[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Notices]
[Pages 7055-7058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2795]
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FEDERAL DEPOSIT INSURANCE CORPORATION
General Counsel's Opinion No. 7; Treatment of Assessments Paid by
``Oakar'' Banks and ``Sasser'' Banks on SAIF-Insured Deposits
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice of FDIC General Counsel's Opinion No. 7.
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SUMMARY: The FDIC Legal Division has received inquiries concerning the
opinion it expressed in a letter sent to the United States General
Accounting Office on April 23, 1992. In the 1992 letter, the Legal
Division concluded that assessments paid on deposits acquired from
members of the Savings Association Insurance Fund (SAIF) by banks
through a transaction under section 5(d)(3) of the Federal Deposit
Insurance Act (FDI Act) (12 U.S.C. 1815(d)(3)) should remain in the
SAIF and are not required to be allocated among the Financing
Corporation, the Resolution Funding Corporation, or the FSLIC
Resolution Fund. This General Counsel Opinion confirms the opinion
expressed by the Legal Division in the 1992 letter and describes in
greater detail the reasoning underlying that opinion. In addition, this
General Counsel Opinion sets forth the Legal Division's position that
assessments paid to the SAIF by any former savings association that (i)
has converted from a savings association charter to a bank charter, and
(ii) remains a SAIF member pursuant to section 5(d)(2)(G) of the FDI
Act, are likewise not available to the Financing Corporation.
FOR FURTHER INFORMATION CONTACT: Valerie Jean Best, Counsel, Legal
Division (202/898-3812), Federal Deposit Insurance Corporation,
Washington, D.C. 20429.
Text
Opinion
The FDIC Legal Division has received inquiries concerning the
opinion it expressed in a letter sent to the United States General
Accounting Office (GAO) on April 23, 1992. This General Counsel Opinion
confirms the opinion expressed by the Legal Division in the 1992 letter
and sets out in greater detail the reasoning underlying that opinion.
In addition, this General Counsel Opinion sets forth the Legal
Division's position that assessments paid to the Savings Association
Insurance Fund (SAIF) by any former savings association that has
converted from a savings association charter to a bank charter but
remains a SAIF member pursuant to section 5(d)(2)(G) of the Federal
Deposit Insurance Act (FDI) Act, are not available to the Financing
Corporation (FICO).
In the 1992 letter, the Legal Division advised the GAO that
assessments paid on deposits acquired by banks from SAIF members under
section 5(d)(3) of the FDI Act (12 U.S.C. 1815(d)(3)), the so-called
``Oakar'' provision, should remain in the SAIF, retroactive to the
enactment of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA), and were not required to be allocated
among the FICO, the Resolution Funding Corporation (REFCORP), or the
FSLIC Resolution Fund (FRF). The GAO described this conclusion as
``reasonable'' in a letter dated May 11, 1992, from Charles A. Bowsher,
Comptroller General of the United States, to the FDIC Board of
Directors. Comptroller General Bowsher wrote: ``Based on our review of
the applicable statutory provisions and information FDIC provided, we
believe its conclusion and treatment of Oakar assessments are
reasonable.'' The relevant financial statements were restated and
prepared in reliance on the Legal Division's opinion, and the GAO
subsequently cited the Legal Division's conclusion in its audits of the
1990, 1991, and 1992 financial statements of SAIF and FRF.
The principal reason stated in the 1992 letter for this conclusion
was that Oakar banks (i.e., banks that had acquired deposits from SAIF
members pursuant to section 5(d)(3) of the FDI Act) are members of the
Bank Insurance Fund (BIF), not SAIF; thus, assessments paid by such BIF
members are not subject to FICO, REFCORP or FRF draws because the
applicable statutory provisions (12 U.S.C. 1441(f)(2), 1441b(e)(7), and
1821a(b)(4)) require contributions only from SAIF members. An
additional basis for the Legal Division's conclusion, although not
expressly stated, was that FICO's assessment authority extends only to
savings associations which are SAIF members and therefore does not
extend to Oakar banks since Oakar banks are not savings associations.
