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A bridge bank is a temporary national chartered bank organized by federal bank regulators in order to operate an insolvent or failed bank for up to three years or until a buyer is found for its operations. It generally administers the deposits and liabilities of an insolvent bank.
The Competitive Equality Banking Act (CEBA) of 1987 authorizes the Federal Deposit Insurance Corporation (FDIC) to appoint or charter a national bank or a federal savings association as a bridge bank.
The functions of a bridge bank include :
(1) to assume the deposits of an insolvent bank;
(2) to assume such other liabilities of an insolvent bank as the Corporation in its discretion may think as appropriate;
(3) to purchase such assets of an insolvent bank as the Corporation in its discretion, may think as appropriate; and
(4) to perform any other temporary function which the Corporation prescribes.
Each bridge bank established under 12 USCS § 1821 shall have all corporate powers of, and be subject to the same provisions of law as a national bank.
In Texas Refrigeration Supply, Inc. v. Federal Deposit Ins. corp., 953 F.2d 975 (5th Cir. Tex. 1992), the court observed that “a bridge bank is an institution organized by the Federal Deposit Insurance Corporation and chartered by the Comptroller of the Currency to acquire the assets and liabilities of a failed bank”.