In the United States law of banking regulation, a bridge bank is a temporary bank organized by federal bank regulators to administer the deposits and liabilities of a failed bank. Under the Competitive Equality Banking Act (CEBA) of 1987, the Federal Deposit Insurance Corporation (FDIC) is authorized to operate a failed bank for a period of up to three years, until a buyer can be found for its operations.
Under CEBA, when a FDIC-insured bank is in financial trouble, the FDIC "may establish a bridge bank to â€"
Bridge banks must be chartered as national banks. To the extent possible, bridge banks are required to honor the commitments of the failed bank to its customers, and not to interrupt or terminate adequately secured loans. Bridge banks are authorized to seek to liquidate failed banks, either by finding buyers for the bank as a going concern, or by liquidating its portfolio of assets, within two years, which can be extended for cause by an additional year. Should the bridge bank fail to wind down its operations within the allotted time, the bridge bank must notify the Comptroller of the Currency of its intent to dissolve the bridge bank. Under this situation, the FDIC is appointed as the receiver of the bridge bank's assets.
See also
- Receivership
References
