ort market liquidity. These facilities ranged in scope from the Term Securities Lending Facility, which provided loaned Treasury securities to primary dealers against eligible collateral, to the Term Asset-Backed Securities Loan Facility, which provided loans to investors for the purpose of purchasing asset-backed securities.Likewise, during the COVID-19 pandemic, the FRB used its Section 13(3) authority to create several lending facilities, including the Primary Market Corporate Credit Facility, under which the FRB purchased new bond issuances of, and provided loans to, eligible corporations, and the Commercial Paper Funding Facility, though which the FRB purchased the commercial paper of corporations.The FRB to Review the Supervision and Regulation of Silicon Valley BankOn March 13, 2023, the FRB announced that Vice Chair for Supervision Michael Barr is leading a review of the supervision and regulation of Silicon Valley Bank. The review will be publicly released by May 1, 2023. See 12 U.S.C. § 1823(c)(4)(E)(i)(I). 12 U.S.C. § 1823(c)(4)(G)(i). See 12 U.S.C. § 343. The regulation implementing section 13(3) is the FRB’s Regulation A. See 12 C.F.R. §201.4(d). Id. Id.[View source.]

While seemingly a far-fetched scenario, particularly if the fee lender is a significant institutional lender (this would require a sequence of events such that, among other things, the landlord will have defaulted under its fee loan and the fee lender is separately in bankruptcy; though in truth such a scenario may not be difficult to envision given events following the Great Recession of 2008 and its aftermath), lenders, particularly CMBS lenders, view this as a significant flaw. Moody’s, in published guidance for CMBS issuances,5 takes the position that an “SNDA does not sufficiently mitigate the risks inherent when fee financing is superior to the lease and leasehold mortgage” because the SNDA may be deemed an executory contract that could be rejected in the fee lender’s bankruptcy or may be declared unenforceable upon the fee lender’s insolvency and takeover by the FDIC under 12 U.S.C. § 1823(e).6While this issue can be addressed when entering into a new lease by subjecting any current or future fee mortgage to the lease in the manner noted above, using the SNDA mechanism with a refinanced leasehold secured by an existing ground lease may raise concerns with lenders, particularly in the case of CMBS originations.

r uninsured deposits in the event of future bank failures.Under the proposed rule, the FDIC plans to calculate the special assessment based on each bank’s estimated uninsured deposits as of December 31, 2022, reported to the FDIC. The initial $5 billion of uninsured deposits for each bank will be exempted. If a bank operates as part of a holding company, the assessment will be determined at the bank level by the FDIC.The FDIC aims to collect these special assessments at a rate of approximately 12.5 basis points annually, spanning eight quarters. As per FDIC’s estimates, this proposed assessment will generate $15.8 billion in revenue for the Fund. Should the estimated Fund loss change over time, the FDIC retains the authority to adjust the collection period or impose additional assessments to bridge the gap.To provide comments on the proposed assessment, individuals can submit their feedback online, via email, or through traditional mail by following the instructions available on the . 12 U.S.C. 1823(c)(4)(G)

lation LL).See 12 C.F.R. §§252.2 and 252.5 for the relevant definitions of Category II, Category III, and Category IV.A Category I banking organization is a U.S. global systemically important bank holding company (GSIB) as identified under the FRB’s GSIB surcharge rule (see 12 C.F.R. §217.402).Relevant definitions for savings and loan holding companies are contained in the FRB’s Regulation LL. Category IV foreign banking organizations are those with average combined U.S. assets of $100billion or more. The additional risk-based factors are average weighted short-term wholesale funding, nonbank assets, cross‑jurisdictional activity, and off-balance sheet exposure. The LCR and NSFR are essentially joint rulemakings of the FRB, the Office of the Comptroller of the Currency, and the FDIC, and it is highly unlikely that any individual agency would amend these rules unilaterally. In contrast, the FRB may act unilaterally to amend EPS requirements contained in Regulation YY and Regulation LL. 12 U.S.C. §1823(c)(4)(G). For example, additional risk-based triggers could include being funded by heightened levels of uninsured deposits or a concentrated customer base. Under the LCR and NSFR rules, Category III firms with less than $75 billion in average weighted short-term wholesale funding are subject to an 85% outflow adjustment percentage and stable funding adjustment percentage, respectively.Under these rules, Category IV firms with $50billion or more in average weighted short-term wholesale funding are subject to a 70% outflow adjustment percentage and stable funding adjustment percentage, respectively.The LCR and NSFR rules do not apply to depository institution subsidiaries of Category IV firms. There is potential for additional regulatory guidance or rulemaking on incentive compensation. See “Incentive‑Based Compensation Arrangements,” Proposed Rule, 76 FR 21169 (April 14, 2011); “Incentive-Based Compensation Arrangements,” Proposed Rule, 81 FR 37669 (June 10, 2016).Seealso “Guidance on Sound In