Conclusion
The express statutory language of FICO's enabling legislation
grants assessment authority to FICO only over insured depository
institutions which are both (1) savings associations and (2) SAIF
members. Even if Oakar banks could be regarded as members of both BIF
and SAIF rather than just BIF (which we do not think is the correct
view), they are not savings associations. Where, as here, the relevant
statutory language (which, in this case, limits FICO's assessment
authority to savings associations that are SAIF members) is clear and
unambiguous, well-established principles of statutory construction
dictate that the plain meaning of the statute must be given effect. The
Legal Division concludes that the opinion expressed in the 1992
letter--that SAIF assessments paid by Oakar banks should remain in the
SAIF and are not subject to FICO, REFCORP, or FRF draws--remains
correct.
Further, the Legal Division concludes that SAIF assessments paid by
any former savings association that (i) has converted from a savings
association charter to a bank charter, and (ii) remains a SAIF member
pursuant to section 5(d)(2)(G) of the FDI Act (a so-called ``Sasser''
bank), are likewise not subject to draws by FICO. The FDI Act expressly
provides that any such institution is a bank. Since FICO's assessment
authority extends only to savings associations which are SAIF members,
and since Sasser banks are not savings associations, SAIF assessments
paid by Sasser banks are not subject to draws by FICO.
Discussion
I. FICO's Assessment Authority
In relevant part, section 21(f)(2) of the Federal Home Loan Bank
Act (FHLB Act) provides,
(f) Sources of funds for interest payments; Financing
Corporation assessment authority. The Financing Corporation shall
obtain funds for anticipated interest payments, issuance costs, and
custodial fees on obligations issued hereunder from the following
sources:
* * * * *
(2) New assessment authority. To the extent the amounts
available pursuant to paragraph (1) are insufficient to cover the
amount of interest payments, issuance costs, and custodial fees, the
Financing [[Page 7056]] Corporation, with the approval of the Board
of Directors of the [FDIC], shall assess against each Savings
Association Insurance Fund member an assessment (in the same manner
as assessments are assessed against such members by the [FDIC] under
section 7 of the FDI Act * * *.
12 U.S.C. 1441(f)(2) (emphasis added).
Section 21(k)(1) of the FHLB Act defines the term ``Savings
Association Insurance Fund member'' as ``a savings association which is
a Savings Association Insurance Fund member as defined by section 7(l)
of the FDI Act.'' 12 U.S.C. 1441(k)(1).
Thus, with the approval of the FDIC Board of Directors, FICO has
the statutory authority to levy assessments against each ``savings
association which is a (SAIF) member.'' Read together, these statutory
provisions limit FICO's assessment authority to an institution which is
both a savings association and a SAIF member as defined in section 7(l)
of the FDI Act.
II. An Oakar Bank Is Neither a Savings Association Nor a SAIF Member
and Thus Is Not Subject to FICO Draws
A. An Oakar Bank Is Not a ``Savings Association''
The term ``savings association'' is defined in the FHLB Act by
reference to section 3 of the FDI Act. 12 U.S.C. 1422(9). In turn,
section 3(b) of the FDI Act provides:
(b) Definition of Savings Associations and Related Terms.
(1) Savings Association.--The term ``savings association''
means--
(A) any Federal savings association;
(B) any State savings association; and
(C) any corporation (other than a bank) that the [FDIC] Board of
Directors and the Director of the Office of Thrift Supervision
jointly determine to be operating in substantially the same manner
as a savings association.
(2) Federal Savings Association.--The term ``Federal savings
association'' means any Federal savings association or Federal
savings bank which is chartered under section 5 of the Home Owners'
Loan Act.
(3) State Savings Association.--The term ``State savings
association'' means--
(A) any building and loan association, savings and loan
association, or homestead association; or
(B) any cooperative bank (other than a cooperative bank which is
a State bank as defined in subsection (a)(2)),
which is organized and operating according to the laws of the State
* * * in which it is chartered or organized.
12 U.S.C. 1813(b).
Pursuant to section 3 of the FDI Act, the term ``bank'' means any
national bank, State bank, District bank, and any Federal branch and
insured branch.
