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It explains how the law restructures the priority of payments in failed insured depository institutions, placing deposit liabilities above general or senior liabilities. It also analyzes how nondeposit creditors may respond, including strategies to protect claims, and assesses resulting implications for FDIC losses and policy.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/the-national-depositor-preference-law-a-critical-look-at-depositor-preference-and-its-effects/325046/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/the-national-depositor-preference-law-a-critical-look-at-depositor-preference-and-its-effects/325046.png","ImageObject",300,407,{"name":92,"@type":93},"Patrick","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-22","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":44},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What priority of payment does Title III of OBRA93 establish for failed depositories?","Question",{"text":112,"@type":113},"It sets receiver administrative expenses first, followed by deposit liabilities, then general or senior liabilities, subordinated obligations, and finally shareholder claims.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How does the FDIC define administrative expenses under the interim rule?",{"text":117,"@type":113},"The rule clarifies administrative expenses as including post-appointment obligations incurred as part of liquidation and certain expenses incurred before the receiver’s appointment.",{"name":119,"@type":110,"acceptedAnswer":120},"Why might depositor preference increase the FDIC’s loss exposure?",{"text":121,"@type":113},"General creditors may take actions, such as securing collateral to protect their claims, which can shift loss exposure and potentially raise the FDIC’s exposure in some cases.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},325046,1790472289,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":44,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},549758146520,"https://ap-avatar.wpscdn.com/avatar/80002397d8c0411e94?_k=1775819394049821470","by James B.Thomson  \nLast Augus 10,Cogespased heOmnibus Budget Reconciliation Act of1993(OBRA93).Contained in this legis-lation was a provision that dramaticallyrevised the priority of claims on failed de-pository institutions.The Act'seffect wasto give depositors(and,by implication,the Federal Deposit Insurance Corporation[FDICJ]a superior,or preferred,claimona failed bank's assets relative to that ofother general creditors.By doing so,Con-gress hoped to reduce the FDIC's lossesfrom bank failures.In fact,the Office ofManagement and Budget estimated that anational depositor preference law could cutthe FDIC'sexpected losses by SI billionover the next five years.  \nBeing buried in a much larger piece oflegislation,depositor preference receivedlittle public attention and was passed withalmost no debate.This is unfortunate,be-cause economic policies often have unin-tended,secondary effects that dominatethe intended ones.In the case of deposi-tor preference laws,the general creditorsof banking firms are likely to take actionto protect their claims.As a consequencethe loss exposure of the FDIC could actu-ally increase.  \nIn this article,we take a critical look atdepositor preference.The first sectionoutlines the new legislation and theFDIC's implementation of it,and thesecond examines the way in which de-positor preference restructures a bank'sliabilities.We then examine the possi-ble reactions of nondeposit creditors tothis restructuring and discuss the impli-cations for policy.  \n# The National Depositor Preference Law\n\n## ■ The Legislative Provisions\n\nTitle Ⅲ of OBRA93 instituted depositorpreference for all insured depository insti-tutions by amending Section 1l(d)(11)ofthe Federal Deposit Insurance Corpora-tionAct.²The amendment establishesthe following priority of payment in re-solving failed depositories:  \n1.Administrative expenses of thereceiver  \n2.Deposit liabilities  \n3.General or senior liabilities  \n4.Subordinated obligations  \n5.Shareholder claims  \nPrior to passage,general or other seniorliabilities had the same priority of pay-ment as deposits.As before,securedcreditors of the failed institution wilhave their claims satisfied first,up to theamount of the collateral.This is an impor-tant detail,since one avenue for generalor senior creditors to pursue in reaction todepositor preference laws is to take collat-eral to protect their claim.  \nOn August 13,1993,the FDIC issuedan interim rule interpreting the deposi-tor preference amendment.³The im-portance of this rule is that it clarifieswhat the FDIC will consider as admin-istrative expenses of the receiver.Un-der the FDIC's interpretation,these in-clude “post-appointment obligationsincurred by the receiver as part of theliquidation of an institution ...and cer-tain expenses incurred prior to the ap-pointment of the receiver.\"In otherwords,the receiver(which for mostbanks and thrifts is the FDIC)may payexpenses it deems consistent with theorderly closure of the institution,even  \nFebruary 15.1994  \nThe national depositor preferencelaw was added to the 1993 budget actto reduce the government's cost ofproviding deposit insurance.A care-ful look at depositor preference andits attendant effects suggests that itwill provide only minor cost savings.In fact,in some cases it could increasethe Federal Deposit Insurance Corpo-ration's losses from bank failures.  \n       claims equal $12 million,distributed as                         follows:insured deposits(FDIC)=58Liabilities with No Depositor Preferencemillion,uninsured deposits =$3 mil-lion,and general creditor claims=$1Collateralized claims(CC)Senior claims(SC)million.8 The proportion of senior claimsInsured deposits(FDIC)by type are WFDc=0.6667(8/12),WUDUninsured deposits(UD)=0.25,andWGcc=0.0833.Since seniorGeneral creditor claims(GCC)claims exceed the general asset pool bySubordinated debt claims(SDB)S2 million,senior creditors are not repaidEquity(E)in full:Each loses S0.17 per dollar of   Liabilities with Depositor Prefere","cbCaivVr7PEspFQf","https://ap.wps.com/l/cbCaivVr7PEspFQf","pdf",1184404,"English","# The National Depositor Preference Law\n## ■ The Legislative Provisions\n## ■ A Simple Look at Depositor Preference","[{\"question\":\"What priority of payment does Title III of OBRA93 establish for failed depositories?\",\"answer\":\"It sets receiver administrative expenses first, followed by deposit liabilities, then general or senior liabilities, subordinated obligations, and finally shareholder claims.\"},{\"question\":\"How does the FDIC define administrative expenses under the interim rule?\",\"answer\":\"The rule clarifies administrative expenses as including post-appointment obligations incurred as part of liquidation and certain expenses incurred before the receiver’s appointment.\"},{\"question\":\"Why might depositor preference increase the FDIC’s loss exposure?\",\"answer\":\"General creditors may take actions, such as securing collateral to protect their claims, which can shift loss exposure and potentially raise the FDIC’s exposure in some cases.\"}]","The National Depositor Preference Law - A critical look at depositor preference and its effects | PDF",1789969540,13]