[Federal Register: December 13, 2006 (Volume 71, Number 239)]
[Proposed Rules]
[Page 74857-74873]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13de06-20]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Chapter III
RIN 3064-AC98
Large-Bank Deposit Insurance Determination Modernization Proposal
AGENCY: Federal Deposit Insurance Corporation (``FDIC'').
ACTION: Advance notice of proposed rulemaking (``ANPR'').
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SUMMARY: The FDIC is seeking comment on whether and how the largest
insured depository institutions should be required to modify their
deposit account systems to speed depositor access to funds in the event
of a failure. Today, insured institutions do not track the insured
status of their depositors yet the FDIC must make deposit insurance
coverage determinations in the event of failure. The current process
might result in unacceptable delays if used for an FDIC-insured
institution with a large volume of deposit accounts. Such delays would
have an impact on depositors' ability to access their funds and are
likely to result in a resolution (of the failed institution)
significantly more costly to the Deposit Insurance Fund. As currently
contemplated, the options discussed in the ANPR would apply only to the
152 insured depository institutions with more than 250,000 deposit
accounts and more than $2 billion in domestic deposits, as well as
seven additional institutions with total assets over $20 billion, less
than 250,000 deposit accounts and at least $2 billion in domestic
deposits. In December 2005 the FDIC issued a prior advance notice of
proposed rulemaking on this subject (``2005 ANPR'').\1\ This ANPR is a
follow-up to that issuance. The FDIC is seeking comment on all aspects
of the ANPR.
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\1\ ``Large-Bank Deposit Insurance Determination Modernization
Proposal, Advance Notice of Proposed Rulemaking,'' 70 FR 73652,
December 13, 2005.
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DATES: Comments must be submitted on or before March 13, 2007.
ADDRESSES: You may submit comments by any of the following methods:
Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html.
Follow the instructions for submitting comments. E-mail: comments@FDIC.gov..
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
Hand Delivered/Courier: The guard station at the rear of
the 550 17th Street Building (located on F Street), on business days
between 7 a.m. and 5 p.m.
Public Inspection: Comments may be inspected and
photocopied in the FDIC Public Information Center, Room E-1002, 3501
North Fairfax Drive, Arlington, Virginia, between 9 a.m. and 5 p.m. on
business days.
Internet Posting: Comments received will be posted without
change to http://www.FDIC.gov/regulations/laws/federal/propose.html,
including any personal information provided.
FOR FURTHER INFORMATION CONTACT: James Marino, Project Manager,
Division of Resolutions and Receiverships, (202) 898-7151 or
jmarino@fdic.gov, Joseph A. DiNuzzo, Counsel, Legal Division, (202)
898-7349 or jdinuzzo@fdic.gov or Catherine Ribnick, Counsel, Legal
Division, (202) 898-3728 or cribnick@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
When handling a depository institution failure the FDIC is required
to structure the least costly of all possible resolution transactions,
except in the event of systemic risk.\2\ In addition, the FDIC is
required to pay insured deposits ``as soon as possible'' after an
institution fails \3\ and places a high priority on providing access to
insured deposits promptly.\4\ In view of the significant industry
consolidation in recent years, the FDIC is exploring new methods to
modernize the process to determine the insurance status of each
depositor in the event of a depository institution failure. The FDIC's
current procedures to determine deposit
[[Page 74858]]
insurance coverage may result in unacceptable delays if used for an
FDIC-insured institution with a large volume of deposit accounts. In
developing a new system to determine insurance coverage in a large-bank
failure, the FDIC's goals are to minimize disruption to depositors and
communities and to minimize costs to the Deposit Insurance Fund.
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\2\ Section 13(c)(4)(A)(ii) of the Federal Deposit Insurance Act
(``FDI Act'') 12 U.S.C. 1823(c)(4)(A)(ii) and section 13(c)(4)(G)(i)
of the FDI Act, 12 U.S.C. 1823(c)(4)(G)(i).
\3\ Section 11(f)(1) of the FDI, 12 U.S.C. 1821(f)(1).
\4\ Doing so enables the FDIC to: (1) Maintain public confidence
in the banking industry and the FDIC; (2) provide the best possible
service to insured depositors by minimizing uncertainty about their
status and avoiding costly disruptions, such as returned checks,
that may limit their ability to meet financial obligations; (3)
mitigate the spillover effects of a failure, such as risks to the
payments system, problems stemming from depositor illiquidity and a
substantial reduction in credit availability; and (4) retain, where
feasible, the franchise value of the failed institution (and thus
minimize the FDIC's resolution costs).
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The ANPR's focus is on FDIC-insured institutions with complex
deposit systems. These include those institutions with the largest
volume of deposit accounts, currently expected to include 152 insured
institutions with over 250,000 deposit accounts and total domestic
deposits of at least $2 billion, as well as seven additional
institutions with total assets over $20 billion, with less than 250,000
deposit accounts and total domestic deposits of at least $2 billion
(``Covered Institutions''). One of the assumptions underlying this ANPR
is that no institution would be required to submit detailed customer
deposit data to the FDIC unless the institution was in danger of
failing.
Insurance Coverage and Insurance Coverage Determination Procedures
The basic FDIC insurance limit is $100,000 per depositor, per
insured institution.\5\ Deposits maintained by a person or entity in
different ownership rights and capacities at one institution are
separately insured up to the insurance limit. All types of deposits
(for example, checking accounts, savings accounts, certificates of
deposit, interest checks and cashier's checks) held by a depositor in
the same ownership category at an institution are added together before
the FDIC applies the insurance limit for that category. The FDIC
generally relies upon the deposit account records of a failed
institution in making deposit insurance determination.
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\5\ The coverage for Individual Retirement Accounts and other
specific types of retirement accounts was recently increased to
$250,000. 71 FR 14629, March 23, 2006. The FDIC's rules and
regulations for deposit insurance coverage described the categories
of ownership rights and capacities eligible for separate insurance
coverage. FDIC refers to these as ``ownership categories.'' There is
a description of the primary ownership categories in Appendix A.
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To achieve accurate deposit insurance determinations, the FDIC uses
a specialized system to analyze depositor data and apply insurance
rules. As part of its normal practice, the FDIC obtains depositor data
only at the time an insured institution is in danger of failing. These
data are received in the weeks or months prior to failure, and the FDIC
uses them to determine the insurance status of their depositors and to
estimate the total amount of insured funds in the institution. The
current FDIC deposit insurance determination process has several steps.
Each step varies in time and complexity, depending on the institution's
characteristics (primarily the number of deposit accounts and type of
deposit account system). The following is a summary of the usual steps
involved in the insurance coverage determination process where deposits
are passed to an acquiring institution:
Closing out the day's business. In the event of failure,
it is the FDIC's practice to close out the insured institution's daily
business prior to obtaining the account balances upon which the
insurance determination is based. Generally, this process is completed
according to the bank's existing procedures. All of the day's check
processing and deposit transactions are completed, and end-of-day
account balances are determined. This process can require varying
lengths of time, across Covered Institutions. For larger institutions
this process can run into the early morning hours.
Obtain deposit data. A data file is obtained from the
institution or its servicer. Obtaining usable data from the institution
or its servicer frequently is a time-consuming process. The FDIC will
provide the institution or its servicer with a standard data request.
The standard data request requires the institution to provide
approximately 45 data fields for each deposit account along with
electronic copies of trial balances and deposit application
reconciliations. FDIC technical staff works with the insured
institution until the standard data set requirements are met and the
files provided the FDIC can be processed properly. Generally, the FDIC
has at least 30 days advance warning to plan and prepare for a failure.
Data are requested in advance to test delivery capabilities, prove the
balancing and reconciliation processes and make certain that all
required data fields have been included.
Process deposit data. Data are received and validated
(including reconciliation to supporting subsidiary systems). Using its
Receivership Liability System (``RLS''), the FDIC determines which
accounts are fully insured, which are definitely uninsured and which
are possibly uninsured (pending the collection of further information).
The RLS automatically groups accounts based on the ownership category
and the name(s), address, and tax identification number for each
account. This process is part of the insurance determination performed
on the depositor data received from a failed institution.
FDIC holds/debits based on insurance determination
results. Funds deemed insured are passed in full to the acquiring
institution. Accounts definitely uninsured are debited for the
uninsured amount and a receivership certificate (``RC'') is issued for
the debited amount.\6\ Holds are placed on accounts deemed potentially
uninsured for amounts over the insurance limit, and the account owner
is contacted. If additional information is required from the depositor,
a meeting is scheduled. These meetings afford the opportunity to
collect information necessary to finalize the insurance determination
on the possibly uninsured depositors. The typical institution resolved
by the FDIC does not have the capability to post a large volume of
holds electronically by batch. However, this is an essential
requirement for an effective depositor claims process for larger
institutions.
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\6\ The receivership certificate entitles the depositor to a pro
rata distribution of the receivership proceeds with respect to their
claim.
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Least-Cost Resolution Requirements
As noted above, when handling a depository institution failure the
FDIC is required by statute to structure the least costly of all
possible resolution transactions, except in the event of systemic risk.
Even with systemic-risk failures, the FDIC must conserve costs. Since
the introduction of the systemic risk exception in 1991, no exceptions
to the least-cost requirement have been made. The FDIC's least-cost
requirement was intended to reduce resolution cost and instill a
greater degree of market discipline by requiring losses to be borne by
uninsured depositors and non-deposit creditors.
When an insured institution fails the FDIC may pay insured
depositors up to the insurance limit (a ``pay-off'') or the FDIC may
sell the failed institution to another FDIC-insured institution (a
``purchase and assumption transaction''). Another option is to
establish a bridge bank or a conservatorship and transfer deposits to
that institution.\7\ Preservation of the deposit franchise of a failed
institution
[[Page 74859]]
is an important facet of minimizing resolution costs.
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\7\ A bridge bank is a national bank chartered for the purpose
of temporarily carrying on the banking operations of a failed
institution until a permanent solution can be crafted. See 12 U.S.C.
1821(n). The FDIC's bridge bank authority applies only to the
failure of a bank. In the event of the failure of an insured savings
association the FDIC could seek a federal thrift charter that would
be operated as a conservatorship. As with a bridge bank, the new
thrift institution would be a temporary mechanism to facilitate a
permanent resolution structure.
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Complexities Caused by Industry Consolidation
Historically, most insured institution closures occur on a Friday.
