Purchase And Assumption Definition

What is purchase and assumption definition?

Purchase and assumption definition refers to a process in the banking industry where one bank acquires the assets and liabilities of another bank. This can occur when a bank is facing financial distress or is unable to meet its obligations. The acquiring bank takes over the accounts, loans, and deposits of the failing bank, ensuring that customers' funds are protected and the banking system remains stable.

What are the types of purchase and assumption definition?

There are two main types of purchase and assumption definitions: whole bank purchase and partial bank purchase. In a whole bank purchase, the acquiring bank buys all the assets and liabilities of the failing bank, including its branches, employees, and customer relationships. This type of purchase is typically used when the failing bank is in severe distress or unable to continue operating independently. On the other hand, a partial bank purchase involves the acquiring bank only taking over certain assets and liabilities of the failing bank, such as specific loan portfolios or customer accounts. This type of purchase is often used when the failing bank has some valuable assets or a strong customer base that the acquiring bank wants to acquire.

How to complete purchase and assumption definition

Completing a purchase and assumption definition involves several steps:

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