Large Bank Deposit Insurance Determination Modernization, 23478-23484 [2015-09650]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 80, Number 81 (Tuesday, April 28, 2015)]
[Proposed Rules]
[Pages 23478-23484]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09650]



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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AE33


Large Bank Deposit Insurance Determination Modernization

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Advance notice of proposed rulemaking (ANPR).

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SUMMARY: The FDIC is seeking comment on whether certain insured 
depository institutions that have a large number of deposit accounts, 
such as more than two million accounts should be required to undertake 
actions to ensure that, if one of these banks were to fail, depositors 
would have access to their FDIC-insured funds in a timely manner 
(usually within one business day of failure). Specifically, the FDIC is 
seeking comment on whether these banks should be required to: (1) 
Enhance their recordkeeping to maintain (and be able to provide the 
FDIC) substantially more accurate and complete data on each depositor's 
ownership interest by right and capacity (such as single or joint 
ownership) for all or a large subset of the bank's deposit accounts; 
and (2) develop and maintain the capability to calculate the insured 
and uninsured amounts for each depositor by deposit insurance capacity 
for all or a substantial subset of deposit accounts at the end of any 
business day. This ANPR does not contemplate imposing these 
requirements on community banks.

DATES: Comments must be received by the FDIC no later than July 27, 
2015.

ADDRESSES: You may submit comments on the advance notice of proposed 
rulemaking using any of the following methods:
     Agency Web site: https://www.fdic.gov/regulations/laws/federal/propose.html. Follow the instructions for submitting comments 
on the agency Web site.
     Email: comments@fdic.gov. Include RIN 3064-AE33 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7 a.m. and 5 p.m.
     Public Inspection: All comments received, including any 
personal information provided, will be posted generally without change 
to https://www.fdic.gov/regulations.laws/federal/.

FOR FURTHER INFORMATION CONTACT: Marc Steckel, Deputy Director, 
Division of Resolutions and Receiverships, 571-858-8224; Teresa J. 
Franks, Assistant Director, Division of Resolutions and Receiverships, 
571-858-8226; Christopher L. Hencke, Counsel, Legal Division, 202-898-
8839; Karen L. Main, Counsel, Legal Division, 703-562-2079.

SUPPLEMENTARY INFORMATION:

I. Deposit Insurance

    Under section 11 of the Federal Deposit Insurance Act (``FDI 
Act''), the FDIC is responsible for paying deposit insurance ``as soon 
as possible'' following the failure of an insured depository 
institution. 1 2 While the FDIC may pay insurance either in 
cash (a ``payout'') or by making available to each depositor a 
``transferred deposit'' in another insured depository institution 
(which could be a bridge bank),\3\ in most cases the FDIC uses 
transferred deposits.
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    \1\ As used in this ANPR, the term ``bank'' is synonymous with 
``insured depository institution.''
    \2\ 12 U.S.C. 1821(f)(1).
    \3\ Id.
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    Although the statutory requirement that the FDIC pay insurance ``as 
soon as possible'' \4\ does not obligate the FDIC to pay insurance 
within a specific period of days or weeks, the FDIC strives to pay 
insurance promptly. Indeed, the FDIC strives to make most insured 
deposits available to depositors by the next business day after a bank 
fails (usually the Monday following a Friday failure). For several 
reasons, the FDIC believes that prompt payment of deposit insurance is 
essential. First, prompt payment of deposit insurance maintains public 
confidence in the FDIC guarantee as well as confidence in the banking 
system. Second, depositors must have prompt access to their insured 
funds in order to meet their financial needs and obligations. Third, a 
delay in the payment of deposit insurance--especially in the case of 
the failure of one of the largest insured depository institutions--
could have systemic consequences and harm the national economy. Fourth, 
a delay could reduce the franchise value of the failed bank and thus 
increase the FDIC's resolution costs.\5\
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    \4\ Id.
    \5\ See 70 FR 73652, 73653-54 (December 13, 2005).
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    Under section 11 of the FDI Act, the FDIC pays insurance up to the 
``standard maximum deposit insurance amount'' or ``SMDIA'' of 
$250,000.\6\ In applying the SMDIA, the law requires the FDIC to 
aggregate the amounts of all deposits in the insured depository 
institution that are maintained by a depositor ``in the same capacity 
and the same right.'' \7\ For example, before the $250,000 limit is 
applied, all single ownership accounts owned by a particular depositor 
must be aggregated. Such accounts, however, are insured separately from 
joint ownership accounts because joint ownership represents a separate 
``capacity and right.''
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    \6\ 12 U.S.C. 1821(a)(1)(E).
    \7\ 12 U.S.C. 1821(a)(1)(C).
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    In accordance with section 11, the FDIC has recognized a number of 
ownership ``capacities'' or account categories. Some of the most common 
account categories are the following: (1) Single ownership accounts; 
(2) joint ownership accounts; (3) certain retirement accounts; and (4) 
revocable trust accounts (informal ``payable-on-death'' accounts as 
well as formal ``living trust'' accounts).\8\ Appendix A contains a 
list of deposit insurance account categories.
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    \8\ See 12 CFR 330.6 (governing the coverage of single ownership 
accounts); 12 CFR 330.9 (joint ownership accounts); 12 CFR 
330.14(b)(2) (retirement accounts); 12 CFR 330.10 (revocable trust 
accounts).
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    While the FDIC is authorized to rely upon the account records of 
the failed insured depository institution to identify owners and 
insurance categories,\9\ the failed bank's records are often ambiguous 
or incomplete. For example, the FDIC might discover multiple accounts 
under one name but at different addresses. Conversely, the FDIC might 
discover accounts under different names but at the same address. In 
such circumstances, the FDIC is faced with making a potentially 
erroneous overpayment or delaying the payment of insured amounts to 
depositors while it manually reviews files and obtains additional 
information from the account holders about the ownership of the 
accounts.
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    \9\ See 12 U.S.C. 1822(c); 12 CFR 330.5.
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    The problem identifying the owners of deposits is exacerbated when 
an account at a failed bank has been opened through a deposit broker or 
other agent or custodian. In this scenario, neither the name nor the 
address of the owner may appear in the failed bank's records. The only 
party identified in the records might be the custodian. The FDIC is 
faced with decision to overpay erroneously deposit insurance or to 
delay payment to insured depositors until information is obtained from 
the custodian as to the