In almost all cases, the FDIC has made funds available to the majority
of insured depositors by the next business day, usually the Monday
following a Friday closing. All of the insured institution failures of
the past ten years have been of modest size, the largest being Superior
Bank, FSB with total deposits at the time of closure of about $2
billion and roughly 90,000 deposit accounts.
Industry consolidation raises practical concerns about the FDIC's
current business model for handling institution failures. In most
instances, larger institutions are considerably more complex, have more
deposit accounts, are more geographically dispersed and have more
diverse systems and data-integration issues than small institutions.
This is especially true of large institutions that have recently
engaged in merger activity. Implications of industry consolidation over
the past ten years can be seen in Table 1. If such trends continue,
deposits will become even more concentrated in the foreseeable future.
Table 1.--Top Ten Institutions, by Number of Deposit Accounts
[In millions]
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Rank 1996 2001 2006
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1............................................ 11.3 33.7 50.6
2............................................ 10.4 12.3 30.4
3............................................ 5.0 11.6 22.7
4............................................ 4.1 10.1 18.7
5............................................ 4.0 9.1 17.7
6............................................ 3.8 8.3 13.9
7............................................ 3.7 8.0 9.0
8............................................ 3.7 6.5 8.8
9............................................ 3.6 6.2 6.2
10........................................... 3.2 5.6 5.9
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Total.................................... 52.7 111.5 183.9
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The single most important facet determining the complexity of the
claims process for depositors of a failed institution is the number of
deposit accounts. Other factors are important as well, including the
volume of daily transactions, the amount of uninsured funds, the number
of separate computer systems or ``platforms'' on which deposit accounts
are maintained, the speed at which the institution's deposit operations
must be resumed following failure and the potential spillover
implications of the failure. The FDIC's analysis of these factors as
applied to larger banks indicates that the industry can be divided into
two segments as shown in Table 2.
Table 2.--Industry Segmentation
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Total
domestic
Segment Definition Number % of Total deposits % of Total
(Billions)
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Covered....................... Total number of 159 1.8 $4,445 69.1
deposit accounts over
250,000 and total
domestic deposits
over $2 billion or
total assets over $20
billion regardless of
the number of deposit
accounts and total
domestic deposits
over $2 billion.
Non-Covered................... All insured 8,619 98.2 1,992 30.9
institutions not
covered.
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
Total..................... ...................... 8,778 100.0 6,437 100.0
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Note: Data are as of June 30, 2006.
Large institutions typically have more accounts, more complex
deposit systems and require a rapid resumption of deposit operations in
the event of failure to protect the institution's franchise value. With
Covered Institutions the speed of the claims process could be greatly
enhanced by the FDIC obtaining a timely data download and by improving
the institution's capability to automatically post holds or debit
uninsured funds.
Covered Institutions are more likely to fail due to liquidity
reasons prior to becoming critically undercapitalized under prompt
corrective action.\8\ Most likely, this will be a more rapid and less
orderly event. Institutions more susceptible to a liquidity insolvency
pose greater problems for the FDIC. Such institutions have a less
predictable failure date. The failure could occur on any day of the
week, and pre-failure access to the institution may be limited because
liquidity insolvency oftentimes is difficult to anticipate, and because
liquidity insolvency can occur in a very compressed period of time.
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\8\ 12 U.S.C. 1831o.
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Covered Institutions present unique challenges in the event of
failure. For the smaller, less-complex Covered Institutions these
challenges may be only modest; for the larger, more complex members of
the group they are more severe. As noted, the FDIC is concerned about
both the size and complexity of the deposit operations of Covered
Institutions and the necessary speed of the claims process to make
funds available quickly to depositors and maximize the institution's
franchise (or re-sale) value.
II. The 2005 ANPR
The 2005 ANPR \9\ requested comment on three options for enhancing
the speed at which depositors of the larger, more complex insured
institutions would receive access to their funds in the event of
failure.\10\ All of the options entailed modifications to the deposit
account systems of Covered Institutions to facilitate the insurance
determination process. Option 1 was to require the institution to
install on its deposit system a capability that, in the event of
failure, would place a temporary hold on a portion of the balances of
large deposit accounts. The percentage hold amount would be determined
by the FDIC at the time of failure, depending mainly on estimated
losses to uninsured depositors.\11\ Such provisional holds
[[Page 74860]]
would be placed immediately prior to the day the institution reopens
for business (generally expected to be the next business day) as a
bridge bank (discussed above). The institution also would need to be
able to automatically remove these holds and replace them with the
results of the deposit insurance determination when they become
available. The insurance determination would be facilitated by certain
depositor data (such as the depositor's name, address, and tax
identification number) maintained by the institution in a standard
format. The data would include a unique identifier for each depositor
and the insurance ownership category of each account.
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\9\ 70 FR 73652 (Dec. 13, 2005).
\10\ In the 2005 ANPR Covered Institutions were defined to
include all insured institutions with total number of deposit
accounts over 250,000 and total domestic deposits over $2 billion. A
full description of the three options is provided in the 2005 ANPR.
\11\ Uninsured depositors are entitled to a pro rata
distribution of the receivership proceeds with respect to their
claim. The FDIC--at its discretion--may immediately distribute
receivership proceeds in the form of advance dividends at the time
the bridge bank is opened. Advance dividends are based on the
expected recovery to uninsured depositors.
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Option 2 was similar to Option 1 except that the standard data set
would have included only information that institutions currently
possessed. The option would not have required institutions to create a
unique identifier for each depositor or to classify each account by
ownership category.
Option 3 was to require the largest ten or twenty insured
institutions (in terms of the number of deposit accounts) to know the
insurance status of their depositors and to be able to deduct expected
losses to uninsured depositors in the event of failure.
Comments on the 2005 ANPR
The FDIC received 28 comments on the 2005 ANPR.\12\ Six were from
trade organizations, fourteen from large institutions, four from
community banks and four from others. Most commenters expressed an
appreciation of the objectives set forth in the 2005 ANPR. The letter
submitted jointly by American Bankers Association, America's Community
Bankers and The Financial Services Roundtable ``recognize[d] that the
Federal deposit insurance system's viability depends on the principle
that no financial institution is either too big or too small to fail.
The development of prudent systems to prepare for and respond to the
failure of any size institution is an important component of the
Corporation's receivership functions.'' \13\ Nevertheless, the majority
of commenters generally opposed implementation of any of the options
offered in the 2005 ANPR. Eighteen of the twenty-eight comment letters
(sixty-four percent) indicated opposition to the 2005 ANPR, citing high
costs and regulatory burden. The aforementioned joint comment letter
from three trade associations ``urge[d] the Corporation to reconsider
its program to implement the 2005 ANPR.'' \14\ A complete summary of
the comments received on the 2005 ANPR is provided in Appendix B.
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\12\ The 2005 ANPR comment letters are available at: http://www.fdic.gov/regulations/laws/federal/2005/05comlargebank.html
.
\13\ Comment letter provided by American Bankers Association,
America's Community Bankers and The Financial Services Roundtable
dated March 13, 2006 in response to the 2005 ANPR, page 3.
\14\ American Bankers Association, America's Community Bankers
and The Financial Services Roundtable, page 4.
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III. The Revised ANPR
Process Overview
Under the process discussed in the ANPR, in the event of failure a
Covered Institution would complete its nightly processing cycle
according to the institution's normal practices. After completion of
this nightly processing cycle provisional holds would be placed on
large deposit accounts through the institution's deposit systems as
specified by the FDIC. The placement of provisional holds will allow
the opening of a bridge bank the day following failure, yet guard
against the loss of uninsured deposit funds subject to loss. A standard
set of data files reconciled to the institution's supporting subsidiary
systems will then be provided to the FDIC, to be used as the basis for
making deposit insurance determinations. The results of the insurance
determination will be returned to the bridge bank, likely within
several days. At this point the provisional holds will be removed en
masse to be replaced with the results of the deposit insurance
determination. The FDIC requests comment on all aspects of this
contemplated approach, including cost/benefit issues and alternative
approaches that would allow the FDIC to accomplish its objectives of
affording a timely deposit insurance determination and a prompt release
of funds to depositors.
Continuation of Business Operations
For the purposes of implementing the possible requirements
explained in the ANPR, Covered Institutions should assume that their
deposit operations would continue post failure in a bridge bank or a
federally chartered mutual association. In the event of failure the
bank would complete the nightly deposit processing cycle according to
the institution's normal practices. For insurance determination
purposes, the FDIC would use the deposit account balance generated at
the end of the nightly processing cycle. This is the account balance
against which provisional holds would be calculated.
Tiered Approach
Based on the comments received on the 2005 ANPR and additional
analysis, the FDIC has refined its thinking in terms of how to approach
the issues discussed in the 2005 ANPR. The FDIC is putting forward for
comment an approach under which each insured depository institution
would fall into one of three categories: Tier 1 Covered Institutions,
Tier 2 Covered Institutions and Non-Covered Institutions. Tier 1
Institutions would include the largest, most complex institutions among
those having at least 250,000 deposit accounts and more than $2 billion
in domestic deposits. Tier 2 Institutions would include institutions of
lesser complexity among those having at least 250,000 deposit accounts
and more than $2 billion in domestic deposits, and those with at least
$20 billion in domestic assets and $2 billion in domestic deposits not
falling under the definition of a Tier 1 Institution. Non-Covered
Institutions would be any insured depository institution not meeting
the definition of a Tier 1 or 2 Covered Institution. Non-Covered
Institutions would be exempt from the requirements discussed in the
ANPR.\15\
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\15\ As part of its claims-process modernization effort, the
FDIC is streamlining the business processes it uses to facilitate a
deposit insurance determination. This involves replacing the current
Receivership Liability System (noted above) with a new system
incorporating more advanced technologies to enhance automation.
These changes will improve the FDIC's ability to process efficiently
a large number of accounts and provide timely customer support to
uninsured depositors. Enhancements to the FDIC's claims system would
be facilitated by a closer interaction with a Covered Institution's
deposit systems.
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Compared to the 2005 ANPR, the definition of a Covered Institution
has been expanded to include insured institutions with at least $20
billion in domestic assets and $2 billion in domestic deposits,
regardless of the number of accounts. While some such institutions may
have far fewer than 250,000 deposit accounts, the FDIC is concerned
that--for such institutions--a Friday closure date cannot be expected,
a bridge institution will need to be established quickly and that a
high percentage of deposit accounts may involve uninsured funds. The
FDIC is interested in comments on the challenges presented by such
institutions in the event of failure compared to other institutions
with a comparable number of deposit accounts. Should the definition of
Covered Institutions be expanded to include institutions with fewer
than 250,000 deposit accounts?
