[Federal Register: January 14, 2008 (Volume 73, Number 9)]
[Proposed Rules]
[Page 2363-2401]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ja08-28]
[[Page 2363]]
-----------------------------------------------------------------------
Part IV
Federal Deposit Insurance Corporation
-----------------------------------------------------------------------
12 CFR Part 360
Processing of Deposit Accounts in the Event of an Insured Depository
Institution Failure and Large-Bank Deposit Insurance Determination
Modernization; Proposed Rule
[[Page 2364]]
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 360
RIN 3064-AD26
Processing of Deposit Accounts in the Event of an Insured
Depository Institution Failure and Large-Bank Deposit Insurance
Determination Modernization
AGENCY: Federal Deposit Insurance Corporation (``FDIC'').
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The FDIC is seeking comment on a proposed rule composed of two
parts. The first part would establish the FDIC's practice for
determining deposit account balances at a failed insured depository
institution. The second part would require the largest insured
depository institutions to adopt mechanisms that would, in the event of
the institution's failure: provide the FDIC with standard deposit
account and customer information; and allow the FDIC to place and
release holds on liability accounts, including deposits. The first part
of the proposal would apply to all insured depository institutions. The
second part of the proposal would apply only to insured depository
institutions having at least $2 billion in domestic deposits and
either: more than 250,000 deposit accounts (currently 152
institutions); or total assets over $20 billion, regardless of the
number of deposit accounts (currently 7 institutions). The FDIC is
seeking comment on all aspects of the proposed rule.
DATES: Comments must be submitted on or before April 14, 2008.
ADDRESSES: You may submit comments by any of the following methods:
Agency Web site: http://www.fdic.gov/regulations/laws/federal.
Follow instructions for submitting comments on the Agency Web
Site.
E-mail: Comments@FDIC.gov. Include ``Processing of Deposit
Accounts and Insurance Determination Modernization'' 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. (EST).
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided. Comments may be inspected and
photocopied in the FDIC Public Information Center, 3501 North Fairfax
Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m.
(EST) on business days. Paper copies of public comments may be ordered
from the Public Information Center by telephone at (877) 275-3342 or
(703) 562-2200.
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, Christopher L. Hencke, Counsel, Legal
Division, (202) 898-8839 or chencke@fdic.gov or Catherine Ribnick,
Counsel, Legal Division, (703) 562-2407 or cribnick@fdic.gov.
SUPPLEMENTARY INFORMATION: The proposed rule comprises two parts. The
first part would establish the FDIC's practice for determining deposit
account balances at a failed insured depository institution.\1\ The
second part would require the largest insured depository institutions
to adopt systems that would, in the event of the institution's failure:
(1) Provide the FDIC with standard deposit account and customer
information; and (2) allow the FDIC to place and release holds on
liability accounts, including deposits.
---------------------------------------------------------------------------
\1\ Part one imposes no requirements on insured depository
institutions, rather it only establishes the FDIC's practices for
determining deposit account balances in the event of failure.
---------------------------------------------------------------------------
I. Determining Deposit Account Balances at a Failed Insured Depository
Institution
A. Background
Upon the failure of an FDIC-insured depository institution, the
FDIC must determine the total insured amount for each depositor. 12
U.S.C. 1821(f). To make this determination, the FDIC must ascertain the
balances of all deposit accounts owned by the same depositor in the
same ownership capacity at a failed institution as of the day of
failure.
The second part of this proposed rule, among other things, would
require certain large depository institutions to place holds on
liability accounts, including deposits, in the event of failure. The
amount held would vary depending on the account balance, the nature of
the liability (whether it is a deposit or non-deposit for insurance
purposes) and the expected losses resulting from the failure. In order
to calculate these hold amounts, the rules used by the FDIC to
determine account balances as of the day of failure must be clearly
established.
A deposit account balance can be affected by transactions \2\
presented during the day. A customer, a third party or the depository
institution can initiate a deposit account transaction. All depository
institutions process and post these deposit account transactions
according to a predetermined set of rules to determine whether to
include a deposit account transaction either in that day's close-of-
business balances or in the next day's close-of-business balances.
These rules establish cutoff times that vary by institution and by type
of deposit account transaction--for example, check clearing, Fedwire,
ATM, and teller transactions. Institutions post transactions initiated
before the respective cutoff time as part of that day's business and
generally post transactions initiated after the cutoff time the
following business day. Further, institutions automatically execute
prearranged ``sweep'' instructions affecting deposit balances at
various points throughout the day. The cutoff rules for posting deposit
account transactions and the prearranged automated instructions define
the close-of-business balance for each deposit account on any given
business day.\3\
---------------------------------------------------------------------------
\2\ A deposit account transaction, such as deposits,
withdrawals, transfers and payments, causes funds to be debited from
or credited to the account.
\3\ Some depository institutions operate ``real-time'' deposit
systems in which some deposit account transactions are posted
throughout the business day. Most depository institutions, however,
process deposits in a ``batch mode,'' where deposit account
transactions presented before the cutoff time are posted that
evening or in the early morning hours of the following day. With
either system--batch or real-time--the institution calculates a
close-of-business deposit balance for each deposit account on each
business day.
---------------------------------------------------------------------------
In the past, the FDIC usually took over an institution as receiver
after it had closed on a Friday. For institutions with a few branches
in one state, deposit account transactions for the day were completed
and determining account balances on that day was relatively
straightforward. The growth of interstate banking and branching over
the past two decades and the increasing complexity of bank products and
practices (such as sweep accounts) has made the determination of
account balances on the day of closing much more complicated. Financial
institutions are much larger and the industry is more concentrated than
in the past, factors further complicating the determination.
[[Page 2365]]
B. The proposed rule
Overview
In general. The FDIC makes deposit insurance determinations based
upon deposit account balances at a failed institution on the day of
failure. The proposed rule would define what is meant by a deposit
account balance on the day an insured depository institution fails and,
thus, would define the deposit account balances on which the FDIC would
make insurance determinations. A deposit account balance on the day of
failure would be defined as the end-of-day ledger balance of the
deposit on the day of failure. Whether a deposit account transaction
would be included in the end-of-day ledger balance on the day of
failure would depend generally upon how it normally would be treated
using the institution's ordinary cutoff time on that day. As mentioned
above, many institutions have different cutoff times for different
kinds of transactions, such as check clearing, Fed wire, ATM and teller
transactions.
Under the proposed rule, the FDIC would establish the FDIC Cutoff
Point, defined as a point in time after it takes control of the failed
institution as receiver. If the institution's ordinary cutoff time on
the day of failure for any particular kind of transaction preceded the
FDIC Cutoff Point, the institution's ordinary cutoff time would be
used. Otherwise, the institution's ordinary cutoff time for an
individual kind of transaction would be replaced by the FDIC Cutoff
Point. The ``Applicable Cutoff Time'' used for any kind of transaction
thus would be the earlier of the institution's ordinary cutoff time or
the FDIC Cutoff Point. In practice, there might be several Applicable
Cutoff Times for a given failed institution, since different kinds of
transactions could have different cutoff times. No Applicable Cutoff
Time would be later than the FDIC Cutoff Point established by the FDIC,
though some could be earlier.
Transactions occurring after the Applicable Cutoff Time would be
posted to the next day's business, if the operations of the failed
institution were carried on by a successor institution. In a depository
institution failure where deposit operations are not continued by a
successor institution, account transactions on the day of failure would
be posted to the applicable deposit accounts until the FDIC takes
control of the institution as receiver. This practice would be
consistent with the FDIC's current practice in handling deposit account
transactions in deposit insurance payout situations.\4\
---------------------------------------------------------------------------
\4\ This is when the FDIC handles the resolution of a failed
depository institutions by making payments to insured depositors.
More commonly, the FDIC handles a failed institution by arranging a
purchase-and-assumption transaction with a healthy depository
institution. In those cases, insured depositors' funds are
transferred to the assuming institution and available at that
institution to depositors.
---------------------------------------------------------------------------
Upon taking control of a failed institution as receiver, the FDIC
would take steps necessary to limit additional transactions to ensure,
to the extent practicable, that funds would not be received by or
removed from the failed institution. These steps might include the
suspension of wire activities and new deposit account transactions. For
example, wire transactions not yet executed by the FDIC Cutoff Point
would not be allowed to occur.
For a failed institution operating in several time zones, the FDIC
Cutoff Point, which would set the latest possible time for any
particular transaction's Applicable Cutoff Time, would be translated
into local time. For example, a 6 p.m. Eastern Time FDIC Cutoff Point
on the day an institution was closed would mean a 5 p.m. FDIC Cutoff
Point in the Central Time zone. As receiver, the FDIC would attempt, as
it has customarily done in the past, to close all offices of the failed
institution as soon as practicable after taking over as receiver.
To illustrate the Applicable Cutoff Time, consider an institution
whose normal cutoff time for teller transactions is 3 p.m. local time.
Assume that the institution has branches in both the Eastern and
Pacific Time zones. Assume also that the FDIC designates 5 p.m. Eastern
Time as the FDIC Cutoff Point. The Applicable Cutoff Time for teller
transactions would then be 3 p.m. Eastern Time for branches in the east
and 2 p.m. Pacific Time for branches in the west. Thus, a deposit made
at a teller station at a branch in the west at 1 p.m. local time would
be posted to (and included in) the end-of-day ledger balance on the day
of failure. A deposit made at a teller station at a branch in the west
at 2:30 p.m. local time (assuming that the FDIC could not immediately
close the branch) would not be posted to (or included in) the end-of-
day ledger balance on the day of failure. Instead, the deposit would be
included in the next day's business, unless no successor institution
continued the operations of the failed institution, in which case it
would either be included in the day-of-failure's business or returned.
The deposit insurance implications of including or not including the
deposit in the end-of-day ledger balance on the day of failure are
discussed below.
Prearranged instructions to ``sweep'' funds after the posting
process. Certain account agreements, such as those applying to zero
balance accounts \5\ and other internal sweep accounts,\6\ provide for
the automated transfer from one account at an institution to another
account at the institution after transactions are posted for the day,
but before the end-of-day balance is established. Applicable contracts
and business rules governing these accounts determine the amount to be
transferred. Under the proposed rule, any automated internal sweep
transaction from one account at the failed institution to another
account at the failed institution would be completed on the day of
failure.\7\ In effect, the FDIC, as receiver would recognize the
transfer, pursuant to the account agreement, in determining the end-of-
day balance for deposit insurance and depositor preference purposes.
The completion of prearranged internal sweep transactions results in
the calculation of end-of-day deposit balances for insurance purposes
consistent with how such funds currently are treated for Call Report
and assessment purposes.
---------------------------------------------------------------------------
\5\ In the case of a zero balance account ordinarily a customer
has a master account tied to one or more subsidiary accounts. The
institution's agreement with the customer calls for the subsidiary
account to have a zero balance at the end of each day. For example,
if funds need to be transferred from the master account to cover
checks presented against the subsidiary account, this will be done
during the nightly processing cycle. Alternatively, if there are
excess funds in the subsidiary account they will be transferred to
the master account prior to the end of the day.
\6\ Insured depository institutions maintain two types of sweep
accounts. Internal sweep arrangements--such as those where the
investment vehicle is a ``deposit'' in a foreign branch of the
institution or its international banking facility--sweep funds only
within the institution itself by accounting or bookkeeping entries.
External sweep arrangements--such as those connected to investments
in money market mutual funds--move funds (usually by wire transfer)
outside the institution and, hence, off its books altogether.
\7\ The FDIC as receiver would not, however, complete an
external sweep--a sweep in which funds leave the institution and
another entity assumes liability to the customer--if funds have not
already left the failed institution by the FDIC general cutoff time.
An external sweep includes, for example, an account where funds are
swept from a deposit account at the institution and wired to a third
party money market mutual fund every evening. External sweeps also
would include an arrangement where funds are swept from a deposit
account at a depository institution to an account or product at an
affiliate of the institution, even if the transfer is accomplished
through a book-entry at the depository institution. In some cases it
would not be practicable to stop an external sweep from occurring
after the FDIC general cutoff time. In these cases the FDIC would
use the pre-sweep deposit balance for insurance purposes.
---------------------------------------------------------------------------
[[Page 2366]]
For example, assume an agreement between a depository institution
and its customer provides that, at the close of every business day, the
funds in excess of a designated amount are to be transferred from the
customer's checking account at the institution's domestic branch to a
Eurodollar account at the institution's foreign branch. Under the
proposed rule, the transfer of funds to the foreign branch would be
deemed to have been completed on the day of failure, regardless of the
FDIC Cutoff Point, because the transfer was authorized as of that day
as part of the agreement between the institution and its customer.
The proposed treatment of internal zero balance and other sweep
accounts has important implications for a customer's depositor and
creditor status and chances of recovery from the receivership estate.
The implications are discussed below.
Post-closing adjustments. Under the proposed rule, the FDIC, as
receiver, would be able to correct errors and omissions after the day
of failure and reflect them in the day-of-closing deposit account
balances.
No requirements proposed. The proposed rule would not require
insured institutions to have in place computer systems capable of
applying the FDIC Cutoff Point to determine deposit account balances
upon an institution's day of failure. The FDIC requests comments on
whether such a requirement should be imposed for either all
institutions or, alternatively, for ``Covered Institutions''--defined
in the second part of the proposed rule as institutions having at least
$2 billion in domestic deposits and either: more than 250,000 deposit
accounts; or total assets over $20 billion, regardless of the number of
deposit accounts.
Treatment of Uncollected Deposited Checks
Under the proposed rule, in determining deposit account balances at
a failed insured depository institution, the FDIC would deem all checks
deposited into and posted to a deposit account by the Applicable Cutoff
Time as part of the deposit account balance for insurance purposes.
This approach means that the FDIC would use the ``ledger balance'' of
the account for purposes of its deposit insurance determination, in
contrast to using either ``available funds'' or ``collected funds''
account balances.
The FDIC proposes to use deposit account ledger balances for
deposit insurance purposes for several reasons:
Depository institutions use and calculate the ledger
balance in a more consistent way than other balances.
It is consistent with the way that depository institutions
report deposits on Call Reports and Thrift Financial Reports and it is
the balance the FDIC uses to determine an institution's deposit base
for calculating the institution's deposit insurance assessments.\8\
---------------------------------------------------------------------------
\8\ The FDIC's recent revisions to the FDIC's risk-based
assessment system have made an institution's assessment base, which
is used to determine its deposit insurance assessment, virtually
identical with an institution's deposits as defined in the Federal
Deposit Insurance Act. The revisions eliminated the ``float''
deductions previously used to compute an institution's assessment
base; hence, deposits posted to a deposit account but not yet
collected are now part of the assessment base. The stated rationale
for eliminating the float deduction from the calculation of an
institution's assessment base was that such deductions were small
and decreasing as a result of legal, technological and system
payment changes. 71 FR 69720 (Nov. 30, 2006).
---------------------------------------------------------------------------
It is the easiest balance for depositors to understand,
and it is the most frequently used balance on financial statements
provided to customers.
Using ledger balances also is consistent with the definition of
``deposit'' in the Federal Deposit Insurance Act (``FDI Act''), which
includes balances both ``conditionally'' or ``unconditionally''
credited to a deposit account. 12 U.S.C. 1813(l).
Further, especially in a large depository institution failure,
using ledger balances may be the only operationally feasible means for
the FDIC to make deposit insurance determinations timely and
expeditiously. As discussed in more detail in the second part of this
rulemaking, the FDIC is statutorily obligated to pay insured deposits
``as soon as possible'' after an insured depository institution fails.
12 U.S.C. 1821(f)(1). The FDIC places a high priority on providing
access to insured deposits promptly and, in the past, has usually been
able to allow most depositors access to their deposits on the business
day following closing. The largest insured institutions are much bigger
than any institution has been in the past and are growing increasingly
complex. Providing prompt access to depositors if one of these
institutions were to fail would prove difficult if adjustments for
uncollected funds were necessary.
The proposed rule differs from the FDIC's past and current practice
in an important way. In the past, for a check that was posted to an
account but not yet collected at the time of failure--including a check
already forwarded by the failed institution for collection but not yet
collected--the FDIC acted as agent or trustee for the depositor and
remitted or credited payments received on these checks to the depositor
in full. These checks were not included in deposits on the day of
failure for insurance purposes and were not subject to deposit
insurance limits.\9\ In contrast, under the proposed rule, when a check
is posted to an account at the failed institution as provided by the
Applicable Cutoff Time, the check would be included in the end-of-day
balance and would be subject to deposit insurance limits, even if
uncollected.\10\
---------------------------------------------------------------------------
\9\ FDIC Adv. Op. 95-2 (Jan. 23, 1995).
\10\ If the check ultimately proved to be uncollectible, the
ledger balance would be adjusted accordingly.
---------------------------------------------------------------------------
To illustrate, assume again that the FDIC Cutoff Point for teller
transactions at a failed institution is 2 p.m. Pacific Time for
branches in the west. In the past, the receiver, as agent or trustee,
would collect any deposit made to the account (whether before or after
2 p.m. local time) that was uncollected on the day of failure and
credit or remit the proceeds to the depositor without regard to
insurance limits. The amount of the checks would not have counted
against the depositor's deposit total for insurance purposes. Under the
proposed rule, however, any deposit made at a teller station at a
branch in the west up to 2 p.m. local time (possibly including deposits
made in previous days) would be included in the end-of-day ledger
balance on the day of failure (unless previously withdrawn by the
depositor). If such a deposit caused the depositor's total deposits to
exceed the maximum deposit insurance amount for that ownership
capacity, the depositor would have uninsured deposits.
Some depositors may receive less favorable treatment under the
proposed rule than if the FDIC were to continue to use its current
approach to handling uncollected deposited checks. The increasing speed
with which checks are processed as a result of electronic check
processing, the use of checking account debit cards and other
developments, however, should limit the effect of the proposed rule in
this regard. Moreover, the current approach would not be feasible in a
larger bank failure, and the FDIC must plan for all contingencies.
