Accelerated Resolution Program
A program put together to preserve the value of financial institutions while in the process or on the verge of bankruptcy.
Accelerated Resolution Program Details
The purpose of the Accelerated Resolution Program, also known as ARP, is to keep failing financial institutions in private hands until they're purchased. Due to the collapse of a large number of banks and savings institutions, the financial resources of the Federal Deposit Insurance Corporation, Resolution Trust Corporation, and Federal Regulators are under increasing pressure to support failing financial institutions.
In times of financial difficulty, regulators' interests rarely coincide with the interests of shareholders, debt holders, creditors, employees, and customers. The mechanism for Accelerating Resolution Programs is simple. First, an institution that is bankrupt or on the verge of bankruptcy stands as a protector or receiver. The supervisory authority must agree to appoint a protector. Second, the agency must accept a wide range of operating restrictions. These restrictions provide regulators with the opportunity to approve meaningful business decisions to help secure the financial institution's future.
The decisions made by regulators include the following:
- Loan exercise and restructuring
- Major asset disposal
- Payments to debt holders
- Employee compensation and changes in benefit plans
- Compensation and insurance arrangements for directors and senior staff
The Accelerated Resolution Program theory allows the financial institution to be under private individuals or organizations' operations during the marketing process. The Accelerated Resolution Program maintains the financial institution's value to its greatest extent, so less government help is needed to support the resolution.
Real-Life Examples of the Accerlaretd Resolution Program
Continental Savings Organization
The Continental Savings Organization was unable to raise enough funds to continue operations; the Continental Savings Organization in San Francisco agreed to join the federal government's Accelerated Resolution Program. The company has six Bay Area branches and many loan production offices in California. The Continental Savings Organization lost $10.7 million in the first nine months of last year. On September 30, tangible capital was 2.95%, and venture capital was 5.26%.
The Accelerated Resolution Program allowed the Thrift Oversight Office and the Resolution Trust Corporation to promote the Continental Savings Organization based on ancillary transactions. The transactions aim to solve the frugality of $418 million in assets.
San Clemente Savings Bank
The Federal Regulators assumed charge of the San Clemente Savings Bank. The California bank had already been part of an Accelerated Sales Program due to its weak condition. The Office of Thrift Supervision has stated that it has placed the seven-branch subsidiary in bankruptcy protection. It has accredited a new federal mutual institution to take its place. The new institution, San Clemente Federal Savings Bank, will function under the Resolution Trust Corporation's supervision.
The takeover of the San Clemente Federal Savings Bank won't result in the obstruction of daily operational activities. Over one-tenth of the treasury assets were categorized as non-performing or $22.3 million of $220.4 million. For the past few months, federal regulators have been looking to offload San Clemente Federal Savings Bank through the government's Accelerated Resolution Program.