[[Page 23479]]

actual owners and their respective interests.\10\
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    \10\ In the case of accounts held by agents or custodians, the 
FDIC provides ``pass-through'' insurance coverage (meaning that the 
coverage ``passes through'' the agent or custodian to each of the 
actual owners). See 12 CFR 330.7. The FDIC cannot apply the $250,000 
limit on a ``pass-through'' basis, however, until the FDIC has 
obtained records from the custodian as to the identities and 
interests of the actual owners. See 12 CFR 330.5.
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    In some cases, even when the owner of a particular account is 
clearly disclosed in the failed bank's account records, the FDIC may be 
required to obtain additional information before applying the $250,000 
limit. For example, in the case of revocable trust accounts, the 
account owner's coverage depends upon the number of testamentary 
beneficiaries (the coverage generally is $250,000 times the number of 
beneficiaries).\11\ Generally, when an account is an informal ``pay-on-
death'' or ``POD'' account, the identities of the beneficiaries are 
contained in the bank's records, but are not electronically stored in a 
structured way using standardized formatting. When an account has been 
opened in the name of a formal revocable ``living trust,'' the 
beneficiaries typically are not contained in the bank's records at all. 
As a result, if the balance of the account exceeds $250,000, the FDIC 
is faced with the decision to overpay erroneously deposit insurance or 
delay payment to insured depositors until the account owner provides 
the FDIC with a copy of the trust agreement (or otherwise provides the 
FDIC with information about the account beneficiaries). To complicate 
the insurance determination further, bank records on trust accounts are 
often in paper form, microfiche, or electronically scanned images that 
the FDIC must manually review, since these records cannot be processed 
electronically. This manual review is time consuming. As with brokered 
or other custodial deposits, the number of such trust accounts could be 
quite large at certain institutions.
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    \11\ See 12 CFR 330.10.
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II. Section 360.9--Large Bank Deposit Insurance Determination 
Modernization

