[Federal Register Volume 71, Number 96 (Thursday, May 18, 2006)]
[Proposed Rules]
[Pages 28809-28819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7583]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AD08
One-Time Assessment Credit
AGENCY: Federal Deposit Insurance Corporation (FDIC).
[[Page 28810]]
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Deposit Insurance Corporation (``FDIC'') is
proposing to amend 12 CFR part 327 to implement the one-time assessment
credit for certain eligible insured depository institutions required by
the Federal Deposit Insurance Act (``FDI Act'') as amended by the
Federal Deposit Insurance Reform Act of 2005 (``Reform Act''). The
proposed rule covers: the aggregate amount of the one-time credit; the
institutions that are eligible to receive credits; and the amount of
each eligible institution's credit, which for some institutions may be
largely dependent on how the FDIC defines ``successor'' for these
purposes. The proposed rule also would establish the qualifications and
procedures governing the application of assessment credits, and provide
a reasonable opportunity for an institution to challenge
administratively the amount of the credit.
DATES: Comments must be received on or before July 17, 2006.
ADDRESSES: You may submit comments, identified by RIN number by any of
the following methods:
Agency Web site: http://www.fdic.gov/regulations/laws/federal.propose.html. Follow instructions for submitting comments on
the Agency Web site.
E-mail: [email protected]. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429
Hand Delivery/Courier: 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.
Instructions: All submissions received must include the agency name
and RIN for this rulemaking. All 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: Munsell W. St.Clair, Senior Policy
Analyst, Division of Insurance and Research, (202) 898-8967; Donna M.
Saulnier, Senior Assessment Policy Specialist, Division of Finance,
(703) 562-6167; and Kymberly K. Copa, Counsel, Legal Division, (202)
898-8832.
SUPPLEMENTARY INFORMATION:
I. Background
Section 7(e)(3) of the Federal Deposit Insurance Act, as amended by
the Reform Act,\1\ requires that the FDIC's Board of Directors
(``Board'') provide by regulation an initial, one-time assessment
credit to each ``eligible'' insured depository institution (or its
successor) based on the assessment base of the institution as of
December 31, 1996, as compared to the combined aggregate assessment
base of all eligible institutions as of that date (``the 1996
assessment base ratio''), taking into account such other factors the
Board may determine to be appropriate. The aggregate amount of one-time
credits is to equal the amount that the FDIC could have collected if it
had imposed an assessment of 10.5 basis points on the combined
assessment base of the Bank Insurance Fund (``BIF'') and Savings
Association Insurance Fund (``SAIF'') as of December 31, 2001. 12
U.S.C. 1817(e)(3).
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\1\ The Reform Act was included as Title II, Subtitle B, of the
Deficit Reduction Act of 2005, Public Law 109-171, 120 Stat. 9,
which was signed into law by the President on February 8, 2006.
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An ``eligible'' insured depository institution is one that:
1. Was in existence on December 31, 1996, and paid a Federal
deposit insurance assessment prior to that date;\2\ or
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\2\ Prior to 1997, the assessments that SAIF member institutions
paid the SAIF were diverted to the Financing Corporation (``FICO''),
which had a statutory priority to those funds. Beginning with
enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (``FIRREA,'' Pub. L. 101-73, 103 Stat. 183)
and ending with the Deposit Insurance Funds Act of 1996 (``DIFA,''
Pub. L. 104-208, 110 Stat. 3009, 3009-479), FICO had authority, with
the approval of the Board of Directors of the FDIC, to assess
against SAIF members to cover anticipated interest payments,
issuance costs, and custodial fees on FICO bonds. The FICO
assessment could not exceed the amount authorized to be assessed
against SAIF members pursuant to section 7 of the FDI Act, and FICO
had first priority against the assessment. 12 U.S.C. 1441(f), as
amended by FIRREA. Beginning in 1997, the FICO assessments were no
longer drawn from SAIF. Rather, the FDIC began collecting a separate
FICO assessment. 12 U.S.C. 1441(f), as amended by DIFA. Payments to
SAIF prior to December 31, 1996, therefore, are considered deposit
insurance assessments for purposes of the one-time assessment
credit. The new law does not change the existing process through
which the FDIC collects FICO assessments.
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2. Is a ``successor'' to any such insured depository institution.
The FDI Act requires the Board to define ``successor'' for these
purposes and provides that the Board ``may consider any factors as the
Board may deem appropriate.'' The amount of a credit to any eligible
insured depository institution must be applied by the FDIC to the
assessments imposed on such institution that become due for assessment
periods beginning after the effective date of the one-time credit
regulations required to be issued within 270 days after enactment.\3\
12 U.S.C. 1817(e)(3)(D)(i).
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\3\ Section 2109 of the Reform Act also requires the FDIC to
prescribe, within 270 days, rules on the designated reserve ratio,
changes to deposit insurance coverage, the dividend requirement, and
assessments. An interim final rule on deposit insurance coverage was
published on March 23, 2006. See 71 FR 14629. A notice of proposed
rulemaking on the dividend requirement and a notice of proposed
rulemaking on operational changes to the FDIC's assessment
regulations are both being proposed by the FDIC at the same time as
this notice on the one-time assessment credit. Additional
rulemakings on the designated reserve ratio and risk-based
assessments are expected to be proposed in the near future.
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There are three restrictions on the use of credits:
1. As a general rule, for assessments that become due for
assessment periods beginning in fiscal years 2008, 2009, and 2010,
credits may not be applied to more than 90 percent of an institution's
assessment. 12 U.S.C. 1817(e)(3)(D)(ii). (This 90 percent limit does
not apply to 2007 assessments.)
2. For an institution that exhibits financial, operational or
compliance weaknesses ranging from moderately severe to unsatisfactory,
or is not at least adequately capitalized (as defined pursuant to
section 38 of the FDI Act) at the beginning of an assessment period,
the amount of any credit that may be applied against the institution's
assessment for the period may not exceed the amount the institution
would have been assessed had it been assessed at the average rate for
all institutions for the period. 12 U.S.C. 1817(e)(3)(E).
3. If the FDIC is operating under a restoration plan to
recapitalize the Deposit Insurance Fund (``DIF'') pursuant to section
7(b)(3)(E) of the FDI Act, as amended by the Reform Act, the FDIC may
elect to restrict credit use; however, an institution must still be
allowed to apply credits up to three basis points of its assessment
base or its actual assessment, whichever is less. 12 U.S.C.
1817(b)(3)(E)(iii).
The one-time credit regulations must include the qualifications and
procedures governing the application of assessment credits. These
regulations also must include provisions allowing a bank or thrift a
reasonable opportunity to challenge administratively the amount of
credits it is awarded.\4\ Any determination of the amount of an
institution's credit by the FDIC pursuant to these administrative
procedures is
[[Page 28811]]
final and not subject to judicial review. 12 U.S.C. 1817(e)(4).
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\4\ Similarly, for dividends under the FDI Act as amended by the
Reform Act, the regulations must include provisions allowing a bank
or thrift a reasonable opportunity to administratively challenge the
amount of dividends it is awarded. 12 U.S.C. 1817(e)(4).
