Bank+of+New+England+Failure+FDIC - CHAPTER 8 Bank of New...

CHAPTER 8
Bank of New England Corporation
Name of Institution: Bank of New England Corporation
Subsidiary Banks: Bank of New England, N.A., Boston, Massachusetts
Connecticut Bank & Trust Company, N.A., Hartford, Connecticut
Maine National Bank, Portland, Maine
Date of Resolution: January 6, 1991
Resolution Method: Formation of Bridge Banks
Date of Resolution: July 12, 1991
Resolution Method: Sale of Bridge Banks by Dissolution and
Purchase and Assumption Transaction
Introduction
The January 6, 1991, failure of the Bank of New England (BNE), Boston, Massachu-
setts, and its two sister banks, Connecticut Bank & Trust Company (CB&T), Hartford,
Connecticut, and Maine National Bank (MNB), Portland, Maine, was the largest since
the 1989 collapse of MCorp and the 1988 collapse of the First RepublicBank Corpora-
tion, both of Dallas, Texas. All three banks were owned by Bank of New England Cor-
poration (BNE Corp.). The failures received a lot of news media attention because 45
credit unions without federal deposit insurance had been closed in nearby Rhode Island
on New Year’s Day. 1
In addition to being very large, the resolution of the BNE Corp. banks is notable
because the FDIC, considering the region’s financial conditions, decided to protect all
depositors (except those affiliated with BNE Corp.), including those whose total depos-
its exceeded the $100,000 insurance limit. Of the approximately $19.1 billion on
deposit in the three banks, more than $2 billion were in accounts larger than $100,000.
Then-FDIC Chairman L. William Seidman stated, “It was clear to us that to protect the
stability of the system, we should protect all depositors.”
2
1. L. William Seidman, Full Faith and Credit: The Great S&L Debacle and Other Washington Sagas (New York:
Times Books, 1993), 165.
2. Stephen Labaton, “U.S. Is Taking Over a Group of Banks to Head Off a Run,” The New York Times ( January
7, 1991), A1.

636 MANAGING THE CRISIS
The FDIC again used its bridge bank powers in the resolution of Bank of New
England, Connecticut Bank & Trust Company, and Maine National Bank, and the FDIC
used its cross guarantee assessment authority to assess MNB for the FDIC’s costs associ-
ated with the BNE failure. As part of the transaction, the FDIC injected $750 million of
capital into the bridge banks. A small trust company, BNE Trust Company, West Palm
Beach, Florida, that was also owned by the holding company, BNE Corp., did not fail.
General Description of the Bank
BNE, based in Boston, was one of the largest banks in the commonwealth of Massachu-
setts and at the time of its failure was the 33rd largest bank in the United States. CB&T,
based in Hartford, was the second largest bank in the state of Connecticut. These two
banks, along with a sister bank, MNB, had $21.8 billion in total assets and 117 branch
locations throughout New England. They also held more than $19 billion in deposits at
the time of their failure.