Treatment of Internal Sweep Accounts in General
Background. In a prearranged, internal sweep arrangement, the
nature of an institution's liability to its customer changes
automatically and repeatedly (usually once or twice every
[[Page 2367]]
day). Usually, some or all of the funds in an obligation denominated a
deposit account (typically, a checking account) are transferred to a
non-deposit liability account within the same depository institution
(an ``internal sweep''). For many such internal sweeps (such as sweeps
to Eurodollar accounts, discussed below), funds do not usually
transfer; rather, a ledger or accounting entry is used to record that
the obligation has moved to another type of account.
Most agreements between sweep customers and a depository
institution expressly provide that the institution's liability, once
the sweep occurs, is not a deposit (as defined in section 3(l) of the
FDI Act) and that the institution will pay interest (typically
overnight) while the liability remains a non-deposit liability. These
sweep agreements allow an institution to pay interest without violating
the statutory prohibition on the payment of interest on demand
deposits.\11\ These sweep agreements also relieve insured institutions
from having to maintain reserve requirements for the swept liabilities
under the regulations issued by the Board of Governors of the Federal
Reserve System.\12\ In addition, the agreements relieve institutions
from having to pay deposit insurance assessments (or premiums) on the
swept liabilities, since only deposits are included in the base upon
which institutions pay assessments.\13\
---------------------------------------------------------------------------
\11\ In general, insured depository institutions are prohibited
from paying interest on commercial demand deposits. See 12 U.S.C.
371a; 12 U.S.C. 1828(g); 12 CFR part 217; 12 CFR part 329.
\12\ 12 CFR Part 204.
\13\ 12 CFR 327.5.
---------------------------------------------------------------------------
The Adagio decision. The need for a rule to govern the treatment of
internal sweep accounts in an institution failure is motivated, in
part, by a recent court decision involving the treatment of sweep
accounts. In Adagio Investment Holding Ltd. v. FDIC, 338 F. Supp. 2d 71
(D.D.C. 2004), the FDIC was appointed as the receiver of the failed
Connecticut Bank of Commerce. On the night of the bank's failure, in
accordance with its customary practice, the FDIC ``completed the day's
business'' which involved processing pending transactions, including
approximately $20.2 million which had been authorized to be swept from
a demand deposit account in the bank to a non-insured non-deposit
account in the bank's international banking facility (``IBF''). Because
``deposits'' in an IBF are not deposits for purposes of section 3(l) of
the FDI Act, the FDIC issued (pursuant to the national deposit
preference statute, described below) the holders of these ``deposits''
receivership certificates as general creditors rather than according
them priority status as depositors. The creditors, claiming that the
receiver did not have authority to permit the sweeps, sued the FDIC. In
the Adagio case, the court concluded that the sweep should not have
been performed in light of the lack of ``any provision in either the
statute or regulations that would permit the sweep that occurred.* *
*'' 338 F. Supp. 2d at 81.
Operation of the proposed rule as to sweeps. Under the proposed
rule, the FDIC would complete a prearranged internal sweep transaction
on the day of the institution's failure if the applicable sweep account
agreement provides for the automated sweep after transactions are
posted for the day, but before the final deposit account balance is
established.
As in the Adagio situation, a sweep that resulted in a non-deposit
liability would leave the creditor with an unsecured general creditor
claim against the receivership. This is because under the national
deposit preference statute (section 11(d)(11) of the FDI Act, 12 U.S.C.
1821(d)(11)), unsecured general creditor claims receive payment from
the receivership estate only after all deposit claims, including
uninsured deposits and the FDIC's claim as the subrogee of all insured
deposits, have been paid in full. As a result, general creditors often
receive little or no recovery in the receivership of a failed
depository institution, while uninsured depositors have historically
recovered at least part of their funds. Thus, the sweep of a liability
from a deposit account to a non-deposit account (on the day of the
institution's failure) could significantly reduce the accountholder's
recovery from the receivership estate.
Customers could either lose or gain from having internal sweeps
completed. Eurodollar sweeps and sweeps to IBF accounts are two
examples of internal sweep arrangements that would result in customers
losing due to the sweep being completed. The Eurodollar and IBF sweep
arrangement typically begins each business day with balances only in a
domestic deposit account. At the end of the day, the customer's claim
is denominated a Eurodollar account (typically associated with the
bank's branch in the Cayman Islands or Bahamas) or an IBF account. At
the start of the next business day, the depository institution will
sweep the balance back to the domestic deposit account. The cycle
typically repeats itself daily.
Usually the underlying contract for a Eurodollar sweep specifies
that the obligation at the foreign branch is not payable in the United
States and, hence, is not a deposit,\14\ for deposit insurance and
depositor preference purposes. Upon an institution failure, amounts in
a Eurodollar account in a non-insured branch of the failed institution
would be treated as foreign deposits and would not be deposits for
insurance or depositor preference purposes. The same treatment would
apply to sweeps to IBFs, which by statutory definition are not
deposits. Eurodollar and IBF accountholders would be accorded general
creditor status in the receivership estate. Institutions do not pay
deposit insurance assessments on liabilities denominated, as of an
institution's close of business, as foreign deposits or IBF deposits.
---------------------------------------------------------------------------
\14\ The definition of ``deposit'' in the FDI Act expressly
excludes: ``any obligation of a depository institution which is
carried on the books and records of an office of such bank or
savings association located outside of any State, unless (i) such
obligation would be a deposit if it were carried on the books and
records of the depository institution, and would be payable at an
office located in any State; and (ii) the contract evidencing the
obligation provides by express terms, and not by implication, for
payment at an office of the depository institution located in any
State.'' 12 U.S.C. 1813(l)(5)(A). Also, the FDI Act defines IBF
obligations as non-deposits. 12 U.S.C. 1813(l)(5)(B).
---------------------------------------------------------------------------
Thus, under the proposed rule, the sweep to the IBF described in
the Adagio decision would be completed by the receiver on the day of
failure and the account holders, who held IBF accounts after the sweep,
would be deemed to be general creditors of the receivership, rather
than depositors, under the deposit preference statute.\15\
---------------------------------------------------------------------------
\15\ Rights are fixed as of the close of the day's business.
Those rights would not be changed if, for example, it was
impractical to reprogram the bank's computers before a liability
swept to a foreign branch of an insured institution as of the day of
the institution's failure was swept back to a deposit account at the
bridge bank serving as the successor to the failed institution.
---------------------------------------------------------------------------
Completing repurchase agreement sweeps could--if the accounts are
properly structured--benefit the customer. In a repurchase sweep, the
process is similar to that of a Eurodollar or IBF sweep. At the start
of the business day, the customer balances reside in a deposit account.
At some point during the day the obligation is changed to an interest-
bearing, non-deposit liability account, and is so reported by the
institution as of the close of business. In some cases, the institution
sells securities to the customer (and agrees to repurchase them later).
At the start of the next business day, the depository institution will
repurchase the securities by re-crediting the deposit account. The
cycle repeats itself daily.
Under the proposed rule, internal repurchase account sweeps would
be
[[Page 2368]]
accorded the same treatment as other pre-arranged, automated sweep
arrangements. That is, the FDIC would consider sweep transactions to be
completed on the day of the institution's failure if the applicable
sweep account agreement provides for the automated sweep before the
final deposit account balance is established.
Some repurchase sweep agreements provide for an actual sale of
securities by the depository institution to a customer (followed by the
institution's ``repurchase'' of the securities from the customer). When
the customer uses a deposit account to make the purchase, the bank's
deposit liability to the customer is extinguished. In other cases,
however, the so-called repurchase agreement does not provide for the
actual sale and repurchase of securities. Rather, the agreement
provides for the transfer of the customer's claim from a deposit
account at the depository institution to another liability account,
collateralized by either specific securities or a pool of securities,
at the same institution. In this regard, the FDIC seeks comment on
specific questions: Do some or all repurchase arrangements as actually
executed: (1) Pass title to the customer in a transaction that is
enforceable against the FDIC? or (2) create perfected security
interests that are enforceable against the FDIC? Comments also are
requested as to whether the nature of some or all repurchase sweep
arrangements satisfies the definition of ``deposit'' in section 3(l) of
the FDI Act. In addition, comments are requested as to what arguments
may be made that repurchase arrangements in which the institution
collateralizes its liability are permissible, given restrictions on
collateralizing private deposits. See Texas & Pacific Railway Company
v. Pottorff, 291 U.S. 245 (1934).
Treatment of Sweep Accounts Involving the Transfer of Funds Outside the
Depository Institution
The proposed rule would apply differently to sweep accounts
involving the transfer of funds outside the depository institution. In
those situations, the status of the funds as of the institution's day
of failure would depend on whether the funds left the institution (via
wire transfer or otherwise) before the FDIC Cutoff Point. For example,
assume the customer and the institution have an agreement that funds in
excess of a certain amount are to be wired to a mutual fund (outside
the institution) at 5 p.m. each business day. The institution fails and
the FDIC Cutoff Point is set at 4 p.m. If the funds have not been wired
out of the institution by 4 p.m., the FDIC would consider the funds to
be part of the deposit account balance upon which the FDIC would make a
deposit insurance determination. Conversely, under the same facts,
except that the FDIC Cutoff Point is set at 6 p.m., the wire transfer
would be executed at 5 p.m., and the wired funds would no longer be
part of the deposit account balance upon which the FDIC would make a
deposit insurance determination.
Where funds subject to a prearranged, automated external sweep have
been temporarily transferred to an intermediate deposit account (or
omnibus account) at the failed institution awaiting transfer to an
external source, but have not actually been transferred to the external
source (for example, the mutual fund) by the FDIC Cutoff Point, those
funds would still be considered part of the customer's deposit account
balance for deposit insurance and receivership purposes.
External sweep arrangements typically provide that invested funds
remain outside the institution on a day-to-day basis. In this regard,
at the point of failure the preponderance of a customer's funds would
reside in the external sweep investment vehicle and not be considered a
deposit for Call Report, assessment or insurance purposes. Such
external funds typically would not be subject to loss in the event of
failure. The proposed rule would affect only those balances leaving the
institution on the day of failure. Thus, the proposed treatment of
external sweep arrangements is consistent with the FDIC's practice,
upon taking control of a failed institution as receiver, to limit the
removal of funds from the failed institution.
Request for comment on sweeps alternative. As described above,
funds subject to an internal sweep that is to take place before end-of-
day balances are calculated would not be accorded treatment as deposits
because they would be swept, within the depository institution, by
prearrangement, before the institution's close of business, from a
deposit to a non-deposit account. Under such an arrangement, no deposit
insurance premiums would have been assessed against these funds since
they would not have been reported as deposits by the institution. The
FDIC requests comments on whether, if the swept funds in such
arrangements were to be assessed insurance premiums, they also should
be eligible to be treated as deposits for purposes of FDIC deposit
insurance and depositor preference. The FDIC requests comment on
whether or to what extent such an option would involve any operational
or regulatory burden or other adverse regulatory consequences.
Request for Comment on Part One of the Proposed Rule
In addition to requesting responses to the specific questions posed
above and requesting comments on all aspects of this part of the
proposed rulemaking, the FDIC requests comments on alternative
approaches for determining deposit account balances at a failed insured
depository institution, including whether the FDIC should have the
discretion to establish a universal cut-off time for such
determinations at the time it takes control of a failed insured
depository institution.
II--Large-Bank Deposit Insurance Determination Modernization
As mentioned above, the second part of the proposed rule would
require the largest insured depository institutions to adopt mechanisms
that would, in the event of the institution's failure: (1) Provide the
FDIC with standard deposit account and customer information and (2)
allow the placement and release of holds on liability accounts,
including deposits.
A. Overview
This part of the proposed rule applies to large FDIC-insured
institutions, defined in the proposed rule as ``Covered Institutions.''
The definition would encompass insured depository institutions having
at least $2 billion in domestic deposits and at least either: (1)
250,000 deposit accounts; or (2) $20 billion in total assets,
regardless of the number of deposit accounts. Currently, the combined
total number of Covered Institutions would be 159.\16\ In summary,
Covered Institutions would be required to adopt mechanisms that would,
in the event of the institution's failure:
---------------------------------------------------------------------------
\16\ Based upon Call Reports dated June 30, 2007.
---------------------------------------------------------------------------
Allow automatic posting of provisional holds on large
liability accounts in any percentage specified by the FDIC on the day
of failure.
Provide the FDIC with deposit and customer account data in
a standard format.
Allow automatic removal of the provisional holds and
posting of the results of insurance determinations as specified by the
FDIC.
B. Need for a Rule
When handling a depository institution failure the FDIC is required
to structure the least costly of all possible resolution transactions,
except
[[Page 2369]]
in the event of systemic risk.\17\ In addition, the FDIC is required to
pay insured deposits ``as soon as possible'' after an institution
fails.\18\ The FDIC places a high priority on providing access to
insured deposits promptly and, in the past, has usually been able to
allow most depositors access to their deposits on the business day
following closing. 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 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).
---------------------------------------------------------------------------
\17\ Section 13(c)(4)(A)(ii) of the 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).
\18\ Section 11(f)(1) of the FDI Act, 12 U.S.C. 1821(f)(1).
---------------------------------------------------------------------------
The largest insured depository institutions are growing
increasingly complex. The proposed rule would help facilitate an
insurance determination and dramatically improve upon access to
depositor funds if one of these institutions were to fail. The proposed
rule is intended to allow the deposit operations of a failed
institution to be continued on the day following failure. It is also
intended to permit the FDIC to meet its legal mandates regarding the
resolution of failed insured institutions, provide liquidity to
depositors promptly, enhance market discipline, ensure equitable
treatment of depositors at different institutions and reduce the FDIC's
costs by preserving the franchise value of a failed institution.
Limitations of current processes. Making deposit insurance
determinations is inherently complex because a single depositor may
have more than one account and may hold accounts in different ownership
capacities, each of which may be separately insured.\19\ To make
insurance determinations, the FDIC must aggregate all accounts owned by
a depositor in a single ownership capacity. This process often requires
reviewing detailed account agreements and other documents.
---------------------------------------------------------------------------
\19\ The basic FDIC insurance limit is $100,000 per depositor,
per insured institution, although the insurance limit for Individual
Retirement Accounts and other specified types of retirement accounts
was recently increased to $250,000. 71 FR 14629, March 23, 2006.
Deposits maintained by a person or entity in different ownership
rights and capacities at one institution are aggregated and
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. Today
the FDIC generally relies upon the deposit account records of a
failed institution in making a deposit insurance determination. The
FDIC's rules and regulations for deposit insurance coverage describe
the categories of ownership rights and capacities eligible for
separate insurance coverage. FDIC refers to these as ``ownership
categories.'' Addendum 1 describes the main ownership categories.
---------------------------------------------------------------------------
The larger the number of deposit accounts at an institution, the
more complex and difficult the insurance determination becomes.
Complexity also depends upon the volume of transactions, the amount of
uninsured funds, the number of separate computer systems or
``platforms'' on which deposit accounts are maintained and the speed at
which the institution's deposit operations must be resumed following
failure. These factors all present significant challenges in a large-
bank failure.
All of the insured institution failures using the FDIC's current
processes and procedures have been of modest size, the largest being
NetBank (2007) with total deposits at the time of closure of $1.9
billion and roughly 175,000 deposit accounts. With this proposed rule,
the FDIC's processes and procedures for determining deposit insurance
coverage would be improved to avoid delays.
Table 1 reflects the increasing number of deposit accounts at the
largest insured institutions over the past 10 years. If this trend
continues, the largest institutions will hold even more deposit
accounts in the future.
Table 1.--Top Ten Institutions, By Number of Deposit Accounts
(In Millions)
------------------------------------------------------------------------
Rank 1997 2002 2007
------------------------------------------------------------------------
1............................................... 11.3 27.9 54.0
2............................................... 10.4 17.3 33.9
3............................................... 5.0 11.1 24.1
4............................................... 4.1 10.7 20.5
5............................................... 4.0 10.4 19.4
6............................................... 3.8 10.0 16.2
7............................................... 3.7 9.0 12.7
8............................................... 3.7 6.8 9.5
9............................................... 3.6 6.0 9.4
10.............................................. 3.2 5.1 7.2
-----------------------
Total....................................... 52.7 114.3 206.8
------------------------------------------------------------------------
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
engaged in merger activity.
Table 2 shows some of the differences between Covered Institutions
under the proposed rule, and all other institutions (Non-Covered
Institutions). By definition, Covered Institutions typically have more
accounts than other institutions. Covered Institutions also usually
have more complex deposit systems and require a rapid resumption of
deposit operations in the event of failure to protect the institution's
franchise value.
Table 2.--Industry Segmentation
----------------------------------------------------------------------------------------------------------------
Total
domestic
Segment Definition Number % of Total deposits % of Total
(billions)
----------------------------------------------------------------------------------------------------------------
Covered.......................... Total domestic deposits 159 1.8 4,612 68.9
of at least $2 billion
with: (1) over 250,000
deposit accounts or (2)
total assets over $20
billion but less than
250,000 deposit accounts.
Non-Covered...................... All insured institutions 8,466 98.2 2,086 31.1
not Covered.
------------------------------------------------------------------------------
Total........................ ......................... 8,625 100.0 6,698 100.0
----------------------------------------------------------------------------------------------------------------
Note: Data are as of June 30, 2007.
[[Page 2370]]
Even when a smaller institution fails, making insurance
determinations is a time consuming process. The FDIC typically needs
several months of advance planning to make deposits available to
insured depositors on the next business day. In the past, insured
institution closures typically have occurred on a Friday, which has
allowed the FDIC two days to prepare for the next business day. But
Friday closures are not always the case and the FDIC must be prepared
for all contingencies.