lationships. It could also result in a piecemeal sale of their assets. The market will decide the outcome. Our advice is: hope for the best, prepare for the worst. And if you are acting in a management or fiduciary role, you must consider the possible outcomes if you wish to be maximally protected by the business judgment rule.If You Have A Claim Against The Closed Banks:The FDIC originally put out on its website that if the closed Silicon Valley Bank owed anyone money on the date of its closure, such creditor was required to file a claim with the FDIC for it or it would be extinguished.The same for Signature Bank. The bar date to file a proof of claim is (at least) 90 days from the date of the publication of the bank closure; we would utilize the closure dates in the absence of more specific information from the FDIC. We are presently evaluating what, if any claims must be brought by creditors of the failed banking entities, and by when. We will provide more information on this soon. 12 U.S.C. § 1823(d)(3)(D)(i) & (ii).https://www.svb.com/news/company-news/silicon-valley-bridge-bank-n.a.-in-operation-details-for-counterpartieshttps://www.signatureny.com/homehttps://www.svb.com/globalassets/bridge-bank/silicon-valley-bdi-transfer-agreement-03.13.23sign.pdfhttps://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/signature-ny.htmlhttps://www.reuters.com/business/finance/us-regulator-taps-piper-sandler-new-bid-sell-silicon-valley-bank-sources-2023-03-15/https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley-faq.html; see also https://www.fdic.gov/analysis/quarterly-banking-profile/fdic-quarterly/2010-vol4-2/fdic-quarterly-vol4no2-claimsarticle.pdf; https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/poc-form-resolute.pdf; https://www.fdic.gov/consumers/banking/facts/creditors.htmlhttps://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/signature-ny.html12 U.S.C. § 2277a-10c (b)(3)(B)(i).

er which insured depositors must be paid back their deposits, followed by the uninsured depositors, and then general creditors being paid on their approved claims (followed by subordinated debt holders, followed by stockholders). Here, both the insured and uninsured depositors were paid back all of their deposits in full pursuant to the FDIC’s authority and the exercise of the systemic risk exception.https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html.https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/signature-ny.html.See fn. 1 & fn. 2.https://www.fdic.gov/consumers/banking/facts/creditors.html.Id.See fn. 1 & fn. 2.https://www.fdic.gov/consumers/banking/facts/creditors.html.https://www.fdic.gov/consumers/banking/facts/priority.html; https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley.html; https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/signature-ny.html.See 12 U.S.C. § 1823(c)(4)(G). The statute provides that if excess losses result from the exercise of the systemic risk exception, the FDIC “shall recover the loss to the Deposit Insurance Fund . . . from “1 or more special assessments on insured depository institutions, depository institution holding companies . . . or both . . . .” Id.

