Accelerated Resolution Program (ARP)

DEFINITION of 'Accelerated Resolution Program (ARP)'

A program designed to reduce the time and cost of resolving failed financial institutions. The Accelerated Resolution Program (ARP) is designed to sell the assets of failed institutions, often to other large institutions. The ARP is designed to pass the conservation stage of the insolvency resolution process.

BREAKING DOWN 'Accelerated Resolution Program (ARP)'

The Accelerated Resolution Program (ARP) came to prominence during the savings and loan crisis of the 1980s. In order to improve the speed at which the Resolution Trust Corporation (RTC) - a government organization tasked with managing insolvent financial institution - operated, the Office of Thrift Supervision (OTS) created the ARP.

The goal of the ARP was to sell the assets of a troubled institution – in this case a savings and loan (S&L) bank - before the institution became insolvent. The institutions participating in the program had been losing money, but were not in such bad shape that buyers would not be interested in their assets.

The ARP was designed to reduce taxpayer exposure to the costs associated with bailing out failed banks, but still required funding by Congress in order to purchase bad assets and assist interested financial institutions in the purchase of the good assets of failing banks. The government would only provide a relatively small amount of funds to cover losses, but could also take over bad assets, such as delinquent loans and real estate that were hard to sell. The cost of winding down the failing institutions through the ARP was lower than the government experienced when it managed and dismantled the banks on its own.

When a financial institution, such as a savings and loan bank, was sold by the government through the ARP, the transaction was considered an assisted transaction. Depositors were covered up to the federal limit on their accounts, but shareholders and bondholders were expected to lose some or all of the value of their investment in the financial institution.