Final Rule Regarding Limited Amendment of the Temporary Liquidity Guarantee Program To Extend the Transaction Account Guarantee Program With Modified Fee Structure, 45093-45100 [E9-21034]
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45093
Rules and Regulations
Federal Register
Vol. 74, No. 168
Tuesday, September 1, 2009
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
Associate Director, Division of
Supervision and Consumer Protection,
(202) 898–8633 or larquette@fdic.gov;
Donna Saulnier, Manager, Assessment
Policy Section, Division of Finance,
(703) 562–6167 or dsaulnier@fdic.gov;
or Munsell St. Clair, Chief, Bank and
Regulatory Policy Section, Division of
Insurance and Research, (202) 898–8967
or mstclair@fdic.gov.
SUPPLEMENTARY INFORMATION
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 370
RIN 3064–AD37
Final Rule Regarding Limited
Amendment of the Temporary Liquidity
Guarantee Program To Extend the
Transaction Account Guarantee
Program With Modified Fee Structure
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: To assure an orderly phase
out of the Transaction Account
Guarantee (TAG) component of the
Temporary Liquidity Guarantee Program
(TLGP), the FDIC is extending the TAG
program for six months until June 30,
2010. Each insured depository
institution (IDI) that participates in the
extended TAG program will be subject
to increased fees during the extension
period for the FDIC’s guarantee of
qualifying noninterest-bearing
transaction accounts. However, each IDI
that is currently participating in the
TAG program will have an opportunity
to opt out of the extended TAG program.
Each IDI that is currently participating
in the TAG program must review and
update its disclosure postings and
notices to accurately reflect whether it
is participating in the extended TAG
program.
The Final rule becomes effective
on October 1, 2009.
FOR FURTHER INFORMATION CONTACT:
Christopher L. Hencke, Counsel, Legal
Division, (202) 898–8839 or
chencke@fdic.gov; A. Ann Johnson,
Counsel, Legal Division, (202) 898–3573
or aajohnson@fdic.gov; Robert C. Fick,
Counsel, Legal Division, (202) 898–8962
or rfick@fdic.gov; Joe DiNuzzo, Counsel,
Legal Division, (202) 898–7349 or
jdinuzzo@fdic.gov; Lisa D Arquette,
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DATES:
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I. Background
The FDIC established the TLGP in
October 2008 following a determination
of systemic risk by the Secretary of the
Treasury (after consultation with the
President) that was supported by
recommendations from the FDIC and
the Board of Governors of the Federal
Reserve System (Federal Reserve).1 The
TLGP is part of a coordinated effort by
the FDIC, the U.S. Department of the
Treasury (Treasury), and the Federal
Reserve to address unprecedented
disruptions in credit markets and the
resultant inability of financial
institutions to fund themselves and
make loans to creditworthy borrowers.
On October 23, 2008, the FDIC’s
Board of Directors (Board) authorized
the publication in the Federal Register
of an interim rule that outlined the
structure of the TLGP.2 Designed to
assist in the stabilization of the nation’s
financial system, the FDIC’s TLGP is
composed of two distinct components:
The Debt Guarantee Program (DGP) and
the TAG program. Pursuant to the DGP
the FDIC guarantees certain senior
unsecured debt issued by participating
entities. Pursuant to the TAG program
the FDIC guarantees all funds held in
qualifying noninterest-bearing
transaction accounts at participating
IDIs.
The TAG program was originally
scheduled to expire on December 31,
2009.3 Over 7,100 IDIs participate in the
1 See Section 13(c)(4)(G) of the Federal Deposit
Insurance Act (FDI Act), 12 U.S.C. 1823(c)(4)(G).
The determination of systemic risk authorized the
FDIC to take actions to avoid or mitigate serious
adverse effects on economic conditions or financial
stability, and the FDIC implemented the TLGP in
response. Section 9(a) Tenth of the FDI Act, 12
U.S.C. 1819(a)Tenth, provides additional authority
for the establishment of the TLGP.
2 73 FR 64179 (October 29, 2008). The Final Rule
was published in the Federal Register on November
26, 2008. 73 FR 72244 (November 26, 2008).
3 The other component of the TLGP, the DGP,
initially permitted participating entities to issue
FDIC-guaranteed senior unsecured debt until June
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TAG program, and the FDIC has
guaranteed an estimated $700 billion of
deposits in noninterest-bearing
transaction accounts that would not
otherwise be insured. Under the TAG
program each IDI that offers noninterestbearing transaction accounts is required
to post a conspicuous notice in the
lobby of its main office and each branch
office, and on its Web site, if applicable,
that discloses whether the IDI is
participating in the TAG program.4
Disclosures for participating IDIs must
contain a statement that indicates that
all noninterest-bearing transaction
accounts are fully guaranteed by the
FDIC.5 In addition, even those IDIs that
are not participating in the TAG
program are required to disclose that
deposits in noninterest-bearing
transaction accounts continue to be
insured for up to $250,000, pursuant to
the FDIC’s general deposit insurance
rules.6 At this time, IDIs participating in
the TAG program pay quarterly an
annualized 10 basis point assessment on
any deposit amounts that exceed the
existing deposit insurance limit.7
II. The Notice of Proposed Rulemaking
As with those entities participating in
the DGP, the FDIC is committed to
providing an orderly phase-out of the
TAG program for participating IDIs and
their depositors. To that end, the Board
authorized publication in the Federal
Register of a notice of proposed
rulemaking that presented two
30, 2009, with the FDIC’s guarantee for such debt
to expire on the earlier of the maturity of the debt
(or the conversion date, for mandatory convertible
debt) or June 30, 2012. To reduce market disruption
at the conclusion of the DGP and to facilitate the
orderly phase-out of the program, the Board issued
a final rule that generally extended for four months
the period during which participating entities could
issue FDIC-guaranteed debt. 74 FR 26521 (June 3,
2009). All IDIs and those other participating entities
that had issued FDIC-guaranteed debt on or before
April 1, 2009, were permitted to participate in the
extended DGP without application to the FDIC.
Other participating entities that were specifically
approved by the FDIC also could participate in the
extended DGP. At the same time, the FDIC extended
the expiration of the guarantee period from June 30,
2012 to December 31, 2012. As a result,
participating entities may issue FDIC-guaranteed,
debt through and including October 31, 2009, and
the FDIC’s guarantee for such debt expires on the
earliest of the mandatory convertible debt, the
stated date of maturity, or December 31, 2012.
4 12 CFR 370.5(h)(5).
5 Id.
6 Id.
7 12 CFR 370.7(c).
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alternatives for phasing out the TAG
program (the ‘‘Proposed Rule’’).8
The first alternative described in the
Proposed Rule, designated Alternative
A, would preserve the original
termination date for the TAG program.
For those IDIs that had not opted out of
the TAG program, under this option, the
FDIC’s guarantee of noninterest-bearing
transaction accounts would expire on
December 31, 2009.
The second alternative, designated
Alternative B, proposed the extension of
the TAG program through June 30, 2010,
six months beyond the current
expiration date of December 31, 2009.
Under this option, IDIs are provided an
opportunity to opt out of the extended
TAG program; if an IDI that is currently
participating in the program opts out,
Alternative B provided that the FDIC’s
guarantee would expire as scheduled on
December 31, 2009. To balance the
income generated from TAG fees with
potential losses associated with the TAG
program during the extension period,
the FDIC proposed to increase the
assessment rate to an annualized rate of
25 basis points (rather than the current
10 basis points) on the guaranteed
deposits in noninterest-bearing
transaction accounts. Under this option,
the increased fee would be collected
quarterly in the same manner provided
in existing regulations. Finally,
Alternative B recognized that some IDIs
would have to revise their disclosures
related to the TAG program. This would
be required only if their current
disclosures became inaccurate following
extension of the TAG program. For
example, under Alternative B, each IDI
that is participating in the extension
would need to revise its disclosures if
its existing disclosures indicated that
the FDIC’s guarantee will apply only
through December 31, 2009. Such an IDI
would need to revise its disclosures to
indicate that the guarantee will apply
through June 30, 2010.
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III. Comment Summary and Discussion
The FDIC requested comment on
every aspect of the Proposed Rule. In
addition, the FDIC posed specific
questions relating to proposed
Alternative B. The FDIC received 91
comments on the proposed rule. The
commenters included 60 insured
depository institutions, 13 industry
associations, 5 holding companies, 7
state government entities, 3 bankers’
banks, and 3 depositors. A summary of
the comments, including a summary of
the comments addressing the specific
questions, follows.
8 74
FR 31217 (June 30, 2009).
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A. Alternatives for Phasing Out TAG
Program
The FDIC sought information on
whether commenters preferred
Alternative A or Alternative B (or some
other alternative) as the most
appropriate means of insuring an
orderly phase-out of the FDIC’s TAG
program. The FDIC received 15
comments expressly supporting
Alternative A and 44 comments
expressly supporting Alternative B. A
summary of the comments the FDIC
received in both of those categories
follows.
Comments Favoring Alternative A
The FDIC received 15 comments
expressly supporting Alternative A.
Commenters supporting Alternative A
generally shared the opinion that
financial market volatility and risk
aversion have moderated since the FDIC
implemented the TAG program in the
fall of 2008. These commenters
generally noted that recent economic
and financial market improvements,
such as greater access to debt and
capital markets and increased depositor
and consumer confidence in the
banking system, have eliminated the
need for the TAG program.
A small number of commenters
supporting Alternative A expressed
concern that an extension of the TAG
program would burden healthy
institutions that elect to opt out. An
insured depository institution electing
to opt out of the extended TAG program
would be required to disclose to
customers that balances in its noninterest-bearing transaction accounts
exceeding the $250,000 limit are no
longer guaranteed under the TAG
program. Several commenters expressed
concern that such disclosures would
result in a loss of depositor
relationships. Similarly, a small number
of the comments favoring Alternative A
suggested that extending the TAG
program with an opt-out election as
proposed under Alternative B would
effectively punish institutions electing
to opt out and give an unfair
competitive advantage to those
institutions that elect to remain in the
TAG program through the extended
period. Specifically, these commenters
expressed concern that customers
would inaccurately perceive a bank’s
election to opt out of the TAG program
extension as an indication that the noninterest bearing transaction account
balances exceeding $250,000 at that
bank are at risk. To avoid customer
confusion and any unfair competitive
advantage being created by an extension
of the TAG program, these commenters
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recommended that the FDIC allow the
TAG program to phase out under
Alternative A.
Comments Favoring Alternative B
The FDIC received 44 comments
expressly supporting Alternative B as
the more appropriate method of phasing
out the TAG program. Commenters that
supported Alternative B generally
expressed a belief that, despite vast
improvement since the fall of 2008, the
economy has not yet stabilized to the
point that depositors would be
comfortable having large uninsured or
non-guaranteed transaction balances on
deposit with smaller insured depository
institutions or community banks. A
number of comments the FDIC received
from community banks and state and
national banking industry associations
expressed concerns that regions of the
country most affected by the recent
financial and economic turmoil would
not see an improvement in depositor
confidence within the phase-out time
period proposed in Alternative A. These
commenters also emphasized that an
extension of the TAG program is
important to the country’s continuing
economic recovery.
