# Financial Institutions (GFI)

## Title 5. Banking Institutions -- General Provisions

### Subtitle 6. Reorganizations

#### Section 5-601

(a) The board of directors of any banking institution may place the banking institution, including its property, records, and business, in the hands of the Commissioner by posting on the front door of each banking office of the institution a notice that states: "This institution is in the hands of the Maryland Commissioner of Financial Regulation".

(b) The banking institution immediately shall notify the Commissioner of its action, and the Commissioner immediately shall take possession of the institution.

#### Section 5-602

(a)

  (1) If the Commissioner finds that the capital stock account of any commercial bank is impaired because of a loss or for any other reason, the Commissioner, by notice to the board of directors of the commercial bank, may require the commercial bank to correct the impairment.

  (2) If the commercial bank fails to correct the impairment within 3 months after the board receives the notice, the Commissioner may take possession of the commercial bank, including its property, records, and business.

(b)

  (1) If the reserves of any commercial bank fall below the amount required under this article:

    (i) The commercial bank may not increase its loans or discounts until the deficiency is corrected, except by discounting or buying drafts payable at sight or on demand; and

    (ii) The Commissioner, by notice to the board of directors of the commercial bank, shall require the commercial bank to correct the deficiency.

  (2) If the commercial bank fails to correct the deficiency within 30 days after the board receives the notice, the Commissioner may take possession of the commercial bank, including its property, records, and business.

#### Section 5-602.1

(a) In this section, "insolvent" means:

  (1) Incapable of meeting the demands of creditors; or

  (2) Having liabilities that exceed assets.

(b) Notwithstanding the notice and timing requirements in Sec. 5-602 of this subtitle, if the Commissioner determines that a nondepository trust company is insolvent, the Commissioner may take immediate possession of the nondepository trust company, including its property, records, and business, by:

  (1) Posting on the front door of each banking office of the nondepository trust company a notice that states: "This institution is in the hands of the Maryland Commissioner of Financial Regulation"; and

  (2) Immediately delivering written notice to the board of directors of the nondepository trust company that the Commissioner has taken possession of the nondepository trust company.

#### Section 5-603

As long as the Commissioner has possession of a banking institution, the property, records, and business of the institution are not subject to attachment, lien, execution, or distraint of any kind.

#### Section 5-604

After the Commissioner takes possession of a banking institution, the Commissioner promptly shall give notice of that fact to:

(1) Each person who has any asset of the institution; and

(2) The general public, by notice published in an appropriate newspaper.

#### Section 5-604.1

(a) All necessary and reasonable expenses of the Commissioner that are court approved and related to the Commissioner's possession of a nondepository trust company, including costs associated with the receivership, reorganization, or liquidation of the nondepository trust company, shall be paid from the assets of the nondepository trust company, the proceeds of the sale of securities pledged under Sec. 3-211.1 of this article, or recovery against a surety bond delivered under Sec. 3-211.1 of this article.

(b) Any proceeds of a sale of pledged securities that remain after making the payments required under subsection (a) of this section and Sec. 5-606(b)(2) of this subtitle shall be an asset of the nondepository trust company.

#### Section 5-605

(a) Within a reasonable time after the Commissioner takes possession of a banking institution, the Commissioner, in the name of this State, shall petition an equity court in the county where the banking institution has its principal banking office to:

  (1) Take jurisdiction over the banking institution; and

  (2) Subject to subsection (b) of this section, appoint as receiver:

    (i) An examiner; or

    (ii) The Federal Deposit Insurance Corporation.

(b)

  (1) The Commissioner may petition for appointment of the Federal Deposit Insurance Corporation as receiver only of a banking institution that the Corporation insures.

  (2) Appointment of the Federal Deposit Insurance Corporation becomes effective when the Corporation files with the court and the court approves a certificate of acceptance.

(c) A receiver shall provide any bond that the court requires.