    The FDIC previously attempted to enhance its ability to make prompt 
deposit insurance determinations at larger insured depository 
institutions through the adoption of Sec.  360.9 of its 
regulations.\12\ Effective August 18, 2008,\13\ Sec.  360.9 requires 
insured institutions covered by its requirements to maintain processes 
that would provide the FDIC with standard deposit account information 
promptly in the event of the institution's failure. In addition, Sec.  
360.9 requires these institutions to maintain the technological 
capability to automatically place and release holds on deposit 
accounts. If certain banks with a large number of deposit accounts were 
to fail with little prior warning, however, additional measures are 
likely to be needed to ensure the rapid application of deposit 
insurance limits to all deposit accounts.
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    \12\ 12 CFR 360.9.
    \13\ See 73 FR 41180 (July 17, 2008).
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    Section 360.9 applies to ``covered institutions,'' with the term 
``covered institution'' defined as an insured depository institution 
with at least $2 billion in domestic deposits and at least (1) 250,000 
deposit accounts; or (2) $20 billion in total assets.\14\ Section 360.9 
requires a covered institution to have in place an automated process 
for placing and removing holds on deposit accounts and certain other 
types of accounts concurrent with or immediately following the daily 
deposit account processing on the day of failure.
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    \14\ 12 CFR 360.9(b)(1).
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    Under Sec.  360.9, a covered institution is also required to be 
able to produce upon request data files that use a standard data format 
populated by mapping preexisting data elements regarding deposit 
accounts.\15\ For accounts in most of the deposit insurance categories 
recognized by the FDIC, the required information includes the deposit 
insurance category.\16\ The required information also includes the 
customer's name and address.\17\ At failure (or before), Sec.  360.9 
contemplates that the covered institution would transmit its Sec.  
360.9 data to the FDIC so that the FDIC could determine specifically 
which amounts were insured and which were not. In general, the 
determination would not be made on closing night, and, for many 
accounts, would not be made on closing weekend.
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    \15\ 12 CFR 360.9(d).
    \16\ 12 CFR 360.9, appendix C.
    \17\ 12 CFR 360.9, appendix F.
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    The self-described purpose of Sec.  360.9 is the following: ``This 
section is intended to allow the deposit and other operations of a 
large insured depository institution (defined as a `Covered 
Institution') to continue functioning on the day following failure. It 
also is intended to permit the FDIC to fulfill its legal mandates 
regarding the resolution of failed insured institutions[,] to provide 
liquidity to depositors promptly, enhance market discipline, ensure 
equitable treatment of depositors at different institutions and reduce 
the FDIC's costs by preserving the franchise value of a failed 
institution.'' \18\
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    \18\ 12 CFR 360.9(a).
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III. The Need for Additional Rulemaking

    The lessons of the financial crisis, which peaked in the months 
following the promulgation of the FDIC's Final Rule prescribing Sec.  
360.9, illustrate definitively that further changes are needed to 
ensure that the FDIC can maintain the public trust in the banking 
system and can fulfill its statutory obligation to make insured 
depositors whole ``as soon as possible.''
    A significant change to the banking industry resulting from the 
financial crisis affecting FDIC deposit insurance determinations arises 
out of further consolidation of the industry, particularly for larger 
firms. In 2005 the FDIC noted:

    Industry consolidation raises practical concerns about the 
FDIC's current business model for conducting a deposit insurance 
determination. Larger institutions--especially those initiating 
recent merger activity--are considerably more complex, have more 
deposit accounts, greater geographic dispersion, more diversity of 
systems and data consistency issues arising from mergers than has 
been the case historically. . . . Should such trends continue, 
deposits will become even more concentrated in the foreseeable 
future.\19\
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    \19\ Advance Notice of Proposed Rulemaking, 70 FR 73652, 76354 
(December 13, 2005).

    Such trends have not only continued, they accelerated as a result 
of the crisis, as reflected in Table A.

                                     Table A--Deposit Account Concentrations
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                                                                                                      Percent
                                                                     June 2008     December 2014     increases
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Largest number of deposit accounts at a single bank.............      59,604,549      84,491,835              42
Number of deposit accounts at the 10 banks having the most           254,180,422     318,809,420              25
 deposit accounty...............................................
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    As a result of this concentration, many institutions are more 
complex with more serious systems and data consistency challenges.
    The financial crisis also reinforced the challenges posed by 
multiple and rapid resolution of banks. Since the beginning of 2008, 
511 insured depository institutions failed, comprising a total asset 
value of approximately $696 billion. These failed banks range in asset 
value from a few million to over $300 billion. Still other firms, 
including some of the largest banking organizations, were spared from 
failure only by extraordinary government intervention. These 
experiences indicate to the FDIC that the provisional account holds and 
other requirements finalized in Sec.  360.9 are not sufficient to 
mitigate the complexities of large institution failures. Further 
measures are required. This is especially true because the experience 
of the financial crisis indicates that failures can often happen with 
no or little notice and time for the FDIC to prepare. Since 2009, the 
FDIC has been called upon to resolve 47 institutions within 30 days 
from the launch of the resolution process to the ultimate closure of 
the bank. In addition to these rapid failures, the financial condition 
of two banks with a large number of accounts--Washington Mutual Bank 
and Wachovia Bank--deteriorated very quickly in 2008, leaving the FDIC 
little time to prepare.
    The implementation of Sec.  360.9 requirements by covered firms 
also underscores the need for further measures. The FDIC has worked 
with covered institutions for several years to implement Sec.  360.9. 
Based on its experience reviewing banks' deposit data, deposit systems 
and mechanisms for imposing provisional holds, staff has concluded that 
Sec.  360.9 has not been as effective as had been hoped in enhancing 
the capacity to make prompt deposit insurance determinations. For the 
reasons discussed below, the FDIC has concluded, that, if certain banks 
with a large number of accounts were to fail with little prior notice 
and an insurance determination were required, additional measures would 
be needed, beyond those set out in Sec.  360.9, to provide assurance 
that a deposit insurance determination would be made promptly and 
accurately. Because delays in insurance determinations could lead to 
bank runs or other systemic problems, the FDIC believes that improved 
strategies must be implemented to ensure prompt deposit insurance 
determinations at failures of banks with a large number of deposit 
accounts.
    First, in reviewing covered institutions for compliance with Sec.  
360.9 requirements, the FDIC has often found inconsistent and missing 
data.
    Second, the continued growth following the promulgation of Sec.  
360.9 in the number of deposit accounts at larger banks and the number 
and complexity of deposit systems (or platforms) in many of these banks 
would exacerbate the difficulties at making prompt deposit insurance 
determinations.
    Third, using the FDIC's information technology systems to make 
deposit insurance determinations at a failed bank with a large number 
of deposit accounts would require the transmission of massive amounts 
of deposit data from the bank's systems (now held by the bank's 
successor) to the FDIC's systems. The FDIC would have to process this 
data. The time required to transmit and process such a large amount of 
data present a challenge in making an insurance determination on the 
night of closing (``closing night'') or possibly even on closing 
weekend, if the bank was closed on a Friday. A failed bank that has 
multiple deposit systems would further complicate the aggregation of 
deposits owned by a particular depositor in a particular right and 
capacity, causing additional delay.
    Finally, if a bank with a large number of deposit accounts were to 
fail suddenly because of liquidity problems, the FDIC's opportunity to 
prepare for the bank's closing would be limited, thus further 
exacerbating the challenge in making a prompt deposit insurance 
determination.\20\
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    \20\ See 71 FR 74857, 74859 (December 13, 2006).
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IV. Possible Solution