The FDIC also received several
comments expressing concern that
expiration of the TAG program under
Alternative A would result in a
significant shift in large business
deposits and public deposits away from
community banks. Given the current
economic environment, depositors with
large balances in non-interest bearing
transaction accounts could be motivated
to move their deposits away from
smaller insured depository institutions
for the perceived security of a larger
‘‘too big to fail’’ insured depository
institution if the TAG program were to
expire. A depletion of large noninterestbearing transaction account balances
would significantly harm community
banks and smaller insured depository
institutions by putting them at risk of
becoming troubled, especially in those
regions of the country still recovering
economically.
In addition, the FDIC received several
comments concerning the effect that
recent media coverage has had on the
public’s perception of the banking
industry. As one community bank
noted, news stories covering the current
problems with commercial real estate
and bank failures have caused the
business community and many
depositors to be very concerned about
the safety of their money. The
commenter recommended adopting
Alternative B as an appropriate phase
out for the TAG program because it
would counter such negative media
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coverage and would help alleviate the
concerns of large businesses and public
entities about the safety of their noninterest bearing transaction accounts
that exceed $250,000.
For several reasons the FDIC believes
that the better alternative is to extend
the TAG program beyond December 31,
2009. The FDIC, like some commenters,
has observed that significant
improvement in the financial markets
has been made since last fall. However,
the FDIC believes that there are still
significant portions of the banking
industry, particularly in regions still
suffering the most from recent economic
turmoil, that will benefit of the TAG
program beyond the end of this year.
Progress toward a stable, fullyfunctioning financial marketplace has
been made, and the FDIC believes that
the TAG program, as well as the DGP,
was instrumental in achieving these
improvements. However, terminating
the TAG program too quickly could
significantly impair or erase that
progress. Moreover, all currently
participating entities can choose
whether they will participate in the
extension of the TAG program. The
FDIC believes that any competitive
disadvantage that may be incurred by
choosing not to participate is
outweighed by the help the program
provides in stabilizing the financial
markets and restoring public confidence
in the economy and the banking
industry.
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B. Specific Questions Presented in the
NPR
In addition to requesting information
on whether commenters preferred
Alternative A or Alternative B as the
most appropriate means of ensuring an
orderly phase out of the FDIC’s TAG
program, the FDIC also posed specific
questions relating to proposed
Alternative B. The specific questions, as
well as a summary and discussion of the
comments the FDIC received addressing
each question, follows.
Question #1: If the TAG program is
extended, is six months an appropriate
time for the extension? If not, what
would be considered an appropriate
extension period for the TAG program?
The FDIC received 72 comments
supporting an extension of the TAG
program for at least six months.
Commenters supporting a six-month
extension of the TAG program generally
indicated that a six-month period
presented an appropriate timetable for
phasing out the TAG program. One
industry association noted that certain
risk spreads have returned to pre-crisis
levels, suggesting that the worst of the
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market turmoil has passed. However,
that commenter also noted that some
areas of the country continue to be
affected by high unemployment rates, a
decline in business activity, and
increases in bank credit delinquencies
and losses. The commenter supported a
six-month extension as appropriate
given the lingering financial threats in
many local markets.
The FDIC also received 45 comments
(including some of the comments that
also expressly favored Alternative B)
that recommended extending the TAG
program for one-year (through December
31, 2010). A number of community
banks cited various forecasts predicting
that the U.S. economy will continue to
face significant financial and economic
pressures through 2009. Several of the
comments noted that the TAG program
has helped preserve the franchise values
of banking institutions both through
customer retention and reduction of the
likelihood of bank deposit runs. A
number of community banks also
commented that the proposed six-month
extension would be too short a time
period to be of value for many insured
depository institutions given the
proposed 25 basis point fee.
Additionally, several commenters
recommended extending the TAG
program through the year 2013.
Generally, these commenters advocated
extending the TAG program to
December 31, 2013 because it would
match the TAG program’s non-interest
bearing transaction account guarantee
time period with the time period
established for the FDIC’s $250,000
deposit insurance limit for individual
accounts.
The FDIC does not disagree with
projections that the economy will
continue to face pressures through the
remainder of this year. In fact, that
premise is one of the bases for the
decision to extend the TAG program.
However, the FDIC does not agree that
the TAG program should be extended
for one year or longer. The TAG
program, like the DGP, was always
intended to be temporary. The FDIC
believes that a six-month extension of
the TAG program will provide the
optimum balance between continuing to
provide support to those institutions
most affected by the recent financial and
economic turmoil and phasing out the
program in an orderly manner.
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Question #2: In order to balance the
income generated from TAG fees with
potential losses associated with the TAG
program during the extension period,
the FDIC has proposed to charge an
annualized rate of 25 basis points
(rather than the current 10 basis points)
on deposits in non-interest-bearing
transaction accounts. Is this increase in
fees appropriate? If not, what fee should
be charged by the FDIC to cover
potential losses caused by an extension
of the TAG program?
A large number of commenters
addressed the issue of whether a
participation fee of 25 basis points on
deposits in non-interest-bearing
transaction accounts is appropriate for
the proposed TAG program extension
under Alternative B. While a few
commenters were in favor of the
proposed 25 basis point fee, a majority
of the comments favored a fee less than
25 basis points.
The FDIC received 20 comments
supporting the extension of the current
fee structure (10 basis points) to cover
the six-month extension of the TAG
program as proposed in Alternative B.
Some of these commenters raised
concerns that a 25 basis-point fee for a
six-month extension period is too high.
One community bank expressed the
belief that increasing the fees charged
for the TAG program would decrease
profitability and capital levels of FDIC
member banks at a time when all banks
are struggling to improve profitability.
One commenter noted that while the
assessment needs to be priced fairly, it
is also important not to make the fee so
expensive that some financial
institutions cannot participate. One
community bank commented that
maintaining the 10 basis-point fee
would encourage greater participation
from healthier banks and could
potentially generate greater revenue if
collected during a time of a
strengthening economy.
The FDIC also received 16 comments
supporting a participation fee between
10 basis points and 25 basis points.
These commenters generally shared the
concerns of those who supported
extending the current 10 basis-point fee,
that is, they felt that a fee of 25 basis
points is too high. However,
commenters supporting a fee between
10 basis points and 25 basis points also
recognized the increased costs the TAG
program poses to the FDIC. Several of
these commenters noted that the fee
associated with the extension of the
TAG program should be based on the
costs of the program for the FDIC. A
majority of these comments
recommended that an appropriate
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participation fee for the TAG program
extension would fall within the range of
15 to 20 basis points based on the costs
of the TAG program to the FDIC. A
small number of comments from
insured depository institutions stated
that they would still participate in the
TAG extension program if the
participation fee were increased to 25
basis points.
The FDIC received 23 comments
recommending that the FDIC adopt a
risk-based approach to establish the
participation fee for the TAG program
extension. Specifically, these
commenters suggested establishing fees
that are commensurate with the risk
profile of the participating bank as
determined under the FDIC’s risk-based
assessment system for deposit
insurance. One community bank
commented that implementing a riskbased approach would encourage
broader participation in the TAG
program extension by the vast majority
of banks that fall within Risk Category
I and II, but more fully assess the cost
per deposit at banks placed in higher
Risk Categories. A second community
bank commented that a risk-based
approach to assessing the fee for
participation in the TAG program
extension would ensure that the banks
that pose the most risk to the fund
would pay the most for participation in
the TAG program extension.
The cost of providing guarantees for
noninterest-bearing transaction accounts
at failed IDIs since the inception of the
TAG program already has exceeded
projected total TAG program revenue
through the end of December 2009.
Further, the FDIC projects additional
failures of IDIs through the end of the
year that will result in overall TAG
losses that are expected to considerably
exceed revenues. (Revenues generated
from fees associated with the DGP are
expected to cover TAG losses as well as
losses incurred by the FDIC under the
DGP.) In an effort to balance the income
generated from TAG fees with potential
losses associated with the TAG program
during the extension period, the FDIC
believes that the base fee for the
guarantee should be increased.
The FDIC finds merit in the proposals
that a risk-based system be
implemented. Switching to a risk-based
fee system will allow the FDIC to align
the fees charged under the TAG program
to the risks posed by the institutions
that participate in the program. Those
institutions that pose greater risk will be
charged higher fees to reflect that risk
and will thus bear more fully the cost
from the extension of the program.
Additionally, the higher overall fees
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will better cover the potential costs of
the program.
Given the short duration of the TAG
extension and the limited timeframe for
implementing a risk-based fee system,
the FDIC will rely on the general
framework it has in place for the
quarterly, risk-based premium system.
Participants in the extended program
will be charged a fee based on the risk
category to which they are assigned for
purposes of the risk-based premium
system. The minimum annualized fee
will be 15 basis points (rather than the
current 10 basis points) on deposits in
noninterest-bearing transaction
accounts.
Question #3: Should the FDIC reduce
the maximum interest rate for NOW
accounts that qualify for the FDIC’s
guarantee under the TAG program?
Would placing an interest rate limit on
NOW accounts of no higher than 0.25
percent be appropriate? If not, what
would be considered an appropriate rate
limitation for NOW accounts?
The FDIC received 28 comments
addressing the question of whether to
reduce the maximum interest rate for
NOW accounts that qualify for the TAG
program during the proposed extension
period under Alterative B. The FDIC
received 12 comments expressly
supporting a reduction of the maximum
interest rate and 16 comments opposing
a reduction.
One community bank that favored a
reduction in the maximum interest rate
for NOW accounts stated that dropping
the maximum interest rate to a range of
35 to 40 basis points would more
closely match current market
alternatives. However, the commenter
also raised concerns that a reduction of
the interest rate ceiling to 25 basis
points might encourage larger
institutions to grab market share by
pricing at higher levels with the implied
security of government backing. On the
other hand, another community bank
expressed the opinion that reducing the
interest rate ceiling on qualifying NOW
accounts under the extended TAG
program to 25 basis points would have
no effect on the bank’s customers.
Similarly, a different community bank
argued that a reduction in the maximum
interest rate for NOW accounts is
reasonable given that most money
market rates have moved lower since
the TAG program was introduced in the
fall of 2008. However, this commenter
also pointed out that NOW account
customers are concerned with safety of
principal and immediate funds
availability rather than the maximum
interest rate of the account.
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In opposition to a reduction in the
maximum interest rate limit for NOW
accounts, the FDIC received several
comments that expressed concern that a
reduction in the maximum interest rate
would confuse customers about the
guarantees available under the TAG
program extension.
A number of other commenters
pointed out that a reduction in the
maximum interest limit for NOW
accounts would require participating
banks in the TAG program extension to
make costly disclosures to existing
customers. Similarly, one national
banking industry association
commented that the potential disruption
to NOW account customers and the cost
of adjusting bank systems and customer
agreements argues against altering the
maximum interest rate limitation. A
second national banking industry
association supported not changing the
maximum interest rate on NOW
accounts because many institutions do
not consider the interest rates on NOW
accounts to be as sensitive as other
deposit rates, and NOW account rates
do not vary as the market fluctuates.
