[Federal Register Volume 75, Number 219 (Monday, November 15, 2010)]
[Rules and Regulations]
[Pages 69577-69583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28627]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 330
RIN 3064-AD65
Deposit Insurance Regulations; Unlimited Coverage for
Noninterest-Bearing Transaction Accounts
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The FDIC is adopting a final rule amending its deposit
insurance regulations to implement section 343 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (``Dodd-Frank Act''),\1\
providing for unlimited deposit insurance for ``noninterest-bearing
transaction accounts'' for two years starting December 31, 2010.
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\1\ Public Law 111-203 (July 21, 2010).
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DATES: Effective Date: The final rule is effective December 31, 2010.
FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Supervisory
Counsel, Legal Division (202) 898-7349 or [email protected]; Mike
Figge, Honors Attorney, Legal Division (202) 898-6750 or
[email protected]; or James V. Deveney, Chief, Deposit Insurance Section,
Division of Supervision and Consumer Protection (202) 898-6687 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. The Proposed Rule
On September 30, 2010, the FDIC published a proposed rule
(``proposed rule'') to implement section 343 of the Dodd-Frank Act
(``Section 343'').\2\ Section 343 amended the deposit insurance
provisions of the FDI Act (12 U.S.C. 1821(a)(1)) to provide temporary
[[Page 69578]]
separate insurance coverage for noninterest-bearing transaction
accounts. In summary, the proposed rule: Followed the Section 343
definition of noninterest-bearing transaction account; identified and
discussed the differences between Section 343 and the FDIC's
Transaction Account Guarantee Program (``TAGP''); explained the
separate deposit insurance available for noninterest-bearing
transaction accounts under Section 343; proposed disclosure and notice
requirements as part of the implementation of Section 343; announced
that, because of this Congressional action, the FDIC would not be
extending the TAGP beyond its sunset date of December 31, 2010; and
requested comments on all aspects of the proposed rule.
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\2\ 75 FR 60341 (Sept. 30, 2010).
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II. Comments on the Proposed Rule
The comment period on the proposed rule ended on October 15, 2010.
The FDIC received ninety-three comments from trade associations,
insured depository institutions (``IDIs'') and law firms, among others.
In particular, the FDIC received eighty-four comments from state-bar
affiliated associations and five comments from banking and other
associations. The remaining four comments were from individual IDIs.
Trade associations and bankers commented that the proposed rule
reflects an accurate interpretation of Section 343. A number of banks
and state bar associations commented that the exclusion of Interest on
Lawyer Trust Accounts (``IOLTAs'') from Section 343, and consequently
the proposed rule, was the result of an inadvertent omission on the
part of Congress. These comments referenced a pending bi-partisan
Senate bill to include IOLTAs in the Section 343 definition of
noninterest-bearing transaction account. The commenters oppose the
proposed rule's requirement that IDIs notify IOLTA and negotiable order
of withdrawal (``NOW'') account holders of changes in the deposit
insurance scheme before Congress has the opportunity to amend Section
343 to include IOLTAs. Their comments reflect a concern that the
exclusion of IOLTA and NOW accounts from the definition of noninterest-
bearing transaction account will cause large IOLTA and NOW account
depositors to spread these deposits across multiple IDIs to ensure full
deposit insurance coverage or to place their deposits with institutions
deemed ``too big to fail.'' Their comments also reflect a concern that
failure to provide unlimited insurance to IOLTA and NOW accounts will
significantly restrict community lending.
One commenter requested that the final rule clarify whether the
notice requirements apply to all depositors who hold NOW accounts in
IDIs participating in the TAGP, or only to depositors who may be
affected by the change in deposit insurance coverage. According to this
comment letter, most NOW account holders will not be affected by the
change because they have less than the standard maximum deposit
insurance amount of $250,000 (``SMDIA'') and remain fully insured
should an IDI default. Another commenter requested clarification that
one notice per account, rather than one notice per account holder, will
satisfy the notice requirement. Similarly, when depositors have
multiple accounts that are affected, the commenter requested
clarification that compliance with the notice requirement is achieved
by sending one notice which lists all affected accounts along with the
account holder's statement. Another comment letter requested
clarification that the language included in the proposed rule under 12
CFR 330.16(c)(1) is language that may be used to comply with the notice
requirement.
Several commenters expressed concerns over the unintended
consequences of providing unlimited deposit insurance coverage for
noninterest-bearing transaction accounts, contending that providing
such coverage for these accounts promotes moral hazard. Four commenters
suggested charging a separate assessment, in addition to the normal
assessment rates, to address what they deem to be disproportionately
high assessment rates on banks with a relatively low level of
noninterest-bearing transaction accounts. One commenter requested
clarification on how the FDIC intends to treat official checks for
deposit insurance purposes under the proposed rule, in light of the
provision in the FDIC's current deposit insurance regulations dealing
with negotiable instruments,12 CFR 330.5(b)(4)(i).