[[Page 74861]]
Requirements for Different Tiers/Explanation of Requirements
As explained more fully below, under the approach being put forward
for comment, a Tier 1 Covered Institution would be required to have in
place systems that could: (1) Provide a unique depositor identification
(``ID'') for each depositor; (2) implement automated provisional holds
against deposit accounts; (3) supply a standard data framework (where
the form and content of this data structure will be developed in
cooperation with insured institutions); (4) remove provisional holds;
(5) supply an agreed upon standardized data structure to compute a
trial balance; and (6) post holds and debits in batch mode resulting
from the deposit insurance determination results. A Tier 2 Covered
Institution would be subject to the same requirements as a Tier 1
Covered Institution except it would not have to provide a unique
depositor ID for each depositor.\16\ Each of these requirements is
described below, along with specific questions on which the FDIC
requests comment.
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\16\ Each institution in Tiers 1 and 2 would be required to
provide the FDIC with the names of the individuals responsible for
the deposit data file(s), provisional holds, communications,
customer service and the removal the provisions holds and
implementation of the results of the deposit insurance
determination.
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(a) Unique Depositor ID
Tier 1 Covered Institutions would be required to uniquely identify
each depositor. The FDIC requests comments on all aspects of this
possible requirement. In particular:
To what extent can Covered Institutions uniquely identify
depositors using current systems and procedures?
What would be the best method(s) to use for depositor
identification? Should the FDIC specify the format to be used for
depositor identification, or should this be left to the Covered
Institution to determine?
How expensive would it be for Covered Institutions to
supply a unique identifier for each depositor? Is this something that
Covered Institutions are considering for internal business purposes? If
not, how do Covered Institutions determine common ownership for
relationship management, cross-selling, risk management or other
purposes? How long would it take to implement a unique depositor
identification process? To what extent is the answer to that question a
function of running deposit accounts on more than one platform?
How reliable would the data be in identifying each
depositor? To what extent are Covered Institutions able to identify
account owners (as opposed to trustees, managers, beneficiaries, etc.)
from source files being supplied to the FDIC for insurance
determination purposes? Does this differ by types of accounts; for
example, checking accounts versus (brokered) CDs?
Could Covered Institutions uniquely identify depositors
within a single legacy data system? Is there an accompanying Customer
Information File (``CIF'') available for each legacy data system? Could
the Covered Institutions provide instructions or rules to assist the
FDIC to integrate depositor records across these legacy data sources?
(b) Provisional Holds Against Deposit Accounts
Under the suggested approach, Tier 1 and 2 Covered Institutions
would be required to have in place an automated process for
implementing a one-time FDIC provisional hold immediately following the
completion of the nightly deposit processing cycle following a failure.
The contemplated provisional hold algorithm contains variables that
would be supplied by the FDIC only on the day of failure. Provisional
holds would be applied to individual accounts (commonly owned deposits
are not aggregated). Provisional holds would vary by individual account
balance and type. Under one approach: (1) Deposit accounts with
balances below $X dollars would not be subject to a provisional hold;
(2) deposit accounts with balances between $X and $100,000 would be
subject to a provisional hold of Y percent; and (3) deposit accounts
with balances above $100,000 would be subject to a provisional hold of
Z percent.
The FDIC would supply the values X, Y and Z to the institution on
the day of failure. Those values could differ depending on whether the
account is a demand deposit/NOW account, money market deposit/savings
account or time deposit. X could be set at a higher level for DDA
systems than for time deposit systems, for example. The values X, Y and
Z also could differ depending on whether the institution categorizes
the account as consumer or business. For these purposes, the account
category would be the one normally used by the institution, rather than
a definition more consistent with FDIC insurance rules. FDIC research
indicates the likely value of X would fall between $30,000 and $80,000.
Based on account-size distributions provided by a sample of insured
institutions, this potential threshold range is expected to exclude
over 90 percent of deposit accounts from the provisional hold process
at most institutions. Given the historical loss experience for large
institutions and their general liability structure, the FDIC expects
that the values of Y and Z would be less than 15 percent.
The FDIC requests comments on all aspects of these possible
requirements concerning provisional holds on deposits. In particular:
What more would Covered Institutions need to know to
design and implement such a system?
What would be the overall cost to a Covered Institution
for developing the capability to automatically post provisional holds?
The deposit systems of many Covered Institutions use
software purchased from a small group of vendors. To what extent would
vendor-based software changes help mitigate the overall implementation
costs of this program?
Some Covered Institutions use a servicer to process
deposit accounts, and some Covered Institutions share the same deposit
servicer. To what extent would implementation changes made by the
servicer mitigate the costs of this program?
A provisional hold could potentially trigger complications
in the back office of the bridge bank due to an increase in returned
items. This might be mitigated if a large percentage of a depositor's
checking account balance is made available immediately. If, for
example, fifteen percent holds were placed on transaction accounts with
balances over $50,000, how significant would the impact be for the back
office of the bridge bank? Would overdraft facilities already in place
with depositors mitigate this potential impact? If the impact is
expected to be significant, how could it be mitigated? Would there be
any potential complications in the back office of the bridge bank due
to holds placed on MMDA, savings accounts or time deposits? If so, what
types of complications, and how could they be mitigated?
The FDIC may set Y and Z to the same percentage. If the
FDIC required institutions to be prepared for only one ratio rather
than two, would that reduce the system development costs, the
reliability of the algorithm or the speed of running the algorithm? If
so, by how much? If only one ratio were used, the FDIC might choose to
apply the ratio to the entire balance of accounts with over $X dollars,
or it might apply the ratio to only the portion of the balance that
exceeds $X. The FDIC does not anticipate requiring institutions to be
prepared for both options. Would this choice influence the system
[[Page 74862]]
development costs, the reliability of the algorithm or the speed of
running the algorithm? If so, which choice would be better, and to what
degree would it be better?
The FDIC may choose to set the same X, Y and Z for all
deposit systems (as opposed to different thresholds or ratios for
transaction account systems, MMDA/Savings systems and time deposit
systems). If the FDIC required institutions to be prepared for only one
set of thresholds and ratios, would that reduce the system development
costs, the reliability of the algorithm or the speed of running the
algorithm? If so, by how much?
The FDIC may choose to set the same X, Y and Z for all
account categories. If the FDIC required institutions to be prepared
for only one set of thresholds and ratios, would that reduce the system
development costs, the reliability of the algorithm or the speed of
running the algorithm? If so, by how much?
Where do individual retirement accounts (``IRAs'') reside?
Are they clearly coded or otherwise identified on bank records in a way
that would allow their ready identification? Are all IRAs generally
found in time deposit systems, in other systems, or are they
distributed across multiple systems?
Since the FDIC would want to continue operating the
institution on the business day after failure, the provisional hold
process must be completed quickly. The time thresholds may be
challenging especially if the institution does not fail on a Friday.
Are there ways to structure the provisional hold requirements that
would make it easier for institutions to meet the associated timing
requirements? For example, would it be helpful if the FDIC agreed that
$X would never fall below a predetermined amount (say $30,000 or
$40,000)?
How long would you expect such a program to run?
What problems would occur if holds were placed during the
first day (that is, before the evening check-clearing process) rather
than before opening for business on the first day?
(c) The Generation of a Standard Data Structure Reconciled to the
Supporting Subsidiary Systems
A fundamental aspect of this ANPR is the development of a standard
data framework which does not place an onerous burden on Covered
Institutions, while ensuring that the FDIC is provided with an optimum
set of data structures within that framework that enable a timely and
accurate insurance determination process. The FDIC seeks industry input
into the development of this standard data framework. Industry
participation will be important in assuring that the FDIC specifies
standards that are adequate for making deposit insurance determinations
without being unduly burdensome to Covered Institutions. Consequently,
the FDIC seeks comment on all aspects pertinent to the development of
this standard. Appendix C provides representative standard data
elements.
What would be the overall cost to a Covered Institution to
develop a capability to produce a standard data structure complete with
associated linked data sources for information such as account
ownership or other maintained information relationships required to
define a deposit account, as well as provide a data structure to
facilitate the generation of a trial balance and reconciliations of
accounts? Could a Covered Institution develop and deploy this standard
in 18 months? Does the Covered Institution have a standard deposit
account data framework that they would recommend the FDIC adopt as a
standard to support this deposit account definition process?
The deposit systems supporting many Covered Institutions
use software purchased from a small group of vendors and servicers.
Could a vendor or servicer develop the standard data structure and the
necessary processing logic to pull the data into the specified standard
format for multiple institutions or does your institution have unique
details that would prevent this from occurring?
To meet the proposed standard data structure requirement,
institutions may have to link records from the CIF with the deposit
systems or provide a key for linking elements so data from the CIF
could be linked to individual account owner records. This would be more
complex than a standard data structure that only included items from
the deposit systems, but it would enable the FDIC to make timely
insurance determinations. Once the systems had been developed and
tested, how much longer would it take for an institution to prepare a
standard data structure that included CIF and deposit system items,
compared to one that included only deposit system items?
The FDIC would require transmitted deposit balances to
reconcile to the actual trial balance, both principal and interest
dollar amounts and the deposit record counts. How does reconciliation
affect timeliness? Can the process be developed in advance and
automated?
The standard data set should not contain records for
foreign deposits or international banking facility (``IBF'') accounts,
since they are not defined as deposits for insurance purposes. Do
foreign deposits reside on separate deposit systems? Would your
institution have any problems creating a data set that excludes foreign
deposits not payable in the U.S.? If so, how might these problems be
mitigated? Would your institution have problems placing a blanket
freeze on all foreign deposits and IBF accounts so that the funds could
not be drawn on the bridge bank?
Deposits held by the institution's subsidiaries and
affiliates should be included in the standard data set. For deposit
insurance purposes all deposits owned by the same FDIC charter, whether
an affiliate or subsidiary, should be included in the data call if the
account is held at the institution. Would your institution have any
problems complying with the standard data structure described above
that includes the full balance of deposits held by subsidiaries and
affiliates? If so, how might these problems be mitigated?
Would Covered Institutions have difficulty supplying
complete and reliable data for any of the items listed in Appendix C?
If so, which ones? Do problems arise because the data are incomplete
(available for some accounts but not others) or for other reasons?
One of the items envisioned in the standard data structure
is a flag for bank-owned accounts (the institution's payroll accounts,
for example), but not accounts owned by others and managed by the
institution (trust accounts, for example). These accounts are not
deposits and thus should be excluded from the deposit insurance
determination process. How costly would it be for institutions to
provide a reliable flag for these accounts or remove them from the
standard data set prior to transferring it to the FDIC? If no flag were
available, the FDIC might place provisional holds on these accounts.