The cost and confusion that could
potentially accompany such a reduction
would be disruptive for both
participating banks and NOW account
customers.
The FDIC agrees with many of the
concerns raised by commenters who
support no change to the maximum
permissible interest rate for qualifying
NOW accounts. The FDIC believes that
there would be a potential for customer
confusion about the availability of the
guarantee if the maximum interest rate
is changed for the remainder of the
program. Each participating institution
would also have to revise or adjust its
banking systems, customer agreements,
and disclosures to reflect the change.
The burden of making these changes,
the potential for customer confusion,
and the relatively short period of time
of the extension (i.e., six months) argue
against making such a change.
Therefore, the FDIC has decided not to
change the maximum interest rate limit
for NOW accounts. The term
‘‘noninterest-bearing transaction
account’’ will continue to include only
those NOW accounts with interest rates
that are no higher than 0.50 per cent as
further described in 12 CFR 370.2(h).
IV. The Final Rule
In general, the final rule amends
various provisions in 12 CFR Part 370
to (1) Extend for six months the
expiration date of the TAG program, (2)
increase the assessment fee that applies
during that six month period from 10
basis points to either 15 basis points, 20
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basis points, or 25 basis points
depending on the entity’s Risk Category,
(3) provide an opportunity for currently
participating entities to opt out of the
TAG program effective on January 1,
2010, and (4) provide a sample
disclosure statement for those entities
that elect to opt out.
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Six-Month Extension
The final rule extends the TAG
program for six months; the TAG
program will now expire on June 30,
2010. However, each participating entity
will have an opportunity to opt out of
the extension. While there is evidence
that confidence in the banking system
and the economy in general is
improving, some additional time is
needed in order to provide an orderly
phase-out of the program.
Increased Assessment
The final rule imposes an increased
assessment and a risk-based fee system
on those entities participating in the
extension of the TAG program.
Beginning on January 1, 2010, a
participating entity that does not opt out
of the transaction account guarantee
program in accordance with
§ 370.5(c)(2) shall pay quarterly an
annualized fee in accordance with its
respective Risk Category rating. All
institutions that are assigned to Risk
Category I of the risk-based premium
system will be charged an annualized
fee of 15 basis points on their deposits
in noninterest-bearing transactions
accounts for the portion of the quarter
in which they are assigned to Risk
Category I. Likewise, institutions in Risk
Category II will be charged an
annualized fee of 20 basis points, and
institutions in either Risk Category III or
Risk Category IV will be charged an
annualized fee of 25 basis points for
those portions of the quarter in which
they are assigned to the various risk
categories. The fee will continue to be
collected quarterly in the same manner
as provided for in existing regulations.
The fee will apply only to deposit
amounts that exceed the existing
deposit insurance limit of $250,000, as
reported on the quarterly Call Report in
any noninterest-bearing transaction
accounts (as defined in § 370.2(h)),
including any such amounts swept from
a noninterest bearing transaction
account into an noninterest bearing
savings deposit account as provided in
§ 370.4(c).
Opt-Out
Although the final rule extends the
expiration date of the TAG program for
six months, it also provides each
participating entity the opportunity to
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16:24 Aug 31, 2009
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opt out of the program effective on
January 1, 2010. The option to opt out
is a one-time option, and any decision
to opt out is irrevocable. In order to
exercise the option to opt out, a
participating entity must submit an email to dcas@fdic.gov no later than
November 2, 2009 that meets all of the
requirements of 12 CFR 370.5(g)(2). The
opt-out provision allows each
participating entity the opportunity to
decide whether participation in the
extension of the TAG program is
desirable based upon on each entity’s
condition and business plan. In order to
ensure that an institution’s depositors
and the public are aware of an entity’s
decision to opt out of the extension, the
final rule also includes a sample
disclosure statement for currently
participating institutions that opt out of
the extension.
IV. Regulatory Analysis and Procedure
A. Regulatory Flexibility Act
Under the Regulatory Flexibility Act
(RFA), the FDIC must prepare a final
regulatory flexibility analysis in
connection with the promulgation of a
final rule,9 or certify that the final rule
will not have a significant economic
impact on a substantial number of small
entities.10 For purposes of the RFA
analysis or certification, a ‘‘small entity’’
is any financial institution with total
assets of $175 million or less. For the
reasons discussed below, the FDIC
certifies that the final rule will not have
a significant economic impact on a
substantial number of small entities.
Currently 7,063 IDIs participate in the
TAG program, of which approximately
3,688, or 52.2 percent are small entities.
Within the universe of small
institutions, 1,011, or 27.4 percent did
not have TAG eligible deposits as of the
June 2009 Report of Condition and
Income for banks and the Thrift
Financial Report for thrifts (collectively,
‘‘June 2009 Call Reports’’); thus, they
were not required to pay the 10 basis
point fee currently assessed for
participation in the TAG program.
Assuming these IDIs do not change
circumstances and do not opt out, there
would be no impact on this group as a
result of the fee increase. As to the
remaining 2,677 small entities that had
TAG eligible deposits as of the June
2009 Call Reports, they have the
opportunity to opt out of the extended
TAG program. However, assuming these
2,677 small entities remain in the TAG
program, the fee increase could have
some impact on a substantial number of
95
U.S.C. 604.
U.S.C. 605(b).
10 5
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45097
the remaining participants in the TAG
program during the extension period.
Nevertheless, the FDIC has
determined that, the economic impact of
the Rule on small entities will not be
significant for the following reasons.
With respect to the fee increase from 10
basis points to 15, 20 or 25 basis points
depending upon the institution’s risk
rating, based on figures from the June
2009 Call Reports, the average fee
increase for IDIs participating in the
extended TAG program would be $681
for the 6 month extension period,
representing 8.2 percent of the average
net operating income before taxes for
the six months through June 2009.
Moreover, the FDIC asserts that the
economic benefit of the six-month
extension would outweigh the increased
fee associated with participation in that
the small entities would benefit from
the extended time period within which
to phase out the TAG program as
financial markets continue to stabilize.
With respect to amending the
disclosures related to the TAG program,
the FDIC asserts that the economic
impact on all small entities participating
in the program (regardless of whether
they pay a fee) would be de minimis in
nature and would be outweighed by the
economic benefit of the six-month
extension.
Accordingly, the Rule would not have
a significant economic impact on a
substantial number of small entities.
B. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (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 displays a currently valid OMB
control number. This Final Rule
implements Alternative B of the Notice
of Proposed Rulemaking, which extends
the TAG program through June 30, 2010.
Alternative B included disclosure and
reporting requirements which are
retained in the Final Rule. Specifically,
section 370.5(c)(2) allows IDIs
participating in the TAG program on
October 31, 2009, to opt out of the
program effective January 1, 2010. In
addition, section 370.5(g)(2)(vi) requires
institutions that opt out of the TAG
program to disclose to customers that
funds in excess of the standard
maximum deposit insurance amount
will no longer be guaranteed under the
TAG program after December 31, 2009.
Finally, pursuant to section
370.5(h)(5)(i), institutions participating
in the TAG program extension would be
required to update any existing
disclosures regarding participation in
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the program to reflect the extension of
coverage through June 30, 2010.
In the Notice of Proposed
Rulemaking, the FDIC expressed an
intention to amend its existing TLGPrelated information collection (OMB No.
3064–0166) to incorporate the burden
associated with the TAG program
extension. However, a request for
normal clearance of the TLGP
information collection, which was
initially approved under emergency
clearance procedures, was pending
before OMB at the time of publication
of the Notice of Proposed Rulemaking.
To avoid concurrent requests on the
same information collection, the FDIC
instead, on July 1, 2009, submitted to
OMB a request for clearance of the
reporting and disclosure requirements
in Alternative B as a separate, new
information collection. That request is
still pending.
The proposed rule document for the
TAG program extension requested
comment on the estimated paperwork
burden. Although, as previously
discussed, a number of comments were
received on substantive aspects of the
proposal, none of the comments
addressed the estimated paperwork
burden. Therefore, the FDIC has not
altered its initial burden estimates. The
estimated burden for the reporting and
disclosure requirements, as set forth in
the Notice of Proposed Rulemaking and
the Final Rule, is as follows:
Title: Temporary Liquidity Guarantee
Program.
OMB Number: 3064–0166.
Affected public: Insured depository
institutions.
Estimated Number of Respondents:
Opt out of TAG program/Disclosure to
customers of discontinuation or TAG
program guarantee—3,555.
Disclosure to customers of TAG
program extension—3,554.
Frequency of Response:
Opt out of TAG program/Disclosure to
customers of discontinuation of TAG
program guarantee—once.
Disclosure to customers of TAG
program extension—once.
Average time per response:
Opt out of TAG program/Disclosure to
customers of discontinuation of TAG
program guarantee—1 hour.
Disclosure to customers of TAG
program extension—1 hour.
Estimated Annual Burden:
Opt out of TAG program/Disclosure to
customers of discontinuation of TAG
program guarantee—3,555 hours.
Disclosure to customers of TAG
program extension—3,554 hours.
Total annual burden—7,109 hours.
Comment Request: The FDIC has an
ongoing interest in public comments on
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16:24 Aug 31, 2009
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its collections of information, including
comments on: (1) Whether this
collection of information is necessary
for the proper performance of the FDIC’s
functions, including whether the
information has practical utility; (2) the
accuracy of the estimates of the burden
of the information collection, including
the validity of the methodologies and
assumptions used; (3) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (4)
ways to minimize the burden of the
information collection on respondents,
including through the use of automated
collection techniques or other forms of
information technology. Comments may
be submitted to the FDIC by any of the
following methods: By mail to the
Executive Secretary, Federal Deposit
Insurance Corporation, 550 17th Street,
NW., Washington, DC 20429; by FAX at
(202) 898–8788; or by e-mail to
comments@fdic.gov. All comments
should refer to ‘‘Transaction Account
Guarantee Program Extension.’’ Copies
of 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 10235, Washington, DC 20503.
C. Use of Plain Language
Section 722 of the Gramm-LeachBliley 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. In issuing the proposed rule, the
FDIC solicited comments on how to
make the proposed regulation easier to
understand. No comments addressing
that issue were received.
D. The Treasury and General
Government Appropriations Act, 1999—
Assessment of Federal Regulations and
Policies on Families
The FDIC has determined that the
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 and Fairness Act
The Office of Management and Budget
(OMB) has determined that this Final
Rule is not a ‘‘major rule’’ within the
meaning of the relevant sections of the
Small Business Regulatory Enforcement
and Fairness Act of 1996 (SBREFA), 5
U.S.C. 801 et seq. As required by
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Fmt 4700
Sfmt 4700
SBREFA, the FDIC will file the
appropriate reports with Congress and
the Government Accountability Office
so that the Rule may be reviewed.
