups unfamiliar with this process should discuss their plans
and any related questions with the licensing manager well in advance of
submitting an application. This booklet does not apply to the creation and/or
acquisition of a bridge bank pursuant to 12 USC 1821(n), or emergency
combinations (see the ”Business Combinations” booklet for further
discussion).

Definitions
A clean purchase and assumption transaction is a transaction in which the
receiver keeps all known problem assets and provides the purchaser with
specific options for recourse to the receiver on certain assets within specified
periods of time.
A deposit insurance transfer and asset purchase agreement (DITAPA) is an
agreement governing a transaction for the transfer by the receiver of insured
deposits (e.g., deposits, including interest, of $100,000 or less) and certain
assets of a failed institution to the purchaser. The procedures for a purchase
of assets and assumption of liabilities apply to this transaction. The purchaser

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must honor the contract rate on deposits for a specified number of days, but
can renegotiate rates thereafter to reflect market conditions.
A failed institution is a failed bank or savings association.
A potential national bank bidder is: (1) an existing national bank that has
been approved preliminarily to bid on the acquisition of a failed institution;
or, (2) a group that has been approved preliminarily to establish and organize
a new national bank to bid to acquire a failed institution.
A premium generally is paid by the assuming bank to the receiver to
purchase the assets and assume the liabilities of a failed institution.
Depending upon the amount of the assuming bank’s bid, a positive premium
is paid by the acquiring bank (purchaser) to the receiver or a negative
premium is paid by the receiver to the acquiring bank (purchaser). Negative
premium acquisitions are discussed in greater detail later in this booklet.
The primary regulator is the banking agency responsible for regulating a
depository institution. The OCC is the primary regulator of nationally
chartered banks. The Office of Thrift Supervision (OTS) is the primary
regulator of federally chartered thrifts. The appropriate state banking
regulatory authority regulates its state-chartered institutions. In a bank failure
transaction involving an insured bank, the OCC or the appropriate state
banking regulatory authority notifies the Federal Deposit Insurance
Corporation (FDIC) when the insured bank is in imminent danger of failing.
The OCC, state authority, or FDIC in certain circumstances involving state
banks, later determines that grounds for a receivership exists and appoints the
FDIC as receiver.
A purchase and assumption transaction (P&A) in the context of failure
acquisitions refers generally to the acquisition of a failed institution that the
receiver structures as a purchase and assumption transaction. A P&A
transaction is governed by a P&A agreement between the purchaser and the
receiver that transfers certain assets and liabilities to the acquirer. If problem
or classified assets are acquired, provisions in the executed agreement
normally address resale to the receiver under certain specified conditions. In
P&A transactions, deposit liabilities and other specified liabilities may be
assumed. If the failed institution is a state bank in a depositor preference
state, only deposit liabilities would be accepted. OCC approval of a national
bank’s acquisition of a failed institution is required under 12 USC 1828(c).
Shareholders of the acquiring bank legally are not required to approve the
transaction.
A receiver is a person or entity responsible for liquidating and winding up the
affairs of a failing entity. The FDIC is appointed receiver for institutions
insured by the Bank Insurance Fund (BIF) or the Savings Association
Insurance Fund (SAIF).
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Key Policies
General
The OCC appoints the FDIC as receiver of any closed insured national bank
or insured federal branch of a foreign bank. OCC approval is required
whenever an existing national bank, or a group organizing a national bank,
seeks to acquire a failed institution.

Decision Criteria
In reviewing a proposed transaction, the OCC considers:
C

Promoting the safety and soundness of the banking system.

C

Determining the acquiring bank’s prospects for success following the
transaction.

C

Minimizing any negative effect on the affected community.

