Conservator or Receiver

If necessary, establish a preliminary failed bank employee retention strategy with the bank intervention manager, and management of any extant liquidation office, giving consideration to (1) the cost of the incentive versus the disruptive cost to the receivership should the employee(s) leave, (2) industry standards, and (3) alternative retention strategies. The receiver should hire any necessary employees on a limited-term contract in order to avoid labor problems later.¹²

Ensure that appropriate delegations of authority (see Chapter 7) and powers of attorney have been issued, as applicable.¹³

Make inquiries with the examiner-in-charge, or the appropriate bank employee, to determine when the bank employees were last paid and how much accrued vacation pay may be owed to them.

Bank Intervention Manager

The bank intervention manager’s main function is managing and coordinating all intervention team members to assure that the intervention goes as smoothly as possible. The bank intervention manager can delegate many of the functions to others; however, the bank intervention manager bears ultimate responsibility to assure completion of intervention activities as required. Initial activities include:

• Obtain and review a copy of the information package and other relevant information.

• Verify and coordinate with the function managers the number and distribution of noncomputer-generated reports and computer-generated reports.

• Determine the type of business conducted at each location.

• Develop strategies and assign responsibilities for business lines.

• Select a code name for the intervention.

• Ensure that lodging (if necessary) and meeting room arrangements have been made.

• Prepare “intervention packets” to be given to program areas and intervention team members (include organizational chart, telephone and fax number list, and information sheet).

• Coordinate with information technology (IT) team and get a copy of the preintervention IT analysis to determine the important information itemized on the IT checklist (e.g., When do accruals cut off? Can hold be placed on accounts?).

• Ensure that security and facilities teams are prepared to secure ATMs and night deposit boxes if locations are not purchased or the assuming bank wants them closed

• Conduct a preintervention meeting with the entire intervention team, making sure everyone understands what their job will be, whom they will report to, and how their assignment fits into the intervention as a whole.

• If applicable, contact the winning bidder, provide a copy of the assuming institution’s preintervention information, and discuss the intervention process and weekend schedule and responsibilities, particularly in regard to deposit account holds and how to deal with the media (i.e., refer questions to supervisory authority’s designated spokesperson). Stress the importance of confidentiality until the intervention.

• Obtain the following:

  • List of assuming bank’s personnel attending the intervention

  • Name and telephone number of the contact person with the assuming bank

  • Assuming bank’s board resolutions identifying names and signatures of employees authorized to sign official receipts

  • Insurance binder covering the institution building, contents, and liability, naming the conservator/receiver as additional insured as of institution intervention

  • Wire instructions

• Determine if payment of earned and unpaid payroll expenses of bank employees is in the best interest of the conservatorship/receivership and, if so, ensure payment prior to intervention.

• Obtain the failed bank employee roster and inquire among function managers if they need to use those employees for intervention activities. If possible, select a temporary employment service contractor as the method to pay failed bank employees for their services during an extended intervention or post-intervention period. For small, short interventions, arrange with the assuming bank to pay failed bank employees, with reimbursement through settlement.

Accounting Team

• Review the information package to estimate the number and composition of assets that the receivership can expect to inherit.

• Review proposed transactional document (e.g., P&A agreement) for asset and liabilities splits with assuming bank, if applicable.

• Review bank’s financial reports.

• Determine the staffing required for the intervention.

• Determine the computer equipment/software, and the supplies required to perform the accounting function.

• Attend preintervention function managers meetings and other meetings as applicable.

Asset Team

• Review the information package to estimate the number and composition of assets that the receivership can expect to inherit.

• Review any nontraditional business lines in terms of how they operate, special skills needed, and staffing requirements.

• Determine the staffing required for the intervention.¹⁴

• Determine the computer equipment/software, and the supplies required to perform the asset intervention function.

Branch Operations Team

• Identify the number of branches and the types of activities offered at each branch, the institution contact person, and the assuming bank contact (if applicable) at each branch. Plan for differences in language spoken, time zones, and hours of operation. For foreign branches, the banking and bankruptcy regulations of the country will take precedence and should be researched in advance. For branches located abroad, coordinate with the legal department to secure the services of an experienced banking attorney in each country prior to the intervention.

• Determine the staffing requirements of each branch. For large interventions with large branches, establish an on-call reserve force to help handle Monday customer lines and other unforeseen needs.

• Instruct each branch manager to check in during the first hour of the intervention to report status and problems.