List of Subjects in 12 CFR Part 370
Banks, Banking, Bank deposit
insurance, Holding companies, National
banks, Reporting and recordkeeping
requirements, Savings associations.
■ For the reasons discussed in the
preamble, the Federal Deposit Insurance
Corporation amends 12 CFR part 370 as
follows:
PART 370—TEMPORARY LIQUIDITY
GUARANTEE PROGRAM
1. The authority citation for part 370
continues to read as follows:
■
Authority: 12 U.S.C. 1813(l), 1813(m),
1817(i), 1818, 1819(a)(Tenth), 1820(f),
1821(a), 1821(c), 1821(d), 1823(c)(4).
2. Amend § 370.2 as follows:
a. Revise paragraph (g); and
■ b. Revise paragraph (h)(4); to read as
follows:
■
■
§ 370.2
Definitions.
*
*
*
*
*
(g) Participating entity. The term
‘‘participating entity’’ means with
respect to each of the debt guarantee
program and the transaction account
guarantee program,
(1) An eligible entity that became an
eligible entity on or before December 5,
2008 and that has not opted out, or
(2) An entity that becomes an eligible
entity after December 5, 2008, and that
the FDIC has allowed to participate in
the program, except that a participating
entity that opts out of the transaction
account guarantee program in
accordance with § 370.5(c)(2) ceases to
be a participating entity in the
transaction account guarantee program
effective on January 1, 2010.
(h) * * *
(4) Notwithstanding paragraph (h)(3)
of this section, a NOW account with an
interest rate above 0.50 percent as of
November 21, 2008, may be treated as
a noninterest-bearing transaction
account for purposes of this part, if the
insured depository institution at which
the account is held reduces the interest
rate on that account to 0.50 percent or
lower before January 1, 2009, and
commits to maintain that interest rate at
no more than 0.50 percent at all times
during the period in which the
institution is participating in the
transaction account guarantee program.
*
*
*
*
*
■ 3. Amend section 370.4 by revising
paragraph (a) to read as follows:
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§ 370.4 Transaction Account Guarantee
Program.
(a) In addition to the coverage
afforded to depositors under 12 CFR
Part 330, a depositor’s funds in a
noninterest-bearing transaction account
maintained at a participating entity that
is an insured depository institution are
guaranteed in full (irrespective of the
standard maximum deposit insurance
amount defined in 12 CFR 330.1(n))
from October 14, 2008 through:
(1) The date of opt-out, in the case of
an entity that opted out prior to
December 5, 2008;
(2) December 31, 2009, in the case of
an entity that opts out effective on
January 1, 2010; or
(3) June 30, 2010, in the case of an
entity that does not opt out.
*
*
*
*
*
■ 4. Amend section 370.5 as follows:
■ a. Revise paragraph (c);
■ b. Revise paragraph (g); and
■ c. Revise paragraph (h)(5), to read as
follows:
§ 370.5
Participation.
mstockstill on DSKH9S0YB1PROD with RULES
*
*
*
*
*
(c) Opt-out and opt-in options.
(1) From October 14, 2008 through
December 5, 2008, each eligible entity is
a participating entity in both the debt
guarantee program and the transaction
account guarantee program, unless the
entity opts out. No later than 11:59 p.m.,
Eastern Standard Time, December 5,
2008, each eligible entity must inform
the FDIC if it desires to opt out of the
debt guarantee program or the
transaction account guarantee program,
or both. Failure to opt out by 11:59 p.m.,
Eastern Standard Time, December 5,
2008 constitutes a decision to continue
in the program after that date. Prior to
December 5, 2008 an eligible entity may
opt in to either or both programs by
informing the FDIC that it will not opt
out of either or both programs.
(2) Any insured depository institution
that is participating in the transaction
account guarantee program may elect to
opt out of such program effective on
January 1, 2010. Any such election to
opt-out must be made in accordance
with the procedures set forth in
paragraph (g)(2) of this section. An
election to opt out once made is
irrevocable.
*
*
*
*
*
(g) Procedures for opting out.
(1) Except as provided in paragraph
(g)(2) of this section, the FDIC will
provide procedures for opting out and
for making an affirmative decision to
opt in using FDIC’s secure e-business
website, FDICconnect. Entities that are
not insured depository institutions will
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16:24 Aug 31, 2009
Jkt 217001
select and solely use an affiliated
insured depository institution to submit
their opt-out election or their affirmative
decision to opt in.
(2) Pursuant to paragraph (c)(2) of this
section a participating entity may opt
out of the transaction account guarantee
program effective on January 1, 2010 by
submitting to the FDIC on or before
11:59 p.m., Eastern Standard Time, on
November 2, 2009 an email conveying
the entity’s election to opt out. The
subject line of the email must include:
‘‘TLGP Election to Opt Out—Cert. No.
____.’’ The email must be addressed to
dcas@fdic.gov and must include the
following:
(i) Institution Name;
(ii) FDIC Certificate number;
(iii) City, State, ZIP;
(iv) Name, Telephone Number and
Email Address of a Contact Person;
(v) A statement that the institution is
opting out of the transaction account
guarantee program effective January 1,
2010; and
(vi) Confirmation that no later than
November 16, 2009 the institution will
post a prominent notice in the lobby of
its main office and each domestic
branch and, if it offers Internet deposit
services, on its website clearly
indicating that after December 31, 2009,
funds held in noninterest-bearing
transaction accounts will no longer be
guaranteed in full under the Transaction
Account Guarantee Program, but will be
insured up to $250,000 under the FDIC’s
general deposit insurance rules.
(h) * * *
(5) Each insured depository
institution that offers noninterestbearing transaction accounts must post
a prominent notice in the lobby of its
main office, each domestic branch and,
if it offers Internet deposit services, on
its website clearly indicating whether
the institution is participating in the
transaction account guarantee program.
If the institution is participating in the
transaction account guarantee program,
the notice must state that funds held in
noninterest-bearing transactions
accounts at the entity are guaranteed in
full by the FDIC.
(i) These disclosures must be
provided in simple, readily
understandable text. Sample disclosures
are as follows:
For Participating Institutions
[Institution Name] is participating in
the FDIC’s Transaction Account
Guarantee Program. Under that
program, through June 30, 2010, all
noninterest-bearing transaction
accounts are fully guaranteed by the
FDIC for the entire amount in the
account. Coverage under the
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45099
Transaction Account Guarantee
Program is in addition to and separate
from the coverage available under the
FDIC’s general deposit insurance rules.
For Participating Institutions That Elect
To Opt Out of the Extended Transaction
Account Guaranty Program Effective on
January 1, 2010
Beginning January 1, 2010 [Institution
Name] will no longer participate in the
FDIC’s Transaction Account Guarantee
Program. Thus, after December 31,
2009, funds held in noninterest-bearing
transaction accounts will no longer be
guaranteed in full under the
Transaction Account Guarantee
Program, but will be insured up to
$250,000 under the FDIC’s general
deposit insurance rules.
For Non-Participating Institutions
[Institution Name] has chosen not to
participate in the FDIC’s Transaction
Account Guarantee Program. Customers
of [Institution Name] with noninterestbearing transaction accounts will
continue to be insured for up to
$250,000 under the FDIC’s general
deposit insurance rules.
(ii) If the institution uses sweep
arrangements or takes other actions that
result in funds being transferred or
reclassified to an account that is not
guaranteed under the transaction
account guarantee program, for
example, an interest-bearing account,
the institution must disclose those
actions to the affected customers and
clearly advise them, in writing, that
such actions will void the FDIC’s
guarantee with respect to the swept,
transferred, or reclassified funds.
*
*
*
*
*
■ 5. Amend section 370.7 by revising
paragraph (c) to read as follows:
§ 370.7 Assessments for the Transaction
Account Guarantee Program.
*
*
*
*
*
(c) Amount of assessment.
(1) Except as provided in paragraph
(c)(2) of this section any eligible entity
that does not opt out of the transaction
account guarantee program shall pay
quarterly an annualized 10 basis point
assessment on any deposit amounts
exceeding the existing deposit insurance
limit of $250,000, as reported on its
quarterly Consolidated Reports of
Condition and Income, Thrift Financial
Report, or Report of Assets and
Liabilities of U.S. Branches and
Agencies of Foreign Banks (each, a ‘‘Call
Report’’) in any noninterest-bearing
transaction accounts (as defined in
§ 370.2(h)), including any such amounts
swept from a noninterest bearing
transaction account into a noninterest
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Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 / Rules and Regulations
bearing savings deposit account as
provided in § 370.4(c).
(2) Beginning on January 1, 2010, each
participating entity that does not opt out
of the transaction account guarantee
program in accordance with
§ 370.5(c)(2) shall pay quarterly a fee
based upon its Risk Category rating. An
entity’s Risk Category is determined in
accordance with the FDIC’s risk-based
premium system described in 12 CFR
Part 327. The amount of the fee for each
such entity is equal to the annualized,
TAG assessment rate for the entity
multiplied by the amount of the
deposits held in noninterest-bearing
transaction accounts (as defined in
§ 370.2(h) and including any amounts
swept from a noninterest bearing
transaction account into an noninterest
bearing savings deposit account as
provided in § 370.4(c)) that exceed the
existing deposit insurance limit of
$250,000, as reported on the entity’s
most recent quarterly Call Report. The
annualized TAG assessment rates are as
follows:
(i) 15 basis points, for the portion of
each quarter in which the entity is
assigned to Risk Category I;
(ii) 20 basis points, for the portion of
each quarter in which the entity is
assigned to Risk Category II; and
(iii) 25 basis points, for the portion of
each quarter in which the entity is
assigned to either Risk Category III or
Risk Category IV.
(3) The assessments provided in this
paragraph (c) shall be in addition to an
institution’s risk-based assessment
imposed under Part 327.
*
*
*
*
*
By order of the Board of Directors.
Dated at Washington, DC, this 26th day of
August 2009.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9–21034 Filed 8–31–09; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 23
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[Docket No. CE294; Special Conditions No.
23–234–SC]
Special Conditions: Cessna Aircraft
Company, Model 525C; Single Point
Refuel/Defuel System
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Final special conditions.
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16:24 Aug 31, 2009
Jkt 217001
SUMMARY: These special conditions are
issued for the Cessna Aircraft Company,
model 525C airplane. This airplane will
have a novel or unusual design
feature(s) associated with a Single Point
Refuel/Defuel system. The applicable
airworthiness regulations do not contain
adequate or appropriate safety standards
for this design feature. These special
conditions contain the additional safety
standards that the Administrator
considers necessary to establish a level
of safety equivalent to that established
by the existing airworthiness standards.
DATES: Effective Date: August 20, 2009.
FOR FURTHER INFORMATION CONTACT:
Peter L. Rouse, Federal Aviation
Administration, Aircraft Certification
Service, Small Airplane Directorate,
ACE–111, 901 Locust, Kansas City,
Missouri, 816–329–4135, fax 816–329
4090.