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Accordingly, the FDIC is requesting comment on proposed rules that
would implement the one-time assessment credit requirement added by the
Reform Act.
II. Description of the Proposal
As part of this rulemaking, the FDIC must, among other things:
determine the aggregate amount of the one-time credit; determine the
institutions that are eligible to receive credits; and determine the
amount of each eligible institution's credit, which for some
institutions may be largely dependent on how the FDIC defines
``successor'' for these purposes. The FDIC also must establish the
qualifications and procedures governing the application of assessment
credits, and provide a reasonable opportunity for an institution to
challenge administratively the amount of the credit. The FDIC's
determination after such challenge will be final and not subject to
judicial review.
As set out more fully below, the FDIC proposes that the Board: rely
on the 1996 assessment base figures contained in the Assessment
Information Management System (AIMS II) \5\; define ``successor'' as
the resulting institution in a merger or consolidation, while seeking
comment on alternative definitions; determine that the FDIC will
automatically apply each institution's credit against future
assessments to the maximum extent allowed consistent with the
limitations in the FDI Act; and provide an appeals process for
administrative challenges to the amounts of credits that culminates in
review by the Assessment Appeals Committee (AAC).
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\5\ The current Assessment Information Management Systems
(commonly referred to as AIMS II) contains a record for quarterly
reports of condition data from institutions with bank and thrift
charters. The FFIEC Central Data Repository (``FFIEC-CDR'') for
banks and the Thrift Financial Report for thrifts provide AIMS II
with the values of the deposit line items that are used in the
calculation of an institution's assessment base.
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Shortly after publication of the notice of proposed rulemaking, the
FDIC intends to make available to each insured depository institution
the FDIC's calculation of that institution's 1996 assessment base (if
any), and to give each institution the opportunity to review and verify
its 1996 assessment base, as well as information related to mergers or
consolidations to which it was a party.
A. Aggregate Amount of One-time Assessment Credit
The aggregate amount of the one-time assessment credit is expected
to be $4,707,580,238.19, which is calculated by applying an assessment
rate of 10.5 basis points to the combined assessment base of BIF and
SAIF as of December 31, 2001. The FDIC proposes to rely on the
assessment base numbers available from each institution's certified
statement (or amended certified statement), filed quarterly and
preserved in AIMS II, which records the assessment base for each
insured depository institution as of that date. AIMS II is the FDIC's
official system of records for determination of assessment bases and
assessments due.
B. Determination of Eligible Insured Depository Institutions and Each
Institution's 1996 Assessment Base Ratio
The FDIC must determine the assessment base of each eligible
institution as of December 31, 1996, and any successor institutions, to
determine the 1996 assessment base ratio. In making these
determinations, the Board has the authority to take into account such
factors as the Board may determine to be appropriate. 12 U.S.C.
1817(e)(3)(A).
Stated simply, the denominator of the 1996 assessment base ratio is
the combined aggregate assessment base of all eligible insured
depository institutions and their successors. The numerator of each
eligible institution's 1996 assessment base ratio is its assessment
base as of December 31, 1996, together with the assessment base on
December 31, 1996, of each institution (if any) to which it is a
successor. An eligible insured depository institution is one in
existence as of December 31, 1996, that paid an assessment prior to
that date (or a successor to such institution).
1. Determination of Eligible Institutions
As a starting point, the FDIC proposes to use the December 31, 1996
assessment base for each institution, as it appears on the
institution's certified statement or as subsequently amended and as
recorded in AIMS II. Those numbers reflect the bases on which
institutions that existed on December 31, 1996, paid assessments. As of
December 31, 2005, it appears that there were approximately 7,400
active insured depository institutions that may be eligible for the
one-time assessment credit--that is, they were in existence on December
31, 1996, and had paid an assessment prior to that date.
a. Effect of Voluntary Termination or Failure
The FDIC has identified those institutions that have voluntarily
terminated their insurance or failed since December 31, 1996, which
otherwise would have been considered eligible insured depository
institutions for purposes of the one-time credit. The FDIC proposes
that the definition of ``successor'' (discussed more fully below)
govern the determination of whether the one-time credits of an
institution that voluntarily is eligible and its credits transfer to a
successor. Whether an institution that voluntarily terminated would
have a successor would depend on the specific circumstances surrounding
its termination. The FDIC proposes that an insured depository
institution that has failed would not have a successor.
b. De Novo Institutions
The FDIC has identified those institutions newly in existence as of
December 31, 1996 (``de novo institutions'') that did not pay deposit
insurance premiums prior to December 31, 1996. Under the statute, those
institutions could not be eligible insured depository institutions for
purposes of the one-time assessment credit.
The FDIC's records indicate that there were approximately 90
institutions that became newly insured between July 1, 1996 and
December 31, 1996, that did not pay any deposit insurance assessment
and did not acquire through merger or consolidation another institution
that had paid assessments before year-end 1996. These institutions are
not eligible for credits under the terms of the statute.
In addition, the FDIC's records indicate that there are two de novo
institutions, which did not pay assessments directly, but each acquired
by merger an institution that had paid assessments before December 31,
1996. Under traditional general principles of corporate law, the
surviving or resulting institution in a merger or consolidation is
considered to have acquired the rights, privileges, powers, franchises,
and property of the terminating institution, as well as the
liabilities, restrictions, and duties of that institution. The
surviving or resulting institution effectively continues the business
of the terminating institution. 15 William Meade Fletcher et al.,
Fletcher Cyclopedia of the Law of Private Corporations Sec. Sec. 7041-
7100 (perm. ed., rev. vol. 1999). On that basis, the FDIC proposes that
a de novo institution that acquired, through
[[Page 28812]]
merger or consolidation, an existing insured depository institution
that had paid a deposit insurance assessment be considered to have
stepped into the shoes of the existing institution for purposes of
determining eligibility for the one-time assessment credit.
2. Definition of ``Successor''
As noted above, an insured depository institution in existence on
December 31, 1996, that paid insurance premiums is eligible for the
one-time assessment credit. An institution also may be eligible as a
``successor'' to such an institution. In making the preliminary
determinations of eligible insured depository institutions, their
assessment bases as of December 31, 1996, and the combined assessment
base of the BIF and the SAIF as of the same date, the FDIC proposes to
rely on the institution's certified statement (as amended, if
necessary), as recorded in AIMS II.
Many institutions that existed at the end of 1996 no longer exist.
Some have disappeared through merger or consolidation. In fact, it
appears that approximately 3,850 additional institutions that were in
existence on December 31, 1996, have since combined with other
institutions. In addition, 38 institutions have failed and no longer
exist, while the FDIC has to date identified approximately 90 others
that voluntarily relinquished federal deposit insurance coverage or had
their coverage terminated. The FDIC does not maintain complete records
on sales of branches or blocks of deposits, but various sources suggest
that at least 1,400 and possibly over 1,800 branch or deposit
transactions have occurred since 1996.
Section 7(e)(3)(F) of the FDI Act expressly charges the FDIC with
defining ``successor'' by regulation for purposes of the one-time
credit, and it provides the FDIC with broad discretion to do so. The
Board may consider any factors it deems appropriate.