Previous ANPRs. In 2005, the FDIC published an advance notice of
proposed rulemaking (the 2005 ANPR),\20\ which requested comment on
three options for enhancing the speed at which depositors at larger,
more complex insured institutions would receive access to their funds
in the event of failure.\21\ All of the options would have required
that Covered Institutions modify their deposit account systems. Option
1 would have imposed requirements very similar to those in this
proposed rule, except that, in addition, institutions would have been
required to maintain a unique identifier for each depositor and for the
insurance ownership category of each account.
---------------------------------------------------------------------------
\20\ 70 FR 73652 (Dec. 13, 2005).
\21\ 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.
---------------------------------------------------------------------------
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, similar to the requirements in this proposed rule.
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 from uninsured deposit accounts in the event of failure.
Sixty-four percent of the 28 comment letters on the 2005 ANPR
opposed the proposal, citing high costs and regulatory burden.\22\
---------------------------------------------------------------------------
\22\ The 2005 ANPR comment letters are available at: http://www.fdic.gov/regulations/laws/federal/2005/05comlargebank.html.
Addendum 2 provides a more complete discussion of comments.
---------------------------------------------------------------------------
In response, the FDIC published a second advance notice of proposed
rulemaking (the 2006 ANPR) \23\ focusing on the less costly and
burdensome alternatives. The 2006 ANPR proposed dividing Covered
Institutions into two tiers. Tier 1 institutions would comprise the
largest, most complex Covered Institutions. The Tier 1 proposed
requirements were the same as the Option 1 requirements under the 2005
ANPR, except that the deposit insurance category would not be required
for each deposit account. Tier 2 institutions--the remainder of Covered
Institutions--would have the same requirements as Tier 1, except that
there would not be a unique depositor ID requirement.
---------------------------------------------------------------------------
\23\ 71 FR 74857 (Dec. 13, 2006).
---------------------------------------------------------------------------
The comment letters from the trade associations nevertheless still
cited high costs and regulatory burden and argued that the benefits to
the FDIC would be low and might never materialize.\24\ These letters
suggested that the FDIC should conduct more research on the costs of
the options and the potential benefits. It was recommended that the
FDIC focus on troubled institutions or abandon the initiative
altogether.\25\
---------------------------------------------------------------------------
\24\ See comment letters provided by American Bankers
Association (March 13, 2007), America's Community Bankers (March 13,
2007) and The Financial Services Roundtable (March 7, 2007).
\25\ In total, the FDIC received 13 comments on the 2006 ANPR.
The 2006 comment letters are available at: http://www.fdic.gov/regulations/laws/federal/2006/06comAC98.html.
Addendum 2 provides a
more complete discussion of comments.
---------------------------------------------------------------------------
In response, the FDIC has further reduced the potential costs and
burdens in this NPR by dropping the requirement that the largest, most
complex Covered Institutions provide a unique identifier for each
depositor. The FDIC's has striven to limit costs and burdens as much as
possible while still maintaining the proposed capability for resolving
failed institutions at the least cost and providing depositors prompt
access to funds.
In each ANPR the FDIC requested comment on other alternatives
allowing it to meet its objectives in a less costly or burdensome
manner. No alternative strategies have been proposed. Some trade
organizations proposed delaying implementation of these requirements
until a Covered Institution becomes troubled. Given the technological
complexity of making funds available quickly and the risk that a
Covered Institution could fail with limited warning, this proposal is
not compatible with the FDIC's obligation to be prepared for a large-
bank failure.
In response to the 2006 ANPR, the Board of Governors of the Federal
Reserve System noted that the options reduced the likelihood of a too-
big-to-fail resolution structure, promoted market discipline, lowered
resolution costs and should be in place and tested before a large
institution becomes troubled. The Federal Reserve Bank of Minneapolis
also argued that the FDIC must revamp its systems for determining
insurance at large institutions, should work with the industry to
minimize the costs of the proposed options (but still ensure they meet
the FDIC's objectives) and should not wait to implement the options
until a bank becomes troubled.\26\ The FDIC agrees.
---------------------------------------------------------------------------
\26\ Board of Governors of the Federal Reserve System (February
27, 2007) and Federal Reserve Bank of Minneapolis (January 17,
2007).
---------------------------------------------------------------------------
C. The Proposed Rule
Use of the terms ``deposit,'' ``foreign deposit'' and
``international banking facility deposit.''
In this part of the proposed rule, the term ``deposit'' continues
to be used as defined in section 3(l) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(l)). A deposit--also called a ``domestic
deposit''--includes only deposit liabilities payable in the United
States, typically those deposits maintained in a domestic office of an
insured depository institution. Insured depository institutions may
maintain deposit liabilities in a foreign branch (``foreign
deposits''), but these liabilities are not deposits in the statutory
sense (for insurance or depositor preference purposes) for the time
that they are payable solely at a foreign branch or branches. Insured
depository institutions also may maintain deposit liabilities in an
international banking facility (IBF). An ``international banking
facility deposit,'' as defined by the Board of Governors of the Federal
Reserve System in Regulation D (12 CFR 204.8(a)(2)), also is not a
deposit for insurance purposes under section 3(l) or depositor
preference purposes.
Definition of Institutions Covered
This part of the proposed rule would apply to a Covered
Institution, which would be defined as any insured depository
institution having at least $2 billion in domestic deposits and at
least either: (1) 250,000 deposit accounts; or (2) $20 billion in total
assets, regardless of the number of deposit accounts.\27\ Any other
insured depository institution would be a Non-Covered Institution,
[[Page 2371]]
and would not be subject to this part of the proposed rule.\28\ The
FDIC requests specific comment on the proposed definition.
---------------------------------------------------------------------------
\27\ For the purposes of the criteria in the text, an ``insured
depository institution'' includes all institutions defined as such
in the FDI Act. 12 U.S.C. 1813(c)(2). Other applicable terms would
be as defined in the Reports of Condition and Income (Call Report)
instructions (for insured banks) and Thrift Financial Reports (TFR)
instructions (for insured savings associations): ``deposit
accounts'' mean the total number of deposit accounts (including
retirement accounts), ``domestic deposits'' mean total deposits held
in domestic offices (for insured banks) or deposits (for insured
savings associations), and ``total assets'' means the reported
amount of total assets.
---------------------------------------------------------------------------
Continuation of Business Operations
In the event of failure a Covered Institution's legal entity status
will terminate. In most cases, however, it is expected that a new
entity will carry on the Covered Institution's business operations.\29\
The new legal entity under which business operations will be continued
is the Successor Institution, which could include an established or new
insured depository institution or a bridge bank operated by the FDIC.
The proposed rule is intended to provide a means to facilitate access
to deposit funds and maintain the franchise value of the failed Covered
Institution or a Successor Institution. Thus, in most cases, core
business operations will continue post failure, although some
operations may be suspended temporarily.
---------------------------------------------------------------------------
\28\ The criteria for a Covered Institution apply to separately
chartered insured depository institutions. Commonly owned depository
institutions are not aggregated for the purposes of these criteria.
Furthermore, a holding company may own insured depository
institutions that are both Covered and Non-Covered.
\29\ The provisional hold functionality and other requirements
of the proposed rule should be developed in this context. It is
possible a Covered Institution may be liquidated in the event of
failure. The decision to liquidate or continue the deposit
operations of a Covered Institution will be made on a case-by-case
basis depending on the individual circumstances at the time.
---------------------------------------------------------------------------
Process Overview
As discussed in part one of the proposed rule, in the event of
failure, the FDIC would complete daily account processing to generate
the deposit balances used by the FDIC for insurance purposes. Under
part two of the proposed rule, after completion of the failed Covered
Institution's final daily processing, the Successor Institution would
place provisional holds on selected \30\ deposit accounts, foreign
deposit accounts and certain other liability accounts subject to a
sweep arrangement. Provisional holds, once posted, would allow
depositors access to the remaining balance in their accounts the day
following failure, yet guard against the possibility of an uninsured
depositor or unsecured general creditor receiving more than allowed
under deposit insurance rules or the depositor preference statute.\31\
The FDIC would use a standard set of depositor and customer data to
make deposit insurance determinations. These determinations would be
provided to the Successor Institution, probably several days after
failure. The Successor Institution would then remove the provisional
holds as specified by the FDIC and, if necessary, replace them with
additional holds or debits based upon the deposit insurance
determinations. The FDIC would continue to notify the Successor
Institution to remove additional holds as information is received from
depositors to complete the insurance determination. Figure 1 presents a
hypothetical timeline of this process using local time at the Successor
Institution's headquarters.
---------------------------------------------------------------------------
\30\ The FDIC will supply the business rules upon which a
provisional hold will be placed. These business rules will be based
upon current balance and account product types.
\31\ 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 failure.
Advance dividends are based on the expected recovery to uninsured
depositors.
---------------------------------------------------------------------------
The FDIC requests comment on all aspects of this proposed approach,
including costs, benefits and alternative approaches that would allow
the FDIC to accomplish its objectives of affording a timely deposit
insurance determination, a prompt release of funds to depositors, while
preventing depositors and creditors from receiving more than they are
entitled to under applicable law.
BILLING CODE 6714-01-P
[[Page 2372]]
[GRAPHIC] [TIFF OMITTED] TP14JA08.004
[[Page 2373]]
Provisional Holds
General description. Under the proposed rule, Covered Institutions
would be required to have in place an automated process for
implementing provisional holds concurrent with or immediately following
the daily deposit account processing on the day of failure. After the
placement of provisional holds, all other holds previously placed by
the institution would still remain in effect.\32\ The proposal would
not require development of mechanisms to stop or alter interest accrual
for the affected accounts.
---------------------------------------------------------------------------
\32\ Provisional holds could overlap preexisting holds if the
entire account is held or the unheld account balance before posting
the provisional hold is less than the amount of the provisional
hold. In such cases posting the provisional hold would have to be
constructed so that it did not cause the account to become
``overdrawn'' and trigger service fees against the account.
---------------------------------------------------------------------------
Account-by-account application. Provisional holds would be applied
to individual accounts in an automated fashion. Commonly owned accounts
would not be aggregated by ownership for the purposes of calculating or
placing provisional holds. Provisional holds would extend to all non-
closed deposit accounts held in domestic and foreign offices, as well
as certain sweep account arrangements.\33\
---------------------------------------------------------------------------
\33\ Non-closed deposit accounts include those that are open,
dormant, inactive, abandoned, restricted, frozen or blocked, in the
process of closing or subject to escheatment.
---------------------------------------------------------------------------
The nature of a provisional hold. The provisional hold is intended
to bar access to some or all of a customer's account pending the
results of the insurance determination. Preventing access could be
accomplished using various methods, each of which have different
implications for customer access and implementation costs. As described
in the previous ANPRs, the FDIC contemplated the use of a persistent or
hard hold. But other hold types or mechanisms may also accomplish the
FDIC's objectives. Possible options include:
Persistent hold. A ``persistent'' provisional hold would
be applied once (on or immediately after the day of failure) and stay
on the deposit account until it is removed at the order of the FDIC.
Once applied, the persistent hold would reduce the customer's available
balance. Only ``forced post'' transactions,\34\ as dictated by the
Covered Institution's normal practices, will post through a persistent
provisional hold. In this regard, a persistent provisional hold
protects held funds until the results of the insurance determination
can be provided. The customer would be blocked from accessing funds
held by a persistent hold regardless of the account transaction
mechanism or the time of day.
---------------------------------------------------------------------------
\34\ Forced post transactions may include items such as ATM
withdrawals, POS transactions, cashed checks, fees and deposit
corrections.
---------------------------------------------------------------------------
Memo hold. A provisional hold could be a ``memo hold'' for
institutions that post deposit account transactions via batch process.
A memo-type provisional hold remains effective only intra-day and does
not affect the batch deposit posting process. The memo-type provisional
hold amount is calculated immediately after end-of-day balances are
available on the day of failure and the same amount is applied on a
daily basis until changed or removed at the instruction of the FDIC.
Once applied, a memo-type provisional hold would reduce the customer's
available intra-day balance, blocking wire, over-the-counter, on-line,
ATM, POS, VRU, and call center transactions in a batch-posting
institution. A memo-type hold would block the customer from accessing
funds intra-day and would allow the posting of all transactions during
the nightly processing cycle. The memo-type provisional hold
essentially protects the held balance from being authorized and
therefore the declined items would not be presented for nightly
processing.
Holding balances in an alternate account. Rather than
placing an account hold, balances could be removed from the account to
which a provisional hold is to be applied and otherwise ``held'' in a
work in progress (WIP) or suspense account. Since balances are removed
from the affected account, they would not be available to the customer
until the provisional hold was removed and the balance restored to the
original account.
The more effective the hold mechanism is at preventing access to
held amounts, the more likely it is to generate NSF checks. Holding
balances in a separate account or using a persistent provisional hold
protects the FDIC's interests by blocking customer access to held
amounts at all times. These hold types thus may have the most severe
effect on items returned due to insufficient funds. However, it may be
possible to reduce the volume of returned items to a manageable level
by instructing account officers, who would be reviewing the larger
deposit account relationships, to limit the number of returned items if
doing so would alleviate operational difficulties and the risk of loss
due to nonpayment is expected to be low.
A memo-type provisional hold would allow transactions to be
processed business-as-usual during the nightly cycle. In an institution
with a ``pay-all'' policy, in which NSF items are processed during the
batch nightly processing cycle and the return decision is made the
following morning, either through automated decision rules or by
account officer review, each of the three types of provisional holds
might be equally effective. On the other hand, if the institution has a
``pay-none'' policy, in which NSF items not protected by a pre-existing
overdraft agreement are slated for return the following business day, a
memo-type hold may allow the FDIC more latitude in managing returned
items and be less costly for the Covered Institution. However, it may
place the FDIC at higher risk of inadvertently paying a claimant more
than he or she is entitled to under the law. If a Covered Institution
uses a memo-type provisional hold, the FDIC could require it to have in
place practices and procedures for returning as NSF those items
reducing the deposit account balance below the amount of the
provisional hold, and to demonstrate the effectiveness of this process.
A persistent provisional hold may require greater systems
development and other implementation costs on the part of the Covered
Institution compared to holding balances in a separate account or a
memo hold. Further, persistent provisional holds may take longer to
post following failure, potentially making it difficult or impossible
for some Covered Institutions to be opened in a timely fashion the
following business day.
The FDIC is considering the desirability of each hold format
discussed above, or whether to allow any combination of the three
depending on the circumstances of the Covered Institution. If the FDIC
were to allow the use of multiple hold types, it might require Covered
Institutions to notify the FDIC which types are being used and why they
are effective in limiting access to held amounts. The FDIC is asking
for industry comment on the extent to which a particular type of hold
better accomplishes the FDIC's objectives of preventing depositors and
creditors from receiving more than they are entitled to under
applicable law, maintaining franchise value of the institution,
limiting systems development and implementation costs at Covered
Institutions and improving the speed at which holds can be posted after
failure. The FDIC also is interested in knowing whether other hold
mechanisms not discussed here should be considered.
Provisional holds for deposit accounts. On the day of failure, the
[[Page 2374]]
FDIC would specify a deposit account balance ( the ``account balance
threshold'') that would determine whether a provisional hold would be
placed on a particular deposit account.\35\ No provisional hold would
be placed on a deposit account with a balance less than or equal to the
account balance threshold. For a deposit account above the account
balance threshold, the FDIC would specify, again on the day of failure,
a percentage (the ``provisional hold percentage'') that would be
multiplied by the account balance in excess of the account balance
threshold.\36\ The product of this multiplication would equal the
dollar amount of the provisional hold. Institutions would be required
to adopt systems that would allow the hold to be calculated and placed.
The account balance threshold as well as the provisional hold
percentage could vary for the following four categories, as the Covered
Institution customarily defines them:
---------------------------------------------------------------------------
\35\ The account balance threshold could be any dollar amount
specified by the FDIC, including zero.
\36\ The provisional hold percentage could be any percentage
specified by the FDIC, from 0 to 100 percent.
---------------------------------------------------------------------------
1. Consumer demand deposit, negotiable order of withdrawal
(``NOW'') and money market deposit accounts (``MMDA'').
2. Other consumer deposit accounts (time deposit and savings
accounts, excluding NOW accounts and MMDAs).
3. Non-consumer demand deposit, NOW accounts and MMDAs.
4. Other non-consumer deposit accounts (time deposit and savings
accounts, excluding NOW accounts and MMDAs).
The likely value of the account balance threshold for deposit
accounts would be between $30,000 and $80,000. Based on data provided
by a sample of insured institutions, this range of values would make
only about 10 percent of deposit accounts subject to the provisional
hold at most institutions. Given the historical loss experience for
large institutions and their general liability structure, the FDIC
expects that the provisional hold percentage on domestic deposits would
usually be less than 15 percent.
Provisional holds for foreign deposits. For foreign deposits the
provisional hold methodology will be the same as for deposit accounts,
except that the account balance thresholds and the provisional hold
percentages may vary based on the country in which the account is
located.
Provisional holds for international banking facility deposits. For
international banking facility deposits the provisional hold
methodology will be the same as for deposit accounts, except that the
account balance thresholds and the provisional hold percentages may
differ.
Provisional holds for deposit accounts with prearranged, automated
sweep features. As discussed in part one of the proposed rule, certain
deposit accounts have a feature to ``sweep'' funds periodically
according to predefined rules into another deposit account, a foreign
deposit or an alternative investment vehicle.\37\ The deposit account
through which the customer has primary access to deposited funds--
usually a demand deposit account--is the ``base sweep account.'' The
investable or excess account balance is swept periodically into a
``sweep investment vehicle.'' Sweep investment vehicles may include,
but are not limited to: (1) A deposit account at the same institution
or an affiliated insured depository institution, (2) a foreign or IBF
deposit, (3) repurchase agreements, (4) federal funds, (5) commercial
paper and (6) a proprietary or third-party money market mutual fund.
---------------------------------------------------------------------------
\37\ Sweep accounts as described here do not include zero
balance account (ZBA) arrangements that move funds to and from a
master (or concentration) deposit account and one or more subsidiary
deposit amounts at the same bank. Such deposit account arrangements
are not intended to provide a yield on excess deposit balances nor
do they change the customer's insurance status. ZBAs would be
subject to the provisional hold methodology for deposit accounts
described above.