SUPPLEMENTARY INFORMATION:
Background
On August 9, 2006, Cessna Aircraft
Company applied for an amendment to
Type Certificate Number A1WI to
include the new model 525C (CJ4). The
model 525C (CJ4), which is a derivative
of the model 525B (CJ3) currently
approved under Type Certificate
Number A1WI, is a commuter category,
low-winged monoplane with ‘‘T’’ tailed
vertical and horizontal stabilizers,
retractable tricycle type landing gear
and twin turbofan engines mounted on
the aircraft fuselage. The maximum
takeoff weight is 16,650 pounds, the
VMO/MMO is 305 KIAS/M 0.77 and
maximum altitude is 45,000 feet.
The model 525C fuel system will
incorporate a Single Point Refuel/Defuel
system. The model 525C Single Point
Refuel/Defuel system is used to pressure
refuel and defuel the left and right wing
fuel tanks from a single refuel/defuel
adapter. The system is operated by fuel
level and positive refuel or negative
defuel pressure. This system is similar
in design to other part 25 Cessna
Citation airplanes and uses many of the
same components that are used in these
other airplanes. The components for the
model 525C refuel/defuel system
include a refuel/defuel adapter, a
precheck valve, various other check
valves, a high level pilot valve, a refuel
valve, a defuel valve, and a positive/
negative relief valve. Single point
refueling is accomplished by connecting
the refuel equipment to the refuel/
defuel adapter and applying positive
pressure. Fuel is directed through a
common manifold to each wing tank’s
fuel shutoff (refuel) valve. Single point
defueling is accomplished by
connecting defuel equipment to the
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Frm 00008
Fmt 4700
Sfmt 4700
refuel/defuel adapter and applying
negative pressure. Defueling is
controlled by fuel level and negative
pressure from the defuel equipment.
The incorporation of a pressure
defueling system was not considered
when 14 CFR part 23 was created and
there are no applicable certification
requirements for this novel and unusual
design feature. Pressure defueling
systems are more common on part 25
airplanes, and the applicable
certification requirements are contained
in 14 CFR part 25, § 25.979(e), which
states: ‘‘The airplane defueling system
(not including fuel tanks and fuel tank
vents) must withstand an ultimate load
that is 2.0 times the load arising from
the maximum permissible defueling
pressure (positive or negative) at the
airplane fueling connection.’’ With the
pressure defueling system design
incorporated on the model 525C, it is
necessary to apply a special condition to
this novel and unusual design feature.
Type Certification Basis
Under the provisions of § 21.101,
Cessna Aircraft Company must show
that the model 525C meets the
applicable provisions of the regulations
incorporated by reference in Type
Certificate Number A1WI or the
applicable regulations in effect on the
date of application for the change to the
model 525B. The regulations
incorporated by reference in the type
certificate are commonly referred to as
the ‘‘original type certification basis.’’ In
addition, the certification basis includes
exemptions, if any; equivalent level of
safety findings, if any; and the special
condition adopted by this rulemaking
action.
If the Administrator finds that the
applicable airworthiness regulations in
14 CFR part 23 do not contain adequate
or appropriate safety standards for the
model 525C because of a novel or
unusual design feature, special
conditions are prescribed under the
provisions of § 21.16.
In addition to the applicable
airworthiness regulations and special
conditions, the model 525C must
comply with the fuel vent and exhaust
emission requirements of 14 CFR part
34 and the noise certification
requirements of 14 CFR part 36.
Special conditions, as appropriate, as
defined in § 11.19, are issued in
accordance with § 11.38, and become
part of the type certification basis in
accordance with § 21.101.
Special conditions are initially
applicable to the model for which they
are issued. Should the type certificate
for that model be amended later to
include any other model that
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]]>Agencies
[Federal Register Volume 74, Number 168 (Tuesday, September 1, 2009)]
[Rules and Regulations]
[Pages 45093-45100]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21034]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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========================================================================
Federal Register / Vol. 74, No. 168 / Tuesday, September 1, 2009 /
Rules and Regulations
[[Page 45093]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 370
RIN 3064-AD37
Final Rule Regarding Limited Amendment of the Temporary Liquidity
Guarantee Program To Extend the Transaction Account Guarantee Program
With Modified Fee Structure
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: To assure an orderly phase out of the Transaction Account
Guarantee (TAG) component of the Temporary Liquidity Guarantee Program
(TLGP), the FDIC is extending the TAG program for six months until June
30, 2010. Each insured depository institution (IDI) that participates
in the extended TAG program will be subject to increased fees during
the extension period for the FDIC's guarantee of qualifying
noninterest-bearing transaction accounts. However, each IDI that is
currently participating in the TAG program will have an opportunity to
opt out of the extended TAG program. Each IDI that is currently
participating in the TAG program must review and update its disclosure
postings and notices to accurately reflect whether it is participating
in the extended TAG program.
DATES: The Final rule becomes effective on October 1, 2009.
FOR FURTHER INFORMATION CONTACT: Christopher L. Hencke, Counsel, Legal
Division, (202) 898-8839 or chencke@fdic.gov; A. Ann Johnson, Counsel,
Legal Division, (202) 898-3573 or aajohnson@fdic.gov; Robert C. Fick,
Counsel, Legal Division, (202) 898-8962 or rfick@fdic.gov; Joe DiNuzzo,
Counsel, Legal Division, (202) 898-7349 or jdinuzzo@fdic.gov; Lisa D
Arquette, Associate Director, Division of Supervision and Consumer
Protection, (202) 898-8633 or larquette@fdic.gov; Donna Saulnier,
Manager, Assessment Policy Section, Division of Finance, (703) 562-6167
or dsaulnier@fdic.gov; or Munsell St. Clair, Chief, Bank and Regulatory
Policy Section, Division of Insurance and Research, (202) 898-8967 or
mstclair@fdic.gov.
SUPPLEMENTARY INFORMATION
I. Background
The FDIC established the TLGP in October 2008 following a
determination of systemic risk by the Secretary of the Treasury (after
consultation with the President) that was supported by recommendations
from the FDIC and the Board of Governors of the Federal Reserve System
(Federal Reserve).\1\ The TLGP is part of a coordinated effort by the
FDIC, the U.S. Department of the Treasury (Treasury), and the Federal
Reserve to address unprecedented disruptions in credit markets and the
resultant inability of financial institutions to fund themselves and
make loans to creditworthy borrowers.
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\1\ See Section 13(c)(4)(G) of the Federal Deposit Insurance Act
(FDI Act), 12 U.S.C. 1823(c)(4)(G). The determination of systemic
risk authorized the FDIC to take actions to avoid or mitigate
serious adverse effects on economic conditions or financial
stability, and the FDIC implemented the TLGP in response. Section
9(a) Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth, provides
additional authority for the establishment of the TLGP.
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On October 23, 2008, the FDIC's Board of Directors (Board)
authorized the publication in the Federal Register of an interim rule
that outlined the structure of the TLGP.\2\ Designed to assist in the
stabilization of the nation's financial system, the FDIC's TLGP is
composed of two distinct components: The Debt Guarantee Program (DGP)
and the TAG program. Pursuant to the DGP the FDIC guarantees certain
senior unsecured debt issued by participating entities. Pursuant to the
TAG program the FDIC guarantees all funds held in qualifying
noninterest-bearing transaction accounts at participating IDIs.
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\2\ 73 FR 64179 (October 29, 2008). The Final Rule was published
in the Federal Register on November 26, 2008. 73 FR 72244 (November
26, 2008).
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The TAG program was originally scheduled to expire on December 31,
2009.\3\ Over 7,100 IDIs participate in the TAG program, and the FDIC
has guaranteed an estimated $700 billion of deposits in noninterest-
bearing transaction accounts that would not otherwise be insured. Under
the TAG program each IDI that offers noninterest-bearing transaction
accounts is required to post a conspicuous notice in the lobby of its
main office and each branch office, and on its Web site, if applicable,
that discloses whether the IDI is participating in the TAG program.\4\
Disclosures for participating IDIs must contain a statement that
indicates that all noninterest-bearing transaction accounts are fully
guaranteed by the FDIC.\5\ In addition, even those IDIs that are not
participating in the TAG program are required to disclose that deposits
in noninterest-bearing transaction accounts continue to be insured for
up to $250,000, pursuant to the FDIC's general deposit insurance
rules.\6\ At this time, IDIs participating in the TAG program pay
quarterly an annualized 10 basis point assessment on any deposit
amounts that exceed the existing deposit insurance limit.\7\
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\3\ The other component of the TLGP, the DGP, initially
permitted participating entities to issue FDIC-guaranteed senior
unsecured debt until June 30, 2009, with the FDIC's guarantee for
such debt to expire on the earlier of the maturity of the debt (or
the conversion date, for mandatory convertible debt) or June 30,
2012. To reduce market disruption at the conclusion of the DGP and
to facilitate the orderly phase-out of the program, the Board issued
a final rule that generally extended for four months the period
during which participating entities could issue FDIC-guaranteed
debt. 74 FR 26521 (June 3, 2009). All IDIs and those other
participating entities that had issued FDIC-guaranteed debt on or
before April 1, 2009, were permitted to participate in the extended
DGP without application to the FDIC. Other participating entities
that were specifically approved by the FDIC also could participate
in the extended DGP. At the same time, the FDIC extended the
expiration of the guarantee period from June 30, 2012 to December
31, 2012. As a result, participating entities may issue FDIC-
guaranteed, debt through and including October 31, 2009, and the
FDIC's guarantee for such debt expires on the earliest of the
mandatory convertible debt, the stated date of maturity, or December
31, 2012.
\4\ 12 CFR 370.5(h)(5).
\5\ Id.
\6\ Id.
\7\ 12 CFR 370.7(c).
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II. The Notice of Proposed Rulemaking
As with those entities participating in the DGP, the FDIC is
committed to providing an orderly phase-out of the TAG program for
participating IDIs and their depositors. To that end, the Board
authorized publication in the Federal Register of a notice of proposed
rulemaking that presented two
[[Page 45094]]
alternatives for phasing out the TAG program (the ``Proposed
Rule'').\8\
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\8\ 74 FR 31217 (June 30, 2009).
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The first alternative described in the Proposed Rule, designated
Alternative A, would preserve the original termination date for the TAG
program. For those IDIs that had not opted out of the TAG program,
under this option, the FDIC's guarantee of noninterest-bearing
transaction accounts would expire on December 31, 2009.
The second alternative, designated Alternative B, proposed the
extension of the TAG program through June 30, 2010, six months beyond
the current expiration date of December 31, 2009. Under this option,
IDIs are provided an opportunity to opt out of the extended TAG
program; if an IDI that is currently participating in the program opts
out, Alternative B provided that the FDIC's guarantee would expire as
scheduled on December 31, 2009. To balance the income generated from
TAG fees with potential losses associated with the TAG program during
the extension period, the FDIC proposed to increase the assessment rate
to an annualized rate of 25 basis points (rather than the current 10
basis points) on the guaranteed deposits in noninterest-bearing
transaction accounts. Under this option, the increased fee would be
collected quarterly in the same manner provided in existing
regulations. Finally, Alternative B recognized that some IDIs would
have to revise their disclosures related to the TAG program. This would
be required only if their current disclosures became inaccurate
following extension of the TAG program. For example, under Alternative
B, each IDI that is participating in the extension would need to revise
its disclosures if its existing disclosures indicated that the FDIC's
guarantee will apply only through December 31, 2009. Such an IDI would
need to revise its disclosures to indicate that the guarantee will
apply through June 30, 2010.