Bank Implications:The FDIC has issued a number of releases and letters since the collapse of the financial institutions in an attempt to stabilize the banks and the market. The FDIC provided the following guidance:All obligations and loan positions, including as lender, issuing bank, administrative agent, and any other function that was formerly performed by SVB and SB, have now been assumed by the applicable bridge bank.All commitments to advance under existing credit agreements will be honored in accordance with their terms.All counterparties may transact business with, settle transactions, and conduct business with the banks.All vendors and counterparties to contracts are expected to make payments and fulfill contractual obligations.All obligations of vendors and counterparties to contracts may be enforced by the FDIC as receiver (12 U.S.C. § 1821(e)(13)).All contracts may be transferred by the FDIC as receiver notwithstanding any apparent limits on transfer in the contract itself (12 U.S.C. § 1823(d)(2)).All obligations of the bridge banks are backed by the FDIC and the full faith and credit of the United States government.It is noteworthy to point out, however, that the applicable transfer agreements between the FDIC and the bridge banks grant the receiver the right to reassign any transferred asset or assumed liability upon notice within a specified time period (Transfer Agreement, §§ 2.04 and 2.05). Moreover, contractual obligations assumed and to be assumed are those identified on a Schedule that still remains in process—which provides little comfort to beneficiaries of letters of credit.Relevant Links:Silicon Valley Bridge Bank, N.A. in Operations – Details for Counterparties (March 14, 2023): https://www.svb.com/news/company-news/silicon-valley-bridge-bank-n.a.-in-operation-details-for-counterpartiesFDIC Confirmation That Bridge Bank Open and Operating (March 14, 2023): https://www.svb.com/globalassets/bridge-bank/fdic-confirmation-that-bridge-bank-open-and-operating-new.pdfFDI

ith the protection of investors and unsecured creditors in mind.The FDIC will establish a process for submitting proofs of claims in the receivership proceedings sometime in the near future, and potential claimants should consult with counsel to preserve their positions within the receivership proceedings as they progress. FDIC receiverships typically are administered in ways that are similar to state court receiverships or bankruptcy cases, but they are not governed by state law or the bankruptcy code.[1] FDIC press releases may be accessed here. [2] To read more about the history behind the passage of the Federal Deposit Insurance Corporation Improvement Act of 1991, refer to this 2013 article by Noelle Richards of the Federal Reserve Bank of Philadelphia. [3] A copy of the term sheet for the program is available here. [4] For a more complete discussion of the FDIC strategies, refer to Chapter 6 of Crisis and Response: An FDIC History, 2008-2013. [5] See 12 USC §§ 1821(d)(13)(E) and 1823(d)(3)(D). [6] See 12 USC § 1821(e). [7] See Crisis and Response, linked in footnote 4, above. [8] See A Borrower’s Guide to an FDIC Insured Bank Failure. [9] See 12 USC § 1821(e)(4)(B).

here when need[ed]” in its statement over the weekend and in live remarks from President Biden on March 13, 2023. In addition, the President’s remarks echoed the message contained in the White House statement that the government is “committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.” In live remarks, the President communicated the Administration’s position that it will do whatever it takes.Protection of DepositorsTo prevent potential losses to depositors at SVB and Signature Bank, the agencies invoked the so-called “systemic risk exception.” The exception allows the Deposit Insurance Fund (DIF) to protect “depositors for more than the insured portion of deposit” if doing so would “avoid or mitigate” the “serious adverse effects on economic conditions or financial stability” that would otherwise occur from winding up a bank in receivership. 12 U.S.C. § 1823(c)(4)(G). The exception requires a two-third vote by the Boards of the Federal Reserve and FDIC and an emergency determination by the Secretary of the Treasury made in consultation with the President. The agencies noted that losses to the DIF will be recovered by a special assessment on banks as required by the systemic risk exception authority.Liquidity SupportThe Federal Reserve, with the support from Treasury of up to $25 billion from the Exchange Stabilization Fund,1 announced the Bank Term Funding Program (BTFP) to support bank liquidity by lending against eligible collateral. Notably:Any U.S. federally insured depository institution (including a bank, savings association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit is eligible to borrow under the BTFP;The eligible collateral includes collateral eligible for purchase by the Federal Reserve Banks in open market operations that was owned by the borrower as of March 12, 2023;Advances will b

It does not discuss perfection of the pledge. The federal savings and loan bailout statute enacted after the savings and loan crisis of the 1980's (known as the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended) (FIRREA) provides in 12 U.S.C. § 1823(e) that a collateral pledge agreement will not be valid against the FDIC if it does not meet three specific requirements. The three FIRREA requirements are: (a) the agreement is in writing; (b) the pledge is approved by the board of directors or loan committee of the financial institution, and such approval is reflected in the minutes; and (c) the approval is kept continuously as an official record of the financial institutions.