---------------------------------------------------------------------------
Some sweep accounts would be subject to the same provisional hold
requirements as a deposit account. These are defined as ``Class A''
sweep accounts and include:
Base sweep accounts where the sweep investment vehicle is
another deposit account in an office of the same institution. Both the
base sweep account and the sweep investment vehicle are deposits that
will be subject to the provisional hold requirements of a deposit
account.
Base sweep accounts where funds are wired from the Covered
Institution to a separate legal entity other than the Covered
Institution (e.g. a proprietary or third-party money market mutual
fund). In this case, funds residing in the base sweep account (if any)
would be subject to a provisional hold as any other deposit account
held in a domestic office. No provisional hold would be required for
funds residing outside the Covered Institution in the sweep investment
vehicle.
All other sweep accounts--defined as ``Class B'' sweep accounts--
would have a dual provisional hold methodology. For the fund balance
remaining in the base sweep account as of the institution's customary
close-of-business on the day of failure, the provisional hold
methodology would be the same as applied to other deposit accounts. For
the funds residing in the sweep investment vehicle as of the
institution's customary close-of-business, the provisional hold
methodology would have the capability of a separate account balance
threshold and provisional hold percentage.\38\ The balance threshold as
well as the provisional hold percentage may vary for different types of
sweep investment vehicles.\39\
---------------------------------------------------------------------------
\38\ Some Covered Institutions may allow a single base sweep
account to be associated with multiple investment vehicles. In this
case a separate provisional hold methodology must be developed for
each investment vehicle.
\39\ Some alternative investment vehicles are deposits held in
foreign offices. These foreign deposits would be subject only to the
provisional hold methodology for the sweep alternative investment.
Such foreign deposits would be excluded from the provisional hold
methodology designed for non-sweep deposits held in the same foreign
office.
---------------------------------------------------------------------------
The proposed rule would not require mechanisms to stop the
processing of any prearranged deposit account sweep transactions in the
event of failure. The provisional holds described above would allow for
the transfer of balances from a deposit account to a sweep investment
vehicle. The provisional holds would apply to liability accounts as
they are designated on the books and records of the institution at its
customary close-of-business.
Consider, for example, a prearranged automated sweep transaction in
which a customer's entire deposit account balance is swept to the
institution's Cayman Island branch prior to the institution's customary
close-of-business. Under part one of the proposed rule, the Cayman
Island branch deposit would be classified and treated as a foreign
deposit. In the event of failure the FDIC could request a provisional
hold on the Cayman Island foreign deposit with an account balance
threshold of $0 and a provisional hold percentage of 100. The funds
booked as a Cayman Island branch deposit as of the institution's
customary close-of-business could be swept back to a deposit account
the morning following failure, but only if the provisional hold remains
in place.\40\ Thus the depositor will not be allowed to remove held
amounts from the Successor Institution.
---------------------------------------------------------------------------
\40\ While funds may be swept back to the deposit account the
morning following failure, the rights of these funds for claims
purposes were set based on the institution's end-of-day account
balances, and are not changed by the early morning sweep.
---------------------------------------------------------------------------
Provisional holds for deposit accounts which accept automated
credits from
[[Page 2375]]
funds invested within the Covered Institution. Certain customers may
provide the institution with instructions each day or periodically to
invest funds in a non-deposit investment vehicle within the institution
(e.g., an overnight time account at the Cayman Island branch), whereby
such funds are automatically credited to the customer's deposit account
the following day (``automated credit account''). While the daily
decision to invest funds--and in what amounts--rests with the customer,
the return of the funds the following day to the customer's deposit
account is automated and may be functionally similar or identical to
the return of funds in a sweep account arrangement. In some cases the
deposit account receiving automated credits also will be a sweep base
account accepting funds from a sweep investment vehicle.
Automated credit accounts would have a dual provisional hold
methodology. For the fund balance remaining in the automated credit
account as of the institution's customary close-of-business the
provisional hold methodology would be the same as applied to other
deposit accounts. For the funds residing in the investment vehicle as
of the institution's customary close-of-business, the provisional hold
methodology would have the capability of a separate account balance
threshold and provisional hold percentage.\41\ The account balance
threshold, as well as the provisional hold percentage, may vary for
different types of investment vehicles. These account balance
thresholds and provisional hold percentages could be different from
those applied to: (1) Funds automatically swept into a similar or
identical investment vehicle or (2) funds held in a similar or
identical investment vehicle that does not provide for an automated
crediting of funds.\42\
---------------------------------------------------------------------------
\41\ Some automated credit accounts may also be a base sweep
account. In this case a separate provisional hold methodology must
be developed for each investment vehicle. It is possible, for
example, for a customer to each day provide the institution with
instructions to invest a certain amount of funds in a Cayman Island
branch time account where the funds would be returned to the
customer's demand deposit account the following morning. Further,
the customer may also have provided prearranged instructions to have
excess balances residing in the same deposit account swept to a
Cayman Island branch account where such funds also are returned to
the demand account the following morning. In this case the Covered
Institution must have a provisional hold methodology that: (1)
Treats funds residing in the demand deposit account as of the
institution's end-of-day consistent with other deposit accounts, (2)
treats funds residing in the Cayman Island branch account as a
result of the prearranged sweep consistent with other Cayman Island
sweep investment vehicles and (3) treats funds residing in the
Cayman Island branch account as a result of the daily investment
instructions using a separate account balance threshold and
provisional hold percentage.
\42\ Some investment vehicles are foreign deposits. These funds
would be subject only to the provisional hold methodology for the
automated credit account. Such accounts would be excluded from the
provisional hold methodology designed for non-sweep foreign deposits
held in the same office.
---------------------------------------------------------------------------
Account balance used for provisional hold calculation. The account
balance threshold and provisional hold percentage would be applied
against the ledger balance calculated by the institution as of the end
of the business day, in the event of failure.
Provisional hold duration. Under the proposed rule, the methodology
for implementing a provisional hold process must be designed to hold
funds until removed by the Successor Institution as instructed by the
FDIC. Provisional holds will be removed when the results of the deposit
insurance determination are available, generally anticipated being
several days after failure, depending on the size and complexity of the
failed institution's deposit base.
Provisional hold designation. Provisional holds should be labeled
``FDIC PHold''.
Provisional hold customer disclosure. The FDIC is considering
whether to require the provisional hold, once placed, to be apparent if
the customer views account information on-line or through other means.
Some deposit systems, for example, have the capability to display point
of sale (POS) authorized holds. The FDIC requests comment on the
desirability and cost of such a requirement. If required, how should
such disclosure be structured?
Security level and mechanism for manual removal of provisional
holds. The Covered Institution will create policies, procedures and
systems reasonably capable of preventing the alteration of FDIC
provisional holds or other FDIC hold amounts except under the specific
written direction of the FDIC.
Timeliness of the provisional holds process. The mechanisms put in
place by a Covered Institution must have the capability of placing
provisional holds on the applicable accounts prior to the Successor
Institution opening for business the following day, but in no case
later than 9 a.m. local time the day following the day of the
depository institution failure.
Exception for systems with a small number of accounts. A Covered
Institution may have multiple account systems through which provisional
holds will be placed. Some account systems may service a relatively
small number of accounts making the manual application of provisional
holds feasible. The FDIC is considering whether to allow practices and
procedures whereby provisional holds could be applied manually in
certain cases, if the Covered Institution can demonstrate the holds
could be applied in a timely fashion. If so, the manual application of
provisional holds must be approved by the FDIC in response to a written
request, which would include a justification for the manual process and
its relative effectiveness for posting provisional holds in the event
of failure. The FDIC requests comment on whether such exceptions would
be desirable and, if so, how and in what circumstances they should be
considered.
Institutional contacts. A Covered Institution. would be required to
notify the FDIC of the person(s) responsible for producing the standard
deposit data download and administering provisional holds, both while
this functionality is being constructed and on an on-going basis. The
Covered Institution. would be responsible for ensuring such contact
information is current.
The FDIC requests specific comments on all aspects of these
proposed requirements concerning provisional holds on deposits.
Removal of Provisional Holds
General process. The FDIC will begin forwarding insurance
determination results to the Successor Institution once a substantial
number of the insurance determinations have been made, which should be
within a few days after failure. These results must be incorporated
into the institution's deposit systems as soon as practicable, perhaps
as quickly as the day following the receipt of the standard depositor
and customer data sets. The results would contain instructions for the
removal of provisional holds as well as replacement transactions, which
could include the placement of new holds or account debits and credits.
The processing would work as follows. The FDIC would notify the
Successor Institution that some or all of the deposit insurance
determination results are available. The Successor Institution would
remove the specified provisional holds and then, for uninsured
accounts: (1) The account would be debited for the uninsured amount or
(2) a debit and credit of the account (that is, debit the uninsured
balance and credit an advance dividend). A new hold also may be applied
to certain accounts. Removal of provisional holds and placement of new
FDIC holds, debits and credits must be completed in the same nightly
[[Page 2376]]
processing schedule and the institution would have to be open for
business as usual on the next business day. Since certain accounts
cannot be determined without obtaining additional information from the
depositor, the removal of provisional holds will occur in stages. In
each stage the FDIC will provide the list of accounts against which
provisional holds are to be removed as well as the corresponding hold,
debit or credit transactions.
Removal of provisional holds. The Successor Institution must be
able to remove provisional holds in batch as specified by the FDIC. On
the day(s) provisional holds are to be removed, the FDIC would provide
the Successor Institution with a file listing the accounts subject to
removal of the provisional hold. The file format is shown in Addendum
3. The file would be in a tab- or pipe-delimited format and provided to
the Successor Institution through FDICconnect or Direct Connect,
depending on the size of the file. The file would be encrypted using a
FDIC-supplied algorithm.
Provisional Hold Replacement Transactions
Debiting and crediting accounts after provisional holds are
removed. On the day a provisional hold removal file is provided to the
Successor Institution, the FDIC also would provide a file or set of
files either in ACH format \43\ or in a tab- or pipe-delimited format
listing the accounts subject to debit or credit transactions, which
reflect the results of the insurance determination process.\44\
Addendum 4 provides details on the debit/credit data file structure.
Multiple files may be needed to optimize the number of transactions to
be processed in a single batch. For a large bank there could be
millions of debit and credit transactions which may require multiple
batch files.
---------------------------------------------------------------------------
\43\The FDIC will be establishing ACH transactions, through the
proper ACH definition channels to register the debit and credit
transactions proposed here.
\44\The FDIC is proposing an optional tab- or pipe-delimited
file format to ensure that Covered Institutions can apply debits and
credits to all account types. The FDIC is unsure whether ACH
transactions can be applied to all of the account classes (e.g. CDs
and IRAs) maintained by the all Covered Institutions; therefore,
this format has been included as an alternative means to process
debt and credit transactions.
---------------------------------------------------------------------------
The debit and credit transaction file would be transmitted to the
Successor Institution through FDICconnect or Direct Connect, depending
on the size of the file. The file would be encrypted using a FDIC-
supplied algorithm to secure data during the transport process. The
FDIC would provide the Successor Institution with the necessary
software algorithms needed to decrypt the data files.
Posting of additional FDIC holds. On the day provisional holds are
to be removed, the FDIC also would provide the Successor Institution
with a file listing the accounts subject to a new hold to be placed
after the removal of the provisional hold. The FDIC is considering
whether to require a persistent or memo-type hold, the transfer of
funds to a WIP account, or allow various alternatives depending on the
circumstances of the Covered Institution. (As noted, we also are
interested in comments on other alternatives.) The file format is shown
in Appendix 3. The file would be in a tab- or pipe-delimited format and
provided to the Successor Institution through FDICconnect or Direct
Connect, depending on the size of the file. The file would be encrypted
using a FDIC-supplied algorithm.
Removal of Additional FDIC Holds
In some cases provisional holds would be replaced by a second FDIC
hold. These holds would be removed over time as further information is
gathered from depositors needed to complete the insurance
determination. These additional FDIC holds would be removed using the
same file format described in Appendix 3.
The Generation of Deposit Account and Customer Data in a Standard
Structure
A Covered Institution would be required to have in place practices
and procedures to provide the FDIC with required depositor and customer
data in a standard format following the close of any day's business.
Covered Institutions would not be required to collect or generate new
depositor or customer information. The standard data files are created
through a mapping of pre-existing data elements and internal
institution codes into standard data formats. Data will be provided on
all non-closed deposit or foreign deposit accounts as well as Class B
and automated credit accounts.
Files. The FDIC would require these data to be provided in the
following five separate files:
1. Deposit file. Data fields for each non-closed deposit or foreign
deposit account, except those deposit or foreign deposit accounts
serving as an investment vehicle reported in the Class B Sweep/
Automated Credit file. See Appendix A for more detail.
2. Class B Sweep/Automated Credit file. Data fields capturing
information on funds residing in investment vehicles linked to each
non-closed deposit account: (1) Involved in Class B sweep activity or
(2) which accept automated credits. See Appendix B for more detail.
3. Hold file.\45\ Deposit hold data fields for each non-closed
deposit account. See Appendix C for more detail.
---------------------------------------------------------------------------
\45\The Hold file contains information on holds against each
deposit account, including FDIC provisional holds. Since provisional
holds may be generated after the completion of an institution's
nightly deposit processing cycle, they may not be reflected fully in
the Hold file generated as of the day of closing. The FDIC may
require a second Hold file to be generated the day following closing
to fully capture provisional holds that may not have been posted
until the next deposit processing cycle.
---------------------------------------------------------------------------
4. Customer file. Data fields for each customer. See Appendix D for
more detail.
5. Deposit-customer join file. Data necessary to link each deposit
and foreign deposit with the customers who have an interest in the
account. See Appendix E for more detail.
Possible file combinations. Data could be submitted using one of
each deposit, Class B sweep/automated credit, hold, customer, customer
address and deposit-customer join files. Alternatively, data could be
supplied using multiple files for each type. The number of files could
correspond to the number of institutional systems of record, for
example. When deposit accounts are maintained in multiple deposit
applications (e.g., Business, IRA or Trust), then multiple data files
adhering to the required data structure are acceptable to the FDIC.
When an institution provides multiple data files for a single deposit
application, all of the files must sum to the institution's subsidiary
system control totals. In addition, either a set of customer files or a
single customer file must accompany the deposit file(s). See Appendix F
for rules governing the possible file combinations for depositor and
customer data.
File format. Depositor and customer data files would be provided in
tab- or pipe-delimited format. Each file name would contain the
institution's FDIC Certificate Number, the file type (deposit, sweep
hold, customer, customer address, join or other) and the date of the
extract. Additional data could be provided, not required by the
regulation, that may be helpful to the FDIC's deposit insurance
determination process. For these additional files, the names should
describe the file content such as ``lookup table'' or ``product
codes''. All files would be encrypted using a FDIC-supplied algorithm.
The FDIC would transmit the encryption algorithm over FDICconnect. The
FDIC will support both ASCII and EBCDIC delimited files. All EBCDIC
fields must
[[Page 2377]]
be provided in Pic(X) format. Binary, packed or signed numeric formats
will not be allowed.
File transmission mechanism. The FDIC would require that the data
files be provided to the FDIC in the most expeditious manner. Data
which can be compressed and encrypted could be transmitted to FDIC
using existing telecommunication services. Should the volume be too
great to transmit in the most expeditious manner then a portable hard
drive should be used and physically transported by FDIC personnel to
the FDIC's data processing facilities. The FDIC requests comment on
various transmission/transport mechanisms.
Reporting Requirements
The criteria defining a Covered Institution include the number of
its deposit accounts, total domestic deposits and total assets. Total
domestic deposits and total assets are reported quarterly on the
Consolidated Reports of Condition and Income (insured bank) and the
Thrift Financial Report (insured savings association). Savings
associations report the number of deposit accounts quarterly, but banks
report on the total number of deposit accounts only annually, as part
of the June reporting cycle. The FDIC would recommend quarterly
reporting of the number of deposit accounts for all insured
institutions with total assets over $1 billion.
Testing Requirements
The FDIC will conduct an initial test at each Covered Institution
sometime after the initial implementation period ends.\46\ All testing
would be coordinated with the financial institution and conducted at
the site of their choosing if multiple sites are available. Once the
initial test is completed successfully, the FDIC anticipates that it
would conduct additional tests infrequently at institutions that do not
make major changes to their deposit systems \47\--perhaps only once
every three-to-five years. More frequent testing may be necessary for
institutions that make major acquisitions, experience financial
distress (even if the distress is unlikely to result in failure) or
undertake major system conversions.
---------------------------------------------------------------------------
\46\ In addition to testing, the FDIC expects to require that
information contact points be validated (and updated as needed)
every three-to-six months.
\47\ A major change to a deposit system means a change made to a
Covered Institution's data environment affecting one or more of the
data elements described in attached Appendices. Changes could be the
result of a merger or the streamlining of a financial institution's
systems of record.
---------------------------------------------------------------------------
Covered Institutions would be responsible for establishing a series
of test accounts on their deposit account systems that could be used
for verification purposes. These accounts would be used to verify the
processing of holds, debits and credits. During the institution
verification process the FDIC would expect to send transactions to the
Covered Institution using FDICconnect or otherwise to verify that each
institution could properly process these transactions.
The FDIC is contemplating development of a XML validation service
which would be provided to each Covered Institution for the purpose of
establishing compliance with the NPR standard data requirements for
depositor and customer records. The XML schema would read a file (which
has been created in the NPR standard format), validate the accuracy and
integrity of the file content and provide a report that establishes the
institution's compliance with the NPR criteria. In addition to the XML
service, the FDIC also would provide a more readable description of the
validation process to help facilitate institutional testing. The report
generated from the XML validation would not contain any bank specific
account information and the files would be encrypted prior to
transmission to the FDIC. The results of the XML validation process
would be reviewed by the institution to ensure that it does not contain
any personally identifiable account information prior to being
transmitted to the FDIC.