III. Comment Summary and Discussion
The FDIC requested comment on every aspect of the Proposed Rule. In
addition, the FDIC posed specific questions relating to proposed
Alternative B. The FDIC received 91 comments on the proposed rule. The
commenters included 60 insured depository institutions, 13 industry
associations, 5 holding companies, 7 state government entities, 3
bankers' banks, and 3 depositors. A summary of the comments, including
a summary of the comments addressing the specific questions, follows.
A. Alternatives for Phasing Out TAG Program
The FDIC sought information on whether commenters preferred
Alternative A or Alternative B (or some other alternative) as the most
appropriate means of insuring an orderly phase-out of the FDIC's TAG
program. The FDIC received 15 comments expressly supporting Alternative
A and 44 comments expressly supporting Alternative B. A summary of the
comments the FDIC received in both of those categories follows.
Comments Favoring Alternative A
The FDIC received 15 comments expressly supporting Alternative A.
Commenters supporting Alternative A generally shared the opinion that
financial market volatility and risk aversion have moderated since the
FDIC implemented the TAG program in the fall of 2008. These commenters
generally noted that recent economic and financial market improvements,
such as greater access to debt and capital markets and increased
depositor and consumer confidence in the banking system, have
eliminated the need for the TAG program.
A small number of commenters supporting Alternative A expressed
concern that an extension of the TAG program would burden healthy
institutions that elect to opt out. An insured depository institution
electing to opt out of the extended TAG program would be required to
disclose to customers that balances in its non-interest-bearing
transaction accounts exceeding the $250,000 limit are no longer
guaranteed under the TAG program. Several commenters expressed concern
that such disclosures would result in a loss of depositor
relationships. Similarly, a small number of the comments favoring
Alternative A suggested that extending the TAG program with an opt-out
election as proposed under Alternative B would effectively punish
institutions electing to opt out and give an unfair competitive
advantage to those institutions that elect to remain in the TAG program
through the extended period. Specifically, these commenters expressed
concern that customers would inaccurately perceive a bank's election to
opt out of the TAG program extension as an indication that the non-
interest bearing transaction account balances exceeding $250,000 at
that bank are at risk. To avoid customer confusion and any unfair
competitive advantage being created by an extension of the TAG program,
these commenters recommended that the FDIC allow the TAG program to
phase out under Alternative A.
Comments Favoring Alternative B
The FDIC received 44 comments expressly supporting Alternative B as
the more appropriate method of phasing out the TAG program. Commenters
that supported Alternative B generally expressed a belief that, despite
vast improvement since the fall of 2008, the economy has not yet
stabilized to the point that depositors would be comfortable having
large uninsured or non-guaranteed transaction balances on deposit with
smaller insured depository institutions or community banks. A number of
comments the FDIC received from community banks and state and national
banking industry associations expressed concerns that regions of the
country most affected by the recent financial and economic turmoil
would not see an improvement in depositor confidence within the phase-
out time period proposed in Alternative A. These commenters also
emphasized that an extension of the TAG program is important to the
country's continuing economic recovery.
The FDIC also received several comments expressing concern that
expiration of the TAG program under Alternative A would result in a
significant shift in large business deposits and public deposits away
from community banks. Given the current economic environment,
depositors with large balances in non-interest bearing transaction
accounts could be motivated to move their deposits away from smaller
insured depository institutions for the perceived security of a larger
``too big to fail'' insured depository institution if the TAG program
were to expire. A depletion of large noninterest-bearing transaction
account balances would significantly harm community banks and smaller
insured depository institutions by putting them at risk of becoming
troubled, especially in those regions of the country still recovering
economically.
In addition, the FDIC received several comments concerning the
effect that recent media coverage has had on the public's perception of
the banking industry. As one community bank noted, news stories
covering the current problems with commercial real estate and bank
failures have caused the business community and many depositors to be
very concerned about the safety of their money. The commenter
recommended adopting Alternative B as an appropriate phase out for the
TAG program because it would counter such negative media
[[Page 45095]]
coverage and would help alleviate the concerns of large businesses and
public entities about the safety of their non-interest bearing
transaction accounts that exceed $250,000.
For several reasons the FDIC believes that the better alternative
is to extend the TAG program beyond December 31, 2009. The FDIC, like
some commenters, has observed that significant improvement in the
financial markets has been made since last fall. However, the FDIC
believes that there are still significant portions of the banking
industry, particularly in regions still suffering the most from recent
economic turmoil, that will benefit of the TAG program beyond the end
of this year. Progress toward a stable, fully-functioning financial
marketplace has been made, and the FDIC believes that the TAG program,
as well as the DGP, was instrumental in achieving these improvements.
However, terminating the TAG program too quickly could significantly
impair or erase that progress. Moreover, all currently participating
entities can choose whether they will participate in the extension of
the TAG program. The FDIC believes that any competitive disadvantage
that may be incurred by choosing not to participate is outweighed by
the help the program provides in stabilizing the financial markets and
restoring public confidence in the economy and the banking industry.
B. Specific Questions Presented in the NPR
In addition to requesting information on whether commenters
preferred Alternative A or Alternative B as the most appropriate means
of ensuring an orderly phase out of the FDIC's TAG program, the FDIC
also posed specific questions relating to proposed Alternative B. The
specific questions, as well as a summary and discussion of the comments
the FDIC received addressing each question, follows.
Question 1: If the TAG program is extended, is six months an
appropriate time for the extension? If not, what would be considered an
appropriate extension period for the TAG program?
The FDIC received 72 comments supporting an extension of the TAG
program for at least six months. Commenters supporting a six-month
extension of the TAG program generally indicated that a six-month
period presented an appropriate timetable for phasing out the TAG
program. One industry association noted that certain risk spreads have
returned to pre-crisis levels, suggesting that the worst of the market
turmoil has passed. However, that commenter also noted that some areas
of the country continue to be affected by high unemployment rates, a
decline in business activity, and increases in bank credit
delinquencies and losses. The commenter supported a six-month extension
as appropriate given the lingering financial threats in many local
markets.
The FDIC also received 45 comments (including some of the comments
that also expressly favored Alternative B) that recommended extending
the TAG program for one-year (through December 31, 2010). A number of
community banks cited various forecasts predicting that the U.S.
economy will continue to face significant financial and economic
pressures through 2009. Several of the comments noted that the TAG
program has helped preserve the franchise values of banking
institutions both through customer retention and reduction of the
likelihood of bank deposit runs. A number of community banks also
commented that the proposed six-month extension would be too short a
time period to be of value for many insured depository institutions
given the proposed 25 basis point fee.
Additionally, several commenters recommended extending the TAG
program through the year 2013. Generally, these commenters advocated
extending the TAG program to December 31, 2013 because it would match
the TAG program's non-interest bearing transaction account guarantee
time period with the time period established for the FDIC's $250,000
deposit insurance limit for individual accounts.
The FDIC does not disagree with projections that the economy will
continue to face pressures through the remainder of this year. In fact,
that premise is one of the bases for the decision to extend the TAG
program. However, the FDIC does not agree that the TAG program should
be extended for one year or longer. The TAG program, like the DGP, was
always intended to be temporary. The FDIC believes that a six-month
extension of the TAG program will provide the optimum balance between
continuing to provide support to those institutions most affected by
the recent financial and economic turmoil and phasing out the program
in an orderly manner.
Question 2: In order to balance the income generated from TAG
fees with potential losses associated with the TAG program during the
extension period, the FDIC has proposed to charge an annualized rate of
25 basis points (rather than the current 10 basis points) on deposits
in non-interest-bearing transaction accounts. Is this increase in fees
appropriate? If not, what fee should be charged by the FDIC to cover
potential losses caused by an extension of the TAG program?
A large number of commenters addressed the issue of whether a
participation fee of 25 basis points on deposits in non-interest-
bearing transaction accounts is appropriate for the proposed TAG
program extension under Alternative B. While a few commenters were in
favor of the proposed 25 basis point fee, a majority of the comments
favored a fee less than 25 basis points.
The FDIC received 20 comments supporting the extension of the
current fee structure (10 basis points) to cover the six-month
extension of the TAG program as proposed in Alternative B. Some of
these commenters raised concerns that a 25 basis-point fee for a six-
month extension period is too high. One community bank expressed the
belief that increasing the fees charged for the TAG program would
decrease profitability and capital levels of FDIC member banks at a
time when all banks are struggling to improve profitability. One
commenter noted that while the assessment needs to be priced fairly, it
is also important not to make the fee so expensive that some financial
institutions cannot participate. One community bank commented that
maintaining the 10 basis-point fee would encourage greater
participation from healthier banks and could potentially generate
greater revenue if collected during a time of a strengthening economy.
The FDIC also received 16 comments supporting a participation fee
between 10 basis points and 25 basis points. These commenters generally
shared the concerns of those who supported extending the current 10
basis-point fee, that is, they felt that a fee of 25 basis points is
too high. However, commenters supporting a fee between 10 basis points
and 25 basis points also recognized the increased costs the TAG program
poses to the FDIC. Several of these commenters noted that the fee
associated with the extension of the TAG program should be based on the
costs of the program for the FDIC. A majority of these comments
recommended that an appropriate
[[Page 45096]]
participation fee for the TAG program extension would fall within the
range of 15 to 20 basis points based on the costs of the TAG program to
the FDIC. A small number of comments from insured depository
institutions stated that they would still participate in the TAG
extension program if the participation fee were increased to 25 basis
points.
The FDIC received 23 comments recommending that the FDIC adopt a
risk-based approach to establish the participation fee for the TAG
program extension. Specifically, these commenters suggested
establishing fees that are commensurate with the risk profile of the
participating bank as determined under the FDIC's risk-based assessment
system for deposit insurance. One community bank commented that
implementing a risk-based approach would encourage broader
participation in the TAG program extension by the vast majority of
banks that fall within Risk Category I and II, but more fully assess
the cost per deposit at banks placed in higher Risk Categories. A
second community bank commented that a risk-based approach to assessing
the fee for participation in the TAG program extension would ensure
that the banks that pose the most risk to the fund would pay the most
for participation in the TAG program extension.
The cost of providing guarantees for noninterest-bearing
transaction accounts at failed IDIs since the inception of the TAG
program already has exceeded projected total TAG program revenue
through the end of December 2009. Further, the FDIC projects additional
failures of IDIs through the end of the year that will result in
overall TAG losses that are expected to considerably exceed revenues.
(Revenues generated from fees associated with the DGP are expected to
cover TAG losses as well as losses incurred by the FDIC under the DGP.)
In an effort to balance the income generated from TAG fees with
potential losses associated with the TAG program during the extension
period, the FDIC believes that the base fee for the guarantee should be
increased.