Would such an action cause problems in the back office? If so, how
serious a problem might it cause?
In the event of failure, depositor data may be transmitted
to the FDIC or its designee. One method for data transfer of the
deposit file(s) is via secure FTP, requiring financial institutions or
their servicers to use VPN to communicate with the FDIC over the
Internet. What are the relative costs and benefits of using a secure
FTP? Are there more effective, less costly ways of transmitting data to
the FDIC?
The transmission method may depend on the number of
accounts in the transmission data sets. For some Covered Institutions
the FDIC may have to deploy hardware to the failed
[[Page 74863]]
institution. How would Covered Institution suggest this process be
handled and which location would be optimum to support FDIC
requirements?
(d) Posting the Insurance Determination Results and Removal of
Provisional Holds
The FDIC would forward insurance results to be incorporated into
the institution's deposit systems as soon as possible, perhaps as
quickly as the day following the receipt of the standard data set. The
results would dictate debits and holds to be placed by batch in an
automated fashion on deposit accounts. The processing stream would be
as follows: FDIC would notify Operations/IT that results are available.
This notification would trigger a process whereby all provisional holds
are removed en masse. After provisional holds have been removed, the
bridge bank would run replacement transactions. Depending on the
depositor's insurance status, the replacements could include: (1) No
replacement (that is, just release the provisional hold); (2) a debit
of the account by the amount specified by the FDIC; (3) a debit and
credit of the account (that is, debit the uninsured balance and credit
an advance dividend); and (4) placement of a FDIC hold that might not
be the same amount as the provisional hold. In a few cases, new FDIC
debits or holds may be placed on accounts that did not have a
provisional hold. Both the removal of provisional holds and the
placement of new FDIC transactions would have to be accomplished in the
same nightly processing schedule and the institution would have to be
open for business as usual on the next business day.
As to this proposed procedure, the FDIC requests responses to these
specific questions:
What would be the overall cost to a Covered Institution
for developing the capability to remove provisional holds and
automatically process account debits and holds based on the insurance
determination results?
Would the en masse removal of provisional holds, coupled
with the placement of FDIC debits, credits and holds during the same
processing schedule, raise operational issues? If so, what types of
issues, and how might they be mitigated? Would the system development
costs or operational risk be reduced if this process were only
scheduled on a weekend?
The FDIC is contemplating providing institutions with an
ASCII/EBCDIC text file with debit, credit and hold transactions based
on the insurance determination. Could the data contained in such a file
be readily reformatted so that the transactions can be processed on the
institution's deposit systems? Is there a format other than ASCII/
EBCDIC that is easier and less costly for institutions? If so, what is
it? Would it be helpful for the FDIC to provide institutions a sample
data set (for testing) during the implementation period?
In some cases, all accounts with debits would also have
credits. The FDIC anticipates that this would simplify the
reconciliation process and the settlement process between the insurance
fund and the bridge bank, since the debits relate to uninsured balances
and the credits relate to advance dividends. This policy would,
however, increase the number of required transactions. Is the larger
number of transactions problematic? If so, what are the problems and
how might they be mitigated?
One possible way to reduce the number of transactions in a
given processing schedule would be to segment the process; for example,
release provisional holds and replace them for only one system (or for
selected accounts) per night until they are all completed. The FDIC
anticipates that the costs associated with segmenting this process in
some way would exceed the associated benefits. Do you believe this
would be the case? If not, what benefits and costs would accrue for a
segmented process and how should it be segmented?
Debiting time deposits may be operationally more difficult than
transaction or savings accounts. It might not be possible to debit a
certificate of deposit (``CD'') to reflect a loss resulting from the
insurance determination results. Debiting a CD may require that the
existing CD be closed and new one opened with the lesser dollar amount.
What are the operational difficulties of requiring a
cancellation of a large number of CDs? What is the best way to automate
this process? Are there ways to build upon processes that are already
in place for rolling over or paying out CDs? If so, how? The FDIC
expects that, in the event of a large institution failure, its new
claims system will create a file that contains the data needed by
institutions to cancel an uninsured CD and replace it with a smaller
CD. What information should be included in that file? What format
should it take? Would it be helpful for the FDIC to provide
institutions a sample data set (for testing) during the implementation
period?
IV--Implementation and Testing Requirements
The FDIC is considering an approach under which an insured
institution meeting the definitional requirements of a given tier for
the two quarters prior to the effective date of the requirements
discussed in the ANPR would have eighteen months to fully implement the
respective requirements. The FDIC asks specific comment on whether more
time would be needed to implement Tier 1 requirements. For example,
should the implementation period be fifteen months for Tier 2 Covered
Institutions and eighteen months for Tier 1 Covered Institutions?
Also, under the contemplated approach, regarding a merger of two or
more Non-Covered Institutions resulting in Covered Institution status,
the requirements of the new tier would have to be fully implemented
within, for example, eighteen months following the completion of the
merger. Would this be a reasonable way to handle the situation?
Under the contemplated approach, the FDIC would conduct an initial
test at each Covered Institution sometime after the initial
implementation period ends.\17\ Once the initial test is completed
successfully, the FDIC anticipates that it would conduct additional
tests infrequently at healthy institutions that do not make major
changes to their deposit systems--perhaps only once every three-to-six
years. More frequent testing may be necessary for institutions that
move to Tier 1 from Tier 2, make major acquisitions, experience
financial distress (even if the distress is unlikely to result in
failure) or undertake major system conversions.
---------------------------------------------------------------------------
\17\ In addition to testing, the FDIC might require that
information contact points be validated (and updated as needed)
every three-to-six months.
---------------------------------------------------------------------------
To reduce the frequency of FDIC testing and ensure ongoing
compliance, the FDIC might consider requiring that Covered Institutions
conduct tests in-house on a regular basis (perhaps every year) and
provide the FDIC with evidence that the test was conducted and a
summary of the test results. If the FDIC chose to do this, what type of
protocols should be set? Should the FDIC prepare a standard report
format for the summarized test results? Would it be less costly for
institutions to submit test results to the FDIC regularly to reduce the
FDIC testing frequency (say from every three years to every five-to-six
years)? Which testing option would result in a more reliable process?
Why?
[[Page 74864]]
In addition, the FDIC would have to test certain other requirements
inside the institution, including but not limited to the ability to
remove provisional holds en masse and place new holds and debits using
a data set that meets the FDIC standards. The testing of processes
involving transmittal of data to or from the FDIC would use dummy or
scrambled data.
To protect financial privacy, the FDIC's testing process would not
require that Covered Institutions transmit any sensitive customer data
outside of the institution's premises. Therefore, all testing involving
sensitive customer data would be conducted on the institution's
premises. The FDIC does not intend to remove sensitive data from the
institution's premises under the proposed testing process. These items
include, but might not be limited to the completeness and reliability
of the standard data structure, the format requirements of the standard
data structure and the accuracy and effectiveness of the provisional
holds.
V--New Deposit Accounts
Covered Institutions currently are not required to know the
insurance status of depositors or inform them of this status when a new
account is opened. The FDIC is interested in comments on whether
Covered Institutions should be encouraged or required to know the
insurance status of each new deposit account and/or notify customers of
this status when a new account is opened.
Knowing the identity of each depositor is an important aspect of a
deposit insurance determination. If Tier 1 Covered Institutions are not
required to have a unique ID for each depositor, should the FDIC
require a unique depositor ID to be assigned by Covered Institutions
when a new account is opened? The insurance category of each account is
necessary for the insurance determination process, but is not a
requirement proposed in this ANPR. Should the FDIC require that Covered
Institutions determine the insurance category of each new deposit
account?
VI. Request for Comments
The FDIC realizes that the requirements discussed in the ANPR could
not be implemented without some regulatory and financial burden on the
industry. The FDIC is seeking to minimize these costs while at the same
time ensuring it can effectively carry out its mandates to make insured
funds available quickly to depositors and provide a least-cost
resolution for Covered Institutions. The FDIC would like comment on the
potential industry costs and feasibility of implementing the options in
the ANPR. The FDIC also is interested in comments on whether there are
other ways to accomplish its goals that might be more effective or less
costly or burdensome. In other words, what approach or combination of
approaches (which may include new alternatives) most effectively meets
this cost/benefit tradeoff? The FDIC seeks comments on all aspects of
the ANPR.
Between 2004 and 2006 the FDIC met with six would-be Covered
Institutions and four software vendors/servicers for Covered
Institutions. These meetings took place at various stages in the
development process. The FDIC found these meetings to be extremely
helpful and is requesting additional meetings with interested parties.
FDIC staff is willing to travel to facilitate the meeting or structure
a teleconference. Any such meetings will be documented in the FDIC's
public files to note the institution's general views on the ANPR or
answers to questions that have been posed. In past meetings, the
institutions and software vendors/servicers discussed proprietary
information. Such confidential information would not be made public.
The record of the meeting could be prepared by the institution or the
FDIC. Any institution or organization wishing to discuss this proposal
in more detail or influence the way in which it is implemented should
contact James Marino, Project Manager, Division of Resolutions and
Receiverships, (202) 898-7151 or jmarino@fdic.gov.
During 2006 the FDIC met with several major software vendors/
servicers to discuss an earlier version of the proposal outlined in
this ANPR. These meetings provided useful insights into the operations
of different deposit software and resulted in changes to the proposal.
A previous version of the FDIC's proposal included a ``freeze'' on time
deposits rather than the use of provisional holds against these
accounts. The discussions with the software vendors resulted in an
elimination of the ``freeze'' in favor of using provisional holds
against all accounts. Further, an earlier version of the FDIC's
proposal included three tiers for Covered Institutions rather than two.
The third tier--to be comprised of the least complex of the Covered
Institutions--did not include a unique depositor ID or provisional hold
requirement. The original purpose of the three-tiered approach was to
reduce industry implementation costs. The software vendors indicated a
less varied set of requirements would be easier and less costly to
implement, hence the movement to a suggested two-tiered approach.
Appendix A--Primary FDIC Deposit Insurance Categories
------------------------------------------------------------------------
Insurance category Description
------------------------------------------------------------------------
1. Single Ownership.......... Funds owned by a natural person including
those held by an agent or custodian,
sole proprietorship accounts and
accounts that fail to qualify in any
other category below. Coverage extends
to $100,000 per depositor.