The type of failure acquisition used will determine the OCC’s decision
criteria. The OCC will apply the decision criteria used for charters when a
new national bank is established and will use business combinations decision
criteria when a new or an existing national bank seeks to acquire the failed
institution.
In addition, the OCC will weigh other banking factors and normally will not
approve a failure acquisition that will result in a bank with inadequate
capital, unsatisfactory management, poor earnings prospects, or inadequate
liquidity.
The OCC will also consider an existing national bank’s performance in
meeting the credit needs of its community, including low- and
moderate-income neighborhoods. That record may cause the OCC to
condition the bank’s ability to bid to acquire a failed institution. In some
instances, a bank’s record of performance may result in the OCC prohibiting
the bank from submitting a bid.
The OCC also will weigh the effects on competition in the markets affected
by the proposed acquisition. The OCC may approve a proposed acquisition if
it determines that a bidder’s satisfaction of the previously mentioned decision
criteria outweighs any adverse competitive effects of the proposed
acquisition.

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Standards of Review
Acquisition proposals from experienced organizing groups or national banks
in an economically strong area will be reviewed only to determine that they
present reasonable business strategies for success. No further analysis
normally is needed if the due diligence and market analyses are reasonable
and the strategy is clear. If unprecedented or unusual banking services or
corporate arrangements are proposed, the OCC may require additional
information and may conduct a more extensive review.
Proposals sponsored by bank holding companies or persons affiliated with
other banking organizations will be evaluated on the performance record of
the bank holding company and/or affiliated institution(s). The OCC may
review FR Y-6 reports, SEC 10-K reports, Annual Reports to Stockholders,
reports of examination, financial statements, and any other information
available to it in its supervisory capacity. In addition, a bank holding
company’s overall philosophy and plans, e.g., strategy, capital, management,
and profitability, may be reviewed for consistency and compatibility with the
proposal.
The strength of a parent company, combined with the direct support it offers
to its bank subsidiaries, can mitigate concerns over capital, draft operating
plans, or other supervisory matters. When the bank holding company or an
affiliated institution serves as a substantial source of strength, proposals may
be approved preliminarily, even in markets where economic conditions are
weak and/or competitive conditions intense.
Conversely, the poor condition of a parent company and/or its affiliates or the
absence of any evidence of the parent’s support of its subsidiaries may result
in negative action on the proposal, even though it may have merit. The
review and analysis of holding company sponsored proposals will not be
confined to the proposed acquisition alone. When the proposed bank is
affiliated with institutions subject to special supervisory concern, the OCC
may reject a proposal or approve it preliminarily subject to conditions.

Specific Requirements
Public Notice
When the OCC must approve an acquisition immediately (e.g., overnight) to
resolve an actual or imminent failure of an insured institution, the acquiring
bank does not need to publish a notice of the proposed transaction.

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Competitive Factors
When the OCC must approve an acquisition immediately (e.g., overnight) to
resolve an actual or imminent failure of an insured institution, the OCC also
need not request reports from the Attorney General, the FDIC, and the
Federal Reserve Board (FRB) on the competitive factors.

Background Investigations
New national bank organizing groups and their chief executive officers
(CEOs) must have the experience, competence, and willingness to direct the
bank’s affairs in a safe, sound, and legal manner. Organizing groups that do
not appear to meet those criteria will be denied permission to organize a
bank. Organizers and CEOs, whose previous banking experience is tied to
failed or problem financial institutions, will be scrutinized closely by the
OCC to determine their ability to carry out their duties safely and adequately.
Unless specifically waived by the OCC, each executive officer of a new
national bank must complete and file with the OCC a Biographical Report
and Financial Statement (see the ”Background Investigations” booklet for
further discussion).
Both newly established and existing national banks must assure the OCC that
appropriate management and staff will be available when the acquired
locations of the failed institution reopen.

Other Requests
When a national bank acquires a failed national, or state bank, or thrift, other
requests may be submitted with the application. Other types of requests filed
with failure acquisition applications may include applications for investment
in subsidiaries and equities, branches and relocations, and fiduciary powers.
Each request should be responsive to the requirements discussed in other
booklets of this manual.

Legal Considerations
When the failed institution is not a national bank, the application should
include a certification by an official of the applicant that the proposed
transaction conforms with applicable federal laws and is not in contravention
of applicable state laws. This certification also should indicate that any action
required by law will be taken prior to consummation of the transaction. If the
proposal presents novel or precedent-setting legal issues, an opinion from
counsel should be provided.

