[Federal Register Volume 60, Number 27 (Thursday, February 9, 1995)]
[Rules and Regulations]
[Pages 7701-7710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3178]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 330
RIN 3064-AB28
Deposit Insurance Coverage
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The FDIC is amending its deposit insurance regulations to
require that: Upon request, an insured depository institution disclose
in writing to depositors of employee benefit plan funds, its current
Prompt Corrective Action (PCA) capital category, its capital ratios,
and whether employee benefit plan deposits would be eligible for
``pass-through'' insurance coverage; upon opening an account comprised
of employee benefit plan funds, an insured depository institution
disclose in writing its PCA capital category, a description of the
requirements for ``pass-through'' insurance coverage and whether, in
the institution's judgment, the deposits are eligible for ``pass-
through'' deposit insurance; and when employee benefit plan deposits
placed with an insured depository institution would no longer qualify
for ``pass-through'' insurance coverage, the institution disclose in
writing to all existing employee benefit plan depositors within 10
business days the institution's PCA capital category and that new,
rolled-over or renewed employee benefit plan deposits will not be
eligible for ``pass-through'' deposit insurance coverage.
The FDIC is also making a number of technical amendments to its
insurance regulations concerning commingled accounts of bankruptcy
trustees, joint accounts, accounts for which an insured depository
institution is acting in a fiduciary capacity, and accounts for which
an insured depository institution is acting as the trustee of an
irrevocable trust.
The intended effect of the final rule is to provide employee
benefit plan depositors important information, not otherwise available,
on ``pass-through'' deposit insurance which may be needed to prudently
manage their funds. The technical amendments clarify the insurance
rules involving commingled accounts of bankruptcy trustees, joint
accounts, accounts for which an insured depository institution is
acting in a fiduciary capacity, and accounts for which an insured
depository institution is acting as the trustee of an irrevocable
trust.
EFFECTIVE DATES: The amendments to 12 CFR 330.12 are effective on July
1, 1995. The amendments to 12 CFR 330.6, 330.7, 330.10 and 330.11 are
effective on March 13, 1995.
FOR FURTHER INFORMATION CONTACT: Daniel M. Gautsch, Examination
Specialist, Division of Supervision (202/898-6912) or Joseph A.
DiNuzzo, Counsel, Legal Division (202/898-7349), Federal Deposit
Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Background
In May 1993, the FDIC Board of Directors (Board) revised
Sec. 330.12 of the FDIC's regulations (12 CFR 330.12) (58 FR 29952 (May
25, 1993)) to reflect the new limitations imposed by section 311 of the
Federal Deposit Insurance Corporation Improvement Act of 1991
[[Page 7702]] (Pub. L. 102-242, 105 Stat. 2236) (FDICIA) on the ``pass-
through'' deposit insurance provided for employee benefit accounts.
(``Pass-through'' insurance means that the insurance coverage passes
through to each owner/beneficiary of the applicable deposit.) As
required by section 311 of FDICIA, under the revised rules, whether an
employee benefit plan deposit is entitled to ``pass-through'' deposit
insurance coverage is based, in part, upon the capital status of an
insured depository institution at the time the deposit is accepted.
Under Secs. 330.12 (a) and (b), ``pass-through'' insurance shall
not be provided if, at the time an employee benefit plan deposit is
accepted, the institution may not accept brokered deposits pursuant to
section 29 of the FDI Act (12 U.S.C. 1831f(a)) unless, at the time the
deposit is accepted: (1) The institution meets each applicable capital
standard; and (2) the depositor receives a written statement from the
institution indicating that such deposits are eligible for insurance
coverage on a ``pass-through'' basis.\1\ The written statement required
under this exception must be provided each time a deposit is made or
additional employee benefit plan funds are placed with the insured
institution. 58 FR 29957 (May 25, 1993).
\1\The recordkeeping requirements of Sec. 330.4 of the FDIC's
regulations also would have to be satisfied. 12 CFR 330.12(a) &
330.4.
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Section 29 of the FDI Act prohibits insured depository institutions
that are ``adequately capitalized'' but have not obtained a broker
deposit waiver from the FDIC and ``undercapitalized'' institutions (or
institutions in lower capital categories) from accepting brokered
deposits.\2\ A brokered deposit is defined in Sec. 337.6 of the FDIC's
regulations (12 CFR 337.6) as any deposit that is obtained, directly or
indirectly, from or through the mediation or assistance of a deposit
broker.
\2\``Well capitalized'' insured institutions can, in certain
circumstances, avoid a lapse in eligibility for ``pass-through''
insurance of employee benefit plan deposits, should the
institution's PCA capital category be reduced to ``adequately
capitalized'', by obtaining a broker deposit waiver from the FDIC.