2. Joint Ownership........... Accounts jointly owned as joint tenants
with the right of survivorship, as
tenants in common or as tenants by the
entirety. Coverage extends to $100,000
per co-owner.
The account title generally must
be in the form of a joint account
(``Jane Smith & John Smith'').
Each of the co-owners must sign
the account signature card. (This
requirement has exceptions, including
certificates of deposit.)
The withdrawal rights of the co-
owners must be equal.
3. Revocable Trust........... Accounts whereby the owner evidences an
intention that upon his or her death the
funds shall belong to one or more
qualifying beneficiaries. For each
owner, coverage extends to $100,000 per
beneficiary.
The title of the account must
include ``POD'' (payable-on-death) or
``trust'' or some similar term.
The beneficiaries must be
specifically named in the account
records. (This requirement applies to
informal ``POD'' accounts but does not
apply to formal `living trust'
accounts.)
The beneficiaries must be the
owner's spouse, children, grandchildren,
parents or siblings.
4. Irrevocable Trust......... Accounts established pursuant to an
irrevocable trust agreement. Coverage
extends to $100,000 per beneficiary.
The account records must
indicate that the funds are held by the
trustee pursuant to a fiduciary
relationship.
The account must be supported by
a valid irrevocable trust agreement.
Under the trust agreement, the
grantor of the trust must retain no
interest in the trust funds.
For ``per beneficiary''
coverage, the interest of the
beneficiary must be ``non-contingent.''
[[Page 74865]]
5. Self-Directed Retirement.. Individual retirement accounts under 26
U.S.C. 408(a), eligible deferred
compensation plans under 26 U.S.C. 457,
self-directed individual account plans
under 29 U.S.C. 1002 and self-directed
Keogh plans under 26 U.S.C. 401(d).
Coverage extends to $250,000 per owner
or participant.
The account records must
indicate that the account is a
retirement account.
The account must be an actual
retirement account under the cited
sections of the Tax Code.
6. Corporation, Partnership Accounts of a corporation, partnership or
or Unincorporated unincorporated association. Coverage
Association. extends to $100,000 per entity.
The account records must
indicate that the entity is the owner of
the funds or that the nominal
accountholder is merely an agent or
custodian (with the entity's ownership
interest reflected by the custodian's
records).
The entity must be engaged in an
``independent activity.''
The entity must not be a sole
proprietorship (which is treated as a
single ownership account).
7. Employee Benefit Plan..... Deposits of an employee benefit plan as
defined at 29 U.S.C. 1002, including any
plan described at 26 U.S.C. 401(d).
Coverage extends to $100,000 per
participant.
The account records must
indicate that the funds are held by the
plan administrator pursuant to a
fiduciary relationship.
The account must be supported by
a valid employee benefit plan agreement.
For ``per participant'' coverage
the interests of the participants must
be ascertainable and non-contingent.
8. Public Unit............... Funds of ``public units'' or ``political
subdivisions'' thereof. Coverage extends
to $100,000 for interest bearing
deposits and $100,000 for non interest
bearing deposits for each official
custodian of the public unit or
subdivision.
For separate coverage for the
non interest bearing deposits, the
insured financial institution must be
located in the same state as the public
unit.
The account records must
indicate that the funds are held by the
custodian in a custodial capacity.
For ``per custodian'' coverage,
the custodian must be a separate
``official custodian.''
For ``per subdivision''
coverage, the governmental entity must
be a separate ``political subdivision.''
------------------------------------------------------------------------
Appendix B--Comment Summary
The FDIC received 28 comment letters in response to the 2005 ANPR.
While most of the comment letters touched on multiple points, they
generally focused on a common theme. The various themes of the letters
are summarized in Table 3. Sixty-four percent of the comment letters
indicated opposition due to the view that implementation costs of the
options outweighed any potential benefits, high potential costs and
regulatory burdens, or the options simply are not needed. In other
words, these commenters expressed the general belief that the FDIC
failed in the 2005 ANPR to make a compelling case in favor of any of
the options in light of their perceptions of the costs.
Table 3.--2005 ANPR Comment Summary
------------------------------------------------------------------------
General comment Number Percentage
------------------------------------------------------------------------
Costs Outweigh Benefits....................... 10 35.7
Opposed Due to Costs/Burdens.................. 5 17.9
Options Are Not Needed........................ 3 10.7
Do Not Include Our Institution as Covered..... 2 7.1
Supportive of at Least One Option, but in Some 5 17.9
Cases Expressed Concern Over Costs...........
Too-Big-To-Fail and/or Market Discipline...... 2 7.1
Options Raise Significant Privacy Issues...... 1 3.6
-------------------------
Total..................................... 28 100.0
------------------------------------------------------------------------
The 2005 ANPR noted that the FDIC was considering expanding the
definition ofa Covered Institution to include any institution with at
least $20 billion in total assets, regardless of the total number of
deposit accounts. Two institutions falling into this category commented
that the definition of a Covered Institution should not be changed from
the original definition of at least 250,000 deposit accounts and $2
billion in domestic deposits.
Some commenters were expressly supportive of one or more of the
options, but in some cases indicated concern over costs. In particular,
the letter from Dollar Bank stated it ``understands and supports the
need for the FDIC to have a rapid and effective process for determining
insurance coverage. Not only does this benefit the FDIC directly, but
effective performance by the FDIC also benefits the entire banking
system by assuring the public of the reliability of federal insurance
of deposits. The FDIC asked in this Proposal for suggestions on
alternative approaches that might achieve approximately the same
benefits for the FDIC at lower costs for banks. Because Dollar sees no
reasonable alternative, it supports the general thrust of the
Proposal.'' \18\
---------------------------------------------------------------------------
\18\ Comment letter provided by Dollar Bank dated March 13, 2006
in response to the 2005 ANPR, page 1.
---------------------------------------------------------------------------
Two other commenters indicated support because the 2005 ANPR
options were viewed as addressing the concept of too-big-to-fail
(``TBTF'') and enhancing market discipline. Gary H. Stern, President of
the Federal Reserve Bank of Minneapolis made the following five
points.\19\
---------------------------------------------------------------------------
\19\ Comment letter provided by the Federal Reserve Bank of
Minneapolis in response to the 2005 ANPR, pages 1-5.
---------------------------------------------------------------------------
``To ensure effective use of society's resources, the FDIC
must reform current insurance determination procedures which hinder its
ability to carry out the least-cost resolution of a large bank.
The FDIC's Board of Directors should focus on net benefits
when
[[Page 74866]]
evaluating the comments received on the 2005 ANPR and choosing which
option to implement.\20\
---------------------------------------------------------------------------
\20\ This quote provides further elaboration on this point. ``As
already noted, creating the conditions for imposition of least cost
resolution of a large bank is the first and most important benefit
of the options. This outcome, in turn, should increase market
discipline/reduce moral hazard. More market discipline and less
moral hazard means a higher standard of living, as resources flow to
their best uses. This benefit is difficult to quantify but the
limited evidence available suggests that it is potentially large.''
---------------------------------------------------------------------------
The features of Option 2 are necessary but may not prove
sufficient to correct weaknesses in the insurance determination
process.
The FDIC should give serious consideration to implementing
Options 1 and 3.
The reformed insurance determination regime should apply
to all large banks for which the current regime could prevent a least
cost resolution; the same insurance determination scheme need not apply
to all covered institutions.''
One comment letter focused almost entirely on financial privacy
issues. Numerous other commenters indicated financial privacy concerns
as well, particularly as they may arise from any testing program
implemented as part of the proposal.
The 2005 ANPR noted that ``the FDIC solicits suggestions on
alternative means of meeting the objective of conducting a timely
insurance determination on Covered insured institutions.'' \21\ No
alternative suggestions were received.
---------------------------------------------------------------------------
\21\ 70 FR 73659, December 13, 2005.
---------------------------------------------------------------------------
Since such a large portion of the comment letters raised concerns
about costs versus benefits, this topic will be discussed in the next
section. This will be followed by a discussion of other issues raised
in the comment letters.
Commenters' Views on Costs Versus Benefits
General arguments. Many commenters--including all responses from
the trade organizations--argued that any option presented in the 2005
ANPR would impose high or significant costs on Covered Institutions.
These costs would come in the form of dollar expenditures and the
utilization of scarce technological resources. Some responders
indicated this was the wrong time for a new technological initiative
since ``under both Basel II and Basel I-A as proposed, banks will be
required to develop new and costly information technologies.'' \22\
---------------------------------------------------------------------------
\22\ Comment provided by The Financial Services Roundtable dated
March 10, 2006 in response to the 2005 ANPR, page 3.
---------------------------------------------------------------------------
Many commenters also argued that the likelihood of a Covered-
Institution failure was remote. The Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (``FIRREA''), the Federal Deposit
Insurance Corporation Improvement Act of 1991 (``FIDICA'') and the
Federal Deposit Insurance Reform Act of 2005 (``FDIRA'') were cited as
containing provisions reducing the likelihood of large-institution
failures. It was noted that the FDIC is undergoing the longest period
in its history without a failure. Furthermore, responders pointed out
that the most recent failures were of institutions not proposed to be
covered by the regulation. It also was argued that the FDIC likely will
have ample warning of a large-institution failure, thereby allowing for
adequate preparation time. Several commenters recommended applying the
2005 ANPR options only in the event the Covered Institution reaches
problem status. This suggestion is discussed in more detail below.
Failure preparation time. The joint trade association letter noted
``failures that have occurred in the last few years were among
financial institutions that would not be covered by this 2005 ANPR.
Regulators frequently had knowledge of the problems undermining these
institutions and had time to prepare for closure. Sudden failures were
more likely to have been caused by fraud or other criminal activity. It
is highly unlikely that such a series of similar events could cause a
failure of covered financial institutions because of their size,
capital strength and diversity of lines of business. Constructing,
maintaining and periodically testing the programs proposed under this
2005 ANPR solely because of the remote chance of sudden failure
resembles an expensive solution in search of a very low probability
problem.'' \23\
---------------------------------------------------------------------------
\23\ American Bankers Association, America's Community Bankers
and The Financial Services Roundtable, page 3.
