On Sunday, March 12th, the Treasury Department, the FDIC, and the Board of Governors of the Federal Reserve System (Fed) (the Agencies) announced that the New York Department of Financial Services had appointed the FDIC as receiver for Signature Bank, which was closed on March 11th.  Subsequently, the FDIC announced that it had transferred substantially all of the assets and all of the deposits of Signature Bank to the newly created Signature Bridge Bank, N.A.  Early on March 13th, the FDIC announced a similar transfer of assets and deposits to Silicon Valley Bank, N.A., another n

Date

6/22/2017

Action

Testimony of Keith Noreika, Acting Comptroller of the Currency, before the Senate Committee on Banking, Housing, and Urban Affairs.

Key Provisions

The Comptroller made a series of recommendations for regulatory reforms directed at promoting economic growth and reducing regulatory burden. He stated that the OCC’s recommendations are consistent with the Treasury Report.

Key recommendations include:

Companies that the Financial Stability Oversight Council (FSOC) believes may be subject to FDIC receivership under the Orderly Liquidation Authority contained in Title II of the Dodd-Frank Act, and certain of their affiliates, are now subject to recordkeeping requirements related to their “qualified financial contracts”1 (QFCs).

The Board of Governors of the U.S. Federal Reserve System (Board) recently proposed a rule (Proposed Rule) that will impact parties to any "qualified financial contract" (QFC), as described below, with a global systemically important banking organization (GSIB) or a GSIB affiliate (together, a covered entity). The Proposed Rule will eliminate certain contractual rights with respect to the QFC when:

the covered entity counterparty is placed in a Federal Deposit Insurance Corporation (FDIC) receivership; or

SEC and FDIC Propose Dodd-Frank Broker-Dealer Resolution Rules

Our October 2010 DechertOnPoint “FDIC Begins Action on Its Super-Resolution Rules for Covered Financial Companies” discussed how systemi-cally significant non-bank financial companies (“covered financial compa-nies”) may find themselves in unknown territory if the FDIC is appointed re-ceiver for them.

Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.

Title II of the Dodd-Frank Act establishes a new non-judicial receivership al-ternative for resolving troubled financial companies that could threaten the stability of the U.S. financial system (“Covered Financial Companies”), as described further below. The Federal Deposit Insurance Corporation (“FDIC”), on October 12, 2010, issued a notice of proposed rulemaking (the “Proposal”) to begin to implement the provisions of Title II.

The next few years will see the “redevelopment” of the law in two critical areas involving bank failures where the Federal Deposit Insurance Corpora-tion (“FDIC”) is appointed receiver: (i) the relative rights and claims of creditors of a bank or savings and loan holding company, including the FDIC; and (ii) D&O and professional liability. Significant decisions are be-ginning to be issued with regard to the former.