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Negative Premium Acquisitions
Accounting for the acquisition of a failed institution follows the same
accounting principles as are used in any other nonaffiliated business
combination. Accordingly, the ”Business Combinations” booklet provides
guidance on these issues. Since certain contractual provisions may differ
from those generally included in other business combinations, however, the
following discussion highlights the appropriate accounting treatment for those
provisions.
Cash received from the FDIC as a negative premium is considered an asset
acquired in the acquisition and should be accounted for accordingly. It is not
a capital injection and should not be included as capital.
In certain negative premium situations, the fair value of the assets acquired,
including cash payments received from the FDIC, may exceed the liabilities
assumed, creating negative goodwill. Generally accepted accounting
principles require that the noncurrent assets, other than investments in
marketable securities, be reduced proportionately by the negative goodwill.
Non-current assets include bank premises. Any remaining negative goodwill
is recorded as a liability and is not included as capital.
The negative premium proposal may include amounts designated as
payments for core deposit intangibles or future tax benefits. For accounting
purposes, those amounts should be considered as an element of the purchase
price (goodwill or a reduction of negative goodwill). A core deposit
intangible may be recorded only on the basis of a formal economic study to
determine its value. Additionally, the core deposit intangible cannot exceed
the actual premium paid on an acquisition. Therefore, in negative premium
situations, core deposit intangibles generally would not be recorded.
If the applicant’s contractual provisions differ from those discussed in this
section, the applicant should consult with the OCC for further guidance.

Branch Closings
An acquiring institution’s decision not to purchase a branch from the FDIC
after its temporary operation and during an option period does not constitute
a branch closing requiring 90-day advance notice prior to closing (see the
”Branch Closings” booklet for further discussion).

Summary of Process
In anticipation of a receivership appointment for a failing insured bank, the
OCC (in the case of insured nationally chartered banks) or the state banking
regulatory authority (in the case of insured state-chartered banks and thrifts) or

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the OTS (in the case of insured federally chartered thrifts) advises the receiver
(FDIC) that an institution is in imminent danger of failing or otherwise is
likely to fall below required minimum capital levels.
Failing institutions are not notified when the OCC or the state banking
regulator has notified the FDIC to proceed with preliminary sale/liquidation
procedures. Prior to the time and date of the appointment of the FDIC as
receiver, ongoing efforts may be made to prevent the insured institution from
failing.
After being notified of a potential insured bank failure, the FDIC compiles a
preliminary list of banks, bank holding companies, persons, and chain
banking groups that may be interested in acquiring the failed bank and that
meet specific requirements established by the FDIC. This list is commonly
referred to as the ”bid list.”
If the receiver is unable to sell the institution, it will pay off the depositors
and liquidate the remaining assets. The net proceeds of the liquidation are
distributed pursuant to a statutorily mandated order of priority.

Bid List
The FDIC’s criteria for compiling bid lists depend on the size and structure of
the failing institution and the restrictions of state and national banking laws
on expansionary activities that may affect the acquisition of a failed
institution. However, the following criteria apply to most potential acquirers.
C

Banks and Holding Companies ) Generally, banks and bank holding
companies must have a record of safe, sound, and legal operations.
Their management teams must be capable. The OCC also considers
the size of potential acquiring banks and holding companies relative to
that of the failing institution, as well as capital adequacy and antitrust
factors. Bidding banks under administrative agreements with specific
capital or management requirements must be able to comply with
those requirements at the time of purchase. This should be discussed
with the bidding bank’s supervisory office and the licensing manager.

C

Persons and Chain Banking Groups ) Only persons or chain banking
groups (i.e., groups that control several banks, albeit not through a
holding company structure), who have extensive banking experience
and known financial and managerial resources, generally are included
on the FDIC’s bidder list. Because the winning bidder must open a
bank the next business day, persons and groups with nominal banking
experience and/or those absent from banking for even a short time are
scrutinized closely and may be found ineligible to bid. In addition,
groups composed of persons who have not worked together in the past
may be subject to closer review, even though they have current