Finally, one commenter requested clarification that the absence of
a contract interest rate will determine whether an account qualifies
for unlimited deposit-insurance coverage. Likewise, the commenter
requested confirmation that interest-bearing accounts may be converted
to noninterest-bearing accounts after December 31, 2010, and still
obtain unlimited insurance.
III. The Final Rule
Definition of Noninterest-Bearing Transaction Account
As in the proposed rule, the final rule follows the definition of
noninterest-bearing transaction account in Section 343. Section 343
defines a noninterest-bearing transaction account as ``a deposit or
account maintained at an insured depository institution with respect to
which interest is neither accrued nor paid; on which the depositor or
account holder is permitted to make withdrawals by negotiable or
transferable instrument, payment orders of withdrawal, telephone or
other electronic media transfers, or other similar items for the
purpose of making payments or transfers to third parties or others; and
on which the IDI does not reserve the right to require advance notice
of an intended withdrawal.'' One commenter on the proposed rule
suggested that the FDIC define a depositor's balance in a noninterest-
bearing transaction account as the ``average balance collected within
the insured account over the past 30 days'' prior to the date of
failure of the IDI. The FDIC believes this definition would be
inconsistent with the definition of noninterest-bearing transaction
account in Section 343 and would lead to depositor confusion and
uncertainty as to the extent of deposit insurance coverage available on
noninterest-bearing transaction accounts.
The Section 343 definition of noninterest-bearing transaction
account is similar to the definition of that term in the TAGP, but it
includes no interest-bearing accounts. The Section 343 definition of
noninterest-bearing transaction account encompasses only traditional,
noninterest-bearing demand deposit (or checking) accounts that allow
for an unlimited number of deposits and withdrawals at any time,
whether held by a business, an individual or other type of depositor.
Unlike the definition of noninterest-bearing transaction account in the
TAGP, the Section 343 definition of noninterest-bearing transaction
account does not include NOW accounts (regardless of the interest rate
paid on the account) or IOLTAs. Therefore, under the final rule,
neither NOW accounts nor IOLTAs are within the definition of
noninterest-bearing transaction account. Also, like the TAGP, the final
rule does not include money market deposit accounts (``MMDAs'') within
the definition of noninterest-bearing transaction account.
As noted in the comment summary, the FDIC received numerous
comments from law firms, IDIs, attorney trade
[[Page 69579]]
groups and others requesting that the FDIC either postpone issuance of
the final rule or exclude from the final rule the requirement that IDIs
currently participating in the TAGP notify IOLTA customers that,
beginning January 1, 2011, IOLTAs no longer will be eligible for full
deposit insurance coverage. The FDIC believes it is critically
important for depositors to have a clear understanding of the deposit
insurance rules before placing or retaining deposits at an FDIC-insured
institution. As a result of the passage of the Dodd-Frank Act, the
temporary full protection currently afforded to IOLTAs at IDIs
participating in the TAGP will terminate on January 1, 2011, and the
FDIC must ensure that IOLTA customers know about this change. If, as
the commenters suggest, Congress acts before December 31, 2010, to add
IOLTAs to Section 343, thus providing temporary full coverage for these
accounts, the FDIC will act quickly to notify IDIs of the statutory
change and explain how to respond to this change in complying with the
disclosure requirements in the final rule.
Importantly, under the FDIC's general deposit insurance rules,
IOLTAs may qualify for ``pass-through'' deposit insurance coverage, so
long as the regulatory requirements are met. 12 CFR 330.7. That means
each client for whom a law firm holds funds in an IOLTA may be insured
up to $250,000 for his or her funds. In addition, the accrued interest
to which a legal services entity or program is entitled may be
separately insured for $250,000. For example, if a law firm maintains
an IOLTA with $250,000 attributable to Client A, $150,000 to Client B
and $75,000 to Client C, and the accrued interest of $5,000 is payable
to a legal services program, the account likely would be fully insured.
If the clients or the legal services entity have other funds at the
same IDI, those funds would be added to their respective ownership
interest in the IOLTA for insurance coverage purposes. But, coverage is
available, generally, on a per-client basis; thus, a generous amount of
deposit insurance coverage is available for IOLTAs, absent the
availability of unlimited coverage for IOLTAs under either the TAGP or
Section 343.