A Covered Institution would be responsible for ensuring that a
representative sample of data has been passed through the XML
validation service. At a minimum the sampling strategy should cover a
cross-section of: (1) The geographies for the institution; (2)
insurance categories found in Addendum 1; (3) the age of accounts: and
(4) a cross section of account ledger balances maintained by the
institution. The Covered Institution would be required to provide the
FDIC its sampling strategy along with the validation results as a part
of the periodic verification process. The FDIC is anticipating making
available this XML validation service in the third quarter of 2008.
To reduce the frequency of FDIC testing and ensure ongoing
compliance, the FDIC expects to require Covered Institutions to 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.
In addition, the FDIC would have to test certain other requirements
inside the institution, including but not limited to the ability to
place and remove provisional holds, place new holds and implement
debits and credits using a data set that meets the FDIC standards.
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
any 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.
Implementation Requirements
Institutions meeting the criteria of a Covered Institution upon the
effective date of the regulation. A Covered Institution would have 18
months from the regulation's effective date to fully implement the
respective requirements.
Institutions meeting the criteria of a Covered Institution after
the effective date of the regulation. Any insured institution meeting
the criteria of a Covered Institution for at least two consecutive
quarters would have 18 months following the end of the two consecutive
quarters in which to fully implement the respective requirements.
Merger involving two Covered Institutions. Under the proposed rule,
the requirements must be fully implemented within 18 months following
the completion of the acquisition, although the acquisition does not
delay any implementation requirements which may already have been in
place for the individual institutions involved in the merger.
Merger involving a Covered and Non-Covered Institution. Under the
proposed rule, the requirements must be fully implemented within 18
months following the completion of the acquisition, although the merger
does not delay any implementation requirements which may already have
been in place for the individual institutions involved in the merger.
Exception for troubled institutions. Under the proposed rule, on a
case-by-case basis, the FDIC could accelerate the implementation
timeframe of all or part of the proposed rule for a Covered Institution
that either: (1) Has a composite rating of 3, 4 or 5 under the Uniform
Financial Institutions Rating System (commonly referred to as
[[Page 2378]]
CAMELS) \48\ or (2) is undercapitalized as defined for purposes of the
prompt corrective action (``PCA'') rules.\49\ In determining the
accelerated implementation timeframe for such institutions, the FDIC
would be required to consider such factors as the: (1) Complexity of
the institution's deposit systems and operations; (2) extent of asset
quality difficulties; (3) volatility of funding sources; (4) expected
near-term changes in capital levels; and (5) other relevant factors
appropriate for the FDIC to consider in its roles as insurer and
possible receiver of the institution. The proposed rule would require
the FDIC to consult with the Covered Institution's primary federal
regulator in determining whether to implement this provision of the
proposed rule.
---------------------------------------------------------------------------
\48\ CAMELS is an acronym drawn from the first letters of the
individual components of the rating system: Capital adequacy, Asset
quality, Management, Earnings, Liquidity, and Sensitivity to market
risk.
\49\ 12 CFR Part 325.
---------------------------------------------------------------------------
Applications for extension of implementation requirements. A
Covered Institution could request an extension of the 18-month deadline
for implementing the requirements of the proposed rule. An application
for such an extension would be subject to the FDIC's rules of general
applicability, 12 CFR 303.251. For good cause shown, the FDIC could
grant the application for an extension.
New Deposit Accounts
Knowing the identity of each depositor is an important aspect of a
deposit insurance determination. The previous ANPRs contemplated
requiring a unique ID for each depositor under certain options. This
proposed rule does not require a unique depositor ID, rather the FDIC
would rely upon customer information already maintained by the Covered
Institution to link commonly owned accounts. Nevertheless, a unique
depositor ID could prove helpful and speed the insurance determination
process, especially for Covered Institutions with a large number of
deposit accounts. Should the FDIC require a unique depositor ID to be
assigned by Covered Institutions when a new account is opened? What
would be the relative costs of such a requirement?
III. Request for Comments
The FDIC realizes that the proposed requirements for Covered
Institutions could not be implemented without some regulatory and
financial burden on the industry. The FDIC is seeking to minimize the
burden 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
seeks comment on the potential industry costs and feasibility of
implementing the requirements of the proposed rule. 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 both parts of the
proposed rule. In particular, the FDIC seeks comments on these specific
issues:
1. The definition of a Covered Institution.
2. The desirability and structure of requiring the provisional
hold, once placed, to be apparent if the customer views account
information on-line or through other means.
3. The cost and effectiveness of the proposed provisional holds
requirements.
4. The various mechanisms for transmitting data to the FDIC.
5. The cost and effectiveness of the proposed testing process.
6. The desirability of a unique depositor ID requirement for new
deposit accounts.
Solicitation of Comments on Use of Plain Language
Also, section 722 of the Gramm-Leach-Bliley Act, Public 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?
Discussion Meetings
Between 2004 and 2007, 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 to its understanding of industry systems, practices and cost
issues, and is requesting additional meetings with interested parties.
FDIC staff is willing to travel to facilitate a 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 proposed
rule 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.
Any institution or organization wishing to discuss this proposal in
more detail should contact James Marino, Project Manager, Division of
Resolutions and Receiverships, (202) 898-7151 or jmarino@fdic.gov.
IV. Paperwork Reduction Act
OMB Number: New Collection.
Frequency of Response: On occasion.
Affected Public: Insured depository institutions having at least $2
billion in domestic deposits and either at least: (i) 250,000 deposit
accounts; or (ii) $20 million in total assets.
Estimated Number of Respondents: 159.
Estimated time per response: 80-75,000 hours per respondent.
Estimated Total Annual burden: 312,500-625,000 hours.
Background/General Description of Collection: Section 360.9
contains collections of information pursuant to the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.) (``PRA''). In particular, the following
requirements of this proposed rule constitute collections of
information as defined by the PRA: all notices that Covered
Institutions must provide the FDIC of persons responsible for producing
the standard data download and administering provisional holds, both
while the functionality is being constructed and on an on-going basis
(360.9(c)(3)); written practices and procedures for providing the FDIC
with required deposit account and customer data, as to all accounts
held in domestic and foreign offices, in a standard format upon the
close of any day's business, to be created through a mapping of pre-
existing data elements into standard data formats in six separate
files, as indicated in the appendices to this Part 360 (360.9(d)(1) and
(2)); all data provided to the FDIC pursuant to 360.9(d)(3); and the
dollar costs and
[[Page 2379]]
time burdens associated with information systems acquisition,
modification and maintenance that respondents will need in order to
respond to the information requirements. The collections of information
contained in this proposed rule have been submitted to OMB for review.
Estimated costs: Compliance with these requirements will require
Covered Institutions to implement functionality to post provisional
holds, remove provisional holds, post debit and credit transactions,
post additional holds and provide customer data in a standard format
reconciled to supporting subsidiary systems. These requirements also
must be supported by policies and procedures and well as notification
of individuals responsible for the systems. Further, the requirements
will involve on-going costs for testing and general maintenance and
upkeep of the functionality. Estimates of both initial implementation
and on-going costs are provided.
Implementation costs will vary widely among the Covered
Institutions. There are considerable differences in the complexity and
scope of the deposit operations across Covered Institutions. Some
Covered Institutions only slightly exceed the 250,000 deposit account
threshold while several institutions have over 20 million deposit
accounts. In addition, some Covered Institutions--most notably the
largest--have proprietary deposits systems likely requiring an in-
house, custom solution for the proposed requirements while most--
generally the small-to-mid-sized ones--purchase deposit software from a
vendor or use a servicer for deposit processing. Deposit software
vendors and servicers are expected to incorporate the proposed
requirements into their products or services to be available for their
clients. In these cases implementation costs will be greatly reduced.
This analysis assumes 100 of the 159 Covered Institutions, or 63
percent, would have reduced implementation costs due to the use of
software or services from a vendor.
Comments from the 2005 and 2006 ANPRs provided some indication of
implementation and on-going costs. Further, during November 2007 the
FDIC had conversations with several Covered Institutions and deposit
software vendors, which assisted in formulating these cost estimates.
For Covered Institutions with proprietary deposit systems
implementation costs will vary considerably. The costs for the least
complex of these institutions are estimated to range between $250,000
and $350,000.\50\ For super-regional organizations implementation costs
are estimated to be between $2 million and $4 million.\51\ The costs
for the largest, most complex Covered Institutions are estimated to be
several times that of the super-regional organizations. For Covered
Institutions using software or servicing provided by a vendor
implementation costs were estimated to be $13,000 to $20,000 per
institution. These costs primarily are due to installation of software
received from the vendor.
---------------------------------------------------------------------------
\50\ Compliance with the proposed requirements will require
staff time. This analysis assumes an hourly cost of $160 for Covered
Institutions.
\51\ The comment letter provided by the American Bankers
Association dated March 13, 2007 in response to the 2006 ANPR
indicated cost estimates provided by members ranged from $2 million
to $6 million per institution for implementation (page 3).
---------------------------------------------------------------------------
Using this methodology overall industry implementation costs are
estimated to range between $50 million and $100 million. The best
estimate of implementation costs is the mid-point of this range, or $75
million. In reviewing implementation costs as part of the comments
received from previous ANPRs the FDIC viewed them relative to a one
basis point assessment against deposits. In this context the estimated
implementation costs range between 11 and 21 percent of a one basis
point assessment against deposits of Covered Institutions. The mid-
point cost estimate would be 16 percent.
On-going costs for testing, maintenance and other periodic items is
estimated to range between $6,000 and $13,000 for those Covered
Institutions using software or servicing provided by a vendor. For
super-regional organizations on-going costs are estimated to be between
$150,000 and $250,000. The largest, most complex Covered Institution
was estimated to have on-going costs as high as $500,000 per year.
Overall, on-going industry cost estimates ranged from $4 million to
$6.5 million, or 0.8 to 1.4 percent of a one basis point assessment
against the deposits of Covered Institutions.
Comments: In addition to the questions raised elsewhere in this
Preamble, 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.
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 ``Large
Bank Deposit Insurance Determination, 3064-xxxx.'' Comments may be
submitted by any of the following methods:
Agency Web Site: http://www.FDIC.gov/regulations/laws/federal.
Follow instructions for submitting comments on the Agency Web
Site.
E-mail: comments@FDIC.gov. Include ``Large Bank Deposit
Insurance Determination, 3064-xxxx'' in the subject line of the
message.
Mail: Executive Secretary, Attention: Comments, FDIC, 550
17th St., NW., Room F-1066, Washington, DC 20429.
Hand Delivery/Courier: Comments may be hand-delivered to
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. (EST).
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, Room 3208, Washington, DC 20503.
Public Inspection: All comments received will be posted without
change to http://www.fdic.gov/regulations/laws/federal including any
personal information provided. 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.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') requires an agency
publishing a notice of proposed rulemaking to prepare and make
available for public comment an initial regulatory flexibility analysis
that describes the impact of the final rule on small entities. 5 U.S.C.
603(a). Pursuant to regulations issued by the Small Business
Administration (13 CFR 121.201), a ``small entity'' includes
[[Page 2380]]
a bank holding company, commercial bank, or savings association with
assets of $165 million or less (collectively, small banking
organizations). The RFA provides that an agency is not required to
prepare and publish a regulatory flexibility analysis if the agency
certifies that the proposed rule would not have a significant economic
impact on a substantial number of small entities. 5 U.S.C. 605(b).
Pursuant to section 605(b) of the RFA (5 U.S.C. 605(b)), the FDIC
certifies that this proposed rule would not have a significant economic
impact on a substantial number of small entities. The proposed rule
consists of two parts. The first part would establish the FDIC's
practice for determining deposit account balances at a failed insured
depository institution. It would impose no requirements on insured
depository institutions. The second part of the proposed would require
the largest insured depository institutions to adopt systems that
would, in the event of the institution's failure: (1) Provide the FDIC
with standard deposit account and customer information; and (2) allow
the FDIC to place and release holds on liability accounts, including
deposits. This part of the proposed rule would apply only to Covered
Institutions--defined in the proposed rule as insured depository
institutions having at least $2 billion in domestic deposits and
either: (1) More than 250,000 deposit accounts; or (2) total assets
over $20 billion, regardless of the number of deposit accounts. There
are no small banking organizations that would come within the
definition of Covered Institutions.
VI. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the proposed rule would 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
(Pub. L. 105-277, 112 Stat. 2681).
Addendum 1--Overview of 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.''
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.''
------------------------------------------------------------------------
[[Page 2381]]
Addendum 2--Summary of 2005 and 2006 ANPR Comments
The FDIC received 28 comment letters in response to the 2005 ANPR
and 13 from the 2006 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. In response to the
2005 ANPR 64 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, compared to 62 percent of the 2006 ANPR
comments. In other words, these commenters expressed the general belief
during both years that the FDIC failed to make a compelling case in
favor of any of the options in light of their perceptions of the costs.
Table 3.--Summary of 2005 and 2006 ANPR Comments
----------------------------------------------------------------------------------------------------------------
2005 ANPR 2006 ANPR
General comment ---------------------------------------------------------------
Number Percentage Number Percentage
----------------------------------------------------------------------------------------------------------------
Costs Outweigh Benefits or Opposed Due to Costs/ 15 53.6 6 46.2
Burdens........................................
Options Are Not Needed.......................... 3 10.7 2 15.8
Do Not Include Our Institution As Covered....... 2 7.1 1 7.7
Supportive, But In Some Cases Expressed Concern 5 17.9 1 7.7
Over Costs.....................................
Supportive Because Of Too-Big-To-Fail and/or 2 7.1 2 15.8
Market Discipline..............................
Options Raise Significant Privacy Issues........ 1 3.6 1 7.7
---------------------------------------------------------------
Total....................................... 28 100.0 13 100.0
----------------------------------------------------------------------------------------------------------------
The 2005 ANPR noted that the FDIC was considering expanding the
definition of a 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. The 2006 ANPR more explicitly included
the expanded definition of Covered Institutions. One respondent falling
within this expanded definition noted they should not be defined as a
Covered Institution.
During both comment periods, 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.'' \52\
---------------------------------------------------------------------------
\52\ Comment letter provided by Dollar Bank dated March 13, 2006
in response to the 2005 ANPR, page 1.
---------------------------------------------------------------------------
In response to the 2006 ANPR the Board of Governors of the Federal
Reserve indicated it ``strongly supports the goal of the 2006 ANPR,
which is to ensure that the largest and most complex insured
depositories and the FDIC have in place data and other management
systems that would enable the FDIC to promptly identify insured
deposits and resolve the institution in an orderly manner that is least
costly to the FDIC and to taxpayers. Moreover, the Board fully agrees
that it is important for these systems to be in place and operationally
tested before a large or complex institution becomes troubled.'' \53\
---------------------------------------------------------------------------
\53\ Comment letter provided by the Board of Governors of the
Federal Reserve System dated February 27, 2007 in response to the
2006 ANPR, page 1.
---------------------------------------------------------------------------
The FDIC received comment letters from the Federal Reserve Bank of
Minneapolis in response to both ANPRs. Its letter regarding the 2006
ANPR provided three recommendations to the FDIC.\54\
---------------------------------------------------------------------------
\54\ Comment letter provided by the Federal Reserve Bank of
Minneapolis dated January 17, 2007 in response to the 2006 ANPR,
page 1.
---------------------------------------------------------------------------
``Given the net benefits of its suggested reforms, the
FDIC must revamp the current insurance determination procedures; the
question, therefore, is ``how'' not ``if.''
The FDIC should reject, as time-inconsistent, proposals to
address flaws in the status quo only when banks become riskier.
The FDIC should adjust its proposals, based on industry
input, to minimize costs while ensuring that the recommended approach
remains credible and covers institutions for which the current system
would not facilitate least-cost resolution.''
The 2005 and 2006 ANPRs solicited comment on alternative means of
meeting the objective of conducting a timely insurance determination on
Covered insured institutions.'' No alternative suggestions were
received.
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 options presented in either
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.
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.
[[Page 2382]]
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.'' \55\
---------------------------------------------------------------------------
\55\ 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.\56\ 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.
---------------------------------------------------------------------------
\56\ 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.
---------------------------------------------------------------------------
Additional research recommended. In both ANPRs the trade
organizations stressed that the costs of the FDIC's proposed approaches
far exceeded any quantifiable benefits. This theme was present in the
comments to the 2005 ANPR, and continued--in some cases more
vigorously--in the 2006 ANPR comments. In addition, in the 2006 ANPR
comments the trade organizations placed greater emphasis on the FDIC's
need to gather more information on costs and benefits to make an
informed decision.
With regard to potential benefits, The Financial Services
Roundtable ``recommends that the FDIC publish for public comment the
stages that a large bank and its supervisor would go through before the
bank reached the point where it would be deemed to be a `failed'
institution. This analysis is needed so that the probability of a large
institution becoming a failure can be assessed. These stages, which
almost certainly would be spread over several years, include
recapitalizations, downsizing, management changes, strategic
redirections, acquisition by a healthy bank, supervisory interventions,
and other actions which would steer the institution away from failure
long before it became a failed institution. As a point of fact, there
have been instances when this has occurred among larger banks--most
recently when Riggs Bank was acquired by PNC. It may be that, given
these stages, the probability of a large bank failing at a cost to the
FDIC is so low and the cost upon failure being so low, that the
additional benefit provided by the proposed rule, relative to the
FDIC's present procedures, is essentially zero.'' \57\
---------------------------------------------------------------------------
\57\ Comment letter from The Financial Services Roundtable dated
March 7, 2007 in response to the 2006 ANPR, page 3.