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banking experience. Such close scrutiny of persons and groups assures
the continuity of banking services to a failed institution’s community.
Potential bidding groups that meet that criteria usually are included in the
preliminary list prepared by the FDIC, whether or not they have expressed
specific interest in acquiring the institution that is in imminent danger of
failing. Some potential bidders notify the FDIC of their interest in institutions
in a designated geographical area, but others may be included without
request.
The FDIC circulates the preliminary bid list to the OCC, the OTS, the FRB,
and the state banking regulator to obtain additional supervisory information
about the prospective bidders. This process also enables the FDIC to
discover those institutions or persons upon which the other regulators have
placed conditions to bid (e.g., capital plan, management plan, CRA
performance) or those they would not approve to bid. The FDIC retains the
ultimate authority to include or exclude a potential bidder, although it would
probably exclude a bidder if the appropriate bank regulatory agency objects
to a potential bidder’s inclusion on the list.

Bid Information Meeting
Once a bid list is completed, the FDIC schedules a bid information meeting.
The FDIC invites potential bidders to attend the meeting at least 24 hours in
advance. The OCC, the OTS, the FRB, and the state banking regulator also
are invited to send representatives.
The FDIC presides over the bid information meeting. Specific confidential
information about the proposed transaction is communicated to the
attendees. This includes, but is not limited to, information pertaining to the
failing institution’s:
C

Assets and liabilities.

C

Income and expenses.

C

”Banking” headquarters and branch sites.

C

Contracts.

C

Litigation.

C

Legal documents that will be executed with the FDIC by the winning
bidder.

C

Minimum dollar amounts and percentage levels of capitalization.

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C

Application procedures required by regulators.

The information does not include the failing institution’s examination reports.
An invitation to attend the meeting does not mean that the potential bidder
will be allowed to submit a bid. It merely permits the potential bidder to
obtain confidential information about the institution that is in imminent
danger of failing and to prepare an acquisition proposal, if so desired. The
evaluation and analysis of the proposal by the appropriate regulatory
agencies, including the resulting institution’s primary supervisor, will
determine whether the bid may be submitted to the receiver.
A representative from the OCC, the OTS, the FRB, and the state banking
regulator will discuss the procedures to be followed to obtain his/her
agency’s approval(s) to consummate the transaction. Normally, the OCC
representative outlines the requirements for a national bank to acquire the
failed institution or to establish a new national bank for that purpose.
After the meeting is adjourned, national banks interested in bidding should
talk to the OCC representative who attended the meeting generally to discuss
short- and long-range effects of the transaction, current supervisory concerns,
and other issues. Instructions are provided for filing the application(s) needed
to acquire the failed institution. Potential national bank bidders should
contact the appropriate licensing manager and supervisory office before
submitting a bid.

Bid Submission
In determining whether to approve the proposal, the OCC will evaluate the
national bank’s ability to meet the general requirements and to address
supervisory and/or other concerns adequately. Potential bidders should be
prepared to discuss their proposals thoroughly. While a written application
must be submitted for all transactions, licensing managers or their designees
may waive submission of certain portions of an application.
The FDIC will announce the specific date for the submission of bids after the
bid information meeting. Questions about the proposed transaction should
be resolved prior to the time set by the FDIC for the submission of bids.
Failure to do so may disqualify a potential bid.
At least five days prior to the submission date, potential national bank bidders
must send the OCC draft applications with appropriate attachments. The
drafts will be reviewed for accuracy, completeness, and adherence to key
policies and general requirements. Failure to meet the general guidelines, or
submission of a proposal that may have an adverse supervisory effect on the
acquiring national bank, may lead the OCC to withhold approval of the
proposal.
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OCC approval is based on the quality of the analysis by the bidder, rather
than on the size of the bid. National bank bidders, to maintain maximum
flexibility, may disclose a bid range in the proposals submitted to the OCC.
Therefore, the bidder must provide a satisfactory risk assessment relative to
it’s ability to manage the acquisition successfully. The OCC reserves the right
to accept or reject any proposal submitted.
If approval is granted, the OCC will notify the potential national bank bidder
informally that it is eligible to submit a bid to the FDIC. An ineligible
national bank bidder will also be notified that it may not bid. Final OCC
certification of the purchase and assumption is granted after a national bank
bidder is notified by the FDIC that it is the winning bidder and a declaration
of insolvency and court approval of the purchase and assumption transaction
occurs.
Prior to accepting a bid, the FDIC will ask the appropriate regulatory
agency(ies) for any objections to each proposal. Once the OCC completes its
analysis of the proposal it will inform the FDIC of the proposal’s
acceptability. The OCC must approve the proposal before the FDIC may
accept it. If the OCC approves a proposal preliminarily, the FDIC will be
informed that the OCC will not object to the bidder’s submission of a bid and
will grant the necessary final certification to consummate the transaction if
the bidder wins. If the OCC has decided not to grant the necessary
approval(s), the group will not be permitted to participate in the bidding
process as a national bank bidder.
Bids must satisfy pertinent legal requirements including, restrictions on
entrance to a state by out-of-state bank holding companies, or state-tiered
bidding requirements. Bids must also satisfy national banking laws
applicable to acquisitions of failed institutions. In some communities that
have a small number of banks, bids from local groups may be considered
only after all others have been rejected because of potential antitrust
concerns.
The FDIC reviews bids submitted and declares the winner. If the bids are
unacceptable, the FDIC may negotiate with the bidders. The FDIC may also
consider other bids, including those that were restricted because of
state-tiered bidding requirements or antitrust concerns. After the FDIC’s
board has made its final decision, the winning bidder’s name is
communicated to the bidders and regulators. The amount of the winning bid
is announced after the institution is declared insolvent. All bids submitted are
available from the FDIC, in accordance with the Freedom of Information Act
(FOIA).
If the winning bidder is a new or an established national bank, the OCC
formally approves the bank’s application, following its appointment of the