Some commenters noted that, pursuant to Dodd-Frank Act revisions to
the Federal Deposit Insurance Act, the FDIC would not have the
authority to extend the TAGP beyond that program's sunset date of
December 31, 2010. The FDIC agrees with this conclusion. Therefore, in
response to comments that the FDIC extend the TAGP, so that IOLTAs
would continue to be fully protected, the FDIC does not have the
statutory authority to do so. Likewise, in response to comments that
the FDIC expand the final rule to include IOLTAs, the Dodd-Frank Act
would not permit such an expansion, given that the Section 343
definition of noninterest-bearing transaction excludes accounts that
may pay interest.
One trade group suggested that the FDIC undertake a study of the
benefits and costs of a permanent self-supporting, and optional
insurance program for qualifying accounts above the standard insurance
limit. The FDIC will consider this suggestion.
As under the TAGP, under the final rule, whether an account is
noninterest-bearing is determined by the terms of the account agreement
and not by the fact that the rate on an account may be zero percent at
a particular point in time. For example, an IDI might offer an account
with a rate of zero percent except when the balance exceeds a
prescribed threshold. Such an account would not qualify as a
noninterest-bearing transaction account even though the balance is less
than the prescribed threshold and the interest rate is zero percent.
Under the final rule, at all times, the account would be treated as an
interest-bearing account because the account agreement provides for the
payment of interest under certain circumstances. On the other hand, as
under the TAGP, the waiving of fees would not be treated as the earning
of interest. For example, IDIs sometimes waive fees or provide fee-
reducing credits for customers with checking accounts. Under the final
rule, such account features would not prevent an account from
qualifying as a noninterest-bearing transaction account, as long as the
account otherwise satisfies the definition of a noninterest-bearing
transaction account.
One commenter on the proposed rule asked that the FDIC clarify that
``rewards programs'' offered by IDIs on non-interest checking accounts
also would not prevent an account from meeting the definition of
noninterest-bearing transaction account under the final rule.
Generally, the FDIC will look to current requirements and
interpretations under Part 329 of its regulations (Interest on
Deposits, 12 CFR part 329) and such interpretations under Regulation Q
of the Board of Governors of the Federal Reserve System (12 CFR part
217) to determine whether rewards provided in connection with
transaction accounts will be considered interest paid on the account
and, thus, disqualify an account for treatment as a noninterest-bearing
transaction account.
The same commenter requested that the FDIC confirm that interest-
bearing accounts may be converted to noninterest-bearing checking
accounts after December 31, 2010, and still obtain the benefits of
unlimited FDIC coverage. Such account would be eligible for treatment
as a noninterest-bearing transaction account as long as, under the
modified deposit agreement, the depositor may not earn interest on the
account.
This same principle for determining whether a deposit account
qualifies as a noninterest-bearing transaction account will apply when
IDIs no longer are prohibited from paying interest on demand deposit
accounts. Pursuant to section 627 of the Dodd-Frank Act, as of July 21,
2011 (one year after the enactment date of the Dodd-Frank Act), IDIs no
longer will be restricted from paying interest on demand deposit
accounts. At that time, demand deposit accounts offered by IDIs that
allow for the payment of interest will not satisfy the definition of a
noninterest-bearing transaction account. As discussed below, under the
final rule, IDIs are required to inform depositors of any changes in
the terms of an account that will affect their deposit insurance
coverage under this new provision of the deposit insurance rules.
As under the TAGP, the final rule's definition of noninterest-
bearing transaction account encompasses ``official checks'' issued by
IDIs. Official checks, such as cashier's checks and money orders issued
by IDIs, are ``deposits'' as defined under the FDI Act (12 U.S.C.
1813(l)) and part 330 of the FDIC's regulations. The payee of the
official check (the party to whom the check is payable) is the insured
party. Also, as a clarifying point made in one of the comments received
on the proposed rule, if an official check is negotiated to a third
party, the FDIC would recognize that person as the insured party,
subject to certain requirements. 12 CFR 330.5(b)(4). Because official
checks meet the definition of a noninterest-bearing transaction
account, the payee (or the party to whom the payee has endorsed the
check) would be insured for the full amount of the check upon the
failure of the IDI that issued the official check.
Under the FDIC's rules and procedures for determining account
balances at a failed IDI (12 CFR 360.8), funds swept (or transferred)
from a deposit account to either another type of deposit account or a
non-deposit account are treated as being in the account to which the
funds were transferred prior to the time of failure. So, for example,
if pursuant to an
[[Page 69580]]
agreement between an IDI and its customer, funds are swept daily from a
noninterest-bearing transaction account to an account or product (such
as a repurchase agreement) that is not a noninterest-bearing
transaction account, the funds in the resulting account or product
would not be eligible for full insurance coverage. This is how sweep
account products are treated under the TAGP and under the final rule.