    The FDIC is seeking comment on what additional regulatory action 
should be taken to ensure that deposit insurance determinations can be 
made promptly when certain banks with a large number of deposit 
accounts, such as more than two million accounts, fail. The two million 
account threshold would affect about 37 banks as of December 31, 2014. 
In determining whether to initiate the rulemaking process, the FDIC 
will carefully consider all comments from the public, as well as any 
relevant data or information submitted by the public.
    Based on the FDIC's experience, however, and as reflected in the 
discussion that follows, it seems likely that certain banks with a 
large number of deposit accounts (e.g., more than two million accounts) 
will have to: (1) Enhance their recordkeeping to maintain substantially 
more accurate and complete data on each depositor's ownership interest 
by right and capacity (such as single or joint ownership) for all or a 
large subset of the bank's deposit accounts; and (2) develop and 
maintain the capability to calculate the insured and uninsured amounts 
for each depositor by deposit insurance category for all or a 
substantial subset of deposit accounts at the end of any business day. 
This ANPR does not, however, contemplate imposing additional 
requirements on community banks.
    The goal of any regulatory action would be to: (1) Address the 
additional challenges in making deposit insurance determinations posed 
by certain banks with a large number of deposit accounts, which have 
only increased in magnitude following the financial crisis; (2) enhance 
capabilities to make prompt deposit insurance determinations in the 
event of the sudden failure of one of these banks; (3) safeguard the 
Deposit Insurance Fund by avoiding overpayment of deposit insurance and 
other potential consequences from the failure of a bank with a large 
number of accounts; and (4) ensure that public confidence is maintained 
and depositors' expectations of prompt payment of insured deposits are 
met.
    If certain banks with a large number of deposit accounts were to 
fail and a deposit insurance determination were necessary, one possible 
process for making deposit insurance determinations (described here for 
purposes of soliciting comment) would be as follows. For a large subset 
of deposits (``closing night deposits''), including those where 
depositors have the greatest need for immediate access to funds (such 
as transaction accounts and money market deposit accounts (``MMDAs'')), 
deposit insurance determinations would be made on closing night. The 
failed bank's information technology systems and data would be used to 
calculate insured and uninsured amounts. As discussed below, the FDIC 
seeks comment on the types of deposits that should be deemed ``closing 
night deposits.''
    To make a deposit insurance determination on closing night would 
require that certain banks with a large number of deposit accounts:
    1. Obtain and maintain data on all closing night deposits, 
including outstanding official items, that are sufficiently accurate 
and complete to allow the determination of the insured and uninsured 
amounts for each depositor by deposit insurance right and capacity 
(that is, by deposit insurance category) at the end of any business day 
(since failure can occur on any business day). To allow the FDIC to 
examine banks' data, banks with a large number

