DEFINITION of 'Bridge Bank'

A bank authorized to hold the assets and liabilities of another bank, specifically an insolvent bank. A bridge bank is charged with continuing the operations of the insolvent bank until the bank becomes solvent through acquisition by another entity or through liquidation. A bridge bank can be a national bank or a federal savings association chartered or appointed by the Federal Deposit Insurance Corporation (FDIC).

BREAKING DOWN 'Bridge Bank'

The FDIC was given authority to charter these temporary banks by the Competitive Equality Banking Act of 1987. The FDIC has the authority, using a bridge bank, to operate a failed bank for up to three years until a buyer can be found.

RELATED TERMS
  1. Bank Insurance

    A guarantee by the Federal Deposit Insurance Corporation (FDIC) ...
  2. Bridge Financing

    In investment banking terms, it is a method of financing used ...
  3. Bank

    A financial institution licensed as a receiver of deposits. There ...
  4. State Bank

    A financial institution that has been chartered by a state to ...
  5. Bank Failure

    The closing of an insolvent bank by a federal or state regulator. ...
  6. Accounting Insolvency

    A situation where the value of a company's liabilities exceeds ...
Related Articles
  1. Personal Finance

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  2. Personal Finance

    Retail Banking Vs. Corporate Banking

    Retail banking is the visible face of banking to the general public. Corporate banking, also known as business banking, refers to the aspect of banking that deals with corporate customers.
  3. Investing

    Who Backs Up The FDIC?

    The FDIC insures depositors against loss, but what happens if it runs out of money?
  4. Taxes

    Understanding Insolvency

    Persons or businesses that cannot meet their financial obligations are insolvent.
  5. Insurance

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  6. Investing

    FDIC Sues Bank of America Over Deposit Insurance

    In a lawsuit filed Monday, the FDIC says Bank of America owes at least $542 million for deposit insurance.
  7. Personal Finance

    What's a Bridge Loan?

    A bridge loan is a loan that “bridges” a borrower over a temporary shortage in funds on hand.
  8. Insights

    The Role of Commercial Banks in the Economy

    We interact with commercial banks daily to carry out simple financial tasks. That said, the function and creation of a commercial bank is anything but simple.
  9. Investing

    What's a Correspondent Bank?

    A correspondent bank is a bank that acts on behalf of another bank, usually a foreign bank.
RELATED FAQS
  1. Why are CDs (Certificate of Deposit) FDIC-insured?

    Find out why certificate of deposits (CDs) are insured by the FDIC and what the deposit requirements are for receiving insurance ... Read Answer >>
  2. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  3. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
  4. How does investment banking differ from commercial banking?

    Discover how investment banking differs from commercial banking, the responsibilities of each and how the two can be combined ... Read Answer >>
Hot Definitions
  1. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  4. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  5. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  6. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
Trading Center