Although the FDI Act does not further define the term ``bank,'' the
FDIC, throughout its history, has required that a State-chartered
financial institution be chartered by its State of incorporation as a
bank if that institution is to be regarded as a bank by the FDIC. In
determining a financial institution's status as a bank rather than a
savings association, the FDIC will generally look to the
characterization of the institution by the laws under which the
institution is created. An Oakar bank is an institution that pre-
existed the merger or assumption in which it gained Oakar-bank status
and, prior to that merger or assumption, it was a ``bank'' in every
way.
Whether or not the limitations contained in the moratorium
provision (12 U.S.C. 1815(d)(2)) or the Oakar provision apply in any
given situation depends solely on the fund membership of the
participating institutions; neither provision specifically refers to
the charter of a covered institution. Thus, the statutory language of
the moratorium and the Oakar provisions does not provide any basis for
concluding that a bank participating in an Oakar transaction thereby
forfeits its bank charter and somehow becomes a savings association. In
this regard, we note that the sponsor of the Oakar Amendment emphasized
that the Amendment had been drafted with great care and further
emphasized that the Amendment would benefit the SAIF. Rep. Oakar
commented:
I am exceedingly proud of this language as it is and always was
intended to utilize private capital from the bank holding companies
to bolster the SAIF fund * * * [A]s we briefed staffs of the Senate
Banking and House Banking Committees and they in turn, briefed their
members, support for the amendment grew. This was due to the benefit
to taxpayer[s] and to the SAIF fund. But also to [the] care with
which the amendment had been drafted.
135 Cong. Rec. H4970 (daily ed. Aug. 3, 1989) (statement of Rep.
Oakar).
The Oakar provision was added to the pending legislation, for the
first time, at the Committee of Conference level.
Both the Oakar provision and the provision governing FICO's
assessment authority were before the Committee of Conference, and the
Committee had available to it alternative language that would have
extended FICO's authority to the assessments paid to SAIF by BIF-member
Oakar banks. The Committee chose to adopt language that limits FICO's
assessment authority to savings associations that are SAIF
members.1
\1\Earlier drafts of the legislation governing FICO's assessment
authority did not restrict FICO's assessment authority to a
``savings association'' which is a SAIF member. Specifically, the
House and Senate versions sent to the Committee of Conference
provided that FICO had assessment authority over each ``Savings
Association Insurance Fund member.'' H.R. 1278, 101st Cong., 1st
Sess. Sec. 503 at p. 400 (passed by the House June 1, 1989); S. 774,
101st Cong., 1st Sess., Sec. 503, 135 Cong. Rec. S4350 (April 19,
1989). While these earlier versions defined the term ``savings
association,'' neither version contained a definition for ``SAIF
member.'' If either provision had been enacted as drafted at that
time, FICO's assessment authority would have extended to all SAIF
members, regardless of charter. In fact, the definition of the term
``SAIF member'' elsewhere in the Senate bill included ``any other
financial institution that is required to pay assessments into the
[SAIF].'' Id. 135 Cong. Rec. at S4311. The House version defined
SAIF member to mean ``any financial institution the deposits of
which are insured by the [SAIF].'' H.R. 1278, 101st Cong., 1st Sess.
Sec. 207 at p. 71 (passed by the House June 1, 1989). Had the Senate
definition of SAIF member been adopted, FICO would have had the
authority to draw on assessments paid to SAIF by BIF-member Oakar
banks. The Committee of Conference did not adhere to either version,
however. Instead, the Committee chose to add the current SAIF-member
definition to the FICO provision, thereby limiting FICO's authority
to savings associations which are SAIF members. H.R. Conf. Rep. No.
1278, 101st Cong., 1st Sess. Sec. 512 at p. 240 and Sec. 206 at p.
19-21 (1989).
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Since FICO was granted the authority to assess savings associations
but not banks, and a bank that acquires SAIF deposits pursuant to
section 5(d)(3) of the FDI Act does not thereby relinquish or modify
its bank charter to become a ``savings association,'' we conclude that
SAIF assessments paid by Oakar banks should remain in the SAIF and are
not subject to draws by FICO.
B. An Oakar Bank Is Not a SAIF Member
1. Definition of the Term ``SAIF Member.'' As noted above, FICO has
the statutory authority to levy assessments against each savings
association which is a ``Savings Association Insurance Fund member as
defined by section 7(l).'' The term ``Savings Association Insurance
Fund member'' means ``any depository institution the deposits of which
are insured by the Savings Association Insurance Fund.'' 12 U.S.C.