(d) If an examiner is appointed receiver, the examiner:

  (1) May not receive further compensation for services as receiver; but

  (2) Subject to order of the court, is entitled to reimbursement for expenses for legal and clerical help and travel.

#### Section 5-606

(a)

  (1) The receiver may appoint any clerks needed to carry out the receivership.

  (2) The salaries of these clerks shall be paid out of the funds of the banking institution.

(b)

  (1) Notwithstanding subsection (a) of this section, the receiver of a nondepository trust company may, as needed to carry out the receivership:

    (i) Appoint any clerks, agents, counsel, employees, and assistants; and

    (ii) Retain officers and employees of the nondepository trust company.

  (2) The salaries and all other expenses of the individuals specified under paragraph (1) of this subsection that are court approved shall be paid from the assets of the nondepository trust company, the proceeds of the sale of securities pledged under Sec. 3-211.1 of this article, or recovery against a surety bond delivered under Sec. 3-211.1 of this article.

  (3) Any proceeds of a sale of pledged securities that remain after making the payments required under paragraph (2) of this subsection and Sec. 5-604.1(a) of this subtitle shall be an asset of the nondepository trust company.

(c) The receiver may borrow money and, with the approval of the court, pledge, mortgage, or encumber any of the institution's assets to:

  (1) Pay the obligations of the institution;

  (2) Pay dividends to the depositors or creditors of the institution; or

  (3) Enable the institution to reopen or reorganize.

(d)

  (1) The receiver shall file with the court, in the form that the court requires, an itemized account of:

    (i) All receipts, disbursements, and expenses; and

    (ii) Any proposed distribution.

  (2) The court shall accept the account to the same extent as if an auditor of the court had prepared and filed the account.

(e)

  (1) Except as provided in paragraph (2) of this subsection, the receiver may not make any distribution until the court ratifies the receiver's account.

  (2) With the approval of the court, the receiver may pay in full each creditor whose total claims do not exceed $5.

#### Section 5-607

(a) All money received by the receiver shall be deposited to the receiver's credit in any bank or trust company that the receiver chooses.

(b)

  (1) To safekeep and to secure payment of the money deposited with it, the depository bank or trust company shall deposit with the office of the Commissioner general obligations of or obligations guaranteed by the federal government, this State, or any of its political subdivisions.

  (2) These obligations shall be valued at the lower of market value or par value, and their value always shall be at least equal to the deposits of the receiver in the bank or trust company.

(c) The receiver may waive this requirement for obligations for any money remaining more than 6 months after the dividend checks are mailed to the creditors and depositors.

#### Section 5-608

If the court appoints an attorney to advise the receiver, the receiver shall set the attorney's fees, subject to approval by the court.

#### Section 5-609

Within 6 months after taking possession of any banking institution, the Commissioner shall file with the court a complete and detailed report on the institution.

#### Section 5-610

As long as an examiner is in possession of any banking institution, the Commissioner may permit the institution to reopen under the conditions that the Commissioner approves and take the steps necessary to wind up any pending court proceeding.

#### Section 5-611

(a) The board of directors or the depositors representing not less than 25 percent of the deposit liability of any banking institution that is in the possession of a receiver may:

  (1) Propose a plan of reorganization for the reorganization and reopening of the banking institution or for the establishment of a new State banking institution, national banking association, or other corporation that they consider necessary; and

  (2) Choose a committee to represent them to carry out the plan.

(b)

  (1) The plan for reorganization of a commercial bank may provide for:

    (i) The voluntary surrender or exchange of all or part of the outstanding capital stock of the commercial bank and the resale of that stock;

    (ii) The sale of additional authorized stock;

    (iii) The voluntary subscription or contribution by depositors and creditors to a guaranty fund; and

    (iv) Any other protection for the depositors and creditors.

  (2) The plan for reorganization of a savings bank may provide only for the voluntary subscription or contribution by depositors and creditors to a guaranty fund.

