On December 20, 2016, the Office of the Comptroller of the Currency (“OCC”) released a final rule addressing the receivership of national banks that are not insured by the Federal Deposit Insurance Corporation (“FDIC”) and therefore are not subject to receivership by the FDIC under the Federal Deposit Insurance Act (“FDIA”).  While all 52 existing uninsured national banks are trust banks, the final rule also will presumably apply to fintech companies that obtain special purpose national bank charters if and when the OCC charters them.

The final rule addresses the following key issues, among others:

  • Appointment of Receiver.  Under the final rule, the Comptroller may appoint a receiver for an uninsured national bank on the same grounds that a conservator or receiver may be appointed for an insured depository institution under section 11 of the FDIA, and also if the Comptroller finds that the bank has fewer than five members on its board of directors.  The Comptroller can appoint the OCC or another government agency as receiver, and will oversee and direct the activities of the receiver.  However, the FDIA provides that the FDIC is not subject to any other agency when acting as receiver, meaning that if the Comptroller appointed the FDIC as receiver of an uninsured national bank, the FDIC would not be subject to oversight by the Comptroller.  Upon making certain findings, the Comptroller also may, at its discretion, remove a receiver or reduce the receiver’s fees.
  • Powers of receiver.  The receiver of an uninsured national bank has similar powers to the FDIC in a receivership of an insured depository institution, including to take possession of the books, records, and assets of the bank; collect all debts and claims belonging to the bank; sell real and personal property and doubtful debts, subject to the approval by a court of competent jurisdiction; and deposit receivership funds collected from the liquidation of the bank in an account designated by the OCC.
  • Claims process.  Parties with claims against the uninsured bank can seek approval of their claims through two different methods.  First, similar to the process under the FDIA, a party can submit a claim to the OCC for the agency’s evaluation.  Second, and unique to an uninsured national bank receivership, a party can pursue judicial resolution by filing suit in court against the uninsured bank, and then presenting a final judgment from the court to the OCC.  The final rule provides for a right of set-off, meaning that if an uninsured national bank has an obligation to a claimant, and the claimant has an obligation to the bank, the obligations will be set off against each other and the amount of the claimant’s claim will be the net balance remaining.
  • Priority.  The OCC will pay claims and expenses in the following order of priority: (1) administrative expenses of the receiver; (2) uninsured creditors of the bank, including secured creditors to the extent their claim exceeds their valid and enforceable security interest in collateral; (3) creditors with subordinated claims; and (4) shareholders.  A secured creditor with a valid and enforceable security interest in property of the bank is entitled to exercise that security interest apart from the priority of distributions, to the extent of the value of the creditor’s claim.  The receiver may marshal any surplus value in the collateral as an asset of the estate.
  • OCC assessments.  In its September 2016 proposed rule, the OCC solicited comment regarding approaches to assessing fees if the administrative expenses of a receivership exceed the assets of the estate.  Options for the OCC to recoup its otherwise unrecovered receivership expenses might include imposing assessments on all national banks, all uninsured national banks, or all uninsured national banks that share the characteristics of the insolvent bank (e.g., all fintech companies with special purpose national bank charters or all uninsured trust companies).  The final rule does not adopt any particular approach, but the preamble to the rule notes that the OCC continues to consider its options.
  • Treatment of fiduciary or custodial assets.  The final rule provides that assets held by an uninsured national bank in a fiduciary or custodial capacity will not be considered part of the bank’s estate, and therefore will not be available to pay claims to creditors.  In addition, the final rule empowers the receiver to close the bank’s fiduciary and custodial appointments and accounts, or transfer all or some of such accounts to a successor fiduciary or custodian in accordance with applicable federal law.

The final rule will be effective on January 19, 2017.