• Obtain the address, directions to, phone number, and fax number of the branch and a copy of lease and landlord’s name and phone number, if available.

• If a representative of the assuming bank plans to attend the branch intervention, prepare a copy of the closing overview for the representative’s information. If this information has not been delivered, a copy should be provided just prior to the intervention or upon arrival of the representative.

Deposit Operations Team

• Perform a preliminary insurance determination according to governing deposit insurance law.

• Identify any politically sensitive depositors such as churches, charitable or religious organizations, and public units unsecured, fully insured, and/or fully secured.

Facilities and Security

Supplies:

• If needed, prepare a box of supplies to be sent to the intervention site; depending on the retail resources available at the intervention location, additional supplies may be obtained later.

• Ensure necessary forms and documents are loaded on laptop and a CD for back-up.

• Obtain printer for use at the hotel/failed bank.

• Arrange for an official seal, tape, or other means to control drawers, and use labels for inventory.

Intervention team coordination:

• Review the information package and attend all prein-tervention meetings to determine the number of supplies, copiers, printers, and security officers needed to facilitate a smooth institution intervention.

• Prepare the intervention packets for distribution the intervention team members; suggested items to include information sheet, organizational chart, map with directions to the institution/hotel.

• As needed, arrange for intervention meetings with the team managers and/or entire intervention team.

Logistics:

• If applicable, begin travel arrangements (i.e, hotel availability near the institution, airline schedules). Once the hotel is selected and a contract is negotiated, submit it to the bank intervention manager for the approval process. Ask for a 24-hour cancellation clause. Also, arrange for a room for meeting space and storage of supplies/equipment.

• Determine if the failed bank’s existing facilities have the capacity to accommodate the intervention team. Arrange for additional work space if necessary (e.g., hotel conference rooms).

Security:

• Meet with contracted security guard firm or police; provide instructions, determine locations and assignments.

Information Technology Team

If possible, the IT manager should visit the failing institution to help prepare data files, equipment, and information needed for the intervention. The manager can use this opportunity to gather additional information and resolve unanswered questions where possible. Additional tasks include:

• Determine capability of stopping accruals, when to expect the download files, report generation capability, delivery logistics, and staffing.

• Coordinate with the bank intervention manager regarding the important information itemized on the IT checklist (e.g., When do accruals cut off? Can we place holds on accounts? Has the bank been servicing loans for any other banks?).

Legal Team

• Review the bank inspection report.

• Review the legal authority of the regulating and supervisory entities to commence the process, withdraw the bank’s license, and designate a receiver, supporting the actions with legal foundations.

• Prepare the proper legal order (i.e., conservatorship or receivership) as required by law.

• Meet with the members of the receivership/liquidation team to review the strategy for the process.

• Provide the bank intervention manager with copies of applicable transaction documents (e.g., P&A agreement) once a bid has been accepted, if applicable.

• Review major contracts and agreements as requested by the conservator/receiver or the bank intervention manager (including letters of credit, open credit lines, unfunded and partially funded commitments, etc.).

• Accompany the conservator/receiver, the bank intervention manager, and the representative from the applicable supervisory authority when the proper legal notice (i.e., conservatorship or receivership) is served on the bank.

• Make sure that the notice is published in accordance with the law.

• Review important documents as indicated on the checklist (e.g., insurance policies, correspondence and claims, audit reports, board of directors minutes, legal and litigation files, etc.) for possible future legal action against the bank’s directors and officers.

• Identify and prepare the initial target list of directors and officers whose electronic data are to be secured.

Personnel Team

• Prepare sign-in/out sheets for intervention team and failed bank employees.

• Prepare timesheets for failed bank employees to use (unless theirs are acceptable).

Security Team

• The security function manager should take immediate control of SWIFT and/or other wire transfer facilities.

• The security function and IT managers should ensure that ATMs are disabled and applicable networks notified.¹⁵

• All the night depositories should be locked and/or sealed, with official notices posted on them. Any night depositories must be emptied and the contents inventoried under dual control and work processed by the accounting team.¹⁶

• The initial intervention team must keep the key bank officials under control. Do not allow anyone to leave the meeting, make a phone call, or issue any instructions, as this may be detrimental to the bank.

• Depending on the nature of the bank’s problems (i.e., responsibility of key bank management for the bank’s problems), the former key bank management may be escorted out of the bank. In this case, they are not allowed to remove any items, personal or otherwise. The intervention team will inventory their offices and take control of anything important to the bank’s business. The bank intervention manager or conservator or receiver will arrange for any personal items to be delivered later.