As under the TAGP, however, the final rule includes an exception
from the treatment of swept funds in situations where funds are swept
from a noninterest-bearing transaction account to a noninterest-bearing
savings account, notably a MMDA. Often referred to as ``reserve
sweeps,'' these products entail an arrangement in which a single
deposit account is divided into two sub-accounts, a transaction account
and an MMDA. The amount and frequency of sweeps are determined by an
algorithm designed to minimize required reserves. In some situations
customers may be unaware that this sweep mechanism is in place. Under
the final rule, the FDIC will consider such accounts noninterest-
bearing transaction accounts. In response to a comment on the proposed
rule that treating such accounts as noninterest-bearing transaction
accounts is contrary to Section 343, the FDIC notes that these are
single accounts divided into sub-accounts, on neither of which the IDI
pays interest. Considering ``reserve sweep accounts'' to be
noninterest-bearing transaction accounts also is consistent with the
treatment of such accounts under the FDIC's regulations on the
treatment of sweep accounts upon the failure of an IDI. 12 CFR 360.8.
Apart from this exception for ``reserve sweeps,'' MMDAs and
noninterest-bearing savings accounts do not qualify as noninterest-
bearing transaction accounts.
Insurance Coverage
As noted in the proposed rule, pursuant to Section 343, all funds
held in noninterest-bearing transaction accounts will be fully insured,
without limit. As also specifically provided for in Section 343, this
unlimited coverage is separate from, and in addition to, the coverage
provided to depositors with respect to other accounts held at an IDI.
This means that funds held in noninterest-bearing transaction accounts
will not be counted in determining the amount of deposit insurance on
deposits held in other accounts, and in other rights and capacities, at
the same IDI. Thus, for example, if a depositor has a $225,000
certificate of deposit and a no-interest checking account with a
balance of $300,000, both held in a single ownership capacity, he or
she would be fully insured for $525,000 (plus interest accrued on the
CD), assuming the depositor has no other single-ownership funds at the
same institution. First, coverage of $225,000 (plus accrued interest)
would be provided for the certificate of deposit as a single ownership
account (12 CFR 330.6) up to the SMDIA of $250,000. Second, full
coverage of the $300,000 checking account would be provided separately,
despite the checking account also being held as a single ownership
account, because the account qualifies for unlimited separate coverage
as a noninterest-bearing transaction account.
One issue raised during the comment period is how the FDIC will
apply the new Dodd-Frank coverage provision to determine the amount of
insurance coverage available for revocable trust accounts. Coverage for
revocable trust accounts, in general, is based on the number of
``eligible'' beneficiaries named in the account. 12 CFR 330.10. The
specific question is how the FDIC will ``count up'' the number of
eligible beneficiaries in determining revocable trust account coverage
for an account owner who has multiple revocable trust accounts,
including one or more such accounts that would qualify as noninterest-
bearing transaction accounts under the Dodd-Frank provision. For
example, if a depositor has an interest-bearing account with a balance
of $400,000 payable to a niece and a qualifying noninterest-bearing
transaction account with a balance of $200,000 payable to a friend, how
much coverage would be available for the accounts? To make this deposit
insurance calculation, the FDIC would first determine the total number
of different beneficiaries the account owner has named in all revocable
trust accounts (both interest-bearing and noninterest-bearing) at the
same IDI. In this example, there are two (the niece and the friend). We
would then multiply that number times the SMDIA of $250,000 to
determine the maximum coverage available on the account owner's
revocable trust accounts. In this example, the amount is $500,000. We
then would apply that amount to the total balance of the account
owner's interest-bearing revocable trust accounts. Here, because that
amount is $400,000, it would be fully covered. The balance of the
noninterest-bearing transaction account (in this case, $200,000) would
be separately and fully covered under the final rule.
No Opting Out
Under the TAGP, IDIs could choose not to participate in the
program. Because Section 343 of the Dodd-Frank Act provides
Congressionally mandated deposit insurance coverage, IDIs are not
required to take any action (i.e., opt in or opt out) to obtain
separate coverage for noninterest-bearing transaction accounts. From
December 31, 2010, through December 31, 2012, noninterest-bearing
transaction accounts at all IDIs will receive this temporary deposit
insurance coverage. One commenter complained that the proposed rule did
not allow IDIs to opt out of the temporary unlimited coverage for
noninterest-bearing transaction accounts under Dodd-Frank. We note
that, unlike under the TAGP, Section 343 does not allow IDIs to opt out
of this statutory provision.