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of deposit accounts would have to maintain this data using a standard 
format and the data would have to meet quality and completeness 
standards; and
    2. Develop and maintain an information technology system that can 
calculate the insured and uninsured amounts of closing night deposits 
for each depositor by deposit insurance category at the end of any 
business day.
    Deposit insurance determinations on all other deposits (``post-
closing deposits'') would be made after closing night, either on 
closing weekend (if the bank fails and is closed on a Friday) or 
thereafter. The FDIC envisions that, as currently contemplated by Sec.  
360.9, the failed bank's information technology and deposit systems 
would be used to place provisional holds on post-closing deposits on 
closing night. The FDIC also envisions that the failed bank's 
information technology and deposit systems would be used to calculate 
the insured and uninsured amounts of post-closing deposits.
    For this process to work, it would require that a bank with a large 
number of deposit accounts obtain and maintain data on all post-closing 
deposits that are sufficiently accurate and complete to allow a prompt 
determination of the insured and uninsured amounts for each depositor 
by deposit insurance category. Moreover, this data will likely have to 
be more accurate and complete than the data some of these banks 
maintain now and would have to be maintained using a standard format. 
Alternatively, this information might be gathered post-failure using a 
claims administration process where depositors would be required to 
submit a proof of claim to the FDIC. As discussed below, the FDIC seeks 
comment on which types of deposits should be deemed post-closing 
deposits and on data requirements for various types of potential post-
closing deposits.
    The FDIC recognizes that the deposit insurance determination 
processes described above and the requirements they would impose could 
require banks with a large number of deposit accounts to make 
substantial changes to their recordkeeping and information systems. The 
complexity of the deposit insurance coverage rules contributes to the 
challenge of making deposit insurance determinations at these banks. As 
shown in Appendix A, there are more than a dozen different deposit 
insurance categories or ``rights and capacities'' in which a depositor 
can own funds in an FDIC-insured institution.
    Simplifying deposit insurance coverage rules likely would enable 
the FDIC to perform deposit insurance determinations much more quickly 
and accurately but might also entail reduced insurance coverage to some 
affected depositors. For example, deposit insurance coverage for trust 
accounts is complex in part because it depends upon the number of 
beneficiaries, whose names often do not appear in bank records. 
Replacing ``per beneficiary'' coverage with ``per grantor'' or ``per 
trust'' coverage would greatly simplify the insurance determination but 
result in reduced insurance coverage.

V. Request for Comment

    By describing the processes above for making deposit insurance 
determinations at certain banks with a large number of deposit accounts 
that fail and discussing the requirements these processes would entail 
for these banks, the FDIC does not intend to preclude consideration of 
other possible solutions to the problem of making prompt deposit 
insurance determinations if one of these banks were to fail. On the 
contrary, the FDIC is interested in exploring all means that would 
result in prompt deposit insurance determinations. The FDIC invites 
comments on the processes described above and the requirements they 
would impose, as well as suggestions for and comment on other possible 
solutions.
    The FDIC also requests comment on the questions set out below. In 
addition, the FDIC is requesting the opportunity to schedule meetings 
with interested parties during the development of a regulatory 
proposal. Any such meetings will be documented in the FDIC's public 
files to note the institution's or entity's general views on the ANPR 
or their answers to questions that have been posed in this ANPR. Any 
institution or organization that would like to request such a meeting 
to discuss the proposal in more detail and make suggestions or comments 
should contact Marc Steckel, Deputy Director, Division of Resolutions 
and Receiverships, 571-858-8224.

General Issues

Applicability
    This ANPR presents potential options that, if adopted, would impose 
requirements only on certain banks with a large number of deposit 
accounts.
     In general, which banks should be subject to the 
requirements discussed in this ANPR?
     To what size banks, as measured by number of deposit 
accounts, should possible rulemaking apply? Should requirements be 
tiered based on these criteria?
     Should other factors or a combination of factors be used 
to determine which banks would be subject to the requirements?
     Should bank affiliates of certain banks with a large 
number of deposit accounts be subject to the requirements, regardless 
of their size or number of deposit accounts? Why or why not?
Challenges, Costs and Tradeoffs
     Which requirements would likely cause the most significant 
changes to banks' deposit operations and systems?
     What are the costs associated with the requirements; for 
example, what is the cost of--
    [cir] Obtaining and maintaining data on all closing night deposits 
that is sufficiently accurate and complete to allow the determination 
of the insured and uninsured amounts for each depositor at the end of 
any business day;
    [cir] Developing and maintaining an information technology system 
that, on closing night, can calculate the insured and uninsured amounts 
of closing night deposits for each depositor by deposit insurance 
category at the end of any business day;
    [cir] Obtaining and maintaining more accurate and complete data on 
post-closing deposits; and
    [cir] Disclosing and making available each customer's level of 
insured and uninsured deposits on a daily basis?
     Which requirements would be the most costly to implement? 
Why? Please provide estimates of the potential cost(s).
     Could the implementation and maintenance costs be 
mitigated while still meeting the FDIC's objective of timely deposit 
insurance determinations? Are there any adjustments to the processes 
and requirements discussed above that would reduce costs while still 
meeting the objectives? If so, please describe them.
     How could the current IT capabilities at banks with a 
large number of deposit accounts best be used to minimize the cost of 
the requirements?
     Are there related bank activities or regulatory 
requirements that would reduce the cost of implementation or would 
implementation of any requirements considered in this ANPR reduce the 
costs of implementing other rules? If so, what are the activities or 
requirements, and how might they be used to reduce costs? For example, 
could banks reduce regulatory costs by leveraging work on--