The bank intervention manager then notifies the remaining intervention team members to enter the bank and commence their assignments. The intervention team may be much larger than the initial intervention team and in that case, team members should enter in small groups. Coordinate the entry scheduling of intervention team members to eliminate any confusion. Intervention team members with branch operations responsibilities can coordinate by phone.

Initial intervention team meets with remaining management, notifies them of the revocation of all authority and their new reporting responsibilities. Depending on staff size and locations, all employees may be included in initial staff meeting.

When team members enter the bank, each function manager immediately commences a meeting with bank staff in his/her assigned area. If the bank has a small number of staff, this meeting may be held with all bank employees at one time, or the bank intervention manager may have already conducted it. Coordinate this meeting during intervention planning. The outline for the meeting is shown in Annex 3.13.

Function managers are to follow the checklists that have been prepared and approved for their actions. The following critical areas are stressed:

• Ensure that everything concerning the ongoing operation is under control, including:

  • SWIFT or other wire transfer facilities

  • Cash

  • Loan notes, collateral, and other documentation

  • Deposit files and documentation

  • Wire transfer

  • Fixed assets

  • Other assets documentation

  • Telephones

  • Fax machines

  • Cars.

• Cash must be counted.

• Offices, desks, and storage areas, such as drawers, file cabinets, etc., must be secured and inventoried. If inventory cannot be accomplished immediately the storage areas must be secured by an official adhesive seal or tape to prevent contents from being stolen, lost, or destroyed. Initially, extra supervisory authority staff can help secure and inventory bank items. Bank staff may assist as long as they are accompanied by an intervention team member. Frequently bank personnel maintain some cash in their desks.

• Personal computers must be secured to prevent deletion of important files.

• The security function manager must collect the bank’s official stamps, seals, and any other evidence of authority for bank. These must be inventoried and secured, with notification given to the proper authorities.

• General ledger must be posted to date, reconciled, and balanced.

• The supervisory authority must prevent any loss, destruction, or manipulation of records, assets, or liabilities. The function managers must be alert to potential problems with employees such as abuses, vandalism of documentation or systems, and similar problems.

• Immediately advise other affected parties (payment system, clearing system, correspondent banks) of the intervention, revocation of previous management’s authorities, and transfer of authority to supervisory authority.

Public/Media Relations

Well before any problem bank action, communications departments from both the supervisory authority and the DIA should diligently coordinate information and control information through one spokesperson. They should prepare and deliver a media statement immediately after taking control of a bank, providing information in a positive light to reassure the public. It should stress that the authorities have acted in the best interests of the depositors and the financial stability of the banking system. To avert any uncertainty and misconception, all communication should be provided in simple terms, as outlined below.

• Press releases should be brief, factually accurate, and as positive as possible (see Annex 3.14).

• Possible follow-up questions should be anticipated and answers prepared (see Annex 3.15).

• The authorities should share as much information as possible with the media in order to create and maintain goodwill.

• The initial message should describe the action taken and how the resolution will be handled.

Prior to any bank failures, the authorities should coordinate in developing a media and depositor education plan that answers, at a minimum, the following questions:

• Where will insured deposits be paid?

• Is there an acquiring bank to act as paying agent?

• Will all branch facilities be open for payment?

• When will deposits be paid (or be made available)?

• What information must an insured depositor provide to obtain payment?

• What happens to my loan?

• Must I continue making payments?

Function managers, team members, employees of the bank, and supervisory authority and DIA employees must not make statements to the press or the public. Channel all such contact through the designated official spokesperson.

Failed bank employees answering general telephone calls may be provided scripted information to provide to callers or visitors to the failed bank premises (Annex 3.16). Inquiries for further information or callers demanding to talk to an official should be referred to the designated official spokesperson of the intervention team.

Finally a notification letter should be distributed to all shareholders, customers, borrowers, and vendors of the bank. The letter should provide basic information and a contact person and telephone number, and emphasize the continuing responsibilities of borrowers to the bank.

Function Manager Plan

This section describes the various objectives for each intervention function.¹⁸ Each function manager is to prepare a plan for each area of responsibility prior to initial intervention. (Note: Neither the bank intervention manager nor the conservator or receiver should serve as a function manager during the intervention, unless the bank to be closed is small. The bank intervention manager should focus on managing and controlling the process and informing the conservator or receiver, who will be preparing for conservatorship or receivership. Other conservator or receiver team members may also serve as function managers, however.) The plan must be reviewed and approved by the bank intervention manager and conservator or receiver not less than three days prior to intervention. The plan should be developed as follows:

• Review applicable section of intervention manual and preliminary information package for bank.