In developing its proposal regarding the definition of
``successor,'' the FDIC viewed the issue in the context of two
fundamental questions: what would be most consistent with the purpose
of the one-time credit and what would be operationally viable. While a
number of definitions of ``successor'' are possible in light of the
discretion accorded the FDIC in defining the term, on balance, the FDIC
concluded that one approach was more consistent with the purpose of the
credit and more operationally viable.
The FDIC considered definitions that would focus on the institution
itself and definitions that linked credits to deposits and considered
the arguments in support of those definitions. Proponents of an
institution-based approach might argue that it is the institution that
paid deposit insurance premiums to capitalize the insurance funds, that
the potential one-time credit would be one of the rights or privileges
of an institution that would be acquired through merger or
consolidation under general principles of corporate law, and that a
different approach could result in institutions that had not paid
premiums to capitalize the funds receiving credits. Proponents of a
``follow-the-deposits'' definition, however, might argue that the one-
time credit should adhere to deposits because the one-time credit is to
be allocated based on deposits and is intended to offset future
assessments to be paid on deposits. The FDIC also considered the
operational viability of these approaches to the definition and found
that the FDIC's existing systems of records could support an
institution-based approach, but a ``follow-the-deposits'' approach
would require collection of information from the industry before it
could be fully implemented.
For the reasons set forth below, the FDIC proposes to define
``successor'' for purposes of the one-time credit as the resulting
institution in a merger or consolidation occurring after December 31,
1996. As proposed, the definition would not include a purchase and
assumption transaction, even if substantially all of the assets and
liabilities of an institution are acquired by the assuming institution.
However, the FDIC further requests comment on whether to include in
this definition a regulatory definition of a de facto merger to
recognize that the results of some transactions, which are not
technically mergers or consolidations, largely mirror the results of a
merger or consolidation.
a. Merger or Consolidation Rule
Defining ``successor'' as the resulting institution in a merger or
consolidation is consistent with the clear purpose of the one-time
assessment credit--that is, to recognize the contributions that some
insured depository institutions made to capitalize the deposit
insurance funds and conversely to recognize the fact that many newer
institutions have never paid assessments because they were chartered
after the reserve ratios of BIF and SAIF reached 1.25 percent and most
institutions were charged nothing.\6\ In addition, the FDIC believes
that this definition is consistent with the general expectations of the
industry, because it reflects the common legal meaning of the word
``successor'' and the principle that the resulting corporation in a
merger or consolidation generally receives the rights, privileges,
interests, and liabilities of the merging or consolidating
corporations. 15 William Meade Fletcher et al., Fletcher Cyclopedia of
the Law of Private Corporations Sec. Sec. 7041-7100 (perm. ed., rev.
vol. 1999). Institutions that acquired other institutions by way of
merger or consolidation will have believed that they were acquiring all
of the rights and privileges of the acquired institution, known or
unknown.
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\6\ Prior to the effective date of changes to the FDIC's
assessment authority by the Reform Act, the FDIC is required to set
assessments when necessary and only to the extent necessary to
maintain the reserve ratio at 1.25 percent of estimated insured
deposits, except for those institutions that exhibit financial,
operational, or compliance weaknesses ranging from moderately severe
to unsatisfactory, or are not well capitalized. 12 U.S.C.
1817(b)(2)(A) (2005).
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While it is possible that some state banking laws may differ, this
definition is consistent with the National Bank Consolidation and
Merger Act. 12 U.S.C. 215, 216. The FDIC has significant discretion in
defining the term ``successor'' for these purposes, and a single
federal standard is essential to allow the FDIC to implement and
administer the one-time credit requirement in a timely and efficient
manner.
Mergers and consolidations require regulatory approval under
section 18(c) of the FDI Act, and the FDIC maintains records on true
mergers and consolidations. Only if the FDIC's records are incomplete
or in error will institutions have to provide information to the FDIC.
Because the ``merger or consolidation rule'' relies principally on
existing data, it is operationally viable. In addition, a merger or
consolidation rule would not advantage or disadvantage parties simply
on the basis of whether they kept records on transactions for which the
statute of limitations has expired.\7\
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\7\ Section 7(b)(5) of the FDI Act currently requires
institutions to maintain assessment-related records for five years,
and section 7(g) provides a five-year statute of limitations for
assessment actions. The Reform Act includes amendments to those
provisions, prospectively shortening both to three years, effective
on the date that new assessment regulations take effect. See
sections 2104(b), (d) and 2109(a)(5) of the Reform Act.
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b. De Facto Merger Alternative
Some transactions may be viewed as effectively paralleling the
results of a merger or consolidation. The FDIC looked to traditional
principles of corporate law for guidance on this issue and found a
useful analogy. Traditional corporate law principles provide for
[[Page 28813]]
certain exceptions to the general rule that liabilities do not transfer
with the sale of assets, including an exception for a transaction that
amounts to a de facto merger or consolidation (``de facto merger'').
The FDIC recognizes, however, that a de facto merger exception
could be viewed as a departure to some extent from the clear, bright
line that a strictly applied merger or consolidation rule would
provide. The FDIC, therefore, seeks comment on whether to include de
facto mergers in the definition of ``merger'' for purposes of the one-
time assessment credit and to provide a regulatory definition of de
facto merger. A de facto merger for these purposes could be defined,
for example, as an eligible institution conveying all of its deposit
liabilities and substantially all of its assets to a single acquiring
institution, so long as the conveying institution subsequently
terminated its deposit insurance. This type of transaction might have
arisen, for example, as part of a voluntary liquidation. Even under
this alternative, unless an eligible institution actually merged or
consolidated with another institution, it would not have a successor if
it conveyed its assets and deposit liabilities to more than one
acquiring institution.
2. Alternative Approaches to Definition of Successor That Would
``Follow the Deposits''
The FDIC also explored alternative definitions of successor that
allowed credits to follow deposits (regardless of the means by which
deposits were transferred, including merger, consolidation, branch
sale, or other deposit transfer). These alternative definitions might
be based on a view that credits should adhere to deposits, as described
above. Under these alternative definitions, credits could be
transferred on a pro rata basis with the deposits transferred or they
could be split between the parties to the deposit transfer transaction.
Splitting the credits associated with a deposit transfer between the
buyer and seller would be a compromise solution and would recognize
that, as a practical matter, it is unlikely the parties to most of
these deposit transfers took into account the potential for assessment
credits at the time of the transactions.
After considering the arguments, the FDIC concluded that a
``follow-the-deposits'' approach seemed less consistent with the
purpose of the one-time credit and did not reflect the reasonable
expectations of parties to transactions based on general corporate law
principles. In addition, the FDIC was concerned about the viability of
a ``follow-the-deposits'' approach because of: An absence of reliable
existing data; the number of interrelated transactions that would have
to be resolved due to the passage of time and consolidation in the
industry; and the potential inequities and litigation risks inherent in
mechanisms (such as thresholds or other choices) that might be used to
reduce the number of potential claims to a more manageable level.