---------------------------------------------------------------------------
Also, with regard to potential costs, The Financial Services
Roundtable ``is concerned that the FDIC has not properly estimated the
cost of implementing the proposed rule and maintaining the related
information systems. In particular, the Roundtable is concerned that
the FDIC has not gathered any cost information in a systematic manner
as to what it would cost Covered Institutions to not only implement the
proposed rule, but also to maintain deposit data in a manner that
complies with the proposed rule. The implementation cost data provided
in Table 4 of the [2005] ANPR does not constitute a rigorous cost
estimate gathered from a representative sample of Covered Institutions
which could then be extrapolated to a realistic cost estimate for all
Covered Institutions. Instead, these cost estimates are fairly ad-hoc
and not prepared in accordance with a predetermined cost-survey
methodology. The FDIC should conduct a systematic study of the cost of
implementing the proposed rule, including its own costs in ensuring
compliance with the proposed rule.'' \58\
---------------------------------------------------------------------------
\58\ Ibid.
---------------------------------------------------------------------------
Estimated costs--the 2005 ANPR. 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,'' \59\ 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.
---------------------------------------------------------------------------
\59\ Wachovia Corporation, page 3.
[[Page 2383]]
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.
Both ANPRs noted that many Covered Institutions use deposit
software supplied by a common vendor or have their deposits serviced by
a common servicer. The ANPRs suggested this structure may help mitigate
the implementation costs of the options. No deposit software vendor or
servicer responded to either ANPR. In commenting on the 2006 ANPR, The
Financial Services Roundtable indicated ``there is very little
commonality across the deposit-accounting systems of Covered
Institutions because each institution, over the years, has customized
its systems to meet its own needs and to integrate the acquisition of
other banks. This absence of systems commonality will greatly increase
the cost of implementing the proposed rule.'' \60\ The FDIC believes
this common usage would mitigate implementation costs.
---------------------------------------------------------------------------
\60\ Comment letter provided by The Financial Services
Roundtable dated March 7, 2007 provided in response to the 2006
ANPR, page 4.
---------------------------------------------------------------------------
Estimated costs--the 2006 ANPR. The 2006 ANPR comments provided
additional cost information. The American Bankers Association noted
that ``[c]ost estimates provided by our members ranged from $2 million
to $6 million per institution for initial compliance, testing, and
training, plus additional testing and validation costs of approximately
$500,000 per year. These are rough estimates, of course, given that the
ANPR, by design, did not provide enough specifications for a bank to
know precisely what it would spend.'' \61\
---------------------------------------------------------------------------
\61\ Comment letter provided by the American Bankers Association
dated March 13, 2007 in response to the 2006 ANPR, page 3.
---------------------------------------------------------------------------
Two commercial banks also provided cost information for the 2006
ANPR requirements. Union Bank of California indicated ``the proposed
functionality by all banks system-wide could be in the billions of
dollars,'' although no documentation was provided in support of this
estimate.\62\ Zions Bancorporation indicated ``it would cost our
institution millions of dollars to implement.'' \63\
---------------------------------------------------------------------------
\62\ Comment letter provided by Union Bank of California dated
March 13, 2007 in response to the 2006 ANPR, page 1.
\63\ Comment letter provided by Zions Bancorporation dated March
5, 2007 in response to the 2006 ANPR, page 1.
---------------------------------------------------------------------------
Too big to fail and market discipline. During both comment periods
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. The Federal Reserve Bank of Minneapolis letter in
response to the 2005 ANPR 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.'' \64\ The letter
noted that these costs are difficult to quantify, although they could
be substantial.
---------------------------------------------------------------------------
\64\ 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. Both ANPRs
specifically requested comment on the costs of implementing the various
options. The limited data summarized above suggests fairly modest
implementation costs for an Option 2 approach and, for some
institutions, Option 1 as well, as defined in the 2005 ANPR. These
options are similar to the options presented in the 2006 ANPR. The
consensus of comments was that 2005 ANPR Option 3 would be extremely
expensive.
Many responders to both ANPRs noted the low likelihood of a
Covered-Institution 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 failure 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
[[Page 2384]]
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
requirements being proposed.
Providing liquidity to depositors. The provisional hold
functionality proposed in both ANPRs create a mechanism for the FDIC to
provide customer access to their deposit accounts immediately after
failure, albeit with some FDIC provisional hold for large accounts. The
ability to continue uninterrupted the deposit operations of a Covered
Institution in the event of failure has significant benefits for
depositors as well as the preservation of the institution's franchise
value.
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 and 2006
ANPRs, 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, one of the largest failures 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.
Implementation of Options Upon Reaching Problem Status
In response to both ANPRs several commenters suggested delaying the
implementation of any options until a Covered Institution reaches
``problem bank status.'' \65\ For supervisory purposes problem bank
status refers to any insured depository institution with a composite
CAMELS rating of ``4'' or ``5''.
---------------------------------------------------------------------------
\65\ See, for example, the American Bankers Association,
America's Community Bankers and The Financial Services Roundtable
letter in response to the 2005 ANPR, 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.'' \66\
Additional time would be needed for the FDIC to test the system
changes.
---------------------------------------------------------------------------
\66\ 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.
New Deposit Accounts
The 2006 ANPR solicited 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. The American Bankers Association noted that the
``training and compliance costs associated with any modifications to
banks'' account opening procedures would be enormous. Perhaps of
greater significance, any modification has the potential to affect
customer relations negatively. This is especially so if the account
opening process is lengthened and the customer, after hearing a
discussion about insurance status, is left with the impression that the
bank at which he or she has just entrusted his or her money is a
candidate for failure. It is not in anyone's best interest to require
regulatory disclosures that in their language could have the effect of
undermining confidence in the banking system.'' \67\
---------------------------------------------------------------------------
\67\ Comment letter provided by the American Bankers Association
dated March 13, 2007 in response to the 2006 ANPR, page 7.
---------------------------------------------------------------------------
Addendum 3--Non-Monetary Transaction File Structure
This is the structure of the data file the FDIC will provide to
remove or add a FDIC hold for an individual account or sub-account. The
file will be in a tab-or pipe-delimited format and provided through
FDICconnect or Direct Connect. The file will be encrypted using a FDIC-
supplied algorithm.
[[Page 2385]]
----------------------------------------------------------------------------------------------------------------
Field name Field description Comments Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account. This field than one physical
may be the Account data element. If
Number.. multiple fields are
required to
identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
2. DP--Acct--Identifier-2......... Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account..
3. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account..
4. DP--Acct--Identifier-4......... Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account..
5. DP --Acct--Identifier-5........ Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account..
6. DP--Sub--Acct--Identifier...... Sub-Account The Sub-Account Character (25).
Identifier. Identifier may
If available, the sub- identify separate
account identifier deposits tied to
for the account.. this account where
there are different
processing
parameters such as
interest rates or
maturity dates, but
all owners are the
same.
7. PH--Hold--Action............... Hold Action.......... .................... Character (1).
The requested hold
action to be taken
for this account or
sub-account.
Possible values are:.
R =
Remove.
A = Add..
8. PH--Hold--Amt.................. Hold Amount.......... .................... Decimal (14,2).
Dollar amount of the
FDIC hold to be
removed or added..
9. PD--Hold--Desc................. Hold Description..... .................... Character (225).
FDIC hold to be
removed or added..
----------------------------------------------------------------------------------------------------------------
Addendum 4--Debit/Credit File Structure
This is the structure of the data file the FDIC will provide to
apply debits and credits to an individual account or sub-account after
the removal of FDIC holds. The file will be in a tab-or pipe-delimited
format and provided through FDICconnect or Direct Connect. The file
will be encrypted using a FDIC-supplied algorithm. The FDIC also is
considering using ACH transactions to apply monetary transactions to
accounts being held by the FDIC. Further analysis is required to
determine how non-monetary and monetary transactions can be
synchronized while ensuring that account funds are properly maintained
in order for FDIC transactions to be applied.
----------------------------------------------------------------------------------------------------------------
Field name Field description Comments Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account. This field than one physical
may the Account data element. If
Number.. multiple fields are
required to
identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
2. DP --Acct--Identifier-2........ Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account..
3. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account..
4. DP --Acct--Identifier-4........ Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account..
5. DP --Acct--Identifier-5........ Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account..
[[Page 2386]]
6. DP --Sub-- Acct-- Identifier... Sub-Account The Sub-Account Character (25).
Identifier. Identifier may
If available, the sub- identify separate
account identifier deposits tied to
for the account.. this account where
there are different
processing
parameters such as
interest rates or
maturity dates, but
all owners are the
same.
7. DC --Debit--Amt................ Debit Amount......... .................... Decimal (14,2).
Dollar amount of the
debit to be applied
to the account or
sub-account..
8. DC--Credit--Amt................ Credit Amount........ .................... Decimal (14,2).
Dollar amount of the
credit to be applied
to the account or
sub-account..
9. DC-- Transaction-- Desc........ Debit/Credit .................... Character (225).
Description.
FDIC message
associated with the
debit or credit
transaction..
----------------------------------------------------------------------------------------------------------------
List of Subjects in 12 CFR Part 360
Banks, banking, savings associations.
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation proposes to amend part 360 of title 12 of
the Code of Federal Regulations as follows:
PART 360--RESOLUTION AND RECEIVERSHIP RULES
1. The authority citation for part 360 continues to read as
follows:
Authority: 12 U.S.C. 1821(d)(1), 1821(d)(10)(c), 1821(d)(11),
1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h),
Pub. L 101-73, 103 Stat. 357.
2. Add new Sec. Sec. 360.8 and 360.9 to read as follows:
Sec. 360.8. Method for determining deposit account balances at a
failed insured depository institution.
(a) Purpose. The purpose of this section is to describe the process
the FDIC will use to determine deposit account balances for insurance
coverage and receivership purposes at a failed insured depository
institution.
(b) Definitions--(1) The FDIC cutoff point means the point in time
established by the FDIC after it has been appointed receiver of a
failed insured depository institution and takes control of the failed
institution.
(2) The Applicable cutoff time for a specific type of deposit
account transaction means the earlier of either the failed
institution's normal cutoff time for that specific type of transaction
or the FDIC cutoff point. In a depository institution failure where
deposit operations are not transferred to a successor institution, the
Applicable cutoff time for a particular type of deposit account
transaction is the FDIC cutoff point.
(3) Close-of-business deposit account balance means the closing
ledger balance of a deposit account on the day of failure of an insured
depository institution determined by using the applicable cutoff time.
This balance may be adjusted to reflect steps taken by the receiver to
ensure that funds are not received by or removed from the institution
after the FDIC cutoff point.
(c) Determining closing day balances. (1) In determining deposit
account balances for insurance coverage and receivership purposes at a
failed insured depository institution, the FDIC will use close-of-
business deposit account balances as may be adjusted for funds that are
received by or removed from the institution after the FDIC cutoff
point.
(2) A check posted to the close-of-business deposit account balance
but not collected by the depository institution will be included as
part of the balance, subject to the correction of errors and omissions
and adjustments for uncollectible items that the FDIC may make in its
role as receiver of the failed depository institution.
(3) For deposit insurance and receivership purposes in connection
with the failure of an insured depository institution, a depositor's
rights will be determined as of the point the close-of-business deposit
account balance is calculated, irrespective of the continuation of the
institution's computer and other systems after this point. These rights
may be adjusted as necessary to account for funds that are received by
or removed from the institution after the FDIC cutoff point.
Sec. 360.9. Large-bank deposit insurance determination modernization.
(a) Purpose and scope. This section is intended to allow the
deposit and other operations of a large insured depository institution
(defined as a ``Covered Institution'') to continue functioning on the
day following failure. It also is intended to permit the FDIC to
fulfill its legal mandates regarding the resolution of failed insured
institutions to provide liquidity to depositors promptly, enhance
market discipline, ensure equitable treatment of depositors at
different institutions and reduce the FDIC's costs by preserving the
franchise value of a failed institution.
(b) Definitions--(1) A covered institution means an insured
depository institution which, based on items as defined in Reports of
Income and Condition or Thrift Financial Reports filed with the
applicable federal regulator, has at least $2 billion in domestic
deposits and at least either:
(i) 250,000 deposit accounts; or
(ii) $20 billion in total assets, regardless of the number of
deposit accounts.
(2) Domestic deposits, number of deposit accounts and total assets
are as defined in the instructions for the filing of Reports of Income
and Condition and Thrift Financial Reports, as applicable to the
insured depository institution for determining whether it qualifies as
a Covered Institution. A foreign deposit means an uninsured deposit
liability maintained in a foreign branch of an insured depository
institution. An international banking facility deposit is as defined by
the Board of Governors of the Federal Reserve System in Regulation D
(12 CFR 204.8(a)(2)). A demand deposit account, NOW account, money
market deposit account, savings deposit account and time deposit
account are as defined in the instructions for the filing of Reports of
Income and Condition and Thrift Financial Reports.
(3) Sweep account arrangements consist of a deposit account linked
to an interest-bearing investment vehicle whereby funds are swept to
and from the deposit account according to prearranged rules, usually on
a daily basis. Class A sweep account
[[Page 2387]]
arrangements are those where: The interest-bearing investment vehicle
is another domestic deposit account in an office of the Covered
Institution; or for the purposes of the movement of funds to the
interest-bearing investment vehicle, funds are wired from the insured
depository institution to a separate legal entity other than the
Covered Institution. Class B sweep account arrangements are all other
sweep account arrangements.
(4) Automated credit account arrangements consist of a deposit
account into which funds are automatically credited from an interest-
bearing investment vehicle where the funds in the interest-bearing
investment vehicle were not invested by prearranged rules.
(5) Non-covered institution means an insured depository institution
that does not meet the definition of a covered institution.
(6) Provisional hold means an effective restriction on access to
some or all of a deposit or other liability account after the failure
of an insured depository institution.
(c) Posting and removing provisional holds. (1) A covered
institution shall have in place an automated process for implementing a
provisional hold on domestic deposit accounts, foreign deposit accounts
and Class B sweep and automated credit account arrangements immediately
following the determination of the close-of-business deposit account
balances, as prescribed in section 360.8, at the failed covered
institution.
(2) The system requirements under paragraph (c)(1) of this section
must have the capability of placing the provisional holds prescribed
under that provision no later than 9 a.m. local time the day following
the FDIC Cutoff Point, as defined in Sec. 360.8(b)(3).
(3) Pursuant to instructions to be provided by the FDIC, a Covered
Institution must notify the FDIC of the person(s) responsible for
producing the standard data download and administering provisional
holds, both while the functionality is being constructed and on an on-
going basis.
(4) For deposit accounts held in domestic offices of an insured
depository institution, the provisional hold algorithm must be designed
to exempt accounts below a specific account balance threshold, as
determined by the FDIC. The account balance threshold could be any
amount, including zero. For accounts above the account balance
threshold determined by the FDIC, the algorithm must be designed to
calculate and place a hold equal to the dollar amount of funds in
excess of the account balance threshold multiplied by the provisional
hold percentage determined by the FDIC. The provisional hold percentage
could be any amount, from zero to one hundred percent. The account
balance threshold as well as the provisional hold percentage could vary
for the following four categories, as the Covered Institution
customarily defines consumer accounts:
(i) Consumer demand deposit, NOW and money market deposit accounts;
(ii) Other consumer deposit accounts (time deposit and savings
accounts, excluding NOW and money market deposit accounts);
(iii) Non-consumer demand deposit, NOW and money market deposit
accounts; and
(iv) Other non-consumer deposit accounts (time deposit and savings
accounts, excluding NOW and money market deposit accounts).
(5) For deposit accounts held in foreign offices of an insured
depository institution, other than those connected to a Class B sweep
or automated credit arrangements, the provisional hold algorithm will
be the same as for deposit accounts, except that the account balance
threshold and the hold percentage may vary based on the country in
which the account is located.
(6) For international banking facility deposits, other than those
connected to a Class B sweep or automated credit arrangements, the
provisional hold algorithm will be the same as for deposit accounts,
except that the account balance threshold and the hold percentage may
differ.
(7) For the interest-bearing investment vehicle of a Class B sweep
arrangement, the provisional hold algorithm must be designed with the
capability to place a provisional hold on the interest-bearing
investment vehicle with possibly a different account balance threshold
and a different hold percentage according to the type of interest-
bearing investment vehicle.
(8) For the interest-bearing investment vehicle of an automated
credit account arrangement, the provisional hold algorithm must be
designed with the capability to place a provisional hold on the
interest-bearing investment vehicle with possibly a different account
balance threshold and a different hold percentage according to the type
of interest-bearing investment vehicle.
(9) The automated process for provisional holds required by
paragraph (c)(1) of this section must include the capability of
removing provisional holds in batch mode and, during the same
processing cycle, applying debits, credits or additional holds on the
deposit accounts from which the provisional holds were removed, as
determined by the FDIC.
(d) Providing a standard data format for generating deposit account
and customer data. (1) A covered institution must have in place
practices and procedures for providing the FDIC in a standard format
upon the close of any day's business with required account and customer
data, for all deposit accounts held in domestic and foreign offices and
interest-bearing investment accounts connected with Class B sweep and
automated credit arrangements. Such standard data files are to be
created through a mapping of pre-existing data elements and internal
institution codes into standard data formats.
(2) The requirements of paragraph (d)(1) of this section shall be
provided in five separate files, as indicated in the appendices to this
Part 360.
(3) Upon request by the FDIC, a covered institution must submit the
data required by paragraph (d)(1) of this section to the FDIC, in a
manner prescribed by the FDIC.
(4) In providing the data required under paragraph (d)(1) of this
section to the FDIC, the Covered Institution must be able to reconcile
the total deposit balances and the number of deposit accounts to the
institution's subsidiary system control totals.
(e) Implementation requirements. (1) A covered institution must
comply with the requirements of this section no later than eighteen
months after the effective date of this section.
(2) An insured depository institution not within the definition of
a covered institution on the effective date of this section must comply
with the requirements of this section no later than eighteen months
following the end of the second calendar quarter for which it meets the
criteria for a covered institution.
(3) Upon the merger of two or more non-covered institutions, if the
resulting institution meets the criteria for a covered institution,
that covered institution must comply with the requirements of this
section no later than eighteen months after the effective date of the
merger.