• Talk to other function managers in charge of related functions to coordinate responsibilities (e.g., the IT team will have to interact significantly with the deposit operations team and asset team to ensure that they receive the necessary reports).

• Inform the bank intervention manager of any areas of significant overlap, or areas of responsibility with no one assigned.

• From objectives, checklists, and other items set out in this manual, develop a checklist of specific tasks to be accomplished, and establish the priority based upon importance and urgency. The checklist should focus on tasks required from the time of intervention.

• Discuss proposed plan with others on the intervention team in related functions and with persons familiar with bank (on-site and off-site), and revise the plan as necessary.

• Submit your plan to the bank intervention manager for review and approval. The bank intervention manager will review all plans and will be able to detect areas with duplicate or missing items.

• Revise the function plan. Intervention organization and procedures may need to be revised during the intervention period as the function manager learns more about the operation and organization of the bank.

The bank intervention manager will prepare a comprehensive intervention report for the conservator or receiver. The report should include accomplishments, a summary of problems encountered, pending issues, and other areas of concern assembled from the various function manager checklists. It should clearly explain the work performed and follow up concerns in priority order.

The function plan should contain the following components:

• Statement of objectives

• Tasks, with primary and secondary tasks listed in priority order

• Issues or questions requiring additional information or of special interest.

The function areas are:

1. Accounting

2. Asset management (cash, teller, and vault operations)

3. Branch operations

4. Deposit operations

5. Facilities and security

6. Information technology

7. Legal

8. Personnel.

Checklists for each function area are included in the function checklists at the end of this chapter. Checklists must be prepared and ready at the time of intervention. The bank intervention manager or conservator or receiver must approve any major changes and additions. Properly maintained checklists should provide a method for the bank intervention manager, function manager, and conservator or receiver to review the project status at any time.

Conservator or Receiver

The conservator or receiver should attend, to the extent possible, daily bank intervention managers’ meetings with function managers, settlement/P&A meetings with the assuming bank, and accounting meetings with the assuming bank, if applicable.

The conservator or receiver must also bear transition items in mind, such as:

1. Coordinating with the asset manager:

   • Ensure that assets transferred under terms of the P&A agreement are receipted to the assuming bank.

   • Present list of letters of credit to the assuming bank, and request that they replace the letters of credit prior to disaffirmation.

   • Present list of retained unfunded commitments to the assuming bank, and request that they review them for possible assumption prior to dis-affirmation.

   • Ensure that repossessed collateral is secured for later disposition in a proper and cost-effective manner.

   • Confirm with the asset manager that first notice letters have been sent to customers whose loans have been retained by the conservator/receiver.

   • Determine which, if any, unfunded commitments will be honored. Obtain approval to fund or disaffirm unfunded commitments. Set procedures with the intervention accounting manager and the assuming bank, if necessary, on funding and track-ing advances for retained unfunded commitments.

2. Coordinating with the deposit operations manager:

   • Ensure that notice letters are sent to depositors whose accounts have been held.

   • Remind the assuming bank that it is their responsibility to sustain the account holds until appropriately released.

3. Coordinating with the personnel manager:

   • Finalize and implement employee retention strategy.

   • Confirm how the failed bank employee costs are to be shared by the receiver and assuming bank, as applicable.

4. Coordinating with the facilities manager:

   • Obtain schedule of contracts, agreements, and leases from closing team. Prepare disaffirmation cases and notices on items not assumed by the assuming bank. The assuming bank may decline certain contracts and agreements immediately, but others will need further review (a P&A agreement usually sets a 30-day deadline). In either case, disaffirm the contracts, agreements, and leases, as soon as possible.

   • Ensure that appropriate space, staffing, and equipment are available for any potential asset sales.

5. Coordinating with the legal manager:

   • Obtain from the legal department a list of loans subject to litigation. Confirm with legal the correct litigation division between the conservator or receiver and the assuming bank.

Additionally, the conservator or receiver must have adequate staff and space available to meet with customers, answer questions, and respond to customer needs and problems regarding relevant aspects of the intervention process. Please refer to Chapter 6 and 7 for greater detail on transition and post-intervention activities.