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FDIC as receiver. At that time, the winning bidder also executes legal
documents with the FDIC.
Consummation of most failure acquisition transactions occur within a few
hours of the appointment of the FDIC as receiver. The purchasing group
must accept the assets and liabilities it has purchased and assumed from the
receiver and prepare to transact business with the failed bank’s customers on
the next business day.

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Documents

Failure Acquisitions
General Instructions

The following general instructions apply to all proposals submitted by
potential national bank bidders for failed institutions.

Where to File
An existing national bank or established holding company should address its
bid proposal to the appropriate licensing manager. An independent
organizing group should submit its bid to the licensing manager located in
the district office that will have licensing responsibility for the resulting
national bank.

What to File
To acquire a failed institution, a copy of the bid proposal, the signed
application, and a board resolution authorizing the transaction must be filed
with the OCC. For an existing national bank, additional time should be
allowed if management from outside the existing bank or affiliate(s) will
assume an executive management role in the resulting national bank. An
independent organizing group should allow four to six weeks for the OCC to
perform requisite background investigations.

Filing Fees
The OCC requires a filing fee, payable to the ”Comptroller of the Currency,”
if the bid is the winning bid. The fees are based on the type of transaction
and are subject to change effective each January 1.

Additional Requests
Requests for other corporate powers associated with the acquisition of the
failed institution may be made simultaneously with the charter and/or P&A
application. (See other appropriate booklets of the Comptroller’s Corporate
Manual for guidance.)

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Instructions for New National Banks
The following is a brief discussion of special considerations for new national
banks seeking to acquire a failed institution. For comprehensive guidance
and specific filing instructions that involve the chartering of a new national
bank, the applicant should refer to the ”Charters” booklet.
The following information generally is required for new national banks:
G

Charter Application

G

Interagency Biographical and Financial Report Form, unless
specifically waived by the OCC.

Organizing Group’s Role
Groups seeking establishment of a new national bank as an acquisition
vehicle must be composed of five or more persons. The group must identify
a proposed CEO before filing the draft applications to establish a new
national bank, which will purchase certain assets and assume certain
liabilities of the failed institution. Management is especially critical to the
success of a new bank established under those circumstances. Organizers
must investigate thoroughly the background and qualifications of the
candidate prior to submission of his/her name to the OCC and must involve
the candidate in the decision to bid on the failed institution.

