Purchase And Assumption - P&A

DEFINITION of 'Purchase And Assumption - P&A'

A transaction in which a healthy bank or thrift purchases assets and assumes liabilities from an unhealthy bank or thrift. Purchase and assumption (P&A) is the most common of three basic resolution methods used by the Federal Deposit Insurance Corporation (FDIC) to deal with failing banks. The other types are deposit payoffs and liquidation and open bank assistance transactions.

BREAKING DOWN 'Purchase And Assumption - P&A'

Purchase and assumption is a broad category that includes more specialized types of P&A transactions, such as loss sharing and bridge banks. Bridge-bank transactions are considered better than deposit payoffs, but they involve more time, effort and responsibility from the SEC. In the late 1980s and early 1990s, the FDIC used bridge-bank transactions with banks such as Capital Bank & Trust Co., First Republic Bank and First American Bank & Trust.

In a type of P&A called a whole-bank transaction, all of the failing bank's assets and liabilities are transferred to the acquiring bank. However, certain categories of assets are never or infrequently transferred in P&A transactions. The value of assets being purchased is determined by an FDIC asset evaluation.

RELATED TERMS
  1. Bridge Bank

    A bank authorized to hold the assets and liabilities of another ...
  2. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Thrift Bank

    A financial institution focusing on taking deposits and originating ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Savings

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  2. Retirement

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  3. Options & Futures

    Bank Failure: Will Your Assets Be Protected?

    The SIPC and FDIC insure against personal financial ruin when banks or brokerages go belly up.
  4. Options & Futures

    Financial Regulators: Who They Are And What They Do

    Find out how these government agencies govern the financial markets.
  5. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  6. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  7. Investing Basics

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  8. Professionals

    A Day In The Life Of A Public Accountant

    Here's an inside look at the workdays of two experienced CPAs, to give you an idea of what it might be like to pursue a career as a public accountant.
  9. Professionals

    A Day in the Life of a Public Accountant

    There’s no typical day in the life of a public accountant, but one accountant’s experience may shed some light on what the career entails.
  10. Investing Basics

    Analyze Cash Flow The Easy Way

    Cash flow statements reveal how a company spends its money and where that money comes from.
RELATED FAQS
  1. Will Netspend cards let you overdraw your account?

    NetSpend lets cardholders overdraw their accounts, but only if they previously enrolled in the overdraft protection service. ... Read Full Answer >>
  2. Are 401ks FDIC insured?

    The Federal Deposit Insurance Corporation (FDIC) works as a protector for customers when banks and financial institutions ... Read Full Answer >>
  3. Does the FDIC cover identity theft?

    When a third party gains access to your bank account and conducts transactions without your consent, the FDIC does not have ... Read Full Answer >>
  4. Does the FDIC cover credit unions?

    The Federal Deposit Insurance Corporation (FDIC) does not cover credit unions. The FDIC only insures deposits in banks and ... Read Full Answer >>
  5. Does the FDIC cover business accounts?

    Bank deposits owned by corporations, partnerships, limited liability companies (LLCs), and unincorporated associations, including ... Read Full Answer >>
  6. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center