The FDIC finds merit in the proposals that a risk-based system be
implemented. Switching to a risk-based fee system will allow the FDIC
to align the fees charged under the TAG program to the risks posed by
the institutions that participate in the program. Those institutions
that pose greater risk will be charged higher fees to reflect that risk
and will thus bear more fully the cost from the extension of the
program. Additionally, the higher overall fees will better cover the
potential costs of the program.
Given the short duration of the TAG extension and the limited
timeframe for implementing a risk-based fee system, the FDIC will rely
on the general framework it has in place for the quarterly, risk-based
premium system. Participants in the extended program will be charged a
fee based on the risk category to which they are assigned for purposes
of the risk-based premium system. The minimum annualized fee will be 15
basis points (rather than the current 10 basis points) on deposits in
noninterest-bearing transaction accounts.
Question 3: Should the FDIC reduce the maximum interest rate
for NOW accounts that qualify for the FDIC's guarantee under the TAG
program? Would placing an interest rate limit on NOW accounts of no
higher than 0.25 percent be appropriate? If not, what would be
considered an appropriate rate limitation for NOW accounts?
The FDIC received 28 comments addressing the question of whether to
reduce the maximum interest rate for NOW accounts that qualify for the
TAG program during the proposed extension period under Alterative B.
The FDIC received 12 comments expressly supporting a reduction of the
maximum interest rate and 16 comments opposing a reduction.
One community bank that favored a reduction in the maximum interest
rate for NOW accounts stated that dropping the maximum interest rate to
a range of 35 to 40 basis points would more closely match current
market alternatives. However, the commenter also raised concerns that a
reduction of the interest rate ceiling to 25 basis points might
encourage larger institutions to grab market share by pricing at higher
levels with the implied security of government backing. On the other
hand, another community bank expressed the opinion that reducing the
interest rate ceiling on qualifying NOW accounts under the extended TAG
program to 25 basis points would have no effect on the bank's
customers. Similarly, a different community bank argued that a
reduction in the maximum interest rate for NOW accounts is reasonable
given that most money market rates have moved lower since the TAG
program was introduced in the fall of 2008. However, this commenter
also pointed out that NOW account customers are concerned with safety
of principal and immediate funds availability rather than the maximum
interest rate of the account.
In opposition to a reduction in the maximum interest rate limit for
NOW accounts, the FDIC received several comments that expressed concern
that a reduction in the maximum interest rate would confuse customers
about the guarantees available under the TAG program extension.
A number of other commenters pointed out that a reduction in the
maximum interest limit for NOW accounts would require participating
banks in the TAG program extension to make costly disclosures to
existing customers. Similarly, one national banking industry
association commented that the potential disruption to NOW account
customers and the cost of adjusting bank systems and customer
agreements argues against altering the maximum interest rate
limitation. A second national banking industry association supported
not changing the maximum interest rate on NOW accounts because many
institutions do not consider the interest rates on NOW accounts to be
as sensitive as other deposit rates, and NOW account rates do not vary
as the market fluctuates. The cost and confusion that could potentially
accompany such a reduction would be disruptive for both participating
banks and NOW account customers.
The FDIC agrees with many of the concerns raised by commenters who
support no change to the maximum permissible interest rate for
qualifying NOW accounts. The FDIC believes that there would be a
potential for customer confusion about the availability of the
guarantee if the maximum interest rate is changed for the remainder of
the program. Each participating institution would also have to revise
or adjust its banking systems, customer agreements, and disclosures to
reflect the change. The burden of making these changes, the potential
for customer confusion, and the relatively short period of time of the
extension (i.e., six months) argue against making such a change.
Therefore, the FDIC has decided not to change the maximum interest rate
limit for NOW accounts. The term ``noninterest-bearing transaction
account'' will continue to include only those NOW accounts with
interest rates that are no higher than 0.50 per cent as further
described in 12 CFR 370.2(h).
IV. The Final Rule
In general, the final rule amends various provisions in 12 CFR Part
370 to (1) Extend for six months the expiration date of the TAG
program, (2) increase the assessment fee that applies during that six
month period from 10 basis points to either 15 basis points, 20
[[Page 45097]]
basis points, or 25 basis points depending on the entity's Risk
Category, (3) provide an opportunity for currently participating
entities to opt out of the TAG program effective on January 1, 2010,
and (4) provide a sample disclosure statement for those entities that
elect to opt out.
Six-Month Extension
The final rule extends the TAG program for six months; the TAG
program will now expire on June 30, 2010. However, each participating
entity will have an opportunity to opt out of the extension. While
there is evidence that confidence in the banking system and the economy
in general is improving, some additional time is needed in order to
provide an orderly phase-out of the program.
Increased Assessment
The final rule imposes an increased assessment and a risk-based fee
system on those entities participating in the extension of the TAG
program. Beginning on January 1, 2010, a participating entity that does
not opt out of the transaction account guarantee program in accordance
with Sec. 370.5(c)(2) shall pay quarterly an annualized fee in
accordance with its respective Risk Category rating. All institutions
that are assigned to Risk Category I of the risk-based premium system
will be charged an annualized fee of 15 basis points on their deposits
in noninterest-bearing transactions accounts for the portion of the
quarter in which they are assigned to Risk Category I. Likewise,
institutions in Risk Category II will be charged an annualized fee of
20 basis points, and institutions in either Risk Category III or Risk
Category IV will be charged an annualized fee of 25 basis points for
those portions of the quarter in which they are assigned to the various
risk categories. The fee will continue to be collected quarterly in the
same manner as provided for in existing regulations.
The fee will apply only to deposit amounts that exceed the existing
deposit insurance limit of $250,000, as reported on the quarterly Call
Report in any noninterest-bearing transaction accounts (as defined in
Sec. 370.2(h)), including any such amounts swept from a noninterest
bearing transaction account into an noninterest bearing savings deposit
account as provided in Sec. 370.4(c).
Opt-Out
Although the final rule extends the expiration date of the TAG
program for six months, it also provides each participating entity the
opportunity to opt out of the program effective on January 1, 2010. The
option to opt out is a one-time option, and any decision to opt out is
irrevocable. In order to exercise the option to opt out, a
participating entity must submit an e-mail to dcas@fdic.gov no later
than November 2, 2009 that meets all of the requirements of 12 CFR
370.5(g)(2). The opt-out provision allows each participating entity the
opportunity to decide whether participation in the extension of the TAG
program is desirable based upon on each entity's condition and business
plan. In order to ensure that an institution's depositors and the
public are aware of an entity's decision to opt out of the extension,
the final rule also includes a sample disclosure statement for
currently participating institutions that opt out of the extension.
IV. Regulatory Analysis and Procedure
A. Regulatory Flexibility Act
Under the Regulatory Flexibility Act (RFA), the FDIC must prepare a
final regulatory flexibility analysis in connection with the
promulgation of a final rule,\9\ or certify that the final rule will
not have a significant economic impact on a substantial number of small
entities.\10\ For purposes of the RFA analysis or certification, a
``small entity'' is any financial institution with total assets of $175
million or less. For the reasons discussed below, the FDIC certifies
that the final rule will not have a significant economic impact on a
substantial number of small entities.
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\9\ 5 U.S.C. 604.
\10\ 5 U.S.C. 605(b).
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Currently 7,063 IDIs participate in the TAG program, of which
approximately 3,688, or 52.2 percent are small entities. Within the
universe of small institutions, 1,011, or 27.4 percent did not have TAG
eligible deposits as of the June 2009 Report of Condition and Income
for banks and the Thrift Financial Report for thrifts (collectively,
``June 2009 Call Reports''); thus, they were not required to pay the 10
basis point fee currently assessed for participation in the TAG
program. Assuming these IDIs do not change circumstances and do not opt
out, there would be no impact on this group as a result of the fee
increase. As to the remaining 2,677 small entities that had TAG
eligible deposits as of the June 2009 Call Reports, they have the
opportunity to opt out of the extended TAG program. However, assuming
these 2,677 small entities remain in the TAG program, the fee increase
could have some impact on a substantial number of the remaining
participants in the TAG program during the extension period.
Nevertheless, the FDIC has determined that, the economic impact of
the Rule on small entities will not be significant for the following
reasons. With respect to the fee increase from 10 basis points to 15,
20 or 25 basis points depending upon the institution's risk rating,
based on figures from the June 2009 Call Reports, the average fee
increase for IDIs participating in the extended TAG program would be
$681 for the 6 month extension period, representing 8.2 percent of the
average net operating income before taxes for the six months through
June 2009. Moreover, the FDIC asserts that the economic benefit of the
six-month extension would outweigh the increased fee associated with
participation in that the small entities would benefit from the
extended time period within which to phase out the TAG program as
financial markets continue to stabilize.
With respect to amending the disclosures related to the TAG
program, the FDIC asserts that the economic impact on all small
entities participating in the program (regardless of whether they pay a
fee) would be de minimis in nature and would be outweighed by the
economic benefit of the six-month extension.
Accordingly, the Rule would not have a significant economic impact
on a substantial number of small entities.
B. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (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 displays
a currently valid OMB control number. This Final Rule implements
Alternative B of the Notice of Proposed Rulemaking, which extends the
TAG program through June 30, 2010. Alternative B included disclosure
and reporting requirements which are retained in the Final Rule.
Specifically, section 370.5(c)(2) allows IDIs participating in the TAG
program on October 31, 2009, to opt out of the program effective
January 1, 2010. In addition, section 370.5(g)(2)(vi) requires
institutions that opt out of the TAG program to disclose to customers
that funds in excess of the standard maximum deposit insurance amount
will no longer be guaranteed under the TAG program after December 31,
2009. Finally, pursuant to section 370.5(h)(5)(i), institutions
participating in the TAG program extension would be required to update
any existing disclosures regarding participation in
[[Page 45098]]
the program to reflect the extension of coverage through June 30, 2010.
In the Notice of Proposed Rulemaking, the FDIC expressed an
intention to amend its existing TLGP-related information collection
(OMB No. 3064-0166) to incorporate the burden associated with the TAG
program extension. However, a request for normal clearance of the TLGP
information collection, which was initially approved under emergency
clearance procedures, was pending before OMB at the time of publication
of the Notice of Proposed Rulemaking. To avoid concurrent requests on
the same information collection, the FDIC instead, on July 1, 2009,
submitted to OMB a request for clearance of the reporting and
disclosure requirements in Alternative B as a separate, new information
collection. That request is still pending.
The proposed rule document for the TAG program extension requested
comment on the estimated paperwork burden. Although, as previously
discussed, a number of comments were received on substantive aspects of
the proposal, none of the comments addressed the estimated paperwork
burden. Therefore, the FDIC has not altered its initial burden
estimates. The estimated burden for the reporting and disclosure
requirements, as set forth in the Notice of Proposed Rulemaking and the
Final Rule, is as follows:
Title: Temporary Liquidity Guarantee Program.
OMB Number: 3064-0166.
Affected public: Insured depository institutions.
Estimated Number of Respondents:
Opt out of TAG program/Disclosure to customers of discontinuation
or TAG program guarantee--3,555.