Identification of CEO and Executive Officers
Selection of a CEO whom the OCC finds unqualified for the position,
whether for prior unsatisfactory banking experience or for other reasons,
could reflect negatively on the organizers, result in disapproval of the
proposal, or preclude submission of a bid. Information on the proposed CEO
received by the OCC will be treated in confidence, if requested, until the
failure transaction is consummated.
Other executive officers with the experience, competence, and willingness to
manage the bank as required by the operating plan must be identified in the
draft application. If the operating plan contains proposals for specialized
types of services, executive officers should have experience relevant to their
development and administration.
The Depository Management Interlocks Act, 12 USC 3201, prohibits
management interlocks between nonaffiliated depository organizations. The
related regulation (12 CFR 26) allows the OCC to permit an otherwise
prohibited interlock under limited circumstances. An interlock relationship
may be allowed if one of the organizations involved is a newly chartered
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bank, and the relationship is deemed ”necessary to provide management or
operating expertise to [the] organization.” Specifically required information
on the interlocking relationship should be submitted by the organizing group
(see the ”Management Interlocks” booklet for further discussion).
The OCC reviews and must have no objections to all directors and executive
officers appointed during the first two years that a new national bank is open
for business.

Capital
The organizing group must plan to raise capital sufficient to support the
risk-weighted balance sheet acquired from the receiver through the purchase
and assumption transaction and the projected volume and type of business
planned. Considerations for determining the adequacy of capital include:
C

Organizing expenses.

C

Earning prospects.

C

Economic and competitive conditions in the community to be served.

C

The experience and competence of management.

C

The risk inherent in the expected asset and liability mix.

C

The amount of fixed asset investment.

C

The dependability of plans to raise, or the ability of the directors to
supply, additional capital when needed.

Initial tangible Tier 1 capital, after organizing expenses are capitalized or
charged to the bank’s capital, must be adequate to implement successfully
the proposed operating plan and compete effectively in the failed institution’s
market area. Organizers must justify to the OCC their proposed capital level.
The OCC may determine that higher or lower amounts of capital from that
proposed are necessary based on local market conditions or the operating
plan of the organizing group.
Generally the OCC does not look favorably on new bank proposals that rely
on debt or other instruments that require repayment of dividends during a
new bank’s initial years.

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Decision Criteria
In reaching its decision, the OCC considers whether the proposed bank:
C

Is able to open immediately after the failed institution has been
declared insolvent with no disruption in services.

C

Has organizers who are familiar with national banking laws and
regulations.

C

Has a competent board of directors with ability and experience
relevant to the type of services to be provided.

C

Has competent management, and key employees, especially those
needed to work out asset and/or liability problems inherent in the
transaction.

C

Has capitalization that is sufficient to support the projected volume and
type of business.

C

Can reasonably be expected to achieve and maintain profitability.

C

Will be operated in a safe and sound manner and in compliance with
applicable laws, policies, and procedures.

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Instructions for Purchase and Assumption (P&A)
The following documents typically must be provided to the OCC for its
review prior to approval of a failed bank P&A:
G

Business Combination Application—Streamlined or Interagency
Bank Merger Act Application

G

Certification of Compliance with Law

G

Draft Purchase and Assumption Agreement

G

List of Directors and Executive Officers

G

Pro Forma Financial Statements, including Pro Forma Combined
Balance Sheet, Projected Regulatory Capital Schedule, Financial
Assumptions, Accounting Discussion, Material Contingent
Liabilities, Capital Implications and Forecast and Estimates of
Post-Merger Financial Results.

(Refer to the ”Business Combinations” booklet for specific filing
instructions.)

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Procedures

Failure Acquisitions
Regulatory Planning
Primary Regulator
1.

Advises the FDIC (receiver) that an institution is in imminent danger of
failing.

2.

Prepares ”bid list” and circulates it to the appropriate financial
institution regulators (i.e., the OCC, the OTS, the FDIC, the FRB, and
state regulator).

FDIC

Licensing Manager
3.

Reviews bid list with other OCC staff, including the appropriate
assistant deputy comptroller (ADC) or examiner-in-charge (EIC) and/or
the portfolio manager, and provides the receiver with additional
supervisory information about the prospective bidders. Advises the
FDIC about institutions or persons that would not be approved to bid
or who could bid subject to certain conditions (e.g., management plan
and capital plan).

4.

Invites regulators and potential bidders to the bid meeting after
considering material from the regulators.