[[Page 23482]]

    [cir] Liquidity measurement, which may require categorizing 
deposits so as to measure stressed outflows;
    [cir] Stress testing, which may require analyzing and/or segmenting 
deposits to determine how they would behave during a period of stress;
    [cir] Anti-money laundering requirements that may require frequent 
tracking of deposits; and
    [cir] Resolution planning for many insured depository institutions, 
which requires banks to develop credible resolution plans?
     Banks have operational schedules for synchronizing systems 
for reporting at month-end, quarter-end and year-end. How disruptive or 
expensive would off-period reporting be? How long would it take to 
develop the ability for off-period reporting?
     What is the current state of IT systems for tracking 
deposit accounts and customers at certain banks that have a large 
number of deposit accounts? Are the systems modern and effective? Are 
banks already planning upgrades for other reasons? Are there currently 
shortcomings in these systems that impede the ability to process 
transactions effectively, maintain data security and implement cross-
product marketing strategies?
Benefits
     In light of the financial crisis, what are the potential 
benefits arising from reduced losses to the DIF and to public 
confidence and financial stability from systems upgrades that ensure 
the ability of certain banks with a large number of deposit accounts to 
make prompt deposit insurance determinations in the event of failure?
     Are there potential spillover benefits that would accrue 
from the proposed systems changes considered in this ANPR in terms of 
banks' ability to process transactions, maintain data security, and 
implement cross-product marketing strategies? Would the benefits of the 
changes considered in this ANPR accrue only to the public in the FDIC's 
ability to carry out a deposit insurance determination, or would there 
be spillover benefits for the banks themselves?
Timetable for Implementation
    The FDIC recognizes that banks with a large number of deposit 
accounts may need substantial time to implement the requirements 
described in this ANPR.
     How long should banks with a large number of deposit 
accounts be given to implement the requirements contemplated by this 
ANPR and why?
     Are there particular requirements that would take more 
time to implement? If so, which requirements would pose these delays? 
Why?
     If new requirements are adopted, should the FDIC set a 
single implementation date or phase in the requirements?
Providing Depositors with the Insured and Uninsured Amount of Their 
Deposits
     If a bank can readily determine the amount of FDIC-insured 
funds in a depositor's accounts, would it be beneficial to provide this 
information to the depositor? Should banks be required to provide this 
information to depositors?

Closing Night Deposits and Post-Closing Deposits

    The discussion that follows focuses on when deposit insurance 
determinations should be made for various types of deposit accounts.
Savings and Time Accounts
    At a minimum, to meet depositors' immediate liquidity needs, 
deposit insurance determinations would have to be made on transaction 
and MMDA accounts on closing night. One possibility would focus on 
making deposit insurance determinations only for transaction and MMDA 
accounts on closing night, so that banks with a large number of deposit 
accounts would have to create the capacity to calculate insured and 
uninsured amounts and debit uninsured balances on closing night only 
for these types of accounts. Holds would be placed on other types of 
accounts. Shortly after failure, insurance determinations would be 
completed for these accounts, and the holds would be replaced with the 
appropriate debits and credits.
     Should this approach be used? Why or why not?
     How important is it to depositors to be able to have 
immediate or quick access to accounts other than transaction accounts 
and MMDAs? Does it depend on the size of the deposit? What are the 
potential costs associated with delays for these accounts?
     What problems or complications might arise if this 
approach were used?
     From a depositor's perspective, this approach would differ 
from the approach now used by the FDIC at smaller banks. At smaller 
banks, the insurance determination for all accounts (except those where 
more information is needed from a depositor) is completed over the 
weekend following a Friday night bank failure and depositors generally 
have access to their funds the next business day after the bank fails. 
How confusing would this be for depositors? What types of problems 
might this differing treatment introduce?
Pass-Through Coverage Accounts
    In the case of accounts held by agents or custodians, the FDIC 
provides ``pass-through'' insurance coverage (i.e., coverage that 
``passes through'' the agent or custodian to each of the actual 
owners).\21\ This coverage is not available, however, unless certain 
conditions are satisfied. One of these conditions is that information 
about the actual owners must be held by either the insured depository 
institution or by the agent or custodian or other party.\22\ In most 
cases, the agent or custodian holds the necessary information and the 
insured depository institution does not, thus making it impossible to 
determine deposit insurance coverage on closing night. The need to 
obtain information from the agents or custodians delays the calculation 
of deposit insurance by the FDIC, which may result in delayed payments 
of insured amounts or erroneous overpayment of insurance. At certain 
banks with a large number of deposit accounts and large numbers of 
pass-through accounts, potential delays or erroneous overpayments could 
be substantial. A few options to resolve this problem are described 
below.
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    \21\ See 12 CFR 330.7.
    \22\ See 12 CFR 330.5.
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    Option 1: Require banks with a large number of deposit accounts to 
identify pass-through accounts, and place holds on these accounts as if 
the full balance were uninsured. If such a bank failed, brokers, agents 
and custodians would have to submit required information in a standard 
format within a certain time. The standard format could expedite 
deposit insurance determinations.
    Option 2: A bank with a large number of deposit accounts would have 
to maintain up-to-date records sufficient to allow immediate or prompt 
insurance determinations either for all pass-through accounts or for 
certain types of pass-through accounts where depositors need access to 
their funds immediately.
     In addition to brokered deposits that are reported on the 
Call Report, how many accounts with pass-through coverage do banks with 
a large number of deposit accounts have (numbers and dollars)?
     For what types of brokered, agent or custodial accounts at 
banks with a large number of deposit accounts would owners likely need 
immediate or near-immediate access to funds after failure?
     How difficult would it be for banks with a large number of 
deposit accounts to maintain current records on

