WASHINGTON BUREAU — The Federal Deposit Insurance Corp. (FDIC) has issued an interim final regulation that establishes rules for liquidating troubled, systemically important insurers.
The FDIC included rules for insurers in the regulation that apply to many types of systemically important nonbank financial companies.
The regulation gives the FDIC sole discretion over whether it will take a lien on insurance company assets if the FDIC is appointed receiver of an insurance company and if it provides funds to help with the orderly liquidation of the company.
The FDIC says in a preamble to the interim final rule that it would take a lien if it makes the determination, in its sole discretion, that the lien is “necessary for the orderly liquidation of the company” and “will not unduly impede or delay the liquidation or rehabilitation of the insurance company or the recoveries by its policyholders.”
The FDIC issued the rule to implement a provision in Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The provision gives the FDIC the authority to take over a troubled nonbank based on a determination by the Federal Reserve Board, the Federal Office of Insurance, and the Treasury Department, in consultation with the FDIC, that the company is in default or imminent danger of default and that the company’s failure would have serious adverse effects on the nation’s financial stability.
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