FDIC

Bid Meeting
5.

Presides over the bid meeting and communicates confidential
information about the transaction to groups attending or represented at
the bid meeting.

OCC Representative
6.

Receives copies of draft agreements that may be used in resolution of
the failing institution at the bid meeting.

7.

Briefly discusses the necessary requirements for an existing national
bank to acquire the failed institution or for a new national bank to be
established to acquire the failed institution at the bid meeting.

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Potential Bidder
8.

Meets with the OCC representative at the bid meeting to obtain
information and/or express potential interest in acquiring the failed
institution.

OCC Representative
9.

Provides a copy of pertinent application procedures and other
information.

Potential Bidder
10.

Contacts the appropriate licensing manager to express potential interest
in bidding on a specific failed institution. Submits a proposal in the
form of a draft application at least five business days prior to bid
submission to the FDIC, when possible.

Interim Processing
Licensing Staff
11.

Establishes the official file to maintain all original documents relating to
the application. Also provides Corporate Activities Information System
(CAIS) control number. Initiates and enters appropriate information
into CAIS. A winning bid is recorded as either a business combination
or as a new national bank charter.

12.

Reviews and analyzes the information supplied by the potential
bidders.

13.

Solicits comments from the appropriate ADC or EIC and/or portfolio
manager and, as appropriate, other OCC divisions. If the proposal
contains unusual, complex, or precedent-setting proposals, consults
with Bank Organization and Structure.

14.

Requests additional information about any aspect of the proposal that
needs clarification or further analysis.

15.

Reviews any additional information obtained.

16.

Informally advises the receiver and potential bidders of the OCC’s
decision for each draft application reviewed.

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FDIC’s Board of Directors
17.

Selects a winning bidder. Advises winning bidder and regulators of the
selection.

Licensing Staff
18.

When the winning bidder is a national bank, prepares and forwards a
confidential memorandum and decision page to the appropriate
decision maker.

Decision Maker
19.

Makes a decision under delegated authority.

Licensing Staff
20.

Advises the receiver, the ADC or EIC, and/or the appropriate portfolio
manager of the OCC’s decision.

21.

Initiates and enters appropriate information into CAIS.
(Newly established national banks go to step 22; existing national
banks go to step 27.)

Organization of the National Bank
(Steps 22-26 apply only to transactions involving the organization of a
national bank (see the ”Corporate Organization” booklet).)

Winning Bidder
22.

Submits the Organization Certificate and Articles of Association for the
national bank to licensing staff in the appropriate district office after
receiving informal (i.e., verbal) notification that the OCC has found the
proposal acceptable.

Licensing Staff
23.

Reviews the Organization Certificate and Articles of Association for
accuracy and completeness.

24.

Advises bidder that the Articles of Association and Organization
Certificate have been accepted.

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Failure Acquisitions

Winning Bidder
25.

Proceeds with other steps required to organize the new national bank
as advised by the Licensing staff.

26.

Once organization of the national bank is complete, forwards required
corporate organization papers to the OCC.

Final Processing
27.

Submits any outstanding sections of the application, including an
executed copy of the P&A Agreement and an appropriate filing fee.

Licensing Staff
28.

Forwards the correct filing fee and the deposit memorandum (Form
6043-01) to the Comptroller of the Currency, P. O. Box 73150,
Chicago, IL 60673-7150. Retains a copy of the memorandum in the
official file.

29.

Prepares approval letter and letter notifying the Department of Justice
(DOJ) of the decision.

30.

Forwards approval letter and DOJ notification letter to the decision
maker.

Decision Maker
31.

Signs approval letter, decision statement, and DOJ notification letter.

Licensing Staff
32.

Makes appropriate CAIS entries.

33.

Sends letters and, if applicable, a Satisfaction Survey to the winning
bidder.

34.

For all approvals with special conditions, sends a copy of the
confidential memorandum and decision page to the Quality Assurance
Coordinator.

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Failure Acquisitions

Failed Institution Closing and Consummation
Primary Regulator
35 .

Appoints FDIC as the receiver for the insured bank.

36.

Consummates P&A transaction with the winning bidder.

