Watchdog finds problems with FDIC large bank alternative liquidation program

In the more than 12 years since the FDIC was given the authority to liquidate systematically important financial intuitions when they pose a systemic risk that cannot be addressed via bankruptcy proceeding, the agency has not maintained a consistent focus on maturing the program nor has it fully established key elements to execute its responsibilities, the FDIC Office of Inspector General concluded in a report released today.

The Orderly Liquidation Authority, or OLA, program was created by the Dodd-Frank Act to provide the FDIC the authority to liquidate failing financial companies that pose a significant risk to U.S. financial stability and the FDIC, Federal Reserve and Treasury Department determine that a bankruptcy filing is insufficient. The OIG recently reviewed the program and found that while the FDIC had made some progress, there were several deficiencies in its implementation of the OLA, from a lack of adequate monitoring mechanisms to no real readiness plan for a scenario in which multiple large institutions fail over a short time period. The office had 17 recommendations for improving the program and said the agency had proposed appropriate corrective actions.