No Separate Assessment
The FDIC imposes a separate assessment, or premium, on IDIs that
participate in the TAGP.\3\ The FDIC will not charge a separate
assessment for the insurance of noninterest-bearing transaction
accounts pursuant to Section 343. The FDIC will take into account the
cost for this additional insurance coverage in determining the amount
of the deposit insurance assessment the FDIC charges IDIs under its
risk-based assessment system.\4\ Four comments from trade groups and
IDIs suggested that the FDIC charge more for the additional coverage on
noninterest-bearing transaction accounts similar to the way additional
coverage is charged for under the TAGP. The proposed rule was not
intended to address assessment issues, but the FDIC will take this
comment into consideration when considering future changes to the
assessment rate system. The FDIC notes, however, that the deposits
covered by the TAGP were not defined as insured deposits. In contrast,
Congress has specifically determined that noninterest-bearing
transaction accounts are fully insured deposits.
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\3\ 12 CFR 370.7.
\4\ 12 CFR part 327.
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Disclosure and Notice Requirements
The final rule includes disclosure and notice requirements as part
of the implementation of Section 343. As indicated in the proposed
rule, the purpose of these requirements is to ensure that depositors
are aware of and understand what types of accounts will be covered by
this temporary deposit insurance coverage for noninterest-bearing
transaction accounts. As in the proposed rule, the final rule includes
[[Page 69581]]
three such requirements. As explained in detail below: (1) IDIs must
post a prescribed notice in their main office, each branch and, if
applicable, on their Web site; (2) IDIs currently participating in the
TAGP must notify NOW account depositors (that are currently protected
under the TAGP because of interest rate restrictions on those accounts)
and IOLTA depositors that, beginning January 1, 2011, those accounts no
longer will be eligible for unlimited protection; and (3) IDIs must
notify customers individually of any action they take to affect the
deposit insurance coverage of funds held in noninterest-bearing
transaction accounts.
1. Posted Notice
The final rule requires each IDI to post, prominently, a copy of
the following notice in the lobby of its main office, in each domestic
branch and, if it offers Internet deposit services, on its Web site. In
response to comments received on the proposed rule, this notice has
been revised from the notice in the proposed rule to make it more
concise and reader-friendly:
NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION
ACCOUNTS
All funds in a ``noninterest-bearing transaction account'' are
insured in full by the Federal Deposit Insurance Corporation from
December 31, 2010, through December 31, 2012. This temporary
unlimited coverage is in addition to, and separate from, the
coverage of at least $250,000 available to depositors under the
FDIC's general deposit insurance rules.
The term ``noninterest-bearing transaction account'' includes a
traditional checking account or demand deposit account on which the
insured depository institution pays no interest. It does not include
other accounts, such as traditional checking or demand deposit
accounts that may earn interest, NOW accounts, money-market deposit
accounts, and Interest on Lawyers Trust Accounts (``IOLTAs'').
For more information about temporary FDIC insurance coverage of
transaction accounts, visit www.fdic.gov.
2. Notice to Depositors Protected Under the TAGP But Not Under the
Dodd-Frank Provision
As discussed above, through December 31, 2010, low-interest NOW
accounts and all IOLTAs are protected in full at IDIs participating in
the TAGP. These accounts, however, are not eligible for unlimited
deposit insurance coverage under the Dodd-Frank provision. Thus,
starting January 1, 2011, all NOW accounts and IOLTAs will be insured
under the general deposit insurance rules and will no longer be
eligible for unlimited protection. Because of the potential depositor
confusion about this change in the FDIC's treatment of NOWs and IOLTAs,
the final rule requires IDIs currently participating in the TAGP to
provide individual notices to depositors with NOW accounts currently
protected in full under the TAGP and IOLTAs that those accounts will
not be insured under the new temporary insurance category for
noninterest-bearing transaction accounts. IDIs are required to provide
such notice to applicable depositors by mail no later than December 31,
2010. To comply with this requirement, IDIs may use electronic mail for
depositors who ordinarily receive account information in this manner.
The notice may be in the form of a copy of the notice required to be
posted in IDI main offices, branches and on Web sites.
One commenter asked that the FDIC address certain specifics about
complying with this notice requirement. In response to that comment:
(1) As to joint accounts protected under the TAGP as of December 31,
2010, IDIs need only mail the notice to the address designated on the
account; (2) if depositors have more than one affected account, one
notice is sufficient if it identifies all the applicable accounts; and
(3) the notice mailed to affected depositors may be in the form of the
``posting'' notice in Sec. 330.16(c) (1) of the final rule.