[[Page 23483]]

beneficial owners of pass-through accounts? Are there certain types of 
pass-through accounts where maintaining current records might be 
relatively easy or relatively difficult?
     In particular, do banks with a large number of deposit 
accounts maintain full and up-to-date information on the owners of 
brokered deposit accounts where the broker is an affiliate of the bank? 
If not, how difficult would it be for banks to maintain current records 
on beneficial owners of pass-through accounts where the broker is an 
affiliate of the bank?
     What would the challenges and costs be for agents and 
custodians to provide information to banks on each principal and 
beneficiary's interest and to update that information whenever it 
changes? How do these costs compare to the cost of providing the data 
in a standard format at closing?
     Which option for pass-through accounts should the FDIC 
adopt? Why? Is another option preferable? If so, please describe it.
Prepaid Card Accounts
    The FDIC's rules for ``pass-through'' insurance coverage of 
accounts held by agents or custodians apply to all types of custodial 
accounts, including accounts held by prepaid card companies or similar 
companies. After collecting funds from cardholders (in exchange for the 
cards), the prepaid card company might place the cardholders' funds 
into a custodial account at an insured depository institution. Some 
cardholders might use these cards (and the funds in the custodial 
account) as a substitute for a checking account. In the event of the 
failure of the insured depository institution, the cardholders will 
likely need immediate access to the funds in the custodial account to 
meet their basic financial needs and obligations.
     To prevent delays in the payment or erroneous insurance 
overpayments, should the FDIC impose recordkeeping or other 
requirements on banks with a large number of deposit accounts that 
would enable a prompt determination of the extent of deposit insurance 
coverage for prepaid cards, possibly on closing night?
     How difficult would it be for banks with a large number of 
deposit accounts to maintain current records on each prepaid 
cardholder's ownership interest?
    How difficult would it be for prepaid card issuers to regularly 
provide current information on each cardholder's ownership interest to 
banks with a large number of deposit accounts?
Trust Accounts
    In the case of revocable and irrevocable trust accounts, the FDIC 
provides ``per beneficiary'' insurance coverage subject to certain 
conditions and limitations.\23\ For informal trusts (payable-on-death 
accounts), the bank may have either structured or unstructured 
information about beneficiaries. In many cases, however, the FDIC 
cannot calculate ``per beneficiary'' coverage until it obtains a copy 
of the trust agreement (with information about the number of 
beneficiaries and the respective interests of the beneficiaries) from 
the depositor. The need to obtain and review the trust agreement delays 
the FDIC's calculation of insurance and may result in delay of 
insurance payments or overpayment of insurance amounts. Delays or 
erroneous overpayments may also occur even if the bank has the 
information for the informal trusts, but the information is not 
contained in its Sec.  360.9 data. Two potential options for solving 
these problems are discussed below. These options are similar to the 
options discussed above for pass-through accounts.
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    \23\ See 12 CFR 330.10; 12 CFR 330.13.
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    Option 1: A bank with a large number of deposit accounts would have 
to maintain standardized data on trust accounts to ensure that insured 
depositors can be paid promptly at failure. These banks would have to 
collect and maintain relevant information about beneficiaries.
    Option 2: Require that banks with a large number of deposit 
accounts maintain complete information under Sec.  360.9 to identify 
trust accounts and their owners (but not necessarily beneficiaries). If 
such a bank failed, preliminary insured and uninsured amounts would be 
calculated based on the assumption that there is one qualified 
beneficiary for each trust. Owners of potentially uninsured trust 
accounts would have to submit required information in a standard format 
within a certain time to receive greater coverage for multiple 
beneficiaries.
     How many trust accounts do banks with a large number of 
deposit accounts have (numbers and dollar amounts)?
     How many trust accounts are transaction accounts that 
depositors will likely need access to immediately after failure? Would 
providing access to up to $250,000 immediately after failure be 
sufficient (with additional insured funds being provided later, when 
the insurance determination is completed)?
     What challenges would trust account holders face if they 
had to submit information in a standard format to gain the full 
benefits of insurance coverage beyond $250,000 per grantor? Would the 
associated costs exceed the cost of the alternative, which could entail 
potentially lengthy delays in gaining the additional insurance 
coverage?
     How difficult would it be for banks with a large number of 
deposit accounts to maintain current records on each beneficiary's 
ownership interest? How much information do banks already collect and 
retain on beneficiaries?
     How difficult would it be for trustees to supply the 
information to banks and keep it current?
     Under the two options for trust accounts described above, 
trust account holders would be treated differently at banks with a 
large number of deposit accounts compared to other banks, since neither 
option is required at any bank now. What problems might that cause?
     Which option should the FDIC adopt? Why? Is another option 
preferable?
     In conjunction with considering how trust accounts should 
be treated on and post-closing night, how should the FDIC revise the 
rules for the coverage of trust accounts?
Special Deposit Insurance Categories Created by Statute
    Special statutory rules apply to the insurance coverage of certain 
types of accounts, including retirement accounts,\24\ employee benefit 
plan accounts \25\ and government accounts.\26\ In some cases, the FDIC 
cannot apply these special statutory rules without obtaining 
information from the depositor, which delays the calculation and 
payment of deposit insurance. Though the FDIC cannot change these 
special statutory rules, the FDIC could pursue options that are similar 
to those discussed in the previous section for pass-through accounts.
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    \24\ See 12 U.S.C. 1821(a)(3).
    \25\ See 12 U.S.C. 1821(a)(1)(D).
    \26\ See 12 U.S.C. 1821(a)(2).
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     How many of these accounts do banks with a large number of 
deposit accounts have (numbers and dollar amounts)?
     How urgently do depositors need immediate or near-
immediate access to these types of funds after failure?
     These accounts often have characteristics similar to 
accounts with pass-through coverage. Can banks with a large number of 
deposit accounts reliably distinguish these special statutory accounts 
from accounts with pass-through insurance coverage?
     How difficult would it be for banks with a large number of 
deposit accounts

