WASHINGTON — The Federal Deposit Insurance Corp. was set to consider a broad-ranging proposal Tuesday morning on resolution procedures for systemically important nonbanks.
The proposal, required under the Dodd-Frank Act, would establish a "framework for the treatment of creditors" at a failing firm. The FDIC has a well-established process for creditor treatment following the failure of a bank, but Dodd-Frank gave the agency new responsibilities to use its authority for failing behemoths involved in a wide array of financial activities.
The proposal, which FDIC board members planned to discuss at Tuesday's meeting, would lay out criteria to determine if a firm is mainly engaged in financial activities, address the return of compensation from senior executives of a failed company, outlines steps for the priority of unsecured claims and explains the administrative process for a creditor to seek payments from the FDIC.
The proposal would also clarify how creditors of a bridge financial company would be treated.
The priority list for nonbanks would be similar to how the FDIC addresses claims from a failed bank, with some key differences. For one thing, no depositor claims would exist in a nonbank takeover. And some steps added into the process for nonbanks are designed to parallel the bankruptcy code, a key intent of Dodd-Frank.