1817(l)(5). The term ``Bank Insurance Fund member'' means ``any
depository institution the deposits of which are insured by the Bank
Insurance Fund.'' 12 U.S.C. 1817(l)(4).
With regard to fund membership, section 7(l) of the FDI Act
provides as follows:
Designation of fund membership for newly insured depository
institutions; definitions. For purposes of this section:
(1) Bank insurance fund. Any institution which--
(A) becomes an insured depository institution; and
(B) does not become a Savings Association Insurance Fund member
pursuant to paragraph (2),
shall be a Bank Insurance Fund member.
(2) Savings association insurance fund. Any savings association,
other than any [[Page 7057]] Federal savings bank chartered pursuant
to section 5(o) of the Home Owners' Loan Act, which becomes an
insured depository institution shall be a Savings Association
Insurance Fund member.
(3) Transition provision.
(A) Bank insurance fund. Any depository institution the deposits
of which were insured by the [FDIC] on the day before [August 9,
1989], including--
(i) any Federal savings bank chartered pursuant to section 5(o)
of the Home Owners' Loan Act; and
(ii) any cooperative bank,
shall be a Bank Insurance Fund member as of [August 9, 1989].
(B) Savings association insurance fund. Any savings association
which is an insured depository institution by operation of section
4(a)(2) shall be a Savings Association Insurance Fund member as of
[August 9, 1989].
12 U.S.C. 1817(l)(1)-(3).
The FDI Act does not explicitly state that a depository institution
cannot be a member of both SAIF and BIF at the same time, but the FDI
Act implies that this is so. By designating any newly insured
depository institution that does not become a SAIF member to be a BIF
member, the FDI Act indicates that membership in one fund necessarily
excludes membership in the other fund. The designation of depository
institutions insured prior to the enactment of FIRREA as either SAIF
members or BIF members, lends further support to the view that a
depository institution cannot belong to both funds at the same time.
Since the SAIF and the BIF were first established by FIRREA the FDIC
has treated an insured depository institution as either a SAIF member
or a BIF member but not both.
2. A Bank Retains its Status as a BIF Member When it Acquires
Deposits from A Savings Association Pursuant to Oakar. Nothing in
5(d)(3) of the FDI Act indicates that an institution forfeits its fund-
designation by virtue of participating in an Oakar transaction. Rather,
section 5(d)(3) provides that in the case of any ``acquiring, assuming,
or resulting depository institution which is a Bank Insurance Fund
member,'' that portion of the deposits of such member attributable to
the former SAIF member ``shall be treated as'' deposits which are SAIF-
insured for purposes of calculating the assessment to be paid to SAIF,
and for purposes of allocating costs in the event of default.2 The
fact that section 5(d)(3) refers to the acquiring, assuming, or
resulting depository institution as a BIF member, and the use of the
phrase ``treated as'' SAIF deposits--as opposed to ``are'' SAIF
deposits--indicates that a BIF member acquiring deposits from a SAIF
member pursuant to section 5(d)(3) retains its status as a BIF member.
\2\The deposits that are attributable to the former SAIF member
are calculated under a formula prescribed at FDI Act section
5(d)(3)(C). The dollar amount resulting from the statutorily
prescribed formula is the ``adjusted attributable deposit amount''
or ``AADA''.
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Since FICO's assessment authority extends only to ``a savings
association which is a [SAIF] member,'' and (1) a depository
institution cannot be a member of BIF and SAIF at the same time, and
(2) a BIF member that acquires deposits from a SAIF member pursuant to
section 5(d)(3) of the FDI Act retains its status as a BIF member, it
is our opinion that SAIF assessments paid by BIF-member Oakar banks
should remain in the SAIF and are not subject to draws by FICO.
Moreover, neither REFCORP nor FRF are permitted to assess BIF-member
Oakar banks since their assessment authority extends only to ``Savings
Association Insurance Fund members.''3
\3\With regard to REFCORP's assessment authority, see 12 U.S.C.
1441b(e)(7), 1441b(k)(8), 1817(l). With regard to FRF's assessment
authority, see 12 U.S.C. 1821a(b)(4), 1817(l).