[[Page 23484]]

to maintain full and up-to-date information on the owners of these 
accounts? How difficult would it be for depositors to supply the 
information and keep it current? Are there certain types of accounts 
where maintaining current records might be relatively easy or 
relatively difficult?
     Should the FDIC apply any of the options for pass-through 
accounts (described above) to these accounts? If so, which one? Why? Is 
another option preferable?

Appendix A--Deposit Insurance Categories

    The following is a list of the various deposit insurance 
categories with references to the FDIC's regulations or to statute. 
Several of the categories have a statutory basis, but only the 
reference to the FDIC's implementing regulation is given.
1. Revocable trust accounts. (12 CFR 330.10.)
2. Irrevocable trust accounts. (12 CFR 330.13.)
3. Joint accounts. (12 CFR 330.9.)
4. Employee benefit accounts. (12 CFR 330.14.)
5. Public unit accounts. (12 CFR 330.15.)
6. Mortgage escrow accounts for principal and interest payments. (12 
CFR 330.7(d).)
7. Business organizations. (12 CFR 330.11.)
8. Single accounts. (12 CFR 330.6.)
9. Public bonds accounts. (12 CFR 330.15(c).)
10. Irrevocable trust account with an insured depository institution 
as trustee. (12 CFR 330.12.)
11. Annuity contract accounts. (12 CFR 330.8.)
12. Custodian accounts for American Indians. (12 CFR 330.7(e).)
13. Accounts of an insured depository institution pursuant to the 
bank deposit financial assistance program of the Department of 
Energy. (12 U.S.C . 1817 (i)(3).)
14. Certain retirement accounts. (12 CFR 330.14 (b) and (c).)
    Pass-through insurance (12 CFR 330.5 and 330.7) is not a deposit 
insurance category, but can be applied to the categories listed 
above.

    By order of the Board of Directors.

    Dated at Washington, DC, this 21st day of April 2015.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.

[FR Doc. 2015-09650 Filed 4-27-15; 8:45 am]
 BILLING CODE 6714-01-P