Disclosure to customers of TAG program extension--3,554.
Frequency of Response:
Opt out of TAG program/Disclosure to customers of discontinuation
of TAG program guarantee--once.
Disclosure to customers of TAG program extension--once.
Average time per response:
Opt out of TAG program/Disclosure to customers of discontinuation
of TAG program guarantee--1 hour.
Disclosure to customers of TAG program extension--1 hour.
Estimated Annual Burden:
Opt out of TAG program/Disclosure to customers of discontinuation
of TAG program guarantee--3,555 hours.
Disclosure to customers of TAG program extension--3,554 hours.
Total annual burden--7,109 hours.
Comment Request: The FDIC has an ongoing interest in public
comments on its collections of information, including comments on: (1)
Whether this collection of information is necessary for the proper
performance of the FDIC's functions, including whether the information
has practical utility; (2) the accuracy of the estimates of the burden
of the information collection, including the validity of the
methodologies and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the information collection on respondents,
including through the use of automated collection techniques or other
forms of information technology. Comments may be submitted to the FDIC
by any of the following methods: By mail to the Executive Secretary,
Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429; by FAX at (202) 898-8788; or by e-mail to
comments@fdic.gov. All comments should refer to ``Transaction Account
Guarantee Program Extension.'' Copies of 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 10235, Washington, DC 20503.
C. Use of Plain Language
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. In issuing the proposed rule, the FDIC solicited
comments on how to make the proposed regulation easier to understand.
No comments addressing that issue were received.
D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the 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 and Fairness Act
The Office of Management and Budget (OMB) has determined that this
Final Rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement and Fairness 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 Government
Accountability Office so that the Rule may be reviewed.
List of Subjects in 12 CFR Part 370
Banks, Banking, Bank deposit insurance, Holding companies, National
banks, Reporting and recordkeeping requirements, Savings associations.
0
For the reasons discussed in the preamble, the Federal Deposit
Insurance Corporation amends 12 CFR part 370 as follows:
PART 370--TEMPORARY LIQUIDITY GUARANTEE PROGRAM
0
1. The authority citation for part 370 continues to read as follows:
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818,
1819(a)(Tenth), 1820(f), 1821(a), 1821(c), 1821(d), 1823(c)(4).
0
2. Amend Sec. 370.2 as follows:
0
a. Revise paragraph (g); and
0
b. Revise paragraph (h)(4); to read as follows:
Sec. 370.2 Definitions.
* * * * *
(g) Participating entity. The term ``participating entity'' means
with respect to each of the debt guarantee program and the transaction
account guarantee program,
(1) An eligible entity that became an eligible entity on or before
December 5, 2008 and that has not opted out, or
(2) An entity that becomes an eligible entity after December 5,
2008, and that the FDIC has allowed to participate in the program,
except that a participating entity that opts out of the transaction
account guarantee program in accordance with Sec. 370.5(c)(2) ceases
to be a participating entity in the transaction account guarantee
program effective on January 1, 2010.
(h) * * *
(4) Notwithstanding paragraph (h)(3) of this section, a NOW account
with an interest rate above 0.50 percent as of November 21, 2008, may
be treated as a noninterest-bearing transaction account for purposes of
this part, if the insured depository institution at which the account
is held reduces the interest rate on that account to 0.50 percent or
lower before January 1, 2009, and commits to maintain that interest
rate at no more than 0.50 percent at all times during the period in
which the institution is participating in the transaction account
guarantee program.
* * * * *
0
3. Amend section 370.4 by revising paragraph (a) to read as follows:
[[Page 45099]]
Sec. 370.4 Transaction Account Guarantee Program.
(a) In addition to the coverage afforded to depositors under 12 CFR
Part 330, a depositor's funds in a noninterest-bearing transaction
account maintained at a participating entity that is an insured
depository institution are guaranteed in full (irrespective of the
standard maximum deposit insurance amount defined in 12 CFR 330.1(n))
from October 14, 2008 through:
(1) The date of opt-out, in the case of an entity that opted out
prior to December 5, 2008;
(2) December 31, 2009, in the case of an entity that opts out
effective on January 1, 2010; or
(3) June 30, 2010, in the case of an entity that does not opt out.
* * * * *
0
4. Amend section 370.5 as follows:
0
a. Revise paragraph (c);
0
b. Revise paragraph (g); and
0
c. Revise paragraph (h)(5), to read as follows:
Sec. 370.5 Participation.
* * * * *
(c) Opt-out and opt-in options.
(1) From October 14, 2008 through December 5, 2008, each eligible
entity is a participating entity in both the debt guarantee program and
the transaction account guarantee program, unless the entity opts out.
No later than 11:59 p.m., Eastern Standard Time, December 5, 2008, each
eligible entity must inform the FDIC if it desires to opt out of the
debt guarantee program or the transaction account guarantee program, or
both. Failure to opt out by 11:59 p.m., Eastern Standard Time, December
5, 2008 constitutes a decision to continue in the program after that
date. Prior to December 5, 2008 an eligible entity may opt in to either
or both programs by informing the FDIC that it will not opt out of
either or both programs.
(2) Any insured depository institution that is participating in the
transaction account guarantee program may elect to opt out of such
program effective on January 1, 2010. Any such election to opt-out must
be made in accordance with the procedures set forth in paragraph (g)(2)
of this section. An election to opt out once made is irrevocable.
* * * * *
(g) Procedures for opting out.
(1) Except as provided in paragraph (g)(2) of this section, the
FDIC will provide procedures for opting out and for making an
affirmative decision to opt in using FDIC's secure e-business website,
FDICconnect. Entities that are not insured depository institutions will
select and solely use an affiliated insured depository institution to
submit their opt-out election or their affirmative decision to opt in.
(2) Pursuant to paragraph (c)(2) of this section a participating
entity may opt out of the transaction account guarantee program
effective on January 1, 2010 by submitting to the FDIC on or before
11:59 p.m., Eastern Standard Time, on November 2, 2009 an email
conveying the entity's election to opt out. The subject line of the
email must include: ``TLGP Election to Opt Out--Cert. No. --------.''
The email must be addressed to dcas@fdic.gov and must include the
following:
(i) Institution Name;
(ii) FDIC Certificate number;
(iii) City, State, ZIP;
(iv) Name, Telephone Number and Email Address of a Contact Person;
(v) A statement that the institution is opting out of the
transaction account guarantee program effective January 1, 2010; and
(vi) Confirmation that no later than November 16, 2009 the
institution will post a prominent notice in the lobby of its main
office and each domestic branch and, if it offers Internet deposit
services, on its website clearly indicating that after December 31,
2009, funds held in noninterest-bearing transaction accounts will no
longer be guaranteed in full under the Transaction Account Guarantee
Program, but will be insured up to $250,000 under the FDIC's general
deposit insurance rules.
(h) * * *
(5) Each insured depository institution that offers noninterest-
bearing transaction accounts must post a prominent notice in the lobby
of its main office, each domestic branch and, if it offers Internet
deposit services, on its website clearly indicating whether the
institution is participating in the transaction account guarantee
program. If the institution is participating in the transaction account
guarantee program, the notice must state that funds held in
noninterest-bearing transactions accounts at the entity are guaranteed
in full by the FDIC.
(i) These disclosures must be provided in simple, readily
understandable text. Sample disclosures are as follows:
For Participating Institutions
[Institution Name] is participating in the FDIC's Transaction
Account Guarantee Program. Under that program, through June 30, 2010,
all noninterest-bearing transaction accounts are fully guaranteed by
the FDIC for the entire amount in the account. Coverage under the
Transaction Account Guarantee Program is in addition to and separate
from the coverage available under the FDIC's general deposit insurance
rules.
For Participating Institutions That Elect To Opt Out of the Extended
Transaction Account Guaranty Program Effective on January 1, 2010
Beginning January 1, 2010 [Institution Name] will no longer
participate in the FDIC's Transaction Account Guarantee Program. Thus,
after December 31, 2009, funds held in noninterest-bearing transaction
accounts will no longer be guaranteed in full under the Transaction
Account Guarantee Program, but will be insured up to $250,000 under the
FDIC's general deposit insurance rules.
For Non-Participating Institutions
[Institution Name] has chosen not to participate in the FDIC's
Transaction Account Guarantee Program. Customers of [Institution Name]
with noninterest-bearing transaction accounts will continue to be
insured for up to $250,000 under the FDIC's general deposit insurance
rules.
(ii) If the institution uses sweep arrangements or takes other
actions that result in funds being transferred or reclassified to an
account that is not guaranteed under the transaction account guarantee
program, for example, an interest-bearing account, the institution must
disclose those actions to the affected customers and clearly advise
them, in writing, that such actions will void the FDIC's guarantee with
respect to the swept, transferred, or reclassified funds.
* * * * *
0
5. Amend section 370.7 by revising paragraph (c) to read as follows:
Sec. 370.7 Assessments for the Transaction Account Guarantee Program.
* * * * *
(c) Amount of assessment.
(1) Except as provided in paragraph (c)(2) of this section any
eligible entity that does not opt out of the transaction account
guarantee program shall pay quarterly an annualized 10 basis point
assessment on any deposit amounts exceeding the existing deposit
insurance limit of $250,000, as reported on its quarterly Consolidated
Reports of Condition and Income, Thrift Financial Report, or Report of
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks
(each, a ``Call Report'') in any noninterest-bearing transaction
accounts (as defined in Sec. 370.2(h)), including any such amounts
swept from a noninterest bearing transaction account into a noninterest
[[Page 45100]]
bearing savings deposit account as provided in Sec. 370.4(c).
(2) Beginning on January 1, 2010, each participating entity that
does not opt out of the transaction account guarantee program in
accordance with Sec. 370.5(c)(2) shall pay quarterly a fee based upon
its Risk Category rating. An entity's Risk Category is determined in
accordance with the FDIC's risk-based premium system described in 12
CFR Part 327. The amount of the fee for each such entity is equal to
the annualized, TAG assessment rate for the entity multiplied by the
amount of the deposits held in noninterest-bearing transaction accounts
(as defined in Sec. 370.2(h) and including any amounts swept from a
noninterest bearing transaction account into an noninterest bearing
savings deposit account as provided in Sec. 370.4(c)) that exceed the
existing deposit insurance limit of $250,000, as reported on the
entity's most recent quarterly Call Report. The annualized TAG
assessment rates are as follows:
(i) 15 basis points, for the portion of each quarter in which the
entity is assigned to Risk Category I;
(ii) 20 basis points, for the portion of each quarter in which the
entity is assigned to Risk Category II; and
(iii) 25 basis points, for the portion of each quarter in which the
entity is assigned to either Risk Category III or Risk Category IV.
(3) The assessments provided in this paragraph (c) shall be in
addition to an institution's risk-based assessment imposed under Part
327.
* * * * *
By order of the Board of Directors.
Dated at Washington, DC, this 26th day of August 2009.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9-21034 Filed 8-31-09; 8:45 am]
BILLING CODE 6714-01-P