Several commenters requested that this notice requirement either be
eliminated, limited to NOW account owners with balances over the SMDIA
or postponed until a date after the effective date of December 31,
2010. The FDIC has not adopted these suggestions because the Dodd-Frank
coverage provision becomes effective on December 31, 2010; thus,
starting January 1, 2011, low-interest NOW accounts and IOLTAs at IDIs
participating in the TAGP no longer will be eligible for unlimited
protection. As noted, the FDIC believes it is critical that depositors
understand the current deposit insurance rules in placing or retaining
funds at FDIC-insured institutions.
3. Notice To Sweep Account and Other Depositors Whose Coverage on
Noninterest-Bearing Transaction Accounts Is Affected by an IDI Action
Under the TAGP regulations, if an IDI offers an account product in
which funds are automatically transferred, or ``swept,'' from a
noninterest-bearing transaction account to another account (such as a
savings account) or bank product that does not qualify as a
noninterest-bearing transaction account, it must inform those customers
that, upon such transfer, the funds will no longer be fully protected
under the TAGP. As in the proposed rule, the final rule contains a
similar, though somewhat more expansive, requirement, mandating that
IDIs notify customers of any action that affects the deposit insurance
coverage of their funds held in noninterest-bearing transaction
accounts. This notice requirement is intended primarily to apply when
IDIs begin paying interest on demand deposit accounts, as will be
permitted beginning July 21, 2011, under section 627 of the Dodd-Frank
Act (discussed above). Thus, under the final rule's notice
requirements, if an IDI modifies the terms of its demand deposit
account agreement so that the account may pay interest, the IDI must
notify affected customers that the account no longer will be eligible
for full deposit insurance coverage as a noninterest-bearing
transaction account. Though such notifications are mandatory, the final
rule does not impose specific requirements regarding the form of the
notice. Rather, the FDIC expects IDIs to act in a commercially
reasonable manner and to comply with applicable state and federal laws
and regulations in informing depositors of changes to their account
agreements.
One commenter on the proposed rule recommended that the FDIC issue
additional guidance on the implementation of Section 343. The FDIC will
consider publishing such guidance if it seems helpful to do so.
IV. Regulatory Analysis and Procedure
A. Effective Date
Section 302 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (12 U.S.C. Section 4802(b)) requires, subject
to certain exceptions, that regulations imposing additional reporting,
disclosure or other requirements take effect on the first day of the
calendar quarter after publication of the final rule. One of the
statutory exceptions to this requirement is when the regulation is
required to take effect on a date other than on the first day of the
calendar quarter after publication of the final rule. The effective
date of Section 343 is December 31, 2010. Thus, the effective date of
the final rule is December 31, 2010.
B. Paperwork Reduction Act
In accordance with section 3512 of the Paperwork Reduction Act of
1995 (``PRA''), 44 U.S.C. 3501 et seq., an agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it
[[Page 69582]]
displays a currently valid Office of Management and Budget (``OMB'')
control number. This final rule contains disclosure requirements, some
of which implicate PRA as more fully explained below. In the proposed
rule, the Board announced that the TAGP will not continue beyond
December 31, 2010, thereby eliminating the need for an associated,
currently approved information collection. Consequently, the FDIC will
discontinue its information titled ``Transaction Account Guarantee
Extension,'' OMB No. 3064-0170.
The new disclosure requirements are contained in Sec.
330.16(c)(1), (2) and (3). More specifically, Sec. 330.16(c)(1)
requires that each IDI post a ``Notice of Changes in Temporary FDIC
Insurance Coverage for Transaction Accounts'' in the lobby of its main
office and domestic branches and, if it offers Internet deposit
services, on its Web site; Sec. 330.16(c)(2) requires IDIs currently
participating in the TAGP to provide individual notices to depositors
alerting them to the fact that low-interest NOWs and IOLTAs are not
eligible for unlimited coverage under the new temporary insurance
category for noninterest-bearing transaction accounts; and Sec.
330.16(c)(3) requires that IDIs notify customers of any action that
affects the deposit insurance coverage of their funds held in
noninterest-bearing transaction accounts.
The disclosure requirement in Sec. 330.16(c)(1) would normally be
subject to PRA. However, because the FDIC has provided the specific
text for the notice and allows for no variance in the language, the
disclosure is excluded from coverage under PRA because ``the public
disclosure of information originally supplied by the Federal government
to the recipient for the purpose of disclosure to the public is not
included'' within the definition of ``collection of information.'' 5
CFR 1320.3(c)(2). Therefore, the FDIC is not submitting the Sec.
