Banking and Finance Law Daily Wrap Up, RECEIVERSHIPS—OIG reviews FDIC actions following bank failures, (Jun 12, 2025)

By Colleen M. Svelnis, J.D.

The OIG found that FDIC personnel did not adhere to some emergency acquisition procedures while awarding two resolution and receivership contract actions.

The Office of Inspector General (OIG) for the Federal Deposit Insurance Corporation has issued an Audit Report (AUD-25-01) to determine whether the FDIC awarded certain resolution and receivership contracts in accordance with best practices for government contracting and FDIC requirements. The audit focused on identifying industry best practices for emergency acquisitions by reviewing other federal agencies’ acquisition policies.

Findings. The OIG reviewed FDIC policies, procedures, contracts, and supporting documentation, and interviewed key FDIC personnel. Following the Spring 2023 bank failures, the FDIC established emergency acquisition procedures, with a focus on allowing “maximum flexibility,” and identified seven best practices that would continue to permit flexibility while also enhancing the FDIC’s control environment and emergency acquisition preparedness.

According to the audit report, enhancing the FDIC’s preparedness could improve the FDIC’s ability to ensure an adequate supply of contractors, obtain fair and reasonable pricing, oversee contractor performance, protect and ensure the FDIC’s contractual rights, and retain key sources of data and analysis.

The OIG also found that FDIC personnel did not adhere to some emergency acquisition procedures while awarding two resolution and receivership contract actions. FDIC management did not ensure that all aspects of the FDIC’s emergency acquisition process were followed because they perceived the need to employ “maximum flexibility” due to the historic nature of the potential crisis and the need to facilitate procurement actions that met the FDIC’s immediate need. The FDIC’s lack of compliance with some of its acquisition policies and procedures hindered its ability to ensure proper contract oversight management.

The audit report covered three bank failure cases. Silicon Valley Bank, a state-chartered commercial bank based in Santa Clara, California, suffered from “inadequate liquidity and insolvency” and was closed in March 2023. The Federal Deposit Insurance Corporation became the receiver of Silicon Valley Bank, and immediately transferred to the Deposit Insurance National Bank of Santa Clara all insured deposits of Silicon Valley Bank (see Banking and Finance Law Daily, Mar. 10, 2023).

Signature Bank, a New York state-chartered commercial bank also failed in March 2023. The FDIC was immediately appointed as receiver for the Bank, as the FDIC transferred all deposits and most assets to Signature Bridge Bank, N.A. The FDIC also announced it transferred all deposits of both banks to a newly created, full service FDIC-operated ‘bridge bank’ in an action designed to protect all depositors of Silicon Valley Bank (see Banking and Finance Law Daily, Mar. 13, 2023).

The third bank failure was First Republic Bank of San Francisco in May 2023. The bank liquidated its assets, and the FDIC took over as receiver, selling First Republic Bank’s assets and deposits to JPMorgan Chase Bank. As part of the transaction with Chase, the FDIC agreed to assume First Republic Bank’s corporate debt and preferred stock, estimated to be about $13 billion (see Banking and Finance Law Daily, May 1, 2023).

Recommendations. The OIG made 10 recommendations to improve the FDIC’s emergency contracting procedures and internal control environment. The OIG recommended the FDIC do the following:

• establish, and periodically review, an adequate supply of financial advisory and consulting services Receivership Basic Ordering Agreements (RBOA);

• establish an upfront pricing framework within financial advisory and consulting services RBOAs;

• establish an emergency response acquisition team;

• develop and implement periodic testing exercises for key FDIC employees;

• document key analysis, decisions, and commitments;

• establish documented deliverables;

• perform retrospective reviews of the FDIC’s implementation of emergency acquisition procedures;

• review the work performed and information used by four non-U.S. citizens and take appropriate action; and

• provide training and guidance to Division of Complex Institution Supervision and Resolution Executive Management and employees.

FDIC response. After being provided a copy of the report, the FDIC issued a response, emphasizing that the three bank failures discussed in the report represented three of the largest bank failures in FDIC history and occurred with “unprecedented speed.” The FDIC also stated that the FDIC deployed its emergency acquisition procedures and awarded 212 contract actions valued at $450 million to facilitate the resolution and receivership of these failures and minimize risks to the U.S. financial system.

The FDIC agreed that upfront pricing is desirable, and it agreed that improvements can be made around documentation and formalizing certain emergency acquisition processes and response teams.

The FDIC stated that the Division of Complex Institution Supervision and Resolution (CISR) has undertaken several initiatives to enhance its program and begin addressing the OIG’s recommendations. The FDIC also plans to continue using competitive procedures and plans to continue to pursue actions that increase contractor engagement and help ensure the availability of contractor resources, where appropriate.

Companies: First Republic Bank; JPMorgan Chase Bank; Signature Bank; Silicon Valley Bank

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