§5386 — Title 12 Banks and Banking | U.S. Code

Summary

When taking liquidation action, the Corporation must first find that the action is needed to protect the United States’ financial stability and not just to save the failing company. It must make sure shareholders are paid only after all other claims and the Fund are fully paid, and that unsecured creditors take losses under the priority rules in section 5390. The Corporation must remove management and board members who caused the failure if they have not already been removed. It must not take an ownership stake or become a shareholder of the company or any covered subsidiary.

Title 12, §5386

Banks and Banking — Source: USLM XML via OLRC

In taking action under this subchapter, the Corporation shall—

(1)determine that such action is necessary for purposes of the financial stability of the United States, and not for the purpose of preserving the covered financial company;

(2)ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the Fund are fully paid;

(3)ensure that unsecured creditors bear losses in accordance with the priority of claim provisions in section 5390 of this title;

(4)ensure that management responsible for the failed condition of the covered financial company is removed (if such management has not already been removed at the time at which the Corporation is appointed receiver);

(5)ensure that the members of the board of directors (or body performing similar functions) responsible for the failed condition of the covered financial company are removed, if such members have not already been removed at the time the Corporation is appointed as receiver; and

(6)not take an equity interest in or become a shareholder of any covered financial company or any covered subsidiary.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This subchapter, referred to in text, was in the original “this title”, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classified principally to this subchapter. For complete classification of title II to the Code, see Tables.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title.

§5386 Mandatory terms and conditions for all orderly liquidation actions