Bank Intervention Manager

The bank intervention manager has responsibility for the following:

• Coordinates and manages all intervention functions, including staffing level determination, personnel selection, designation of assignments, and liaison with all supervisory authority departments.

• Organizes and supervises intervention personnel in all aspects of the intervention, assuring that all resources are efficiently and properly used.

• Provides input to the function managers regarding specific requirements for the intervention.

• Coordinates all meetings and intervention personnel matters.

• Establishes and ensures appropriate lines of communication with all function managers.

The bank intervention manager should prepare a comprehensive intervention file to document all the intervention activities. The manager’s book should contain documents and materials such as those listed in the sample table of contents in Annex 3.17.¹⁹

Additionally, the bank intervention manager should designate a member of the intervention team to prepare an inventory book of assets and liabilities. The inventory book is a compilation of important financial information and other data pertaining to the bank as of the date of receivership. This information provides an important reference to the receiver in the post-resolution period of the bank.

The inventory book should be completed within 120 days of the bank intervention date. Information should be compiled electronically whenever possible. Original “signed” documents (e.g., the P&A agreement) should be scanned if possible.

Verify the documents with the source contact as needed. The attachments should be reviewed and organized prior to submitting them to the bank intervention manager for approval. The manager may decide to include additional items in the book, as circumstances vary at each intervention.

Annex 3.18 presents a listing of the items to be included in the inventory book, a description of each item, and the contact responsible for providing the information.²⁰

Accounting

Objective: Manage and maintain the accounting function, including posting to the general ledger and subledgers and production of financial and management reports. Preserve integrity and accuracy of accounting system. Assist other function managers to identify all assets and liabilities and see that they are properly reflected on the books of the bank.

It is critical that the bank’s accounting records be current and accurate in order that proper reports can be developed for the conservator or receiver and others to use in this process. The following additional tasks should be carried out:

• Obtain, catalog, secure, and analyze all existing reports in regular usage.

• Request and obtain all of the bank’s account numbers at the clearinghouse, reports on accounting activity, and a daily balance sheet.

• Post any outstanding items after review at proper level.

• Analyze each general ledger account and identify the components of each subsidiary account. Prepare a pro forma balance sheet reflecting corrective adjustments. Identify additional write-offs and questionable entries discovered during the analysis.

• Provide an accurate financial statement as of intervention date (or most recent month-end) and on regular basis in the future.

• Reconcile accounting records internally, and with regulatory reports.

• Work with the asset function manager to prepare the “Estimated Loss in Assets” (Annex 3.19) report for the conservator or receiver.

• Produce cash flow statement (recent historic) and cash flow projection.

• Verify compliance with tax reporting and payment requirements.

• Produce bank regulatory and clearing reports in a timely manner.

• Interact closely with other departments on entries to help identify assets and liabilities that are not properly reflected on the bank’s books.

• Manage the settlement process, including:

  • Administering any transactional agreement (e.g., P&A)

  • Monitoring transactions to assure compliance with all terms and conditions of the agreement by the assuming bank and the receiver

  • Administering the transfer of funds to and from the assuming bank for the payment of assets sold under the agreement and the reimbursement of expenses incurred on behalf of the receiver or the assuming bank

  • Notifying all correspondent banks and transfers accounts, acting as the assuming bank’s key contact during the settlement process.

Asset Management

Objective: Preservation of value of loans and other assets, including off-balance-sheet assets. The following tasks should be carried out:

• Inventory investments, loans, and other assets (nonfa-cilities)

• Assess their condition

• Determine what actions are required to assure the necessary control, continued accounting, and administration of the assets during the conservator or receivership period.

General:

• Obtain physical control and preservation of loan files, other asset documents, and off-balance-sheet items, including written guaranties, commitments, and letters of credit.

• Ensure secure storage of legal documents and other important documentation.

• Order and review most recent accounting records (trial balance, subsidiary ledgers).

• Locate all work in process and confirm exact status—interview loan officers and check their desk files.

• Enforce the general rule—no new loans or applications, and no renewals or extensions without written justification and approval by conservator or receiver.

Loans

Review each outstanding loan to determine current status, according to the asset checklist (e.g., verify that all outstanding loans are reflected on the general ledger and loan subsidiary ledger, verify that original documentation is in file, compile an inventory of any missing documents, review and evaluate pending commitments and approved loans, etc.).