330.16(c)(1) disclosure to OMB for review.
The disclosure requirement in Sec. 330.16(c)(2) provides that IDIs
currently participating in the TAGP provide individual notices to
affected depositors alerting them to the fact that low-interest NOWs
and IOLTAs will not be insured under the new temporary insurance
category for noninterest-bearing transaction accounts. The estimated
burden for this new disclosure requirement has been added to the burden
for an existing information collection, OMB No. 3064-0168, currently
entitled SWEEP Accounts: Disclosure of Deposit Status. In conjunction
with the revision of OMB No. 3064-0168, the FDIC has requested
permission to modify the title of the collection as more fully
explained below.
The disclosure requirement in Sec. 330.16(c)(3) expands upon a
similar, pre-existing requirement for sweep accounts offered by IDIs
participating in the TAGP. The existing disclosure requirement is
approved under OMB No. 3064-0168. The expanded disclosure requirement
is mandatory for all IDIs, although institutions retain flexibility
regarding the form of the notice. Therefore, in conjunction with
publication of this final rule, the FDIC, on September 30, 2010,
submitted to OMB a request to revise OMB No. 3064-0168 to reflect the
estimated burden associated with the expanded disclosure requirement
and to modify the title of the collection to ``Disclosure of Deposit
Status'' to more accurately reflect the broader application of the
requirement. This final rule results in no changes to the previously
submitted burden estimates.
The estimated burden for the new disclosure under Sec. Sec.
330.16(c)(2) and (3) is as follows:
Title: ``Disclosure of Deposit Status.''.
Affected Public: Insured depository institutions.
OMB Number: 3064-0168.
Estimated Number of Respondents:
Disclosure of action affecting deposit insurance coverage of funds in
noninterest-bearing transaction accounts--7,830.
Disclosure to NOW account and IOLTA depositors of change in insurance
category--6,249.
Frequency of Response:
Disclosure of action affecting deposit insurance coverage of funds in
noninterest-bearing transaction accounts--on occasion (average of once
per year per bank).
Disclosure to NOW account and IOLTA depositors of change in insurance
category--once.
Average Time per Response:
Disclosure of action affecting deposit insurance coverage of funds in
noninterest-bearing transaction accounts--8 hours.
Disclosure to NOW account and IOLTA depositors of change in insurance
category--8 hours.
Estimated Annual Burden:
Disclosure of action affecting deposit insurance coverage of funds in
noninterest-bearing transaction accounts--62,640 hours.
Disclosure to NOW account and IOLTA depositors of change in insurance
category--49,992 hours.
Total Annual Burden--112,632 hours.
C. Regulatory Flexibility Act
In accordance with section 3(a) of the Regulatory Flexibility Act
(``RFA''), 5 U.S.C. 603(a), the FDIC must publish an initial regulatory
flexibility analysis with this final rulemaking or certify that the
final rule does not have a significant economic impact on a substantial
number of small entities. For purposes of the RFA analysis or
certification, financial institutions with total assets of $175 million
or less are considered to be ``small entities.'' The FDIC hereby
certifies pursuant to 5 U.S.C. 605(b) that the final rule will not have
a significant economic impact on a substantial number of small
entities.
As of June 30, 2010, there were 4,294 IDIs that were considered
small entities. A total of 1,121 of these institutions do not
participate in the TAGP and receive additional insurance coverage under
the final rule. Currently 3,173 small IDIs participate in the TAGP.
Within this group of small institutions, 618, or 19.5 percent, did not
have TAGP eligible deposits as of the June 2010 Report of Condition and
Income for banks and the Thrift Financial Report for thrifts
(collectively, ``June 2010 Call Reports''); thus, they were not
required to pay the fee currently assessed for participation in the
TAGP. As to the remaining 2,555 small entities that had TAGP eligible
deposits as of the June 2010 Call Reports, they will no longer be
assessed a fee after the termination of the TAGP, and they will not be
charged a separate assessment for the new deposit insurance coverage.
The FDIC has determined that under the final rule, the economic
impact on small entities will not be significant for the following
reasons. Because there is no separate FDIC assessment for the insurance
of noninterest-bearing transaction accounts under section 343 of the
Dodd-Frank Act, small entities currently assessed fees for
participation in the TAGP will realize an average annual cost savings
of $2,373 per institution. All other small entities, whether they are
currently in the TAGP or not, will gain additional insurance coverage
with no direct cost. The FDIC asserts that the economic benefit of
additional insurance coverage and coverage extension until 2013
outweighs any future costs associated with the temporary insurance of
noninterest-bearing transaction accounts.
