Bridge Bank

(redirected from Bridge Banks)

Bridge Bank

In the United States, a bank the FDIC has declared insolvent and has taken over. A bridge bank is separately incorporated from the original bank, which ceases its function altogether. The FDIC administers deposits and loans for the bridge bank for up to three years, until a buyer is found or the bank's operations wind down. A bridge bank must be registered as a national bank.
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The objective is to sell the bridge banks in an open and non-discriminatory process with the aim to maximise the sales price.
Regulators are pushing for the authority to put up special purpose vehicles called bridge banks, which will ensure that bank services to the public will not be disrupted even if an institution has been ordered closed.
The nationalised lenders will now be run by three bridge banks.
The compromise version calls for obliging failed banks to choose one of two options -- let the government make a forced purchase of all of its common shares or come under government administration by becoming bridge banks.
Under the bills, bridge banks would be government-controlled banks that would replace commercial banks facing imminent collapse.
The Asset Management Company of Nigeria (AMCON) has bought three Bridge Banks from the Nigeria Deposit Insurance Corporation (NDIC), for assuming the assets of former Afribank, Bank PHB and Spring Bank.
Bridge banks would basically provide an acquiring bank with two years to assess the quality of the loan portfolio held by the bridge bank.
The establishment of bridge banks to take over failed financial institutions is the centerpiece of the government's plans for financial revitalization released July 2, which aims to salvage the financialsystem from the bad-loan mess.
All these three banks which were acquired through bridge banks were sold to AMCON by the deposit insurer.
Finance Minister Kiichi Miyazawa on Friday asked the opposition camp to revise a key part of its bank-resolution scheme calling for liquidating failing banks, rather than allow such banks to be permanently transformed into bridge banks.
As part of the proposed system, the government will transform insolvent banks into state-controlled bridge banks entrusted with continuing to lend, take and refund deposits until private banks make a purchase offer for the bridge banks.
The opposition has rapped this clause as virtually allowing the Finance Ministry as an adviser to the premier to use its discretionary powers to allow insolvent major banks to continue operations without being transformed into bridge banks.