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C. BIF-Member Oakar Banks Are Not Subject to FICO Draws
Nothing in the legislative history of section 21 of the FHLB Act
indicates that Congress intended a result other than that required by
the plain language of the statute. There is no specific evidence to
suggest that Congress intended the phrase ``a savings association which
is a [SAIF] member'', as used in that Act, to have any meaning other
than the normal meaning of the words. The best, if not the only,
manifestation of congressional intent in this instance is the language
of the statute; we cannot base our interpretation on a supposed intent
that is not spelled out in the statutory text or the legislative
history.
The conclusion that an Oakar bank is not subject to FICO draws
because it is neither a savings association nor a SAIF member finds
ample support in the relevant statutory text. A contrary interpretation
would disregard the explicit statutory language which grants assessment
powers to FICO only over savings associations that are SAIF
members.4 Moreover, the conclusion that an Oakar bank is not
subject to REFCORP or FRF draws because an Oakar bank is not a SAIF
member finds ample support in the relevant statutory text.
\4\At the urging of the Federal Housing Finance Board (the
``FHF-Board''), the Office of Thrift Supervision has decided not to
require Oakar banks and ``Sasser'' banks (SAIF-member savings
associations that convert to bank charters but remain SAIF members)
to maintain Federal Home Loan Bank membership. 58 FR 14510, 14512
(March 18, 1993). The FHF-Board concluded that it had no authority
to prohibit a savings association that converts to a commercial bank
or state savings bank charter from withdrawing from membership. The
FHLB Act prohibits Federal savings associations from withdrawing
from Federal Home Loan Bank membership, but does not apply to
institutions with other types of charters.
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It is consistent with the purposes of the legislation to retain
these SAIF assessments in SAIF. Under section 5(d)(3), the SAIF, rather
than the Resolution Trust Corporation (RTC), is required to bear the
cost of any loss attributable to the SAIF-insured deposits held by an
Oakar bank. Thus, SAIF was and is responsible for losses attributable
to resolving the SAIF-insured part of BIF-member Oakar banks. In the
absence of the 1992 letter, SAIF would have had no funding to cover
insurance losses for which it was and is responsible by statute. The
FDIC and Federal Government agencies have relied on the views expressed
in the 1992 letter to allocate the cost of resolving failed
institutions between the SAIF and the RTC. The FDIC has relied on the
letter to allocate assessments between the SAIF and the FRF.
III. A Sasser Bank is Not a ``Savings Association'' and Thus is not
Subject to FICO Draws
Likewise, it is our opinion that SAIF assessments paid by any
former savings association that (i) has converted from a savings
association charter to a bank charter, and (ii) remains a SAIF member
pursuant to section 5(d)(2)(G) of the FDI Act, are not subject to FICO
draws. As explained above with regard to Oakar banks, FICO's assessment
authority extends only to savings associations which are SAIF members.
Sasser institutions are not savings associations. Rather, the FDI Act
expressly provides that Sasser institutions are banks. More
specifically, section 3(a)(1) of the FDI Act provides:
(a) Definition of Bank and Related Terms.
(1) Bank.--The term ``bank''--
(A) means any national bank, State bank, and District bank, and
any Federal branch and insured branch;
(B) includes any former savings association that--
(i) has converted from a savings association charter; and
(ii) is a Savings Association Insurance Fund member.
12 U.S.C. 1813(a)(1).
Although a Sasser bank is a SAIF member, it is classified as a
``bank'' by the FDI Act. As a result, such an institution is not
subject to draws by FICO. In contrast to BIF-member Oakar banks,
however, Sasser banks are [[Page 7058]] subject to draws by REFCORP and
FRF. This is because REFCORP and FRF have statutory authority to assess
SAIF members regardless of the SAIF-member's charter.
Based on the foregoing, the Legal Division concludes that the
opinion expressed in the 1992 letter remains correct, and further
concludes that assessments paid to SAIF by any former savings
association that (i) has converted from a savings association charter,
and (ii) is a SAIF member, are likewise not subject to FICO draws.
Dated: January 31, 1995.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95-2795 Filed 2-3-95; 8:45 am]
BILLING CODE 6714-01-P
