LEAST-COST RESOLUTION.

SEC. 141. LEAST-COST RESOLUTION. (a) Least-Cost Resolutions Required.— (1) In general.— Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)) is amended— (A) by redesignating paragraphs (5), (6), (7), (8), and (9), as paragraphs (6), (7), (8), (9), and (10), respectively; (B) by redesignating subparagraph (B) of paragraph (4) as paragraph (5); and (C) by amending paragraph (4) (as amended by subparagraph (B) of this paragraph) to read as follows: “(4) Least-cost resolution required.— “(A) In general.— Notwithstanding any other provision of this Act, the Corporation may not exercise any authority under this subsection or subsection (d), (f), (h), (i), or (k) with respect to any insured depository institution unless— “(i) the Corporation determines that the exercise of such authority is necessary to meet the obligation of 105 STAT. 2274the Corporation to provide insurance coverage for the insured deposits in such institution; and “(ii) the total amount of the expenditures by the Corporation and obligations incurred by the Corporation (including any immediate and long-term obligation of the Corporation and any direct or contingent liability for future payment by the Corporation) in connection with the exercise of any such authority with respect to such institution is the least costly to the deposit insurance fund of all possible methods for meeting the Corporation’s obligation under this section. “(B) Determining least costly approach.— In determining how to satisfy the Corporation’s obligations to an institution’s insured depositors at the least possible cost to the deposit insurance fund, the Corporation shall comply with the following provisions: “(i) Present-value analysis; documentation required.— The Corporation shall— “(I) evaluate alternatives on a present-value basis, using a realistic discount rate; “(II) document that evaluation and the assumptions on which the evaluation is based, including any assumptions with regard to interest rates, asset recovery rates, asset holding costs, and payment of contingent liabilities; and “(III) retain the documentation for not less than 5 years. “(ii) Foregone tax revenues.— Federal tax revenues that the Government would forego as the result of a proposed transaction, to the extent reasonably ascertainable, shall be treated as if they were revenues foregone by the deposit insurance fund. “(C) Time of determination.— “(i) General rule.— For purposes of this subsection, the determination of the costs of providing any assistance under paragraph (1) or (2) or any other provision of this section with respect to any depository institution shall be made as of the date on which the Corporation makes the determination to provide such assistance to the institution under this section. “(ii) Rule for liquidations.— For purposes of this subsection, the determination of the costs of liquidation of any depository institution shall be made as of the earliest of— “(I) the date on which a conservator is appointed for such institution; “(II) the date on which a receiver is appointed for such institution; or “(III) the date on which the Corporation makes any determination to provide any assistance under this section with respect to such institution. “(D) Liquidation costs.— In determining the cost of liquidating any depository institution for the purpose of comparing the costs under subparagraph (A) (with respect to such institution), the amount of such cost may not exceed the amount which is equal to the sum of the insured deposits of such institution as of the earliest of the dates 105 STAT. 2275described in subparagraph (O, minus the present value of the total net amount the Corporation reasonably expects to receive from the disposition of the assets of such institution in connection with such liquidation. “(E) Deposit insurance funds available for intended purpose only.— “(i) In general.— After December 31, 1994, or at such earlier time as the Corporation determines to be appropriate, the Corporation may not take any action, directly or indirectly, with respect to any insured depository institution that would have the effect of increasing losses to any insurance fund by protecting— “(I) depositors for more than the insured portion of deposits (determined without regard to whether such institution is liquidated); or “(II) creditors other than depositors. “(ii) Deadline for regulations.— The Corporation shall prescribe regulations to implement clause (i) not later than January 1, 1994, and the regulations shall take effect not later than January 1, 1995. “(iii) Purchase and assumption transactions.— No provision of this subparagraph shall be construed as prohibiting the Corporation from allowing any person who acquires any assets or assumes any liabilities of any insured depository institution for which the Corporation has been appointed conservator or receiver to acquire uninsured deposit liabilities of such institution so long as the insurance fund does not incur any loss with respect to such deposit liabilities in an amount greater than the loss which would have been incurred with respect to such liabilities if the institution had been liquidated. “(F) Discretionary determinations.— Any determination which the Corporation may make under this paragraph shall be made in the sole discretion of the Corporation. “(G) Systemic risk.— “(i) Emergency determination by secretary of the treasury.— Notwithstanding subparagraphs (A) and (E), if, upon the written recommendation of the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) and the Board of Governors of the Federal Reserve System (upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in consultation with the President) determines that— “(I) the Corporation’s compliance with subparagraphs (A) and (E) with respect to an insured depository institution would have serious adverse effects on economic conditions or financial stability; and “(II) any action or assistance under this subparagraph would avoid or mitigate such adverse effects, the Corporation may take other action or provide assistance under this section as necessary to avoid or mitigate such effects. 105 STAT. 2276 “(ii) Repayment of loss.— The Corporation shall recover the loss to the appropriate insurance fund arising from any action taken or assistance provided with respect to an insured depository institution under clause (i) expeditiously from 1 or more emergency special assessments on the members of the insurance fund (of which such institution is a member) equal to the product of— “(I) an assessment rate established by the Corporation; and “(II) the amount of each member’s average total assets during the semiannual period, minus the sum of the amount of the member’s average total tangible equity and the amount of the member’s average total subordinated debt. “(iii) Documentation required.— The Secretary of the Treasury shall— “(I) document any determination under clause (i); and “(II) retain the documentation for review under clause (iv). “(iv) GAO review.