Other (Nonloan, Nonfacility) Assets

Other assets consist of repossessed assets, investments in subsidiaries, joint ventures, partnerships, consignment items such as commemorative coins, art, and apartments or holiday resort properties, or any otherwise unidentified asset that may have value to the bank. The following tasks should be carried out:

• Identify and inventory other assets.

• Assess the risk exposure for other items.

• Determine what further analysis is necessary.

• Recommend appropriate action to protect the value or minimize the risk of identified assets.

Off-balance-sheet items:

• Obtain accounting records.

• Identify and inventory off-balance-sheet items.

• Assess the risk exposure for off-balance-sheet items.

• Develop plans for most urgent items.

• Assess contingent liability and risk exposure, and prepare report on findings.

• Determine next steps and make recommendation.

Written-off loans and other assets:

• Obtain records and review.

• Identify assets that should be accounted for and tracked (collection expected).

• Evaluate collection possibilities.

• Take appropriate steps to liquidate assets, including starting litigation procedure of debtors, if justified.

Note: An important responsibility of the conservator, receiver, or liquidator is the creation of a map of related debtors, indicating their respective companies, as well as the asset and liability accounts involved, the associated collateral, and the persons or representatives through which the presumed “fraud” of the directors and/or managers of the institution placed in conservatorship or receivership has been conducted, so that the legal and financial scam used for personal gain to the detriment of the bank will be absolutely clear.²¹

Cashier, Teller, and Vault Operations²²

Objective: Preserve and safeguard cash and cash-like assets.²³ The following tasks should be carried out:

• Inventory (count) all cash at teller drawers and vault cash at time of intervention (Annex 3.20).

• Inventory cash-like items (traveler’s checks, money orders, all other) at time of intervention.

• Continue teller operations.

• Review internal controls and make changes to protect cash and cash-like items.

• Develop and establish transaction authorizations. Provide clear and simple authorization levels at initial intervention, and modify as necessary.

Branch Operations

Objective: Control branch premises, assets, and operations. The following additional tasks should be carried out:

• Take control of and inventory the cash and any other valuable documents (notes, negotiable collateral, safekeeping items, and other negotiable instruments) at these branches.

• Inspect branch sites and evaluate physical facility and local market, and collect pending items such as approved or in process loans; ensure that information flows and conservator or receiver controls are in place at all branch locations.

• Coordinate branch operations with functional areas related to facilities management, personnel, lending, teller, and deposit functions.

Deposit Operations

Conservatorship objective: To preserve the bank’s deposit base and provide liquidity for the bank.

Receivership objective: To compensate insured depositors.

The following tasks should be carried out:

• Be prepared to have adequate staff on hand to counsel uninsured depositors; staff must explain how the insured deposit was determined and how to file a claim for the uninsured amount.

• Develop contingency plan for a deposit run, and train employees.

• Regardless of whether there is an acquiring bank or the bank goes to liquidation, the intervention team must be prepared for a large number of customers gathering at the bank premises who want their deposits.

• Obtain and secure accounts’ subsidiary ledgers and customer lists.

• Prepare deposit distribution schedules that show deposits according to priority of claim.

• Evaluate interest rates and other account terms on maturing accounts.

• Recommend changes to deposit account interest rates on a regular basis (e.g., weekly) according to market practices.

• Provide maturity information and pro forma to accounting for cash flow projection.

Account Holds

In coordination with legal and the asset team, a member of the deposit operations team should develop a list of deposit accounts that may correspond to delinquent or matured loans (potential offset), or that are pledged as collateral for a loan or letter of credit.

Following are some criteria for freezing deposit accounts:

• The deposit amount is in excess of the deposit insurance limit.

• When any maker or guarantor of a loan (i.e., commercial, real estate, installment, etc.) is 60 days or more past due.

• When any maker or guarantor’s loan is one or more days past maturity.

• The accounts of directors and/or officers, pending consultation with the legal team.

• All deposit accounts pledged as collateral on a loan or letter of credit.

• All accounts of any maker or guarantor of a charged-off loan.

Note: Holds should not be placed on any account or group of accounts for an amount that exceeds the party’s indebtedness. If the loan is past due, past maturity, or charged-off, then a hold for the full amount of payoff (principal and interest) would be appropriate.

Account holds should be coordinated with the IT team prior to the start of business the next day.

In case of an assuming bank, management of the assuming bank is responsible for maintaining the holds. Provide an alphabetical listing of account holds to the assuming bank’s tellers prior to the bank’s reopening. Clearly instruct them that they have no authority to release any funds from held deposit accounts. Any problems should be referred to the bank intervention manager, conservator, or receiver.

