FDIC Loss-Sharing Arrangement
The FDIC Loss-Sharing Arrangement is a program created by the Federal Deposit Insurance Corporation (FDIC) to protect depositors in the event of a bank failure. Under the arrangement, the FDIC agrees to reimburse depositors for losses up to a certain amount, and the bank agrees to share in the losses beyond that amount. This arrangement is designed to protect depositors from the full financial impact of a bank failure, while also providing the bank with an incentive to manage its risk and remain solvent.
History of the FDIC Loss-Sharing Arrangement
The FDIC Loss-Sharing Arrangement was created in the wake of the 2008 financial crisis, when the FDIC was faced with the challenge of protecting depositors from the losses associated with bank failures. The arrangement was designed to provide a more equitable solution than the traditional FDIC insurance program, which only reimburses depositors up to a certain amount. By having the bank share in the losses beyond that amount, the FDIC was able to provide a more comprehensive level of protection for depositors.
The FDIC Loss-Sharing Arrangement has been in place since 2009, and has been used in numerous bank failures since then. The arrangement has been successful in protecting depositors from the full financial impact of a bank failure, while also providing the bank with an incentive to manage its risk and remain solvent.
Comparison Table
| FDIC Insurance | FDIC Loss-Sharing Arrangement |
|---|---|
| Reimburses depositors up to a certain amount | Reimburses depositors up to a certain amount and the bank shares in the losses beyond that amount |
| Incentive for banks to manage risk | Incentive for banks to manage risk and remain solvent |
Summary
The FDIC Loss-Sharing Arrangement is a program created by the Federal Deposit Insurance Corporation (FDIC) to protect depositors in the event of a bank failure. Under the arrangement, the FDIC agrees to reimburse depositors for losses up to a certain amount, and the bank agrees to share in the losses beyond that amount. This arrangement is designed to protect depositors from the full financial impact of a bank failure, while also providing the bank with an incentive to manage its risk and remain solvent. For more information about the FDIC Loss-Sharing Arrangement, you can visit the FDIC website or consult with a financial advisor.
See Also
- FDIC Insurance
- Bank Failure
- Financial Crisis
- Depositor Protection
- Risk Management
- Solvency
- Financial Advisor
- FDIC Website
- Deposit Insurance
- Bank Regulation