(4) Upon the merger of two or more covered institutions, the merged
institution must comply with the requirements of this section within
eighteen months following the effective date of the merger. This
provision, however, does not supplant any preexisting implementation
date requirement, in place prior to the date of the merger, for the
individual covered institution(s) involved in the merger.
[[Page 2388]]
(5) Upon the merger of one or more covered institutions with one or
more non-covered institutions, the merged institution must comply with
the requirements of this section within eighteen months following the
effective date of the merger. This provision, however, does not
supplant any preexisting implementation date requirement for the
individual covered institution(s) involved in the merger.
(6) Notwithstanding the general requirements of this paragraph (e),
on a case-by-case basis, the FDIC may accelerate, upon notice, the
implementation timeframe of all or part of the requirements of this
section for a covered institution that either: Has a composite rating
of 3, 4, or 5 under the Uniform Financial Institution's Rating System;
or is undercapitalized as defined under the prompt corrective action
provisions of 12 CFR part 325. In implementing this paragraph (e)(6),
the FDIC must consult with the covered institution's primary federal
regulator and consider the:
(i) Complexity of the institution's deposit systems and operations;
(ii) Extent of the institution's asset quality difficulties;
(iii) Volatility of the institution's funding sources;
(iv) Expected near-term changes in the institution's capital
levels; and
(v) Other relevant factors appropriate for the FDIC to consider in
its roles as insurer and possible receiver of the institution.
(7) Notwithstanding the general requirements of this paragraph (e),
a covered institution may request, by letter, that the FDIC extend the
deadline for complying with the requirements of this section. A request
for such an extension is subject to the FDIC's rules of general
applicability under 12 CFR 303.251.
(f) Testing requirements. Covered institutions must provide
appropriate assistance to the FDIC in its testing of the systems
required by this section. The FDIC will provide testing details to
covered institutions through the issuance of subsequent procedures and/
or guidelines.
3. Add new Appendices A through F to Part 630 to read as follows:
Appendix A to Part 630--Deposit File Structure
A. This is the structure for the data file to provide deposit
data to the FDIC. If data or information are not maintained or do
not apply, a null value in the appropriate field should be
indicated. The file will be in a tab-or pipe-delimited format. Each
file name will contain the institution's FDIC Certificate Number, an
indication that it is a deposit file type and the date of the
extract. The files will be encrypted using an FDIC-supplied
algorithm. The FDIC will transmit to the Covered Institution the
encryption algorithm over FDICconnect.
B. The total deposit balances and the number of deposit accounts
in each deposit file must be reconciled to the subsidiary system
control totals.
C. The FDIC intends to fully utilize a Covered Institution's
understanding of its customers and the data maintained around
deposit accounts. Should additional information be available to the
Covered Institution to help the FDIC more quickly complete its
insurance determination process, it may add this information to the
end of this data file. Should additional data elements be provided,
a complete data dictionary for these elements must be supplied along
with a description of how this information could be best used to
establish account ownership or insurance category.
D. 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 field data format
and field length must be provided to the FDIC along with the data
structures identified below.
E. A header record will also be required at the beginning of
this file. This record will contain the number of accounts to be
included in this file, the maximum number of characters contained in
largest account title field maintained within the deposit file and
the maximum number of characters contained in largest address field
maintained within the deposit file.
Note: Each record must contain the account title/name and
current account statement mailing address. Fields 16-32 relate to
the account name and address information. Some systems provide for
separate fields for account title/name, street address, city, state,
ZIP, and country, all of which are parsed out. Others systems may
simply provide multiple lines for name, street address, city, state,
ZIP, with no distinction. Populate fields that best fit the system's
data, either fields 16-26 or fields 27-32.
----------------------------------------------------------------------------------------------------------------
Field name Field description Comments Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account. This field than one physical
may be the Account data element. If
Number. multiple fields are
required to
identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
2. DP--Acct--Identifier-2......... Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account..
3. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account..
4. DP--Acct--Identifier-4......... Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account..
5. DP--Acct--Identifier-5......... Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account..
6. DP--Sub--Acct--Identifier...... Sub-Account The Sub-Account Character (25).
Identifier. Identifier may
If available, the sub- identify separate
account identifier deposits tied to
for the account.. this account where
there are different
processing
parameters such as
interest rates or
maturity dates, but
all owners are the
same.
7. DP--Bank--No................... Bank Number.......... .................... Character (15).
The bank number
assigned to the
deposit account..
[[Page 2389]]
8. DP--Tax--ID.................... Tax ID............... For consumer Character (15).
The tax accounts,
identification typically, this
number maintained on would be the
the account.. primary account
holder's social
security number
(``SSN''). For
business accounts
it would be the
federal tax
identification
number (``TIN'').
Hyphens are
optional in this
field.
9. DP--Tax--Code.................. Tax ID Code.......... Generally deposit Character (1).
The type of the tax systems have flags
identification or indicators set
number. Possible to indicate whether
values are:. the number is an
S = Social SSN or TIN.
Security Number..
T = Federal
Tax Identification
Number..
O = Other...
10. DP--Branch.................... Branch Number........ In lieu of a branch Character (15).
The branch or office number this field
associated with the may represent a
account.. specialty
department or
division.
11. DP--Cost--Center.............. Cost Center or This field ties to Character (20).
G[bs]L Code. accounts.
The identifier used
for organization
reporting or
ownership of the
account. Insert null
value if the cost
center is not
carried in the
deposit record..
12. DP--Dep--Type................. Deposit Type A deposit--also Character (1).
Indicator. called a ``domestic
The type of deposit deposit''--includes
by office location. only deposit
Possible values are:. liabilities payable
D = Deposit in the United
(Domestic).. States, typically
F = Foreign those deposits
Deposit.. maintained in a
domestic office of
an insured
depository
institution, as
defined in section
3(l) of the Federal
Deposit Insurance
Act (12 U.S.C.
1813(l)). A foreign
deposit is a
deposit liability
in a foreign branch
payable solely at a
foreign branch or
branches.
13. DP--Currency--Type............ Currency Type........ .................... Character (3).
The ISO 4217 currency
code.
14. DP--Ownership--Ind............ Customer Ownership Single: Accounts Character (2).
Indicator. owned by an
The type of ownership individual and
at the account those accounts held
level. Possible as Minor Accounts,
values are:. Estate Accounts,
S = Single.. Non-Minor Custodian/
J = Joint Guardian Accounts,
Account.. Attorney in Fact
P = Accounts and Sole
Partnership account.. Proprietorships.
C = Joint Account:
Corporation.. Accounts owned by
B = Brokered two or more
Deposits.. individuals, but
I = IRA does not include
Accounts.. the ownership of a
U = Payable on Death
Unincorporated Account or Trust
Association.. Account..
R = Partnership Account:
Revocable Trust.. Accounts owned by a
IR = Partnership..
Irrevocable Trust.. Corporation:
G = Accounts owned by a
Government Accounts.. Corporation (e.g.
E = Employee Inc., L.L.C., or
Benefit Plan P.C.).
Accounts.. Brokered Deposits:
O = Other... Accounts placed by
a deposit broker
who acts as an
intermediary for
the actual owner or
sub-broker.
IRA Accounts:
Accounts for which
the owner has the
right to direct how
the funds are
invested including
Keoghs and other
Self-Directed
Retirement Accounts.
Unincorporated
Association: An
account owned by an
association of two
or more persons
formed for some
religious,
educational,
charitable, social
or other non-
commercial purpose.
Revocable Trusts:
Including PODs and
formal revocable
trusts (e.g. Living
Trusts, Intervivos
Trusts or Family
Trusts).
[[Page 2390]]
Irrevocable Trusts:
Accounts held by a
trust established
by statute or
written trust in
which the grantor
relinquishes all
power to revoke the
trust.
Government Accounts:
Accounts owned by a
government entity
(e.g. City, State,
County or Federal
government entities
and their sub-
divisions).
Employee Benefit
Plan: Accounts
established by the
administrator of an
Employee Benefit
Plan including
defined
contribution,
defined benefit and
employee welfare
plans.
Other Accounts:
Accounts owned by
an entity not
described above.
15. DP--Prod--Cat................. Product Category..... Product Category is Character (3).
The product sometimes referred
classification. to as ``application
Possible values are:. type'' or ``system
DDA = Non- type''.
Interest Bearing
Checking accounts..
NOW =
Interest Bearing
Checking accounts..
MMA = Money
Market Deposit
Accounts..
SAV = Other
savings accounts..
CDS = Time
Deposit accounts and
Certificate of
Deposit accounts,
including any
accounts with
specified maturity
dates that may or
may not be
renewable..
16. DP--Stat--Code................ Status Code.......... .................... Character (1).
Status or condition
of the account.
Possible values are:.
O = Open....
D = Dormant.
I =
Inactive..
E =
Escheatment..
A =
Abandoned..
C = Closing.
R =
Restricted/Frozen/
Blocked..
17. DP--Acct--Title--1............ Account Title Line 1. These data will be Character (100).
Account styling or used to identify
titling of the the owners of the
account.. account.
18. DP--Acct--Title--2............ Account Title Line 2. .................... Character (100).
If available, the
second account title
line..
19. DP--Acct--Title--3............ Account Title Line 3. .................... Character (100).
If available, the
third account title
line..
20. DP--Acct--Title--4............ Account Title Line 4. .................... Character (100).
If available, the
fourth account title
line..
21. DP--Street--Add--Ln--1........ Street Address Line 1 .................... Character (100).
The current account
statement mailing
address of record..
22. DP--Street--Add--Ln--2........ Street Address Line 2 .................... Character (100).
If available, the
second mailing
address line..
23. DP--Street--Add--Ln--3........ Street Address Line 3 .................... Character (100).
If available, the
third mailing
address line..
24. DP--City...................... City................. .................... Character (50).
The city associated
with the mailing
address..
25. DP--State..................... State................ Use a two-character Character (2).
The state state code
abbreviation (official U.S.
associated with the Postal Service
mailing address.. abbreviations).
26. DP--ZIP....................... ZIP.................. If the ``+4'' code Character (10).
The ZIP + 4 code is not available
associated with the provide only the 5-
mailing address.. digit ZIP code.
Hyphens are
optional in this
field.
[[Page 2391]]
27. DP--Country................... Country.............. Provide the country Character (10).
The country name or the
associated with the standard IRS
mailing address.. country code.
28. DP--NA--Line--1............... Name/Address Line 1.. Fields 27-32 are to Character (100).
Alternate name/ be used if address
address format for data are not parsed
the current account to populated Fields
statement mailing 16-26.
address of record,
first line..
29. DP--NA--Line--2............... Name/Address Line 2.. .................... Character (100).
Alternate name/
address format,
second line..
30. DP--NA--Line--3............... Name/Address Line 3.. .................... Character (100).
Alternate name/
address format,
third line..
31. DP--NA--Line--4............... Name/Address Line 4.. .................... Character (100).
Alternate name/
address format,
fourth line..
32. DP--NA--Line--5............... Name/Address Line 5.. .................... Character (100).
Alternate name/
address format,
fifth line..
33. DP--NA--Line--6............... Name/Address Line 6.. .................... Character (100).
Alternate name/
address format,
sixth line..
34. DP--Cur--Bal.................. Current Balance...... This balance should Decimal (14,2).
The current balance not be reduced by
in the account at float or holds. For
the end of business CDs and time
on the effective deposits, the
date of this file.. balance should
reflect the
principal balance
plus any interest
paid and available
for withdrawal not
already included in
the principal (do
not include accrued
interest). 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 institution.
35. DP--Int--Rate................. Interest Rate........ Interest rate should Decimal (10,9).
The current interest be expressed in
rate in effect for decimal format,
interest bearing i.e., 2.0% should
accounts.. be represented as
0.020000000.
36. DP--Bas--Days................. Basis Days........... .................... Character (1).
Basis on which
interest is to be
paid. Possible
values are:.
1 = 30/360..
2 = 30/365..
3 = 365/365
(actual/actual)..
4 = 365/366.
37. DP--Int--Type................. Interest Type........ .................... Character (1).
Type of interest to
be paid. Possible
values are:.
S = Simple..
D = Daily
Compounding..
C =
Continuous
Compounding..
38. DP--Int--Factor............... Interest Rate Daily Interest rate should Decimal (10,9).
Factor. be expressed in
The daily interest decimal format,
rate factor used for i.e., 2.0% should
generating interest.. be represented as
0.020000000.
39. DP--Acc--Int.................. Accrued Interest..... .................... Decimal (14,2).
The amount of
interest that has
been earned but not
yet paid to the
account as of the
date of the file..
40. DP--Lst--Int--Pd.............. Date Last Interest .................... Date (YYYYMMDD).
Paid.
The date through
which interest was
last paid to the
account..
41. DP--Lst--Deposit.............. Date Last Deposit.... For example, a Date (YYYYMMDD).
The date of the last deposit that
deposit transaction included checks and/
posted to the or cash.
account..
42. DP--Int--Mon--Base............ Interest Month Base.. .................... Character (1).
The basis for
determining
calculations to the
account. Possible
values are:.
A = Actual
number of days in
the month..
M = 30-day
month..
43. DP--Int--Term--No............. Interest Term Number. .................... Decimal (3,0).
The number of months
in the current
interest term..
[[Page 2392]]
44. DP--Nxt--Mat.................. Date of Next Maturity For non-renewing CDs Date (YYYYMMDD).
For CD and time that have matured
deposit accounts, and are waiting to
the next date the be redeemed, this
account is to date may be in the
mature.. past.
45. DP--Open--DT.................. Account Open Date.... If the account had Date (YYYYMMDD).
The date the account previously been
was opened.. closed and re-
opened, this should
reflect the most
recent re-opened
date.
46. DP--Sweep--Code............... Sweep Code........... .................... Character (1).
Indicates if the
account is a sweep
account. Possible
values are:.
Y = Yes.....
N = No......
47. DP--Hold--To--Post............ Full Hold on the .................... Character (1).
account:.
Indicator if all
postings to this
account are
restricted. Possible
values are:.
Y = Yes.....
N = No......
48. DP--Issue--Val--Amt........... Issued Value Amount.. For CDs only........ Decimal (14,2).
The value of the
current CD when
issued..
49. DP--Int--CD--Cde.............. Type of Interest for For CDs only........ Character (1).
CD.
Possible values are:.
C = Rate
Change Allowed..
N = Rate
Change Not Allowed..
R = Change
Rate to Default at
Renewal..
T = Rate
Change Allowed Only
During the Term..
50. DP--IRA--Cde.................. IRA Code............. Optional code field Character (1).
The type of IRA. to be used if
Possible values are:. available to help
C = further identify
Corporate the types of IRA
Retirement.. accounts.
E =
Educational IRA..
I = IRA
Account..
K = Keogh
Account..
R = Roth IRA
Account..
S = SEP
Account..
T =
Transitional Roth
IRA..
V = Versa
Account..
H = Health
Savings Account..
51. Deposit--Class--Type.......... Deposit Class Type... The institution may Character (10).
The deposit class. also use more or
Possible values are:. fewer class types.
RTL =
Retail..
FED =
Federal government..
STATE =
State government..
COMM =
Commercial..
CORP =
Corporate..
BANK = Bank
Owned..
DUE TO =
Other Banks..
52. DP--Product--Class--Cde....... Deposit Class Codes.. These Product Class Character (2).
The deposit class codes are used in
codes. Possible conjunction with
values are:. the Deposit Class
RTL.................. Types in field 51.
1 = Payable This field is to be
on Death.. used in concert
2 = with fields 12 and
Individual.. 13 identified above
3 = Living to enable the
Trust--Intervivos or financial
Family.. institution to
4 = capture more
Irrevocable Trust detailed
(includes information
Educational IRAs).. concerning account
5 = Estate.. types. It is the
6 = Attorney intent of the FDIC
in Fact.. to have the
7 = Minor-- financial
(includes all institution map
variations of their detailed
Uniform Gifts to account type to the
Minor Accounts).. codes identified in
8 = this field. The
Bankruptcy Personal.. institution may
9 = Pre-Need also use additional
Burial.. codes, but in this
10 = Escrow. event the
11 = institution must
Representative Payee/ supply the detailed
Beneficiary.. description and
code value for each
additional code
used. If no
additional account
product type detail
is available, then
this field should
be left blank.
[[Page 2393]]
12 = Sole
Proprietorship..
13 = Joint..
14 = Non-
Minor Custodian/
Guardian..
15 = Other
Retail..
FED
16 = FHA.
17 =
Federal
Government..
STATE
18 =
City..
19 =
State..
20 =
County, Clerk of
Court..
21 =
Other State..
COMMERCIAL
22 =
Business Escrow..
23 =
Bankruptcy..
24 = Club...
25 = Church.
26 =
Unincorporated
Association..
27 =
Unincorporated Non
Profit..
28 = Other
Commercial..
CORPORATION
29 =
Business Trust..
30 =
Business Agent..
31 =
Business Guardian..
32 =
Incorporated
Association..
33 =
Incorporated Non
Profit..
34 =
Corporation..
35 =
Corporate
Partnership..
36 =
Corporate
Partnership Trust..
37 =
Corporate Agent..
38 =
Corporate Guardian..
39 = Pre-
Need Funeral Trust..
40 = Limited
Liability
Incorporation..
41 = LLC
partnership..
42 = Lawyer
Trust..
43 = Realtor
Trust..
44 = Other
Corporation..
BANK
45 =
Certified & Official
Checks, Money
Orders, Loan
Disbursements
Checks, and Expense
Checks..
46 = ATM
Settlement..
47 = Other
Bank Owned Accounts..
DUE TO (Other Banks)
48 = Due to
U.S. Banks..
49 = Due to
U.S. Branches of
Foreign Banks..
50 = Due to
Other Depository
Institutions..
51 = Due to
Foreign Banks..
52 = Due to
Foreign Branches of
U.S. banks..
