Purchase and Assumption
A term used in the resolution of failed banks.
Simple P&A involves splitting a distressed bank into ‘good’ and ‘bad’ parts.
The distressed bank’s deposit book is sold to a third party together with some cash injected by the Deposit Guarantee Scheme (DGS) and possibly other good assets.
The deposit book and cash might for a while be held in a Bridge Bank controlled by the Resolution Authority (RA), pending sale to a purchaser.
Services to insured depositors are sustained.
The bad part of the failed bank goes into administration, with the administrators selling what they can and winding down the rest.