In a new twist, the FDIC when contemplating the take over of the failed Silverton Bank, a non-depositor institution, decided to create a bank themselves and become the receiver of the defunct bank’s assets and liabilities.

FDIC Silverton “Bridge Bank” Makes Debut

This newly dubbed “bridge bank” to facilitate the liquidation of Silverton Bank is called Silverton Bridge Bank, National Association according to the FDIC’s press release,

“The creation of the bridge bank allows the client banks to maintain their correspondent banking relationship with the least amount of disruption. The FDIC will operate Silverton Bridge Bank, N.A., to allow preexisting marketing efforts for the bank to continue.”

The fact that Silverton Bank before they failed was a commercial bank and not a retail depositor bank makes the bridge bank idea workable. Commercial banks operate very differently from depositor banks in that they must maintain relationships with correspondent lenders, credit card and clearing accounts.

The mortgage world this type of relationships are standard. A wholesale lender has contracts one one side with their retail brokers who interface with the public and on the other side have agreement with warehouse lenders and servicers who perform “after closing” functions.

If one of these types of “banks” failed and they simply closed them down, this could have a “trickle down” damaging effect.

This bank failure of Silverton Bank may have just created a system the FDIC will use a lot in the future.

Good Luck!

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