---------------------------------------------------------------------------
The 2005 ANPR noted that Covered Institutions are more likely to be
closed due to liquidity reasons, thus are prone to fail on any day of
the week. Covered Institutions generally would be handled through a
bridge bank structure, and to preserve franchise value the failed
institution must open the day following failure. The provisional hold
functionality included in Options 1 and 2 allows for a next-day opening
of the bridge institution. The nightly processing cycle of Covered
Institutions does not end until the early morning hours, often
extending until 4 a.m. and, in some cases, until 7:30 a.m. Once the
nightly processing schedule is complete a failed institution must
generate deposit data to be used by the FDIC to make the deposit
insurance determination. The 2005 ANPR options recognize that, even
under the best of circumstances, it would be impossible for the FDIC to
complete the steps necessary for a deposit insurance determination and
have the results posted in time for the opening of the bridge bank the
business day following failure.\24\ Therefore, it is the FDIC's view
that one or more of the 2005 ANPR options appear necessary for a
successful bridge bank opening, regardless of the advance warning or
preparation time allotted.
---------------------------------------------------------------------------
\24\ These steps include: (1) Generating the depositor data
file, (2) transmitting the data file to the FDIC, (3) processing the
depositor data to produce the deposit insurance determination
results and (4) transmitting and posting these results on the
institution's deposit systems.
---------------------------------------------------------------------------
Differentiation between options. While the majority of commenters
opposed the FDIC moving forward, many clearly differentiated between
the three options listed in the 2005 ANPR. The Clearing House stated,
``we believe that Option 3 is so extraordinarily burdensome as to be
unfeasible and that the burden of Option 1 is clearly excessive.
Although Option 2 is less onerous and a possible solution to the FDIC's
concerns, we believe that further study and dialogue between the
Covered institutions and the FDIC are necessary to refine this
option.'' \25\ \26\
---------------------------------------------------------------------------
\25\ Comment provided by The Clearing House dated March 29, 2006
in response to the 2005 ANPR, page 2.
\26\ This quotation is not intended to suggest the trade
organization supports Option 2, rather to illustrate the clear
differences among the three options. The commenter further noted
``we are concerned that even Option 2 does not create a reasonable
[cost/benefit] balance.''
---------------------------------------------------------------------------
Option 1 differs from Option 2 in that it would require the
institution to supply a unique depositor ID and the insurance category
of each account. Several commenters noted that--of the two--the
insurance category requirement was significantly more burdensome.
Wachovia Corporation noted that it ``currently uses a unique customer
identifier for each of [its] general bank customers. However, this
identifier may not be available in all instances. An example of this is
brokered CDs, in which the insurance is passed through to individuals
who are the ultimate customers. We also do not have a unique way to
identify insurance categories. Identifying and developing systemic ways
to assess categories may be arduous and costly. Again, the development
of this logic by multiple banks would be redundant and would
[[Page 74867]]
shift responsibility to the bank that the bank should not have to
bear.'' \27\
---------------------------------------------------------------------------
\27\ Comment provided by Wachovia Corporation dated March 10,
2006 in response to the 2005 ANPR, page 3.
---------------------------------------------------------------------------
Capital One Financial Corporation noted that ``we estimate the cost
of complying with the FDIC's Option 1 as over $220,000. Most of that
cost is attributable to the additional requirements of Option 1 as
compared with Option 2--in particular, the requirement to identify the
insurance ownership category of each deposit account.'' \28\
---------------------------------------------------------------------------
\28\ Comment provided by Capital One Financial Corporation dated
March 13, 2006 in response to the 2005 ANPR, page 2.
---------------------------------------------------------------------------
Estimated costs. No trade organization provided specific cost
estimates on the 2005 ANPR options, other than to say the costs would
be ``high'' or ``very substantial.'' Four of the 14 large-institution
responders--Wachovia Corporation, Capital One Financial Corporation,
First Tennessee and Dollar Bank--provided cost estimates for one or
more of the options. These estimates generally were characterized as
being ``rough'' and frequently contained caveats. The estimates
provided are listed in Table 4, which also shows the assessable deposit
base of the institution (indicating institution size) and the impact of
a 1-basis point annual FDIC assessment (indicating a basis for relative
cost comparison).
The paucity of data provided on Option 3 reflects the view among
most commenters that it is unfeasible. Wachovia Corporation indicated,
for example, that Option 3 was ``wholly unacceptable,'' \29\ which
appears to be the reason why no cost estimate was provided for this
option. First Tennessee was the only responder providing an estimate
for Option 3 indicating it was roughly five times higher that that for
Option 2.
---------------------------------------------------------------------------
\29\ Wachovia Corporation, page 3.
Table 4.--Cost Estimates of 2005 ANPR Options
----------------------------------------------------------------------------------------------------------------
1-Basis point
Estimated Assessable annual FDIC Estimated Cost
Responder Comment implementation deposits ($ assessment ($ as a % of 1 BP
cost millions) millions) assessment
----------------------------------------------------------------------------------------------------------------
Wachovia Corporation......... Option 2, for ``$2 mm or 307,000 30.7 7
demand deposit, more''.
time deposit
and securities
systems only.
Capital One Financial Option 1........ ``over 44,000 4.4 5
Corporation. $220,000''.
First Tennessee.............. Option 2........ ``exceed 23,000 2.3 44
$1,000,000''.
First Tennessee.............. Option 3........ ``mid seven 23,000 2.3 200
figures''.
Dollar Bank.................. Cost of Option ``approximately 4,500 0.45 13
2, $60,000''.
``negligible''
additional cost
for Option 1.
----------------------------------------------------------------------------------------------------------------
For Options 1 and 2 the cost estimates provided in the table are
fairly modest when matched against other potential deposit insurance
costs. Compared to a 1-basis point annual FDIC assessment, the
estimated implementation costs of Options 1 or 2 ranged from 5 to 44
percent. The FDIC expects that implementation costs will vary across
institutions. The deposit systems at Covered Institutions are
different. In particular, some institutions rely primarily on
proprietary systems while others use software or servicing provided by
an outside vendor.
The 2005 ANPR noted that many Covered Institutions use deposit
software supplied by a common vendor or have their deposits serviced by
a common servicer. The 2005 ANPR suggested this structure may help
mitigate the implementation costs of the options. No deposit software
vendor or servicer responded to the 2005 ANPR, nor did any commenter
address the potential cost savings associated with the common use of
software providers or servicers. The FDIC believes this common usage
would mitigate implementation costs.
Too big to fail and market discipline. Several commenters raised
the issue of TBTF, effectively expressing the concern that uninsured
depositors of a large institution could be made whole in the event of
failure, regardless of expected losses in the failed institution. Mr.
Stern's letter noted that ``[i]n the face of insufficient technology to
segregate deposits or information to determine the insurance status of
deposits, therefore, the FDIC would likely prefer to provide depositors
with access to deposits even if they might be uninsured. This
preference, even if understandable, undercuts least cost resolution and
puts pressure on policymakers to invoke the systemic risk exception of
[FDICIA]. Invoking the systemic risk exception due to limitations in
the resolution process (as opposed to preventing a true systemic
crisis) could contribute to substantial resource misallocation in the
economy over time.'' \30\ Mr. Stern noted that these costs are
difficult to quantify, although they could be substantial.
---------------------------------------------------------------------------
\30\ Federal Reserve Bank of Minneapolis, pages 2-3.
---------------------------------------------------------------------------
FDIC's Views on the Cost/Benefit Tradeoff
Any option will impose industry costs, but benefits also will
accrue. The FDIC must balance these costs and benefits.
Summary of costs. In its 2005 visitations to the four large deposit
software vendors/servicers, two of the organizations indicated the cost
of the provisional hold functionality was fairly modest. The 2005 ANPR
specifically requested comment on the costs of implementing the three
options. The limited data summarized above suggests fairly modest
implementation costs for an Option 2 approach and, for some
institutions, Option 1 as well. The consensus of comments was that
Option 3 would be prohibitively expensive. While no commenters
mentioned the potential cost savings that may arise from the use of
common software vendors or servicers, they could be significant. The
available data on costs currently is limited, although more information
should result from this request for comments as well as other research
conducted by the FDIC.
Many responders noted the low likelihood of a Covered-Institution
[[Page 74868]]
failure. Historical evidence indicates this to be the case. The FDIC
also agrees that the reforms implemented in FIRREA, FDICIA and FDIRA
serve to reduce the probability of a Covered-institution failure.
However, even if the likelihood of a failures among Covered
Institutions is perceived to be low, it is not zero. The FDIC should
have in place a credible plan for resolving the failure of an
institution of any size with the least possible costs. The ability to
determine the insurance status of depositors in a failed institution in
a timely manner is a critical element for ensuring a least-costly
resolution.
Meeting the FDIC's legal mandates. FDICIA was one of the most
important pieces of legislation affecting the FDIC's failure resolution
process. Its least-cost requirement effectively requires uninsured
depositors to be exposed to losses. Also, FDICIA's legislative history
and the nature of the systemic risk exception provide a clear message
that uninsured depositors of large institutions are to be treated on
par with those of any size. Meeting these mandates is an important
benefit of the rules being proposed.
Enhancement of market discipline. The FDIC's legal mandates have
direct implications for TBTF and market discipline. If financial
markets perceive uninsured depositors in large institutions will be
made whole in the event of failure, deposits will be directed toward
these larger depository institutions. The result would be the
misallocation of economic resources. Many market observers believe
there are substantial benefits of improved market discipline that
accrue even without serious industry distress or bank failures. The
FDIC agrees with Mr. Stern's assessment that this resource
misallocation could be significant.
Effective market discipline also limits the size of troubled
institutions and results in a more rapid course toward failure. Both
serve to mitigate overall resolution losses. Lower resolution losses
benefit insured institutions through lower insurance assessments.
Equity in the treatment of depositors of insured institutions. In
the absence of one or more of the options outlined in the 2005 ANPR,
the FDIC is concerned that the resolution of a Covered Institution
could be accomplished only through a significant departure from its
normal claims procedures. This departure could involve leaving the bank
closed until an insurance determination is made or the use of shortcuts
to speed the opening of the bridge institution. The use of shortcuts or
other mechanisms to facilitate depositor access to funds will imply
disparate treatment among depositors within the failed institution and
certainly different treatment relative to the closure of a non-Covered
Institution. The FDIC places a high priority on the consistent
implementation of its claims policies and procedures regardless of the
size or complexity of the institution.
Preservation of franchise value in the event of failure. The sale
of the franchise of a failed institution can provide significant value
to mitigate failure costs and is a necessary ingredient to a least-cost
resolution. Superior Bank, FSB, the largest failure over the past 10
years, generated a franchise premium of $52 million, or 17 percent of
current estimated FDIC losses in the failure. An ineffective claims
process--especially one deviating significantly from the FDIC's normal
policies and procedures--risks reducing or destroying an important
asset of the receivership. Preservation of franchise value in the event
of failure of a Covered Institution will be an important benefit of the
proposed options.