#### Section 5-612

(a) The plan of reorganization shall be filed with the Commissioner.

(b)

  (1) The Commissioner may approve or disapprove the plan without a hearing.

  (2) If the Commissioner is satisfied that the proposed plan is in the best interests of the depositors and creditors of the banking institution, the Commissioner shall:

    (i) Approve the plan; and

    (ii) Publish a notice of the approval in the Maryland Register as provided in the State Documents Law.

  (3) The provisions of Sec.Sec. 3-209, 3-211, and 3-301 of this article, to the extent that they require the capital stock and surplus of a commercial bank to be paid in full and in money, do not apply to the reorganization and reopening of a banking institution or the establishment of a new banking institution under this section.

(c)

  (1) Within 5 days after approval by the Commissioner, the banking institution or the proponents of the plan shall send a notice to each depositor or other creditor at the address shown on the books of the institution.

  (2) The notice shall:

    (i) State that the plan has been filed with and is open to inspection at the office of the Commissioner; and

    (ii) Include a summary of the important provisions of the plan.

  (3) Failure to notify any party in interest does not affect the validity of the plan or its implementation.

  (4) A certificate of the banking institution's president or of the proponents of the plan that the notice has been given is prima facie proof of compliance with this subsection.

(d)

  (1) Within 30 days after the first publication of the Commissioner's notice, any party in interest who did not approve the plan may apply to the court for the value of that party's interest.

  (2) Unless depositors and other unsecured creditors holding one third or more of the dollar amount of all claims apply for the value of their interests, the court may pass an order approving the plan and setting the terms and conditions for termination of receivership.

  (3) If sufficient creditors apply, the court shall:

    (i) Determine the present cash value of the nonapproving party's interest on the basis of a judicial liquidation of the banking institution and order payment to the party of that amount, in money or in kind; or

    (ii) Apportion to the nonapproving party a distributive share in the assets of the banking institution.

  (4) If the court apportions the assets of the banking institution:

    (i) Assets divisible in kind shall be apportioned between the institution and the nonapproving parties; and

    (ii) Assets not divisible in kind shall be apportioned by allotting to the nonapproving parties shares of stock, securities, or certificates of interest that are issued by a corporation or trustee and that represent the nonapproving parties' interests in the indivisible assets, and the entire amount allotted to the nonapproving parties shall be delivered and paid to the receiver for liquidation for their benefit.

(e) Within 10 days after the final decision of the court, the proponents of the plan of reorganization may abandon it.

#### Section 5-613

With the consent of the local governing body of any political subdivision that has money deposited with a banking institution, its treasurer or similar fiscal officer may:

(1) Consent to a plan of reorganization proposed under this subtitle; and

(2) Bind the political subdivision to limit withdrawals from the institution as provided in the plan.

#### Section 5-614

(a) If the Federal Deposit Insurance Corporation is receiver of a banking institution, the Corporation may:

  (1) Operate the trust department of the institution; and

  (2) Liquidate the institution as provided in this subtitle or under federal law.

(b)

  (1) This subsection applies whether or not the Federal Deposit Insurance Corporation is the receiver of the banking institution.

  (2) If the Federal Deposit Insurance Corporation pays the insured deposit liabilities of a banking institution, it is subrogated to the rights of the depositors against the institution to the same extent as it would be subrogated to the rights of the depositors against a closed national banking association under federal law.

  (3) The rights of the depositors and creditors of the banking institution are governed by the laws of this State.

#### Section 5-615

In the distribution of the general assets of a trust company that is liquidated or reorganized, the person who succeeds the trust company as a personal representative, guardian, trustee, receiver, or other fiduciary has a preference for all debts and accounts that are due to or held by it as fiduciary over all other debts and liabilities, including salaries and wages of employees.

---

Md. Code Ann., Fin. Inst. (as displayed at mgaleg.maryland.gov, October 16, 2026)