Potential inequities also arise in connection with the data issue
because institutions that engaged in very similar transactions could be
treated differently solely because some institutions retained records
long past the expiration of the statute of limitations and others did
not.
The FDIC does not routinely maintain the detailed data on all
deposit transfer transactions that would be necessary to implement a
``follow-the-deposits'' rule. Thus, most, if not all, of the necessary
information would have to be collected from the industry and disputes
between institutions resolved before a deposit transfer approach to
allocating the one-time credit could be fully implemented. As
previously noted, available data suggests that, in addition to roughly
3,850 mergers and consolidations, at least 1,400 and perhaps over 1,800
branch or deposit transactions may have occurred since 1996.
Because of the possibility of a chain of mergers, consolidations,
and deposit transfers, resolving one institution's claim to one-time
credits first might require examining claims from many transactions in
the chain. In most cases, the FDIC would have to review and rely on the
records of the institutions involved in the deposit transfer. Appeals
of credit determinations could become lengthy fact finding exercises
involving the comparison of the available evidence from all of the
institutions involved.
The FDIC explored developing a type of de minimis rule under which,
for example, only deposit transfers (or a series of transfers) from one
institution to another that, in total, exceeded some percentage
threshold, such as 15 percent of the transferor's total domestic
deposits or 30 percent of the transferee's deposits as determined at
the time of the transfer, might be considered. The FDIC was concerned,
however, that thresholds or other choices to limit the number of
institutions covered by a rule by their nature may result in disparate
treatment of otherwise similarly situated institutions.
Because the statute of limitations will have expired with respect
to many deposit transfer transactions from the late 1990s, institutions
may not have retained records of these transactions. Institutions that
saved their records would have a significant advantage over those that
did not, potentially leading to results based solely on the
availability of records.
The FDIC is seeking comment on the proposed definition of
``successor,'' as well as alternative ``follow-the-deposits''
approaches, for purposes of the one-time assessment credit. The FDIC
requests that commenters address the purpose of the one-time credit and
the extent to which the various possible definitions of ``successor''
are viewed as consistent with that purpose. In addition, the FDIC
requests that commenters consider whether a ``follow-the-deposits''
approach might be made more operationally viable, including how the
data issues might be addressed.
3. No Successor Identified
If there is no successor to an institution that would have been
eligible for the one-time assessment credit before the effective date
of the final rule, because an otherwise eligible institution ceased to
be an insured depository institution before that date, then the FDIC
proposes that that portion of the aggregate one-time credit amount be
redistributed among the eligible institutions. For example, if an
otherwise eligible insured depository institution failed after December
31, 1996, but before the issuance of the final rule implementing the
one-time credit, and had no successor, that institution would be
excluded from the calculation. As a result, the remaining eligible
institutions would receive a proportionate share of that failed
institution's share of the one-time credit.
On the other hand, if there is no successor to an eligible insured
depository institution that ceases to exist after the Board issues the
final rule and allocates the one-time assessment credit among eligible
insured depository institutions, it is proposed that that institution's
credits expire unused. One example would be the failure of an eligible
institution after it has received its one-time credit amount. Under
those circumstances, any remaining one-time credit amount would simply
expire.
D. Notification of 1996 Assessment Base Ratio and Credit Amount
The FDIC intends to make available a searchable database provided
through the FDIC's public Web site (http://www.fdic.gov) that shows
each currently existing institution and its predecessors by merger or
consolidation from January 1, 1997, onward, based on information
[[Page 28814]]
contained in certified statements, AIMS II, and the Structure
Information Management System (``SIMS'').\8\ The database would include
corresponding December 31, 1996 assessment base amounts for each
institution and its predecessors and preliminary estimates of the
amount of one-time credit that the existing institution would receive
based on the proposed definition of successor.
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\8\ SIMS maintains current and historical non-financial data for
all institutions that is retrieved by AIMS II to identify the
current assessable universe for each quarterly assessment invoice
cycle. SIMS offers institution-specific demographic data, including
a complete set of information on merger or consolidation
transactions. SIMS, however, does not contain complete information
about deposit or branch sales.
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The database will also allow searching by institution name or
insurance certificate number to ascertain which current institution (if
any) would be considered a successor to an institution that no longer
exists. Institutions would have the opportunity to review this
information, which could significantly reduce the time needed to
determine successors even if one of the ``follow-the-deposits''
alternatives for defining ``successor'' is adopted in the final rule.
Institutions should be aware that this preliminary estimate could
change, for example, because of a change in the definition of
``successor'' adopted in the final rule or because of a change to the
information available to the FDIC for determining successorship.
As soon as practicable after the Board approves the final rule, the
FDIC proposes to notify each insured depository institution of its 1996
assessment base ratio and share of the one-time assessment credit,
based on the information developed through the FDIC's searchable
database. The notice would take the form of a Statement of One-time
Credit (or ``Statement''): Informing every institution of its 1996
assessment base ratio; itemizing the 1996 assessment bases to which the
institution may now have claims pursuant to the successor rule based on
existing successor information in the database; providing the amount of
the institution's one-time credit based on that 1996 assessment base
ratio as applied to the aggregate amount of the credit; and providing
the explanation as to how ratios and resulting amounts were calculated
generally. The FDIC proposes to provide the Statement of One-time
Credit through FDICconnect and by mail in accordance with existing
practices for assessment invoices.
Under the proposal, if an institution has any question as to the
calculation of its 1996 assessment base ratio or its credit amount, the
institution would be advised to contact the Division of Finance. The
FDIC encourages institutions to discuss and attempt to resolve
perceived discrepancies due to an omission of a merger or
consolidation, or due to disagreement about the size of an
institution's 1996 assessment base while the notice of proposed
rulemaking is out for comment.\9\ As described below, each institution
would have the opportunity to challenge formally the amount of its one-
time credit, regardless of whether the institution sought an informal
resolution during the rulemaking. Depending upon the definition of
``successor'' ultimately adopted, some challenges may not be resolved
prior to the collection of assessments after the effective date of the
final rule. However, the FDIC proposes to make available any credit
amounts that are not in controversy. For example, if an eligible
institution argues that it may be entitled to a larger share of the
one-time credit as a successor, the amount of its original 1996 base
ratio and share will be available (assuming they are not in dispute),
and any potential additional credit amounts would be frozen until
resolution of the challenge.
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\9\ Staff believes that the information developed through the
searchable database would be useful even if the final rule defines
``successor'' in a way that follows deposits, because a ``follow-
the-deposit'' definition would include recognition of the deposits
actually transferred as part of a merger or consolidation.
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E. Requests for Review of Credit Amounts
Section 7(e)(4) of the FDI Act requires the FDIC's credit
regulations to include provisions allowing an institution a reasonable
opportunity to challenge administratively the amount of its one-time
credit. The FDIC's determination of the amount following any such
challenge is to be final and not subject to judicial review. The
proposed administrative procedures are intended generally to parallel
the process for requesting revision of computation of quarterly
assessment payments. Deadlines, however, would be shorter because of
the need to resolve credit appeals quickly so institutions can use the
credits to offset assessments.
As noted above, the FDIC expects to notify each institution of its
one-time credit share as soon as practicable after the issuance of the
one-time assessment credit final rule through FDICconnect and by mail.