Suggested course of action. The strong industry opposition and high
costs of Option 3 make it unlikely to be the most cost-effective
option. In addition, the less costly options appear to meet the primary
objective of the FDIC. Although the 2005 ANPR generated only limited
data on the costs of Options 1 and 2, these costs are almost certainly
low enough to merit moving forward--particularly given the substantial
benefit to the FDIC in being able to meet its statutory mandate for
least-cost resolutions and the uniform application of insurance limits,
plus additional benefits associated with enhanced market discipline.
Implementation costs may vary among Covered Institutions depending on
conditions such as the number of deposit systems, the age of these
systems and their architecture, and whether deposit operations are
processed in-house or through a servicer. To some degree, the factors
affecting costs also indicate a facet of operational risk which may
influence failure potential.
Implementation of Options Upon Reaching Problem Status
Several commenters suggested delaying the implementation of any
options until a Covered Institution reaches ``problem bank status.''
\31\ For supervisory purposes problem bank status refers to any insured
depository institution with a composite CAMELS rating of ``4'' or
``5''. None of the Covered Institutions currently are designated as
problem institutions. The adoption of this exception likely would imply
that no Covered Institutions would have to immediately comply with the
new FDIC requirements.
---------------------------------------------------------------------------
\31\ See, for example, the American Bankers Association,
America's Community Bankers and The Financial Services Roundtable
letter, page 3.
---------------------------------------------------------------------------
Several commenters also provided insights into the potential time
needed to implement the proposed rules. The Clearing House, for
example, noted that ``material information system changes take
significant time. Our member banks have discussed the ANPR with their
technical staffs and have determined that any of the requested changes
could be made, but only over a significant period of time. Without more
specific direction, they cannot put a specific timeframe on the
project, but to make any substantial changes over multiple systems, and
then fully test them, is likely to take more than a year.'' \32\
Additional time would be needed for the FDIC to test the system
changes.
---------------------------------------------------------------------------
\32\ The Clearing House, page 3.
---------------------------------------------------------------------------
The FDIC is concerned that a Covered Institution could fail prior
to reaching problem status (with a CAMELS rating of ``3'', for
example), or relatively shortly after attaining problem status. If the
one-year implementation time estimate is generally accurate, the FDIC
risks not meeting its objectives should a Covered Institution fail more
quickly than one year after being designated a problem institution.
Further, a period of financial or operational stress is not the
opportune time to make the proposed system enhancements.
Cost Reimbursement
Several responders to the 2005 ANPR suggested that the FDIC cover
implementation costs, either through a direct payment or an assessment
rebate. As shown in Table 4, the estimated costs of implementing
Options 1 or 2 are fairly modest, ranging from 5 to 44 percent of a 1-
basis point annual FDIC assessment. Implementation costs may be viewed
as part of the overall cost of deposit insurance; therefore, not
subject to reimbursement.
Extending Program to All Insured Institutions
Two commenters proposed extending the options to all insured
institutions, and one commenter suggested the FDIC may apply the
options to large institutions now but include small institutions at
some future point. The 2005 ANPR specifically limited the scope of the
options to the 145 insured institutions with at least 250,000 deposit
accounts and more than $2 billion in domestic deposits. The 2005 ANPR
noted that the FDIC was
[[Page 74869]]
considering expanding the definition of a Covered Institution but only
in a way that would include a handful of other institutions (for
example, those with at least $20 billion in total assets, regardless of
the number of accounts). The 2005 ANPR never suggested or mentioned in
any way the possibility of extending coverage to all insured
institutions.
As noted in the 2005 ANPR, the ``FDIC is seeking to minimize
[implementation] costs while at the same time ensuring that it can
effectively carry out its mandates to make insured funds available
quickly to depositors and provide a least-cost resolution for Covered
institutions.'' \33\ The FDIC's deposit insurance determination
modernization initiative is directed at improving the process at the
very largest institutions. The FDIC has never considered extending the
options beyond the largest, most complex institutions. There simply is
no business reason for doing so.
---------------------------------------------------------------------------
\33\ 70 FR 73654, December 13, 2005.
---------------------------------------------------------------------------
Financial Privacy
One comment letter focused primarily on financial privacy, but
other letters mentioned the issue as well, especially in the context of
any testing program. As noted in the 2005 ANPR, ``[a]s part of its
normal practice, the FDIC obtains depositor data only at the time an
insured institution is in danger of failing. These data are received in
the weeks or months prior to failure, and are obtained for the sole
purpose of determining the insurance status of individual depositors
and estimating the total amount of insured funds in the institution.
The receipt of such depositor data is necessary for the FDIC to carry
out its insurance function. The options provided in this [2005] ANPR do
not alter the FDIC policy regarding the receipt of depositor
information in preparation for the resolution of a failing insured
institution. The FDIC is aware of the potential privacy issues
surrounding the holding of depositor information and has in place
strict safeguards to protect these data.'' \34\ The 2005 ANPR also
states ``it is possible to conduct an effective testing process while
on-site, without the need for sensitive depositor data to leave the
institution's premises.'' \35\
---------------------------------------------------------------------------
\34\ 70 FR 73653, December 13, 2005.
\35\ 70 FR 73658, December 13, 2005.
---------------------------------------------------------------------------
The 2005 ANPR options would not change the treatment of depositor
data in the event an institution is in danger of failing, nor have such
changes been proposed. The FDIC still believes an effective testing
program can be structured whereby sensitive depositor data never leaves
the institution's premises. These testing safeguards eliminate privacy
concerns.
Appendix C--Data Elements Included in the Standard Data Set
The Standard Data Request contains data structures which will be
used by the FDIC to determine insurance categorization. This data
structure may be divided into multiple Record Types/Formats. It is the
FDIC's intent to work with the industry to define a standard data
structure. If data or information are not maintained or do not apply, a
null value in the appropriate field should be indicated.
XML may be the most beneficial format. XML has become a widely
adopted standard for data interchange by enabling a common messaging
format for the exchange of information between systems. XML will enable
all the information listed below to be consolidated into one file and
presented in plain text with hierarchical relationships providing a
single source/file containing the required information.
Following is a list of the data fields that are to be included in
the proposed data structure along with explanations of the data being
requested. The fields are listed in the order they should appear in the
file.
Representative Deposit Data Elements
The Deposit data elements provide information specific to deposit
account balances and account data. The sequencing of these elements,
their physical data structures and the mode or method of data
transmission will be developed in cooperation with the Covered
Institutions.
Note: Fields 13-26 relate to the Account Name and Address
information. Some systems provide for separate fields for Account
Title/Name, Address, City, State, Zip, and Country, all of which are
parsed out. Others systems may simply provide multiple lines for
Name, Address, City, State, Zip, with no distinction. Please
populate fields that best fit the system's data, either fields 13-20
or fields 21-26.
----------------------------------------------------------------------------------------------------------------
Questions/comments for
Field name FDIC field description the industry
----------------------------------------------------------------------------------------------------------------
1........... DP--Acct--Numb............... Account Number: The unique number assigned Is there a case where
by the institution to this account. this number is not
unique within your
institution? Are
account numbers
unique across
different deposit
systems? If they are
not unique, will the
combination of branch
and account number
provide a unique
number?
2........... DP--Sub--Acct--Numb.......... Sub-Account Number: Account number field
that further identifies the account. May
be used to identify separate deposits tied
to this account where there are different
processing parameters, i.e. interest
rates, maturity dates, but all owners are
the same (like CD certificate numbers).
3........... DP--Tax--ID.................. Tax ID: Provide the tax identification
number(s) maintained on the account. For
consumer accounts, typically, this would
be the primary account holder's social
security number (SSN). For business
accounts it would be the federal tax
identification number (TIN).
4........... DP--Tax--Code................ Tax ID Code: This field should identify the Is the data field
type of the tax identification number. available in your
Generally deposit systems have flags or deposit system?
indicators set to indicate whether the
number is an SSN or TIN.
S = Social Security Number........
T = Federal Tax Identification
Number..
O = Other.........................
[[Page 74870]]
5........... DP--Branch................... Branch Number: This field should identify
the branch or office associated with the
account. Usually referred to as branch
number but may represent a specialty
department or division or office.
6........... DP--Cost--Center............. Cost Center or G[bs]L
Code: Identifier used for organization
reporting or ownership of the account.
Ties to general ledger accounts. If cost
center is not carried in the deposit
record, leave blank.
7........... DP--Prod--Type............... Product Type: This field is used to Can your deposit
identify the product type from a customer accounts be
perspective. Your financial institution categorized into
may identify this field by another name, these product types?
but will indicate account product: How accurate would
CON = Personal or consumer the designation be?
accounts; this can be a SGL, JNT, REV, What data elements in
IRR, IRA.. your deposit system
BUS = Business.................... would enable you to
NPR = Non-profit accounts......... determine the product
GOV = Accounts held by government type? Is this
entities (city, state, political available for all
subdivisions).. deposit products?
FIN = Accounts held by other
financial institutions..
INT = Internal accounts (bank
control accounts) or bank owned accounts..
BRK= Brokered accounts............
8........... DP--Owner--Ind............... Customer Owner Indicator:.................. How accurately can you
This field is used to identify the type of determine the
ownership at the account level. Your ownership status of
financial institution may call these an account? Are these
indicators by another name, but the field data readily
should indicate:. available on your
S = Single........................ deposit system(s)?
J = Joint Account.................
P = Partnership account...........
C = Corporation...................
B = Brokered Deposits.............
T = Trust.........................
O = Other.........................
9........... DP--Prod--Cat................ Product Category:.......................... Can your deposit
This is a broad classification of products accounts be
and accounts. It is sometimes referred to categorized into
as ``application type'' or ``system these product
type''. Examples of values in the field categories? How
are:. accurate would the
DDA = Non-Interest Bearing categorization be?
Checking accounts.. What data elements in
NOW = Interest Bearing Checking your deposit system
accounts.. would enable you to
MMA = Money Market Accounts....... determine the product
SAV = Savings accounts and Money category? Is this
Market Savings accounts. This includes any available for all
interest bearing accounts with regulated deposit products?
withdrawal requirements..
CDS = Time Deposit accounts and
Certificate of Deposit accounts. Include
any accounts with specified maturity dates
that may or may not be renewable..
REP = Repurchase agreements--
Include any accounts supported by an
agreement to repurchase the deposit at a
specified date and interest rate, and is
secured by designated securities owned by
the institution..
IRA = Individual Retirement
Account (IRA)..
