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A Shared Loss Agreement (SLA) is executed at bank closing between the FDIC and the Assuming Institution. Under the terms of the SLA, the FDIC absorbs a portion of certain losses on specific assets sold with the resolution of the failing institution. The percentage of losses absorbed by the FDIC varies according to the terms of the SLA. The Assuming Institution absorbs the remaining losses. SLAs keep assets in the private sector, reducing borrower and market impact and minimizing resolution costs.
Types of SLAs
- Commercial: For commercial assets, the FDIC offers a range of shared loss coverage terms and provides coverage on certain credit loss events such as charge-offs.
- Single Family: For single family 1-4 residential assets, the FDIC offers a range of coverage terms and covers certain loss events such as loan modification, short sale, and foreclosure loss.
Shared Loss Explained
This video explains the way the FDIC uses shared loss to maximize asset recoveries and minimizes the FDIC losses during the bank resolution process.
Shared Loss Publications
- Managing the Crisis: The FDIC and RTC Experience 1980–1994, Chapter 7
- Crisis and Response: An FDIC History, 2008–2013, Chapter 6
Frequently Asked Questions
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