The Statement of One-time Credit would include: The 1996 assessment
base ratio for the institution; the amount of the assessment credit to
be awarded to the institution based on the 1996 ratio; and a discussion
of the basis for these calculations, based on the FDIC's definition of
``successor'' and any other relevant factors.
After this initial notification, it is proposed that an updated
notice of the remaining amount of one-time credit, as well as any
appropriate adjustment to an institution's 1996 assessment base ratio
due to a subsequent merger or consolidation, would be included with
each quarterly assessment invoice until an institution's credits have
been exhausted. The initial Statement and any subsequent assessment
invoices advising of the remaining credit amount or an adjustment to
the assessment base ratio would also advise institutions of their right
to challenge the calculation and the procedures to follow.
The FDIC proposes that an institution could request review if (1)
It disagrees with the FDIC's determination of eligibility or
ineligibility for the credit; (2) it disagrees with the computation of
the credit amount on the initial Statement or any subsequent invoice,
or (3) it believes that the Statement or a subsequently updated invoice
does not fully or accurately reflect appropriate adjustments to the
institution's 1996 assessment base ratio. For example, the institution
may believe that its 1996 assessment base ratio has not been adjusted
to reflect its acquisition through merger of an eligible institution.
The FDIC also proposes that an institution that disagrees with the
FDIC's determination have 30 days from the date the FDIC made available
its Statement of One-time Credit or adjusted invoice to file a request
for review with the Division of Finance. The request would have to be
accompanied by any documentation supporting the institution's claim.
The FDIC proposes that, if an institution does not submit a timely
request for review, the institution be barred from subsequently
requesting review of its one-time assessment credit amount.
In addition, the requesting institution would have to identify all
other institutions of which it knew or had reason to believe would be
directly and materially affected by granting the request for review and
provide those institutions with copies of the request for review and
supporting documentation, as well as the FDIC's procedures for these
requests for review. The FDIC would make reasonable efforts, based on
its official systems of records, to determine that such institutions
have been identified and notified. These institutions would then have
30 days to submit a response and any supporting documentation to the
FDIC's Division of Finance, copying the institution making the original
request
[[Page 28815]]
for review. If an institution identified and notified through this
process does not submit a timely response, the FDIC proposes that the
institution would be: (1) Foreclosed from subsequently disputing the
information submitted by any other institution on the transaction(s) at
issue in the review process; and (2) foreclosed from any appeal of the
decision by the Director of the Division of Finance (discussed below).
Under the proposal, the FDIC also would be able to request
additional information as part of its review and require the
institution to supply that information within 21 days of the date of
the FDIC's request for additional information.
The FDIC proposes to freeze temporarily the amount of the proposed
credit in controversy for the institutions involved in the request for
review until the request is resolved.
The proposed rule would require a written response from the FDIC's
Director of the Division of Finance (``Director''): (1) Within 60 days
of receipt by the FDIC of the request for revision; (2) if additional
institutions have been notified by the FDIC, within 60 days of the last
response; or (3) if additional information has been requested by the
FDIC, within 60 days of receipt of any additional information due to
such request, whichever is later. Whenever feasible, the response would
notify the requesting institution and any materially affected
institutions of the determination of the Director as to whether the
requested change is warranted. In all instances in which a timely
request for review is submitted, the Director will make a determination
on the request as promptly as possible and notify the requesting
institution and any other materially affected institutions in writing
of the determination. Notice of the procedures applicable to reviews
will be included with the initial Statement and any subsequent
assessment invoice providing notification of the amount of credit and
any change to the institution's 1996 assessment base ratio.
Under the proposed rule, the requesting institution, or an
institution materially affected by the Director's decision, that
disagrees with that decision may appeal its credit determination to the
AAC. An appeal would have to be filed within 15 calendar days from the
date of the Director's written determination. Notice of the procedures
applicable to appeals will be included with that written determination.
The AAC's determination would be final and not subject to judicial
review.
A number of challenges may arise in connection with the
distribution of the one-time credit, in large part because many
transactions occurred after 1996 and before the Reform Act provided for
a one-time credit, and because this will be the first time that an
institution's 1996 assessment base ratio is calculated. Once those
challenges are resolved, and each institution's 1996 assessment base
ratio for purposes of its one-time credit share is established,
unforeseen circumstances or issues may lead to other challenges of
credit share, and administrative procedures will remain in place to
address those challenges.
Once the Director or the AAC has made the final determination, as
appropriate, the FDIC would adjust the affected institutions' 1996
assessment base ratios consistent with that determination and
correspondingly update each affected institution's share of the one-
time credit.
F. Using Credits
The FDIC proposes that the FDIC track each institution's one-time
credit amount and automatically apply an institution's credits to its
assessment to the maximum extent allowed by law. For fiscal year 2007
assessment periods, for most institutions, credits generally can offset
100 percent of an institution's assessment. For assessments that become
due for assessment periods beginning in fiscal years 2008, 2009, and
2010, the FDI Act provides that credits may not be applied to more than
90 percent of an institution's assessment. Thus, under the proposal,
credits would automatically apply to 90 percent of an institution's
assessment, assuming the institution has sufficient credits, subject to
the two other statutory limitations on usage. The statute does not
define a ``fiscal year'' for these purposes. The FDIC, therefore, may
define that term and proposes to define it as the calendar year.
One of the other limitations is that, for an institution that
exhibits financial, operational or compliance weaknesses ranging from
moderately severe to unsatisfactory, or is not adequately capitalized
at the beginning of an assessment period, the amount of any credit that
may be applied against the institution's assessment for the period may
not exceed the amount the institution would have been assessed had it
been assessed at the average rate for all institutions for the period.
The FDIC proposes to interpret the phrase ``average assessment rate''
to mean the aggregate assessment charged all institutions in a period
divided by the aggregate assessment base for that period. The FDI Act
does not define ``average assessment rate'' for these purposes, leaving
that to the discretion of the FDIC. On balance, the FDIC views the
proposed approach as preferable to an average calculated by the sum of
all assessment rates divided by the number of institutions, because the
proposed approach more accurately reflects the average rate actually
charged all insured institutions.
Section 7(e)(3)(E) of the FDI Act, as added by the Reform Act, also
gives the FDIC the discretion to limit the application of the one-time
credit, when the FDIC establishes a restoration plan to restore the
reserve ratio of the DIF to the range established for it.\10\ That
discretion, however, is restricted by the statute. During the time that
a restoration plan is in effect, the FDIC shall apply one-time credit
amounts against any assessment imposed on an institution for any
assessment period in an amount equal to the lesser of (1) the amount of
the assessment, or (2) the amount equal to three basis points of the
institution's assessment base.
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\10\ Section 2105 of the Reform Act, amending section 7(b)(3) of
the FDI Act to establish a range for the reserve ratio of the DIF,
will take effect on the date that final regulations implementing the
legislation with respect to the designated reserve ratio become
effective. Those regulations are required to be prescribed within
270 days of enactment. Section 2109(a)(1) of the Reform Act.