RIRA = Roth IRA...................
KEO = Keogh.......................
10.......... DP--Stat--Code............... Status Code: Include only the following
status or condition of the account. Field
values are:
O = Open..........................
C = Closed........................
D = Dormant.......................
I = Inactive......................
11.......... DP--Short--Name.............. Short Name or SORT Name: Generally the
field used to create an alpha list of
accounts or to sort names. If a similar
field does not exist, create a ``Short
Name'' by concatenating data using the
account title field. Personal accounts
should have all letters or last name if
possible or first 5 letters of last name
and first 2 letters of first name for all
names on account. Business accounts should
have business name with leading words such
as ``the'' dropped so the name can be
properly placed in an alphabetized account
listing.
12.......... DP--Acct--Title--1........... Account Title Line 1: Two lines (Fields 13 Please indicate the
& 14) are provided to enter account best way to obtain
styling or titling of the account. These account title, name
data will be used to identify the owners and address based on
of the account. the characteristics
of your deposit
system(s).
13.......... DP--Acct--Title--2........... Account Title Line 2: Additional Account
Title line.
14.......... DP--Address--Line--1......... Address Line 1: Two lines (Fields 15 & 16)
are provided to enter the street, PO Box,
suite number, etc * * * of the address.
15.......... DP--Address--Line--2......... Address Line 2: Additional address line.
[[Page 74871]]
16.......... DP--City..................... City: Enter the city associated with the
mailing address.
17.......... DP--State.................... State: Enter the state abbreviation
associated with the mailing address.
18.......... DP--ZIP...................... ZIP: This field allows for the ZIP+ 4 Code
associated with the mailing address. If
``4 Code'' is not available provide 5-
digit ZIP Code and leave ``4 Code'' blank.
19.......... DP--Country.................. Country: This field should identify the
country associated with the mailing
address. Provide the name of the country
or the standard country code.
20.......... DP--NA--Line--1.............. Name or Address Line 1: Six lines (Fields
21--26) are provided to enter the name and/
or the account mailing address if your
system does not distinguish particular
address lines.
21.......... DP--NA--Line--2.............. Name & Address Line 2: Additional name and/
or address line.
22.......... DP--NA--Line--3.............. Name & Address Line 3: Additional address
line.
23.......... DP--NA--Line--4.............. Name & Address Line 4: Additional address
line.
24.......... DP--NA--Line--5.............. Name & Address Line 5: Additional address
line.
25.......... DP--NA--Line--6.............. Name & Address Line 6: Additional address
line.
26.......... DP--Cur--Bal................. Current Balance: This amount represents the
current balance in the account at the end
of business on the effective date of this
file. This balance should not be reduced
by float or holds. For CDs and time
deposits, it should reflect the principal
balance plus any interest paid and
available for withdrawal that is not
already included in the principal (do not
include accrued interest not paid). The
total of all current balances in this file
should reconcile to the total deposit
trial balance totals or other summary
reconciliation of deposits performed by
the financial institution.
27.......... DP--Int--Rate................ Interest Rate: The current interest rate in
effect for interest bearing accounts.
28.......... DP--Bas--Days................ Basis Days: Indicates the basis on which
interest is to be paid. Valid values are:
1 = 30/360........................
2 = 30/365........................
3 = 365/365 (actual/actual).......
29.......... DP--Int--Type................ Interest Type: Indicates the type of
interest to be paid. Valid values are:
S = Simple........................
D = Daily Compounding.............
C = Continuous Compounding........
O = Other.........................
30.......... DP--Int--Factor.............. Interest Rate Daily Factor: This field Are these data
should reflect the daily interest rate available for
factor for generating interest. interest-bearing
accounts?
31.......... DP--Acc--Int................. Accrued Interest: This field should reflect
the amount of interest that has been
earned but not yet paid to the account as
of the date of the file.
32.......... DP--Lst--Int--Pd............. Date Last Interest Paid: This field should
indicate the date thru which interest was
last paid to the account. Must be entered
in MMDDYYYY format.
33.......... DP--Lst--Deposit............. Date Last Deposit: This date should reflect
the last deposit transaction posted to the
account. For example, a deposit that
included checks and or cash. Must be
entered in MMDDYYYY format.
34.......... DP--Open--DT................. Account Open Date: This date should reflect
the date the account was opened. If the
account had previously been closed and re-
opened, this should reflect the most
recent re-opened date. Must be entered in
MMDDYYYY format.
35.......... DP--Nxt--Mat................. Date of Next Maturity: For CD and time
deposit accounts, this is the next date
the account is to mature. For non-renewing
CDs that have matured and are waiting to
be redeemed this date may be in the past.
Must be entered in MMDDYYYY format.
----------------------------------------------------------------------------------------------------------------
Representative Hold Data Elements
The Hold data elements provide information related to any holds for
collateral placed on an account. If an account has more than one
collateral hold, additional Hold elements may be provided to help the
Covered Institutions or FDIC to process holds more efficiently.
----------------------------------------------------------------------------------------------------------------
Questions/comments
Field name FDIC field description for the industry
----------------------------------------------------------------------------------------------------------------
1.......... HD--Acct--Numb.................. Account Number............................ Do we need the branch
The account number associated with the number to make this
hold. Should be the same as the account unique across all
number in Deposit Record field 1. deposit accounts?
2.......... HD--Sub--Acct--Numb--ID......... Sub-Account Number: .....................
Account number field that further
identifies the account..
[[Page 74872]]
3.......... HD--Hold--Amt................... Hold Amount: .....................
Dollar amount of the hold.................
4.......... HD--Hold--Reason................ Hold Reason: Reason for the hold. Valid
values are:
LN = Loan collateral hold........
OT = Other--any hold not a
collateral hold..
5.......... HD--Hold--Desc.................. Hold Description: Description of the hold
available on the system.
6.......... HD--Hold--Days.................. Hold Days: The number of days the hold was/ Please specify a
is intended. May be used instead of an preference between
expiration date. field 6 and
field 8.
7.......... HD--Hold--Start--Dt............. Hold Start Date: The date the hold was
initiated. Must be entered in MMDDYYYY
format.
8.......... HD--Hold--Exp--Dt............... Hold Expiration Date: The date the hold is
to expire. Must be entered in MMDDYYYY
format. May be used instead of number of
hold days.
----------------------------------------------------------------------------------------------------------------
Customer Record Held in Central Information File (``CIF'') or Central
Information System (``CIS'')
The Customer Record provides information related to each customer
of the financial institution. Customers may have more than one deposit
account, or may be partial owners of more than one deposit account.
Each of the customer's accounts are associated with a customer record.
If there are multiple owners of an account, multiple customer records
(CIF/CIS) will be associated to the deposit account and will be
associated in the deposit record (pointed to or linked by a linking
file). If a linking file is required to link customer records to
deposit records, please provide the program along with instructions on
how to link.
----------------------------------------------------------------------------------------------------------------
Questions/comments
Field name FDIC field description for the industry
----------------------------------------------------------------------------------------------------------------
1.......... CS--Cust--Numb.................. Customer Number: The number assigned to
the customer in the Customer Information
System.
2.......... DP--Acct--Numb.................. Account Number: The unique account number
assigned by the institution.
3.......... CS--Tax--ID..................... Customer Tax ID Number: Provide the Tax ID Do you store customer
number on record for the customer. tax ID number in
your customer
records? If so, is
there a possibility
that the customer
and account level
tax ID numbers are
different?
4.......... CS--Tax --Code.................. Customer Tax ID Code: This field should
identify the type of the Tax ID number of
the customer. Valid values are:
S = Social Security Number.......
T = Federal Tax Identification
Number..
O = Other........................
5.......... CS--Rel--Code................... Relationship Code: This code indicates how The CIF account is
the customer is related to the account. for one person or
Valid values are: entity. That person
P = Primary Owner................ may have more than
S = Secondary Owner.............. one deposit account
B = Beneficiary.................. that is tied to the
T = Trustee...................... CIF number. The
O = Other........................ relationship code is
U = Unknown...................... given for the person
or entity relating
to each account the
CIF is tied to. Are
these data available
within your customer
records?
6.......... CS--Bene--Code.................. Beneficiary Type Code: If the customer is Are these data
considered a beneficiary, enter the type available within
of account associated with this customer. your customer
This includes beneficiaries on retirement records?
accounts, trust accounts, minor accounts,
and payable-on-death accounts. Valid
values are:
I = IRA..........................
T = Trust--irrevocable...........
R = Trust--revocable.............
M = Uniform Gift to Minor........
P = Payable on death.............
O = Other........................
7.......... CS--Name........................ Customer Name: The name of the customer.
Provide in the Mapping document the
typical format the bank practices for
business customers and personal/
individual customers, i.e.--Last Name
first, First Name last.
8.......... CS--Last--Name.................. Customer Last Name: The last name of the
individual/ personal customer.
9.......... CS--First--Name................. Customer First Name: The first name of the
individual/ personal customer.
10......... CS--Middle--Name................ Customer Middle Name: The middle name of
the individual/ personal customer.
[[Page 74873]]
11......... CS--Suffix...................... Customer Suffix: The suffix of the
individual/ personal customer--i.e. Jr.,
Sr., III, etc.
12......... CS--Comp--Name.................. Customer Company Name: The company name of How are business
the business customer. customers reflected
in your customer
records? Are there
multiple name/
address fields?
13......... CS--Address--1.................. Address Line 1: Two lines (Fields 13 & 14)
are provided to enter the street, PO Box,
suite number, etc. of the address.
14......... CS--Address--2.................. Address Line 2: Additional address field.
15......... CS--City........................ City: Enter the city associated with the
mailing address of the customer.
16......... CS--State....................... State: Enter the state abbreviation
associated with the mailing address of
the customer.
17......... CS--ZIP......................... ZIP: This field allows for the ZIP+ 4 Code
associated with the mailing address of
the customer.
18......... CS--Country..................... Country: This field should identify the
country associated with the mailing
address. Provide the name of the country
or the standard country code.
19......... CS--Birth--Dt................... Customer Birth Date: The birth date on
record for the customer. Must be entered
in MMDDYYYY format.
20......... CS--Telephone................... Customer Telephone Number: The telephone
number on record for the customer.
21......... CS--Email....................... Customer Email Address: The e-mail address
on record for the customer.
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* * * * *
By order of the Board of Directors.
Dated at Washington, DC, this 5th day of December, 2006.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E6-21143 Filed 12-12-06; 8:45 am]
BILLING CODE 6714-01-P