Account hold notices should be prepared, reviewed by legal counsel, and mailed to all appropriate parties (e.g., account holders whose accounts are being held for reasons other than collateral).²⁴

Facilities and Security

Facilities objective: Responsible for financial and physical maintenance of office properties and other fixed assets. The following tasks should be carried out:

• Arrange and maintain work stations for all employees.

• Provide office supplies as necessary.

• Provide meal service for first night of intervention as appropriate.

• Arrange for delivery of copiers, fax machines, and printers as needed.

• Locate and provide support for additional work space for intervention team if needed.

In coordination with the asset manager:

• Place moveable assets, such as vehicles, furniture, fixtures, and equipment under control and immediately inventory (from largest to smallest value).

• Assess physical condition of real estate and determine whether repair or rehabilitation is necessary to preserve asset value.

• Assess all costs and outstanding expenses for reason-ability, especially insider (bank’s affiliates) transactions and recent changes.

In coordination with the accounting manager:

• Review recent purchases, outstanding payables, and similar large items for abuses or insider transactions.

• Continue rent and utilities payments on all office facilities and other fixed assets; notify all vendors immediately in writing (Annex 3.11).

• Continue collection of rents on office space and apartments; notify all tenants immediately in writing (Annex 3.11).

• Collect all insurance policies and evaluate amounts and types that are in force. What are maturity dates? Ensure that premium payments are made to continue coverage.

• Until a closed bank budget is approved, establish a level above which payments must be approved by the function manager and, over a higher designated amount, by the conservator or receiver.

• Develop a six-month budget for anticipated facilities expenses.

• Coordinate funding requirements with the accounting function manager to ensure funds are available for necessary payments.

Security objective: To safeguard the assets of the bank by preventing:

• Entry by unauthorized persons

• Vandalism of property, including files and records

• Theft of bank property.

Two areas of particular vulnerability are actions of remaining employees and/or customers, and nonbanking hours when the intervention team is not in the bank.

• Access to the bank, particularly noncustomer areas, must be restricted to approved employees; asset storage facilities must be secured immediately; put official seals on vault, cash drawers, note cabinets, and any storage areas containing official stamps, negotiable collateral, safekeeping items, other negotiable items (unissued CDs, traveler’s checks, check stock, etc., as applicable), and any other asset.

• Locks must be changed immediately, or as soon as possible;²⁵ distribution of new keys and combinations should be limited to a “need” basis, and be fully documented; keys/combinations to sensitive or significant areas should not be distributed.

• Security systems and services must be immediately brought under control of conservator or receiver (consider hiring new security service for after-hours security).

• Access codes and passwords to alarms, door entries, and computer systems must be immediately changed, with new distribution fully documented and limited to a “need” basis (see Alarm Instructions below).

• Coordinate crowd control with local police in case large gatherings of customers and/or employees threaten the public peace.

• In cases of deposit payoff, coordinate with deposit operations regarding the number of customers to allow inside the bank.

General Security

• Require identification of any individual not readily identified as intervention team members, contractors, or former bank employees working for the conservator or receiver.

• Ensure all individuals sign in and out each time they leave or return to the bank premises.

• Inspect any large parcels, boxes, or suspicious items leaving the premises.

• Refer any questionable items being removed from the building that are not clearly personal in nature to the bank intervention manager, the conservator, receiver, or the facilities manager.

• All individuals not identified as intervention team members or former bank employees working for the conservator or receiver will be denied entrance to the building until cleared by the facilities manager.

Vault Security

• Former bank employees are not permitted in the vault without being accompanied by an intervention team member.

• All individuals must sign in and out of the vault.

• Any item removed from or taken into the vault must be signed in and out.

Other Requirements

• Provide contact information for the bank intervention manager and conservator or receiver to security personnel in case of an emergency after hours.

• After hours, no one is permitted into the bank unless accompanied or authorized by an intervention team member.

• Security personnel must ensure that the bank premises key is given to the next guard on duty.

Combinations

• Obtain all combinations from bank personnel and place them in a sealed envelope with the critical information listed on the envelope (bank name, bank number, branch location, person obtained from and location of the vault). The combinations will be receipted to the assuming bank. In the event of a payout, receipt over to the owned real estate specialist.

