United States: Rhode Island Limited Bank Holiday, 1991

In 1990, the Rhode Island Share and Deposit Indemnity Corporation (RISDIC) was a private mutual deposit insurance corporation funded by member institutions. Late that year, after the failures of two of its insured institutions in July and October, other RISDIC member institutions faced large depositor withdrawals, as concerns began to focus on the financial health of RISDIC itself. RISDIC had maintained inadequate reserves, and on December 31, 1990, it found itself lacking the resources to cover depositor withdrawals from member institutions. RISDIC leadership requested a state-appointed conservator, which meant that all its member institutions no longer had the deposit insurance that Rhode Island law mandated. On January 1, 1991, to prevent an uncontrolled run on financial institutions that no longer had deposit insurance, incoming Governor Bruce Sundlun declared a bank holiday for the 45 banks and credit unions that RISDIC had insured. Management remained in place at the closed institutions; state authorities encouraged them to seek federal deposit insurance or merge with healthier institutions. Twenty-two credit unions reopened on January 7 with federal deposit insurance after federal examiners had reviewed their assets and capital adequacy; a further four reopened by the end of January. On February 8, the governor signed legislation creating the Depositors Economic Protection Corporation (DEPCO) to facilitate liquidations or sales of banks that could not access federal insurance. Most depositors had been repaid within 18 months of the governor's executive order, supported by asset sales; $637.5 million in DEPCO bond issues, of which $125 million received a federal guarantee; and $190 million in clawbacks from insiders and others implicated in RISDIC's failure. Ultimately, all depositors recovered 100% of their deposits.