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Credit amounts may not be used to pay FICO assessments pursuant to
section 21(f) of the Federal Home Loan Bank Act, 12 U.S.C. 1441(f). The
Reform Act does not affect the authority of FICO to impose and collect,
with the approval of the FDIC's Board, assessments for anticipated
interest payments, issuance costs, and custodial fees on obligations
issued by FICO.
G. Transferring Credits
The FDI Act provides for transferring one-time credits through
successors to eligible insured depository institutions. A successor
institution, as defined by regulation, would succeed to the predecessor
institution's credits and to its 1996 assessment base ratio for
purposes of any future dividends.
The FDIC is further proposing to allow transfer of credits and
adjustments to 1996 assessment base ratios by express agreement between
insured depository institutions prior to the FDIC's final determination
of an eligible insured depository institution's 1996 assessment base
ratio and one-time credit amount pursuant to these regulations. It is
possible that such agreements might already be part of deposit transfer
contracts drafted in anticipation of deposit insurance reform
legislative changes. Alternatively,
[[Page 28816]]
institutions involved in a dispute over successorship, their 1996
assessment base ratio, and their shares of the one-time credit might
reach a settlement over the disposition of the one-time credit. In
either case, under the proposal, the FDIC would require the
institutions to submit a written agreement signed by legal
representatives of the involved institutions. Upon the FDIC's receipt
of the agreement, appropriate adjustments would be made to the
institutions' affected one-time credit amounts and 1996 assessment base
ratios. Adjustments to each institution's credit amount and 1996
assessment base ratio would then be reflected with the next quarterly
assessment invoice, so long as the institutions submit the written
agreement, at least 10 business days prior to the FDIC's issuance of
invoices for the next assessment period. If the FDIC does not receive
the written agreement at least 10 days before the next assessment
invoice, the FDIC shall retroactively adjust the invoice or invoices in
later assessment periods.
Similarly, after an institution's credit share has been finally
determined and no request for review is pending with respect to that
credit amount, the FDIC proposes to recognize an agreement between
insured depository institutions to transfer any portion of the one-time
credit from the eligible institution to another institution.
Adjustments to each institution's credit amount would then be reflected
with the next quarterly assessment invoice, so long as the institutions
notify the FDIC of such agreement, through a written agreement signed
by legal representatives of the institutions, at least 10 business days
prior to the FDIC's issuance of invoices for the next assessment
period. If the FDIC does not receive the written agreement at least 10
days before the next assessment invoice, the FDIC shall retroactively
adjust the invoice or invoices in later assessment periods.
With respect to these transactions, occurring after the
determination of each eligible institution's 1996 assessment base ratio
and share of the one-time credit as of the effective date of these
regulations, the FDIC proposes not to adjust the transferring
institution's 1996 assessment base ratio. Adjustments to the 1996
ratios would be made only to reflect mergers or consolidations
occurring after the effective date of these regulations. There would
seem to be less likelihood of disputes over successorship because
institutions would be aware of the definition of ``successor'' and
could take that into account when entering future contracts as the
parties deem appropriate. Thus, there seems little need to allow the
sale of an institution's 1996 assessment base ratio, which the FDIC
would be required to track on an ongoing basis for dividend purposes.
III. Regulatory Analysis and Procedure
A. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Pub. Law 106-102, 113
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. We invite your comments on how to make this proposal
easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the proposed regulation clearly
stated? If not, how could the regulation be more clearly stated?
Does the proposed regulation contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes to the format would make the regulation
easier to understand?
What else could we do to make the regulation easier to
understand?
B. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) requires that each federal
agency either certify that a proposed rule would not, if adopted in
final form, have a significant economic impact on a substantial number
of small entities or prepare an initial regulatory flexibility analysis
of the proposal and publish the analysis for comment. See 5 U.S.C. 603,
604, 605. Certain types of rules, such as rules of particular
applicability relating to rates or corporate or financial structures,
or practices relating to such rates or structures, are expressly
excluded from the definition of ``rule'' for purposes of the RFA. 5
U.S.C. 601. The proposed one-time assessment credit rule relates
directly to the rates imposed on insured depository institutions for
deposit insurance, as they will offset future deposit insurance
assessments. Nonetheless, the FDIC is voluntarily undertaking an
initial regulatory flexibility analysis of the proposal and seeking
comment on it.
As discussed in detail in the SUPPLEMENTARY INFORMATION section,
the proposed rule is required by statute to implement the one-time
assessment credit added to the FDI Act by the Reform Act, and if it is
adopted in final form, would not have a significant impact on a
substantial number of small entities within the meaning of those terms
as used in the RFA. Section 7(e)(3) of the FDI Act provides for the
allocation of the one-time credit among eligible insured depository
institutions and their successors, based on each institution's
assessment base as of December 31, 1996, as compared to the combined
assessment bases of all eligible institutions. The statute defines
``eligible insured depository institution'' and requires the FDIC to
define ``successor'' for these purposes. These credits will be used to
offset deposit insurance assessments collected after the effective date
of the final rule.
All insured depository institutions that are eligible, regardless
of size, would be affected by this rule. Of the approximately 8,845
insured depository institutions as of December 31, 2005, approximately
5,360 institutions fell within the definition of ``small entity'' in
the RFA--that is, having total assets of no more than $165 million.
Approximately 4,390 small institutions appear to be eligible for the
one-time credit under the FDI Act definition of ``eligible insured
depository institution.'' These institutions would have approximately
$241 million in one-time credits out of a total of approximately $4.7
billion in one-time credits, given the FDI Act definition of ``eligible
insured depository institution'' and the definition of ``successor''
proposed in this rulemaking.\11\ These one-time credits represent
approximately 8 basis points of the combined assessment base of small
institutions as of December 31, 2005. Assuming, for purposes of
illustration, that small institutions were charged an average annual
assessment rate of 2 basis points, these one-time credits would last,
on average, approximately 4 years. In sum, most small, eligible
institutions would benefit if the proposed rule were made final.
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\11\ The present value of these one-time credits depends upon
when they are used, which in turn depends on the assessment rates
charged. The one-time credits do not earn interest; therefore, the
higher the assessment rate charged--and the faster credits are
used--the greater their present value. The FDIC has proposed making
one-time credits transferable, which could increase their present
value.
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The proposed rule relies primarily on information already available
to the FDIC and requires little new reporting or recordkeeping. If an
eligible institution, regardless of size, disagrees with the FDIC's
determination of its credit amount, it may request review of
[[Page 28817]]
that determination. The review procedures are required by the statute
and largely parallel existing procedures for similar requests for
review. Moreover, the FDIC proposes to recognize settlements between
institutions if there is a disagreement as to an institution's
eligibility or the amount of its credit. The FDIC would merely require
the institutions' to demonstrate their agreement with the submission of
a signed document. Neither the request for review nor the submission of
agreement is required generally, but rather is aimed at responding to
questions raised by individual institutions based on their particular
circumstances. Thus, the FDIC does not view the proposed rule as
imposing a significant burden on small institutions.