Alarm Instructions

• Obtain the alarm instructions, alarm code, and/or the alarm key from the bank’s security officer. Place the instructions and key/code in a sealed envelope with the critical information listed on the envelope (bank name, bank number, branch location, person obtained from or bank’s security officer, and alarm company name, contact person, phone number and the responding agency).

• Determine whether unauthorized personnel can impair the integrity of the system.

• If the system includes local law enforcement agency monitoring, notify the agency immediately of the bank’s intervention. Advise the agency of the hours in which the premises will be occupied. Inform the agency how they may contact the facilities manager around-the-clock in the event of an emergency.

Information Technology

Objective: Maintain system integrity and continue services in accounting, reporting, and other management information and external beneficiaries. The following tasks should be carried out:

• Physically secure computer system, including on-site data processing operations, communications systems, e-banking services, wire transfer, personal computers, Internet provider, and networks. Secure and protect storage media.

• Disable automatic teller machines (ATM, Bancomat) and notify network service (Annex 3.8).²⁶

• Act as point of contact between the bank intervention manager and failed bank’s data processing operations staff and/or data processing servicer.

• Coordinate processing requirements for all bank intervention team functional areas.

• Coordinate ongoing operation with the assuming bank.

• Coordinate imaging and storage of documents associated with failed bank.

• Obtain and deliver downloads and reports as required.

• Review internal controls and limit access to system.

• Assess backup, archive system, and emergency situation plan; make necessary changes to ensure integrity and protection of systems and data.

• Review distribution procedures for reporting and make necessary changes to ensure proper and timely distribution.

One common possibility that the IT function manager should always bear in mind is that the bank employees may keep unofficial copies of information and/or documents, which could be of great value for the intervention team, whether or not the management of the bank has authorized those copies. Accordingly, any member of the intervention team who has access to or is aware of such information should inform the IT function manager for follow-up. Similarly, the IT function manager, interacting with whomever it may concern, should decide whether to prerecord the data or eliminate and/or disable the use of storage devices such as disk drives, CD writers, external hard drives, etc.²⁷

Legal Issues

Objective: Initiate, manage, and terminate intervention litigation. The following tasks should be carried out:

• Provide legal support to other functions.

• Provide counsel to the conservator or receiver on legal matters.

• Provide legal advice to functional areas at the direction of the conservator or receiver, especially with regard to risk exposure of contracts and viable alternative actions.

• Responsible for continuation of existing litigation, with timely and urgent assessment of whether and to what extent such litigation can and should be continued or concluded.

• Draft legal contracts and other required documents.

• Authority includes hiring and firing of law firms and payment of legal fees, subject to approval of conservator or receiver above a specified amount.

• Oversee modifications to loans and other contract signings.

During the Receivership

• Assist the receiver or liquidator in the act of commencing the bank receivership process.

• Attend the meetings between the persons in charge of the bank placed in receivership and the receiver or liquidator.

• Obtain a list of all the litigation of the bank and the files on those cases (if the files are not at the bank, locate them immediately).

• Review the most important cases and submit a report on them to the receiver or liquidator.

• Provide advice on any legal matter regarding relations with the bank’s employees (labor laws in effect, etc.).

• Provide advice to the members of the intervention team on any legal issue.

• Provide advice on the finalization of contracts or other pending obligations.

• Assist in finalizing or settling all the bank’s fiduciary obligations.

• Collaborate in preparing notice to customers and other financial institutions and persons who may be affected by the bank intervention.

• Assist the receiver or liquidator in the review and resolution of any type of claim.

• Assist the receiver or liquidator regarding legal requirements involving payment priorities on claims (order of priority of creditors).²⁸

Personnel Issues

Objective: Maintain adequate staffing, in number and abilities, to accomplish objectives of the supervisory authority and the conservator or receiver acting in the best interest of the deposit insurance fund and the depositors and creditors of the failed bank. Continue personnel policies and procedures, while preventing abuses. The following tasks should be carried out:

• Prepare and maintain the failed bank organization chart, job descriptions, and listing of employees, consultants, and contractors.

• Assess compensation for reasonableness and identify potential abuses, with particular emphasis on upper management, shareholders, and recent changes in compensation.

• Protect and maintain failed bank personnel records.

• Continue the payment of wages, salaries, and benefits.

• Evaluate staffing level and salaries, and make precise recommendations to conservator or receiver.

• Assist function managers with employee issues, including hiring and firing personnel.

• Do not pay large or suspicious amounts until approved by the conservator or receiver, in consultation with legal.