FDIC
Licensing Staff
37.

Prepares certification letter, including appropriate decisions on all
corporate requests and charter certificates, if appropriate. Forwards it
for signature.

38.

Signs certification letter and, if applicable, delegated official signs
Charter Certificate.

39.

Sends certification letter and, if applicable, Charter Certificate to the
winning bidder.

40.

Makes appropriate CAIS entries.

Close Out
41.

Reviews the official file for completeness and forwards it to Central
Records. Bid lists, satisfactory proposals from unsuccessful bidders,
and unsatisfactory proposals from potential bidders should be retained
for six months and destroyed.

Comptroller’s Corporate Manual

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Failure Acquisitions

References

Failure Acquisitions

Assistance to Insured Depository Institutions
Laws
12 USC 1823, 1823(c)(1)
and (2)(a), 12 USC 1823 (f)(2)(A)
Authorization to Commence Banking Business
Law
12 USC 26
Background Investigations
Regulations

28 CFR 16.34, 50.12

Bank Protection Act
Regulation

12 CFR 21

Bank Secrecy Act (BSA)
Regulation

31 CFR 103

Branches
Law
Regulation

12 USC 36
12 CFR 5.30

Capital Requirements
Law
Regulation

12 USC 51
12 CFR 3

Capital Stock
Law

12 USC 52

Capital Stock Required to Commence Business
Law
12 USC 53
Capital Structure Change
Regulation

12 CFR 5.46

Certificate
Law
12 USC 27
Authorizing Transaction of Banking Business
Law
12 USC 1814
Filing and Preservation
Law
12 USC 23
Changes in Directors and Senior Executive Officers
Law
12 USC 1831i
Regulation
12 CFR 5.51

Comptroller’s Corporate Manual

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Failure Acquisitions

Community Reinvestment Act of 1977
Law
12 USC 2901-2907
Regulation
12 CFR 25
Corporate Powers and Investment Securities
Law
12 USC 24
Depository Institution Management Interlocks Act
Law
12 USC 3201
Regulation
12 CFR 26
Directors
Citizenship Requirement
Law
Convicted of a Crime
Law
Election
Law
Rulings
Engaged in Underwriting
Law
Extensions of Credit
Law
Regulation
Residency
Law

12 USC 72
12 USC 1829
12 USC 71
12 CFR 7.2003, 7.2006
12 USC 78
12 USC 375(b)
12 CFR 215
12 USC 72

Examination of National Banks
Law

12 USC 481

FDIC Insurance
Law

12 USC 222

Federal Reserve Board
Laws

12 USC 222, 12 USC 501a

Fidelity Insurance
Regulation

12 CFR 7.2013

Fiduciary Powers
Law
Regulation

12 USC 92a
12 CFR 5.26

Filing Fees
Regulation

12 CFR 5.5

Comptroller’s Corporate Manual

26

Failure Acquisitions

Independent External Audit
Law

12 USC 1831(m)

Interbank Deposits as Compensating Balances for Loans to Individuals
Connected with Depositing Bank
Law
12 USC 1972
Investment in Bank Premises
Law
Regulation

12 USC 371d
12 CFR 7.3100

Liquidation
Laws
Regulation

12 USC 181, 182
12 CFR 5.48

Notice of Nonpublic Sale of Stock
Regulation
12 CFR 16.7
Offering Circular
Regulation

12 CFR 16.3

Organization Certificate
Law

12 USC 22

Organization of National Bank
Law
Regulation

12 USC 21
12 CFR 5.20

Place of Business
Law

12 USC 81

Prohibited Activities
Law

12 USC 25

Purchase and Assumption
Laws
Regulation

12 USC 24(7), 1828c
12 CFR 5.33

Receivership and Conservatorship
Laws
12 USC 191, 1821, 1821(m)
Securities Offering and Disclosure Rules
Regulation
12 CFR 16
Shareholders’ List
Law

Comptroller’s Corporate Manual

12 USC 62

27

Failure Acquisitions

Trust Bank
Laws
Regulation

Comptroller’s Corporate Manual

12 USC 27, 92a, 1841(c)(2)(D)
12 CFR 9

28

Failure Acquisitions