Part IV Common Law Legal Systems, 14 United States of America

Subject(s):

Civil liability of lenders — Regulatory liability of lenders — Bank resolution and insolvency — Bank supervision — Capital markets — Supervision — Central bank immunity

In the United States there is limited liability for financial supervisors and resolution authorities. Although the Federal Tort Claims Act (FTCA) permits suit against the United States for certain torts to provide compensation for those injured by government wrongdoing, the statute has a significant exception for discretionary functions. This exception has been interpreted to cover most conduct of federal financial regulators. When a bank becomes insolvent, however, the Federal Deposit Insurance Corporation (FDIC) is appointed as its receiver and assumes all of the bank’s rights, including the ability to sue its former officers and directors for liability. In such suits, the officers and directors often assert affirmative defences based on the FDIC’s own conduct. The affirmative defences, if successful, only reduce the amount of the FDIC’s claims against the defendants and do not serve as a positive theory for recovery against the FDIC. Liability has been found, however, when the government promised the benefit of particular accounting practices to depository institutions that purchased failed thrifts but later enacted legislation that precluded the application of those accounting practices.