Based on these findings, particularly the ability to offset future
assessments for some period of time, the FDIC has concluded that the
economic impact of the one-time credit rule would be largely positive
and could be ``significant'' for some small, eligible institutions. One
potentially negative economic impact could be felt by a small number of
institutions that would not be eligible under the proposed definition
of ``successor,'' but might be eligible if an alternative definition
were adopted to recognize acquisitions of deposit or branches. As
discussed more fully in the SUPPLEMENTARY INFORMATION section, the FDIC
concluded that the proposed definition of successor is more consistent
with the purpose of the one-time credit and more operationally viable.
It is particularly noted, for RFA purposes, that the proposed
definition, for the most part, relies on existing data in the FDIC's
official systems of records, while the alternatives considered would
require collection of information from the industry. (The alternative
definitions of ``successor'' also would not affect a substantial number
of small institutions.\12\)
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\12\ Preliminary analysis suggests that the eligibility or
credit amounts of some small institutions could be affected if the
alternative definition of a ``successor'' as the acquirer of
deposits, regardless of whether acquired through a merger or
consolidation, were adopted. Compared to the proposed definition of
``successor,'' at least 330 small institutions could gain or lose
credits. However, the value of the gain or loss is not known because
the FDIC does not maintain comprehensive records of deposit
transfers.
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The FDIC has been unable to identify any other relevant federal
rules that may duplicate or conflict with this proposed rule, although
the FDIC's Notice of Proposed Rulemaking to implement the dividend
requirements added by the Reform Act overlaps with this proposed rule
because both statutory provisions rely to some extent on an
institution's assessment base as of December 31, 1996. Commenters are
invited to provide the FDIC with any information they may have about
the likely quantitative effects of the proposal.
C. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.) the FDIC may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid Office of Management and Budget (OMB) control number.
The collection of information contained in this proposed rule has been
submitted to OMB for review.
ADDRESSES: Interested parties are invited to submit written comments to
the FDIC concerning the Paperwork Reduction Act implications of this
proposal. Such comments should refer to ``Notification of Credit
Transfers, 3064-AD08.'' Comments may be submitted by any of the
following methods:
http://www.FDIC.gov/regulations/laws/federal/propose.html.
E-mail: [email protected]. Include ``Notification of
Credit Transfers, 3064-AD08'' in the subject line of the message.
Mail: Steve Hanft (202-898-3907), Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
Hand Delivery: Comments may be hand-delivered to the guard
station at the rear of the 17th Street Building (located on F Street),
on business days between 7 a.m. and 5 p.m.
A copy of the comments may also be submitted to the OMB
desk officer for the FDIC, Office of Information and Regulatory
Affairs, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503.
Comment is solicited on:
(1) Whether the proposed collection of information is necessary for
the proper performance of the functions of the agency, including
whether the information will have practical utility;
(2) The accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used;
(3) The quality, utility, and clarity of the information to be
collected;
(4) Ways to minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology; e.g., permitting
electronic submission of responses; and
(5) Estimates of capital or start-up costs and costs of operation,
maintenance, and purchases of services to provide information.
Summary of the collection: The information collection occurs when
an institution participates in a transaction that results in the
transfer of one-time credits or an institution's 1996 assessment base,
as permitted under the proposed rule, and seeks the FDIC's recognition
of that transfer. It is expected that most transactions will occur
during the first year.
Need and Use of the Information: Institutions are required to
notify the FDIC of these transactions so that the FDIC can accurately
track the transfer of credits, apply available credits appropriately
against institutions' deposit insurance assessments, and determine an
institution's 1996 assessment base if the transaction involved both the
base and the credit amount. The need for credit transfer information
will expire when the credit pool has been exhausted.
Respondents: Insured depository institutions.
Frequency of response: Occasional.
Annual Burden Estimate:
Number of responses: 200-500 during the first year with fewer than
10 per year thereafter.
Average number of hours to prepare a response: 2 hours.
Total annual burden: 400-1,000 hours the first year, and fewer than
100 hours thereafter.
D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the proposed rule will not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Public Law 105-277, 112 Stat. 2681).
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks, Banking, Savings associations.
Authority and Issuance
For the reasons set forth in the preamble, the FDIC proposes to
amend chapter III of title 12 of the Code of Federal Regulations as
follows:
[[Page 28818]]
PART 327--ASSESSMENTS
1. Revise subpart B, consisting of Sec. 327.30 through 327.36, to
read as follows:
Subpart B--Implementation of One-time Assessment Credit
Sec.
327.30 Purpose and scope.
327.31 Definitions.
327.32 Determination of aggregate credit amount.
327.33 Determination of eligible institution's credit amount.
327.34 Transferability of credits.
327.35 Application of credits.
327.36 Requests for review of credit amount.
Subpart B--Implementation of One-time Assessment Credit
Authority: 12 U.S.C. 1817(e)(3).
Sec. 327.30 Purpose and scope.
(a) Scope. This subpart B of part 327 implements the one-time
assessment credit required by section 7(e)(3) of the Federal Deposit
Insurance Act, 12 U.S.C. 1817(e)(3) and applies to insured depository
institutions.
(b) Purpose. This subpart B of part 327 sets forth the rules for:
(1) Determination of the aggregate amount of the one-time credit;
(2) Identification of eligible insured depository institutions;
(3) Determination of the amount of each eligible institution's
December 31, 1996 assessment base ratio and one-time credit;
(4) Transferability of credit amounts among insured depository
institutions;
(5) Application of such credit amounts against assessments; and
(6) An institution's request for review of the FDIC's determination
of a credit amount.
Sec. 327.31 Definitions.
For purposes of this subpart and subpart C of this part:
(a) The average assessment rate for any assessment period means the
aggregate assessment charged all insured depository institutions for
that period divided by the aggregate assessment base for that period.
(b) Board means the Board of Directors of the FDIC.
(c) An eligible insured depository institution means an insured
depository institution that:
(1) Was in existence on December 31, 1996, and paid a deposit
insurance assessment before December 31, 1996; or
(2) Is a successor to an insured depository institution referred to
in paragraph (c)(1) of this section. The term shall not include an
institution if its insured status has terminated.
(d) Merger means any transaction in which an insured depository
institution merges or consolidates with any other insured depository
institution. Notwithstanding part 303, subpart D, for purposes of this
subpart B and subpart C of this part, merger does not include all
transactions in which an insured depository institution either directly
or indirectly acquires the assets of, or assumes liability to pay any
deposits made in, any other insured depository institution.
(e) Resulting institution refers to the acquiring, assuming, or
resulting institution in a merger.
(f) Successor means a resulting institution.
Sec. 327.32 Determination of aggregate credit amount.
The aggregate amount of the one-time credit shall equal the product
of:
(a) The combined assessment base of BIF and SAIF as of December 31,
2001, as reflected in the FDIC's official system of record for
determination of assessment bases and assessments due; and
(b) 10.5 basis points.
Sec. 327.33 Determination of eligible institution's credit amount.
(a) Allocation of the one-time credit shall be based on each
eligible insured depository institution's 1996 assessment base ratio.
