Receivership: It is what it is.

There has been a lot of talk and confusion regarding the bank and receivership and conservatorship, etc.

Apparently some people think all that means is that the regulators would have another bank step in to replace Citizens to manage the bank, and it would be business as usual. That may be true in some instances, but there appear to be some other outcomes that could occur, depending on the circumstances. All of the possible scenarios do protect the insured accounts of the customers. The OCC policy and procedures manual, referenced below, lays it out pretty well, though there is a lot of room for interpretation. Read it for yourself and decide. Any banking experience here would be helpful.

Some of the contributors to this site have narrowed the scope on the concept under other posts. Click here for a fairly involved explanation from the PPM (policy and procedures manual) of the OCC. Towards the bottom of page 9 hits on the topic. This document also explains some of the enforcement actions to which Princeton National Bancorp, Inc. has subjected of late.

Read Section 38 h of the Federal Deposit Insurance Act . It is just over halfway down in section ” h 3″      “Conservatorship, receivership, or other actions required.”

3 comments on “Receivership: It is what it is.

  1. Yeah I don’t think it is a sure thing that, if the bank fails, that another bank will buy it. I’ve heard from others that a lot of the good loans walked down the street to the other banks already. What’s left to buy? I hope they can pull off raising capital but it looks pretty bleak at this point.

    • Good point. Consider agricultural loans – the larger operators need to take out a new operating loan of perhaps $1M or more each year. Even if they have been doing business at Citizens for years, with all the uncertaintly, why not walk down the street?

      Even longer-term loans may have been taken out when interest rates were higher than now. Those borrowers will want to refinance or restructure their loans – and if they have good credit history, may go elsewhere.

      In the past, major borowers could prefer to keep doing business with one bank – where they are well known by the same staff and lending officers. But now, many of the key bank execs at Citizens are gone and others may follow suit. If there winds up being another bank’s name on the door, headquartered elsewhere, how much is customer loyalty worth?

    • Good loans walking down the street? What about deposits? Many people (I’m one) have innumerable automatic direct deposits and debits coming into and out of their Citizens checking account: various utility bills, social security payments, PayPal, dividends, etc. I don’t worry about losing my FDIC-insured deposits, but I do worry about having to change all those automatic items on short notice if Citizens closes its doors with no successor bank.

      It might be smart to go ahead and open up a checking account at another bank, and start moving the automatic accounts? Worst case: on Super Bowl weekend, our gas, electricity, and TV cable are all shut off.

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