53 = Due to
Foreign Governments
and Official
Institutions..
53. DP--Routing--No............... Bank Routing Number.. This field is Character (15).
The routing/transit identifier
number.. information for ACH
transactions
generated by the
FDIC.
----------------------------------------------------------------------------------------------------------------
Appendix B to Part 630--Class B Sweep/Automated Credit Account File
Structure
A. This is the structure of the data file to provide information
to the FDIC on funds residing in investment vehicles linked to each
non-closed deposit account or sub-account: Involved in Class B sweep
activity; or which accepts automated credits. A single record should
be used for each instance where funds affiliated with the deposit
account are held in an alternative investment vehicle. For any
alternative investment vehicle, a separate account may or may not
exist. If an account exists for the investment vehicle it should be
noted in the record. If no account exists then a null value for the
Class B Sweep/Automated Credit Account Identifiers should be
provided, but the remainder of the data fields defined below should
be populated.
B. For data provided in the Class B Sweep/Automated Credit
Account File the total
[[Page 2394]]
account balances and the number of accounts must be reconciled to
subsidiary system control totals.
----------------------------------------------------------------------------------------------------------------
Field name Field description Comments Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account from which than one physical
funds are swept or data element. If
debited. The field multiple fields are
may be the Account required to
number.. identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
2. DP--Acct--Identifier-2......... Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account from which
funds are swept or
debited..
3. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account from which
funds are swept or
debited..
4. DP--Acct--Identifier-4......... Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account from which
funds are swept or
debited..
5. DP--Acct--Identifier-5......... Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account from which
funds are swept or
debited..
6. DP--Sub--Acct--Identifier...... Sub-Account The Sub-Account Character (25).
Identifier. Identifier may
If available, the sub- identify separate
account identifier deposits tied to
for the account.. this account where
there are different
processing
parameters such as
interest rates or
maturity dates, but
all owners are the
same.
7. SW--Acct--Identifier........... Class B Sweep/ Funds may be swept Character (25).
Automated Credit into an investment
Account Identifier. vehicle not
The primary field represented as an
used to identify the account. In this
account into which case this field
funds are swept or should be a null
credited. This field value.
may be the Account The Class B Sweep/
Number.. Automated Credit
Account Identifier
may be composed of
more than one
physical data
element. If
multiple fields are
required to
identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
8. SW--Acct--Identifier-2......... Class B Sweep/ .................... Character (25).
Automated Credit
Account Identifier-2.
If necessary, the
second element of
the account
identifier used to
identify the account
into which funds are
swept or credited..
9. SW--Acct--Identifier-3......... Class B Sweep/ .................... Character (25).
Automated Credit
Account Identifier-3.
If necessary, the
third element of the
account identifier
used to identify the
account into which
funds are swept or
credited..
10. SW--Acct--Identifier-4........ Class B Sweep/ .................... Character (25).
Automated Credit
Account Identifier-4.
If necessary, the
fourth element of
the account
identifier used to
identify the account
into which funds are
swept or credited..
11. SW--Acct--Identifier-5........ Class B Sweep/ .................... Character (25).
Automated Credit
Account Identifier-5.
If necessary, the
fifth element of the
account identifier
used to identify the
account into which
funds are swept or
credited..
[[Page 2395]]
12. SW--Sub--Acct--Identifier..... Class B Sweep/ .................... Character (25).
Automated Credit Sub-
Account Identifier.
If available, the sub-
account identifier
for the account..
13. SW--Type...................... Class B Sweep/ .................... Character (3).
Automated Credit
Type.
The investment
vehicle. Possible
values are:.
RE = ...............................
Repurchase
Agreement.
DD = ...............................
Deposit Held in a
Domestic Office.
DF = ...............................
Deposit Held in a
Foreign Office.
IBF = ...............................
Deposit Held in
an International
Banking Facility.
AI = ...............................
Deposit Held in
an Affiliated
Depository
Institution.
FF = Federal ...............................
Funds.
CP = ...............................
Commercial Paper.
OT = Other. ...............................
14. SW--Inv--Amount............... Fund Balance in Class .................... Decimal (14,2).
B Sweep/Automated
Credit Investment
Vehicle.
Dollar amount
residing in the
investment vehicle..
15. DP--Currency--Type............ Currency Type........ .................... Character (3).
The ISO 4217 currency
code..
16. SW--Hold--Amount.............. FDIC Hold Amount..... .................... Decimal (14,2).
Amount of FDIC hold
on funds residing in
the investment
vehicle..
17. SW--Sweep--Interval........... Sweep/Investment .................... Character (2).
Frequency.
The frequency with
which the sweep or
investment occurs.
Possible values are:.
D = Daily. ...............................
W = Weekly. ...............................
BW = Bi ...............................
Weekly.
M = Monthly. ...............................
BM = Bi- ...............................
Monthly.
Q = ...............................
Quarterly.
O = Other. ...............................
----------------------------------------------------------------------------------------------------------------
Appendix C to Part 630--Hold File Structure
This is the structure of the data file to provide information to
the FDIC for each legal or collateral hold placed on a deposit
account or sub-account. If data or information are not maintained or
do not apply, a null value in the appropriate field should be
indicated. The file will be in a tab-or pipe-delimited format. Each
file name will contain the institution's FDIC Certificate Number, an
indication that it is a hold data file type and the date of the
extract. The files will be encrypted using an FDIC-supplied
algorithm. The FDIC will transmit the encryption algorithm over
FDICconnect.
----------------------------------------------------------------------------------------------------------------
Field name Field Description Comments Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account. This field than one physical
may be the Account data element. If
Number.. multiple fields are
required to
identify the
account, data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
2. DP--Acct--Identifier-2......... Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account..
3. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account..
4. DP--Acct--Identifier-4......... Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account..
[[Page 2396]]
5. DP--Acct--Identifier-5......... Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account..
6. DP--Sub--Acct--Identifier Sub-Account The Sub-Account Character (25).
Identifier If Identifier may
available, the sub- identify separate
account identifier deposits tied to
for the account. this account where
If available, the sub- there are different
account identifier processing
for the account. parameters such as
interest rates or
maturity dates, but
all owners are the
same.
7. HD--Hold--Amt.................. Hold Amount.......... .................... Decimal (14,2).
Dollar amount of the
hold..
8. HD--Hold--Reason............... Hold Reason.......... .................... Character (2).
Reason for the hold.
Possible values are:.
LN = Loan ...............................
Collateral Hold.
LG = Court ...............................
Order Hold.
FD = FDIC ...............................
hold.
OT = ...............................
Other (do not
include daily
operational type
holds).
9. HD--Hold--Desc................. Hold Description..... .................... Character (255).
Description of the
hold available on
the system..
10. HD--Hold--Start--Dt........... Hold Start Date...... .................... Date (YYYYMMDD).
The date the hold was
initiated..
11. HD--Hold--Exp--Dt............. Hold Expiration Date. .................... Date (YYYYMMDD).
The date the hold is
to expire..
----------------------------------------------------------------------------------------------------------------
Appendix D to Part 630--Customer File Structure
This is the structure of the data file to provide to the FDIC
information related to each customer who has an account or sub-
account reported in the deposit data or Class B sweep/automated
credit account file. If data or information are not maintained or do
not apply, a null value in the appropriate field should be
indicated. The file will be in a tab- or pipe-delimited format. Each
file name will contain the institution's FDIC Certificate Number, an
indication that it is a customer file type and the date of the
extract. The files will be encrypted using an FDIC-supplied
algorithm. The FDIC will transmit the encryption algorithm over
FDICconnect.
Note: Each record must contain the customer's name and permanent
legal address. Fields 4-12 relate to the customer name for
individuals only. Fields 13-14 relate to the customer name for
entities other than individuals. Some systems provide for separate
fields for name, street address, city, state, ZIP, and country, all
of which are parsed out. Other systems may simply provide multiple
lines for name, street address, city, state, ZIP, with no
distinction. In this case, certain name and address data elements
must be parsed and provided in the appropriate fields.
----------------------------------------------------------------------------------------------------------------
Field name Field description Comments Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier........... Customer Identifier.. .................... Character (25).
The unique field used
by the institution
to identify the
customer..
2. CS--Tax--ID.................... Customer Tax ID Hyphens are optional Character (11).
Number. in this field.
The tax
identification
number on record for
the customer..
3. CS--Tax --Code................. Customer Tax ID Code. .................... Character (1).
The type of the tax
identification
number of the
customer. Possible
values are:.
S =
Social Security
Number.
T =
Federal Tax
Identification
Number.
O = Other
4. CS--Name--Line--1.............. Individual Customer .................... Character (100).
Name Line 1.
If available, the
free-form name
narrative of the
customer, first
line..
5. CS--Name--Line--2.............. Individual Customer .................... Character (100).
Name Line 2.
If available, the
free-form name
narrative of the
customer, second
line..
6. CS--Last--Name................. Individual Customer This field is Character (50).
Last Name. required if the
For individuals, the data element is in
customer's last the institution's
name.. records. If
necessary, data
should be parsed
from fields 4 or 5
to obtain this
element.
[[Page 2397]]
7. CS--First--Name................ Individual Customer This field is Character (50).
First Name. required if the
For individuals, the data element is in
customer's first the institution's
name.. records. If
necessary, data
should be parsed
from fields 4 or 5
to obtain this
element.
8. CS--Middle--Name............... Individual Customer This field is Character (50).
Middle Name. required if the
For individuals, the data element is in
customer's middle the institution's
name.. records. If
necessary, data
should be parsed
from fields 4 or 5
to obtain this
element.
9. CS--Suffix..................... Individual This field is Character (20).
Professional Suffix. required if the
For individuals, the data element is in
suffix designating the institution's
customer's academic, records. If
professional or necessary, data
honorary status, should be parsed
such as Esq., PhD., from fields 4 or 5
M.D., and D.D.S.. to obtain this
element.
10. CS--Generation................ Individual This field is Character (10).
Generational Suffix. required if the
For individuals, the data element is in
suffix designating the institution's
the customer's records. If
generational status, necessary, data
such as Jr., Sr. or should be parsed
III.. from fields 4 or 5
to obtain this
element.
11. CS--Prefix.................... Individual Customer This field is Character (10).
Prefix. required if the
For individuals, the data element is in
prefix of the the institution's
customer, such as records. If
Rev., Dr., Mrs., Mr. necessary, data
or Ms.. should be parsed
from fields 4 or 5
to obtain this
element.
12. CS--Birth--Dt................. Individual Customer .................... Date (YYYYMMDD).
Birth Date.
For individuals, the
customer's birth
date..
13. CS--Ent--Name--Line--1........ Entity Name Line 1... .................... Character (100).
For entities other
than individuals,
the free-form name
narrative of the
customer, first
line..
14. CS--Ent--Name--Line--2........ Entity Name Line 2... .................... Character (100).
If available for
entities other than
individuals, the
free-form name
narrative of the
customer, second
line..
15. CS--Nar--Addr--Line--1........ Customer Address Line .................... Character (100).
1.
If available, the
free-form permanent
legal address
narrative for the
customer, line one..
16. CS--Nar--Addr --Line--2....... Customer Address Line .................... Character (100).
2.
If available, the
free-form permanent
legal address
narrative of the
customer, line two..
17. CS--Nar--Addr --Line--3....... Customer Address Line .................... Character (100).
3.
If available, the
free-form permanent
legal address
narrative of the
customer, line
three..
18. CS--Street--Address--1........ Street Address Line 1 This field is Character (100).
The permanent legal required. If
address of the necessary, data
customer, line one.. should be parsed
from fields 16 or
17 to obtain this
element.
19. CS--Street--Address--2........ Street Address Line 2 This field is Character (100).
The permanent legal required. If
address of the necessary, data
customer, line two.. should be parsed
from fields 16 or
17 to obtain this
element.
20. CS--City...................... City................. This field is Character (25).
The city associated required. If
with the permanent necessary, data
legal address.. should be parsed
from fields 16 or
17 to obtain this
element.
21. CS--State..................... State................ This field is Character (2).
The state required. If
abbreviation necessary, data
associated with the should be parsed
permanent legal from fields 16 or
address.. 17 to obtain this
element. Use a two-
character state
code (official U.S.
Postal Service
abbreviations).
22. CS--ZIP....................... ZIP.................. This field is Character (10).
The ZIP + 4 code required. If
associated with the necessary, data
permanent legal should be parsed
address.. from fields 16 or
17 to obtain this
element. If the
``+4'' code is not
available provide
only the 5-digit
ZIP code. Hyphens
are optional in
this field.
23. CS--Country................... Country.............. This field is Character (10).
The country required. If
associated with the necessary, data
permanent legal should be parsed
address.. from fields 16 or
17 to obtain this
element. Provide
the name of the
country or the
standard IRS
country code.
[[Page 2398]]
24. CS--Telephone................. Customer Telephone .................... Character (20).
Number.
The telephone number
on record for the
customer..
25. CS--Email..................... Customer Email .................... Character (150).
Address.
The e-mail address on
record for the
customer..
----------------------------------------------------------------------------------------------------------------
Appendix E to Part 630--Deposit-Customer Join File Structure
A. This is the structure of the data file to provide to the FDIC
information necessary to link the records in the deposit and
customer files. If data or information are not maintained or do not
apply, a null value in the appropriate field should be indicated.
The file will be in a tab- or pipe-delimited format. Each file name
will contain the institution's FDIC Certificate Number, an
indication that it is a join file type, and the date of the extract.
The files will be encrypted using an FDIC-supplied algorithm. The
FDIC will transmit the encryption algorithm over FDICconnect.
B. The deposit-customer join file will have one or more records
for each deposit account, depending on the number of relationships
to each account. A simple individual account, for example, will be
associated with only one record in the deposit-customer join file
indicating the owner of the account. A joint account with two owners
will be associated with two records in the deposit-customer join
file, one for each owner. The deposit-customer join file will
contain other records associated with a deposit account to
designate, among other things, beneficiaries, custodians, trustees,
and agents. This methodology allows the FDIC to know all of the
possible relationships for an individual account and also whether a
single customer is involved in many accounts.
----------------------------------------------------------------------------------------------------------------
FDIC field
Field name description Comments Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier........... Customer Identifier.. .................... Character (25).
The unique field used
by the institution
to identify the
customer..
2. DP--Acct--Identifier........... Account Identifier... The Account Character (25).
The primary field Identifier may be
used to identify the composed of more
account. This field than one physical
may be the Account data element. If
Number.. multiple fields are
required to
identify the
account, the data
should be placed in
separate fields and
the FDIC instructed
how these fields
are combined to
uniquely identify
the account.
3. DP--Acct--Identifier-2......... Account Identifier-2. .................... Character (25).
If necessary, the
second element used
to identify the
account..
4. DP--Acct--Identifier-3......... Account Identifier-3. .................... Character (25).
If necessary, the
third element used
to identify the
account..
5. DP--Acct--Identifier-4......... Account Identifier-4. .................... Character (25).
If necessary, the
fourth element used
to identify the
account..
6. DP--Acct--Identifier-5......... Account Identifier-5. .................... Character (25).
If necessary, the
fifth element used
to identify the
account..
7. CS--Rel--Code.................. Relationship Code.... Institutions must Character (5).
The code indicating map their
how the customer is relationship codes
related to the to the codes in the
account. Possible list to the right.
values are:. If the institution
ADM = maintains more than
Administrator.. one relationship
AGT = Agent/ they must supply
Representative.. the additional
ATF = relationship codes
Attorney For.. being utilized
AUT = along with the code
Authorized Signer.. definition.
BNF =
Beneficiary..
CSV =
Conservator..
CUS =
Custodian..
DBA = Doing
Business As..
EXC =
Executor..
GDN =
Guardian..
MIN = Minor.
PRI =
Primary Owner..
SEC =
Secondary Owner(s)..
TTE =
Trustee..
8. CS--Bene--Code................. Beneficiary Type Code This includes Character (1).
If the customer is beneficiaries on
considered a retirement
beneficiary, the accounts, trust
type of account accounts, minor
associated with this accounts, and
customer. Possible payable-on-death
values are:. accounts.
I = IRA..
T =
Trust--Irrevocabl
e.
R =
Trust--Revocable.
M =
Uniform Gift to
Minor.
[[Page 2399]]
P =
Payable on Death.
O = Other
----------------------------------------------------------------------------------------------------------------
Appendix F to Part 360--Possible File Combinations for Deposit Data
A Covered Institution must provide deposit data using separate
deposit, sweep, hold, customer, customer address and deposit-
customer join files. The simplest file structure involves providing
one of each file. This basic file format is shown in Figure 2.
BILLING CODE 6714-01-P
[GRAPHIC] [TIFF OMITTED] TP14JA08.005
Multiple combinations of deposit, sweep, hold, customer,
customer address and deposit-customer join files are permissible,
but only in the following circumstances:
1. Each separate deposit file must have companion hold and
deposit-customer join files covering the same deposit accounts.
2. Each separate customer file must have a companion customer
address file covering the same customers.
3. A single customer file may be submitted covering customers
affiliated with deposit accounts in one or more deposit files as
long as the customer file contains information on all of the
customers affiliated with the deposit files.
4. Several customer files may be submitted as long as each
separate customer file contains information on all of the customers
affiliated with the associated deposit files.
Figure 3 shows a permissible file configuration using a single
Customer File affiliated with Deposit File A and Deposit File B. As
required, Deposit File A has a companion Hold File A and Deposit-
Customer Join File A. The same is true for Deposit File B.
Another permissible combination of files is shown in Figure 4,
which is a variation of the basic data file structure shown in
Figure 2.
[[Page 2400]]
[GRAPHIC] [TIFF OMITTED] TP14JA08.006
[[Page 2401]]
[GRAPHIC] [TIFF OMITTED] TP14JA08.007
By order of the Board of Directors.
Dated at Washington, DC, this 19th day of December, 2007.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E8-273 Filed 1-11-08; 8:45 am]
BILLING CODE 6714-01-C