(b) An institution's 1996 assessment base ratio shall consist of:
(1) Its assessment base as of December 31, 1996 (adjusted as
appropriate to reflect the assessment base of December 31, 1996, of all
eligible institutions for which it is the successor), as the numerator;
and
(2) The combined aggregate assessment bases of all eligible insured
depository institutions, including any successor institutions, as of
December 31, 1996, as the denominator.
Sec. 327.34 Transferability of credits
(a) Any remaining amount of the one-time assessment credit and the
associated 1996 assessment base ratio shall transfer to a successor of
an eligible insured depository institution.
(b) Prior to the final determination of its 1996 assessment base
and one-time assessment credit amount, an eligible insured depository
institution may enter into an agreement to transfer any portion of such
institution's one-time credit amount and 1996 assessment base ratio to
another insured depository institution. The parties to the agreement
shall submit to the FDIC's Division of Finance a written agreement,
signed by legal representatives of both institutions. The adjustment to
credit amount and the associated 1996 assessment base ratio shall be
made in the next assessment invoice that is sent at least 10 days after
the FDIC's receipt of the written agreement. If the FDIC does not
receive the written agreement at least 10 days before the next
assessment invoice, the FDIC shall retroactively adjust the invoice or
invoices in later assessment periods.
(c) An eligible insured depository institution may enter into an
agreement after the final determination of its 1996 assessment base
ratio and one-time credit amount to transfer any portion of such
institution's one-time credit amount to another insured depository
institution. The parties to the agreement shall submit to the FDIC's
Division of Finance a written agreement, signed by legal
representatives of both institutions. The adjustment to the credit
amount shall be made in the next assessment invoice that is sent at
least 10 days after the FDIC's receipt of the written agreement. If the
FDIC does not receive the written agreement at least 10 days before the
next assessment invoice, the FDIC shall retroactively adjust the
invoice or invoices in later assessment periods.
Sec. 327.35 Application of credits.
(a) Subject to the limitations in paragraph (b) of this section,
the amount of an institution's one-time credit shall be applied to the
maximum extent allowable by law against that institution's quarterly
assessment payment under subpart A of this part, until the
institution's credit is exhausted.
(b) The following limitations shall apply to the application of the
credit against assessment payments.
(1) For assessments that become due for assessment periods
beginning in calendar years 2008, 2009, and 2010, the credit may not be
applied to more than 90 percent of the quarterly assessment.
(2) For an insured depository institution that exhibits financial,
operational, or compliance weaknesses ranging from moderately severe to
unsatisfactory, or is not at least adequately capitalized (as defined
pursuant to section 38 of the Federal Deposit Insurance Act) at the
beginning of an assessment period, the amount of the credit that may be
applied against the institution's quarterly assessment for that period
shall not exceed the amount that the institution would have been
assessed if it had been assessed at the average assessment rate for all
insured institutions for that period.
[[Page 28819]]
(3) If the FDIC has established a restoration plan pursuant to
section 7(b)(3)(E) of the Federal Deposit Insurance Act, the FDIC may
elect to restrict the application of credit amounts, in any assessment
period, to the lesser of:
(i) The amount of an insured depository institution's assessment
for that period; or
(ii) The amount equal to 3 basis points of the institution's
assessment base.
Sec. 327.36 Requests for review of credit amount.
(a)(1) An insured depository institution may submit a request for
review of the FDIC's final determination of the institution's credit
amount as shown on the Statement of One-time Credit (``Statement'')
within 30 days of the date the FDIC makes the Statement available. Such
review may be requested if:
(i) The institution disagrees with a determination as to
eligibility for the credit that relates to that institution's credit
amount;
(ii) The institution disagrees with the calculation of the credit
as stated on the Statement; or
(iii) The institution believes that the 1996 assessment base ratio
attributed to the institution on the Statement does not fully or
accurately reflect its own 1996 assessment base or appropriate
adjustments for successors.
(2) If an institution does not submit a timely request for review,
that institution may not subsequently request review of its credit
amount, subject to paragraph (e) of this section.
(b)(1) An insured depository institution may submit a request for
review of the FDIC's adjustment to the credit amount in a quarterly
invoice within 30 days of the date on which the FDIC provides the
invoice. Such review may be requested if:
(i) The institution disagrees with the calculation of the credit as
stated on the invoice; or
(ii) The institution believes that the 1996 assessment base ratio
attributed to the institution due to the adjustment to the invoice does
not fully or accurately reflect appropriate adjustments for successors
since the last quarterly invoice.
(2) If an institution does not submit a timely request for review,
that institution may not subsequently request review of its credit
amount, subject to paragraph (e) of this section.
(c) The request for review shall be submitted to the Division of
Finance and shall provide documentation sufficient to support the
change sought by the institution. At the time of filing with the FDIC,
the requesting institution shall notify, to the extent practicable, any
other insured depository institution that would be directly and
materially affected by granting the request for review and provide such
institution with copies of the request for review, the supporting
documentation, and the FDIC's procedures for requests under this
subpart. The FDIC shall make reasonable efforts, based on its official
systems of records, to determine that such institutions have been
identified and notified.
(d) During the FDIC's consideration of the request for review, the
amount of credit in dispute shall not be available for use by any
institution.
(e) Within 30 days of the filing of the request for review, those
institutions identified as potentially affected by the request for
review may submit a response to such request, along with any supporting
documentation, to the Division of Finance, and shall provide copies to
the requesting institution. If an institution that was notified under
paragraph (c) of this section does not submit a response to the request
for review, that institution may not:
(1) Subsequently dispute the information submitted by other
institutions on the transaction(s) at issue in the review process; or
(2) Appeal the decision by the Director of the Division of Finance.
(f) If additional information is requested of the requesting or
affected institutions by the FDIC, such information shall be provided
by the institution within 21 days of the date of the FDIC's request for
additional information.
(g) Any institution submitting a timely request for review will
receive a written response from the FDIC's Director of the Division of
Finance:
(1) Within 60 days of receipt by the FDIC of the request for
revision;
(2) If additional institutions have been notified by the requesting
institution or the FDIC, within 60 days of the date of the last
response to the notification; or
(3) If additional information has been requested by the FDIC,
within 60 days of receipt of the additional information,whichever is
later. Whenever feasible, the response will notify the institution of
the determination of the Director as to whether the requested change is
warranted. In all instances in which a timely request for review is
submitted, the Director will make a determination on the request as
promptly as possible and notify the institution in writing of the
determination. Notice of the procedures applicable to reviews will be
included with the Statement and assessment invoices.
(h) Subject to paragraph (e) of this section, the insured
depository institution that requested review under this section, or an
insured depository institution materially affected by the Director's
determination, that disagrees with that determination may appeal to the
FDIC's Assessment Appeals Committee on the same grounds as set forth
under paragraph (a) of this section. Any such appeal must be submitted
within 15 calendar days from the date of the Director's written
determination. Notice of the procedures applicable to appeals under
this section will be included with the Director's written
determination. The decision of the Assessment Appeals Committee shall
be the final determination of the FDIC.
By order of the Board of Directors.
Dated at Washington, DC, this 9th day of May, 2006.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E6-7583 Filed 5-17-06; 8:45 am]
BILLING CODE 6714-01-P