With respect to amending the disclosures related to Section 343,
the FDIC asserts that the economic impact on all small entities
participating in the program (regardless of whether they
[[Page 69583]]
currently pay a fee) is de minimis in nature and is outweighed by the
economic benefit of additional insurance coverage.
Accordingly, the final rule does not have a significant economic
impact on a substantial number of small entities.
D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the final rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Pub. L. 105-277, 112 Stat. 2681).
E. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the final
rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Act of 1996
(``SBREFA'') (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC
will file the appropriate reports with Congress and the General
Accounting Office so that the final rule may be reviewed.
F. Plain Language
Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113
Stat. 1338, 1471), requires the Federal banking agencies to use plain
language in all proposed and final rules published after January 1,
2000. The FDIC has sought to present the final rule in a simple and
straightforward manner, and has made revisions to the proposed rule in
response to commenter concerns seeking clarification of the application
of the deposit insurance rules.
List of Subjects in 12 CFR Part 330
Bank deposit insurance, Banks, Banking, Reporting and recordkeeping
requirements, Savings and loan associations, Trusts and trustees.
0
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation hereby amends part 330 of title 12 of the
Code of Federal Regulations as follows:
PART 330--DEPOSIT INSURANCE COVERAGE
0
1. The authority citation for part 330 continues to read as follows:
Authority: 12 U.S.C. 1813(1), 1813(m), 1817(i), 1818(q), 1819
(Tenth), 1820(f), 1821(a), 1822(c).
0
2. In Sec. 330.1, paragraph (r) is added to read as follows:
Sec. 330.1. Definitions.
* * * * *
(r) Noninterest-bearing transaction account means a deposit or
account maintained at an insured depository institution--
(1) With respect to which interest is neither accrued nor paid;
(2) On which the depositor or account holder is permitted to make
withdrawals by negotiable or transferable instrument, payment orders of
withdrawal, telephone or other electronic media transfers, or other
similar items for the purpose of making payments or transfers to third
parties or others; and
(3) On which the insured depository institution does not reserve
the right to require advance notice of an intended withdrawal.
* * * * *
0
3. New Sec. 330.16 is added to read as follows:
Sec. 330.16 Noninterest-bearing transaction accounts.
(a) Separate insurance coverage. From December 31, 2010, through
December 31, 2012, a depositor's funds in a ``noninterest-bearing
transaction account'' (as defined in Sec. 330.1(r)) are fully insured,
irrespective of the SMDIA. Such insurance coverage shall be separate
from the coverage provided for other accounts maintained at the same
insured depository institution.
(b) Certain swept funds. Notwithstanding its normal rules and
procedures regarding sweep accounts under 12 CFR 360.8, the FDIC will
treat funds swept from a noninterest-bearing transaction account to a
noninterest-bearing savings deposit account as being in a noninterest-
bearing transaction account.
(c) Disclosure and notice requirements. (1) Each depository
institution that offers noninterest-bearing transaction accounts must
post prominently the following notice in the lobby of its main office,
in each domestic branch and, if it offers Internet deposit services, on
its Web site:
NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION
ACCOUNTS
All funds in a ``noninterest-bearing transaction account'' are
insured in full by the Federal Deposit Insurance Corporation from
December 31, 2010, through December 31, 2012. This temporary
unlimited coverage is in addition to, and separate from, the
coverage of at least $250,000 available to depositors under the
FDIC's general deposit insurance rules.
The term ``noninterest-bearing transaction account'' includes a
traditional checking account or demand deposit account on which the
insured depository institution pays no interest. It does not include
other accounts, such as traditional checking or demand deposit
accounts that may earn interest, NOW accounts, money-market deposit
accounts, and Interest on Lawyers Trust Accounts (``IOLTAs'').
For more information about temporary FDIC insurance coverage of
transaction accounts, visit www.fdic.gov.
(2) Institutions participating in the FDIC's Transaction Account
Guarantee Program on December 31, 2010, must provide a notice by mail
to depositors with negotiable order of withdrawal accounts that are
protected in full as of that date under the Transaction Account
Guarantee Program and to depositors with Interest on Lawyer Trust
Accounts that, as of January 1, 2011, such accounts no longer will be
eligible for unlimited protection. This notice must be provided to such
depositors no later than December 31, 2010.
(3) If an institution uses sweep arrangements, modifies the terms
of an account, or takes other actions that result in funds no longer
being eligible for full coverage under this section, the institution
must notify affected customers and clearly advise them, in writing,
that such actions will affect their deposit insurance coverage.
Dated at Washington DC, this 9th day of November 2010.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010-28627 Filed 11-12-10; 8:45 am]
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