— The Comptroller General of the United States shall review and report to the Congress on any determination under clause (i), including— “(I) the basis for the determination; “(II) the purpose for which any action was taken pursuant to such clause; and “(III) the likely effect of the determination and such action on the incentives and conduct of insured depository institutions and uninsured depositors. “(v) Notice.— “(I) In general.— The Secretary of the Treasury shall provide written notice of any determination under clause (i) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking, Finance and Urban Affairs of the House of Representatives. “(II) Description of basis of determination.— The notice under subclause (I) shall include a description of the basis for any determination under clause (i). “(H) Rule of construction.— No provision of law shall be construed as permitting the Corporation to take any action prohibited by paragraph (4) unless such provision expressly provides, by direct reference to this paragraph, that this paragraph shall not apply with respect to such action.’. (2) Annual gao compliance audit.— The Comptroller General of the United States shall annually audit the Federal Deposit Insurance Corporation and the Resolution Trust Corporation to determine the extent to which such corporations are complying with section 13(c)(4) of the Federal Deposit Insurance Act. (3) Clarification of manner of application to the rtc.— Section 21A(b)(4) of the Federal Home Loan Bank Act (12 U.S.C. 1441a(b)(4)) is amended— 105 STAT. 2277 (A) by striking “Powers.—Except as” and inserting “Powers.— “(A) In general.— Except as”; and (B) by adding at the end the following new subparagraph: “(B) Manner of application of least-cost resolution.— For purposes of applying section 13(c)(4) of the Federal Deposit Insurance Act to the Corporation under subparagraph (A), the Corporation shall be treated as the affected deposit insurance fund.”. (b) Secured Claims in Excess of Value of Collateral.— Section 11(d)(5)(D) of the Federal Deposit Insurance Act (12 U.S.C. 1821(d)(5)(D)) is amended to read as follows: “(D) Authority to disallow claims.— “(i) In general.— The receiver may disallow any portion of any claim by a creditor or claim of security, preference, or priority which is not proved to the satisfaction of the receiver. “(ii) Payments to less than fully secured creditors.— In the case of a claim of a creditor against an insured depository institution which is secured by any property or other asset of such institution, any receiver appointed for any insured depository institution— “(I) may treat the portion of such claim which exceeds an amount equal to the fair market value of such property or other asset as an unsecured claim against the institution; and “(II) may not make any payment with respect to such unsecured portion of the claim other than in connection with the disposition of all claims of unsecured creditors of the institution. “(iii) Exceptions.— No provision of this paragraph shall apply with respect to— “(I) any extension of credit from any Federal home loan bank or Federal Reserve bank to any institution described in paragraph (3)(A); or “(II) any security interest in the assets of the institution securing any such extension of credit.”. (c) Data Collections.— Section 7(a)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1817(a)(8)) is amended to read as follows: “(8) Data collections.— In addition to or in connection with any other report required under this subsection, the Corporation shall take such action as may be necessary to ensure that— “(A) each insured depository institution maintains; and “(B) the Corporation receives on a regular basis from such institution, information on the total amount of all insured deposits, preferred deposits, and uninsured deposits at the institution.”, (d) Industry Impact Analysis Required.— (1) In general.— Section 11(h) of the Federal Deposit Insurance Act (12 U.S.C. 1821(h)) is amended by adding at the end the following new paragraph: “(4) Financial services industry impact analysis.— After the appointment of the Corporation as conservator or receiver for any insured depository institution and before taking any action under this section or section 13 in connection with the resolution of such institution, the Corporation shall— 105 STAT. 2278 “(A) evaluate the likely impact of the means of resolution, and any action which the Corporation may take in connection with such resolution, on the viability of other insured depository institutions in the same community; and “(B) take such evaluation into account in determining the means for resolving the institution and establishing the terms and conditions for any such action.”. (2) Clerical amendment.— The heading for section 11(h) of the Federal Deposit Insurance Act (12 U.S.C. 1821(h)) is amended by striking “Liquidation” and inserting “Resolution”. (e) Assistance Before Appointment of Conservator or Receiver.— Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)) is amended by redesignating paragraphs (8), (9), and (10) (as so redesignated by subsection (a)(1)(A) of this section), as paragraphs (9), (10), and (11), respectively, and by inserting after paragraph (7) the following new paragraph: “(8) Assistance before appointment of conservator or receiver.— “(A) In general.— Subject to the least-cost provisions of paragraph (4), the Corporation shall consider providing direct financial assistance under this section for depository institutions before the appointment of a conservator or receiver for such institution only under the following circumstances: “(i) Troubled condition criteria.— The Corporation determines— “(I) grounds for the appointment of a conservator or receiver exist or likely will exist in the future unless the depository institution’s capital levels are increased; and “(II) it is unlikely that the institution can meet all currently applicable capital standards without assistance. “(ii) Other criteria.— The depository institution meets the following criteria: “(I) The appropriate Federal banking agency and the Corporation have determined that, during such period of time preceding the date of such determination as the agency or the Corporation considers to be relevant, the institution’s management has been competent and has complied with applicable laws, rules, and supervisory directives and orders. “(II) The institution’s management did not engage in any insider dealing, speculative practice, or other abusive activity. “(B) Public disclosure.— Any determination under this paragraph to provide assistance under this section shall be made in writing and published in the Federal Register.”. (f) Definitions.— Section 3(m) of the Federal Deposit Insurance Act (12 U.S.C. 1813(m)) is amended by adding at the end the following new paragraphs: “(3) Uninsured deposits.— The term ‘uninsured deposit’ means the amount of any deposit of any depositor at any insured depository institution in excess of the amount of the 105 STAT. 2279insured deposits of such depositor (if any) at such depository institution. “(4) Preferred deposits.— The term ‘preferred deposits’ means deposits of any public unit (as defined in paragraph (1)) at any insured depository institution which are secured or collateralized as required under State law.”.