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On December 8, 1993, the FDIC published in the Federal Register a
proposed rule (58 FR 64521) to impose several specific disclosure
requirements upon insured depository institutions regarding the
availability of ``pass-through'' insurance coverage for employee
benefit plan deposits. In summary, the proposed rule would have
required that: (1) Upon request (within two business days after receipt
of such request), an insured depository institution provide written
notice to any existing or prospective depositor of employee benefit
plan funds of the institution's leverage ratio, Tier 1 risked-based
capital ratio, total risk-based capital ratio, PCA capital category and
whether or not, in the opinion of the institution, employee benefit
plan deposits made with the institution would be entitled to ``pass-
through'' insurance coverage; (2) upon the opening of any account
comprised of employee benefit plan funds, an insured depository
institution provide written notice to the depositor of the
institution's PCA capital category and whether or not such deposits are
eligible for ``pass-through'' insurance coverage; (3) within two
business days after an insured depository institution's PCA capital
category changes from ``well capitalized'' to ``adequately
capitalized'', the institution provide written notice to all depositors
of employee benefit plan funds of the institution's new PCA capital
category and whether or not new, rolled-over or renewed employee
benefit plan deposits would be eligible for ``pass-through'' insurance
coverage; and (4) within two business days after an insured depository
institution's PCA capital category changes to a category below
``adequately capitalized'', the institution provide written notice to
all depositors of employee benefit plan funds indicating that new,
rolled-over or renewed deposits of employee benefit plan funds made on
or after the date the institution's PCA capital category changed to a
category below adequately capitalized will not be eligible for ``pass-
through'' insurance coverage.
The FDIC issued the proposed rule, in part, because of numerous
comments it received from various sources on the difficulty of
obtaining public information concerning an insured institution's
capital levels and on its current PCA capital category--information
necessary to determine whether employee benefit plan deposits would be
eligible for ``pass-through'' insurance coverage.
Discussion of the Final Rule and Comments on the Proposed Rule
The FDIC received 67 comment letters on the proposed rule. Thirty-
seven were from banks and savings associations, seventeen from bank or
thrift holding companies, seven from trade associations, and six from
other interested parties. Numerous suggestions and recommendations were
made to revise the proposal.
Only three commenters expressed support for all aspects of the
proposed rule. The majority of comments recommended various revisions
to make the proposal less burdensome. Many commenters noted that most
institutions presently do not have a system for identifying employee
benefit plan accounts and that more time was needed to provide the
required disclosures to affected depositors. They also expressed
concern about the administrative cost of complying with all aspects of
the proposal. Others commented that the proposed rule might create a
potential liability for insured institutions and promote bank ``runs.''
Most commenters suggested that the FDIC include optional sample
disclosures in the regulation.
In issuing the proposed rule for comment the FDIC was cognizant of
the attendant regulatory burden that would be imposed upon insured
depository institutions. Thus, the FDIC attempted to balance the
undesirability of imposing additional regulatory requirements on
insured depository institutions with the importance of providing timely
notice to existing and prospective employee benefit plan depositors of
the extent of ``pass-through'' insurance coverage available for their
deposits--information which is important to them and not otherwise
generally available. In response to the public comments, the FDIC has
modified the requirements of the proposed rule so that the final rule
has fewer and less burdensome disclosure requirements than those
proposed. The remaining requirements are believed to be essential,
however, to ensure that the necessary deposit insurance information is
provided to employee benefit plan depositors.
In FDICIA Congress for the first time linked deposit insurance
coverage to the capital level of the insured depository institution.
This relationship between the scope of deposit insurance and an
institution's capital applies only to employee benefit plan deposits.
This special category of deposit insurance coverage, therefore,
requires special disclosure rules; otherwise, employee benefit plan
depositors may be inappropriately disadvantaged. Given the nature of
the statutory requirements for ``pass-through'' insurance coverage for
employee benefit plan accounts, the Board believes the disclosure
requirements are essential to safeguard the interests of employee
benefit plan depositors and ultimately plan participants. As indicated
below, however, the Board acknowledges that the disclosure requirements
do not fully safeguard the interests of the owners of employee benefit
plan deposits and believes that amendments to the insurance provisions
of the FDI Act are [[Page 7703]] needed to remedy the continuing
potential exposure of those owners.
The following is a discussion of the comments received on the
various aspects of the proposed rule including comments received on the
specific issues raised in the proposed rulemaking:
A. Disclosures Upon Request
The proposed rule would have required that, upon request ( within
two business days after receipt of such request), an insured depository
institution provide written notice to any existing or prospective
depositor of employee benefit plan funds of the institution's leverage
ratio, Tier 1 risked-based capital ratio, total risk-based capital
ratio, PCA capital category and whether, in the opinion of the
institution, employee benefit plan deposits placed with the institution
would be eligible for ``pass-through'' insurance coverage. A majority
of the commenters that specifically addressed this issue favored this
provision. They cited the need for depositors to be able to obtain
adequate information in order to make an informed decision about where
to invest their funds. Those opposed to such a requirement cited the
regulatory burden of developing policies and procedures, automation
systems, training of customer service personnel and maintaining current
capital-related information to ensure compliance with the requirement.
Other commenters questioned the need to disclose this capital
information because, in their view, the information would confuse most
individuals.
A number of commenters also questioned the requirement that
institutions make disclosures to prospective employee benefit plan
depositors upon request. They indicated that individuals are free to
take their business elsewhere if they are not satisfied with the
information received. They suggested that market forces can address
this issue and recommended that this requirement be deleted from the
regulation.
The FDIC agrees that prospective customers are free to take their
business elsewhere if they do not get the desired information. Existing
customers, however, may have several reasons why they cannot easily
move their accounts. Therefore, the final rule has been changed to
require disclosures when requested by employee benefit plan customers
that already have accounts at an insured institution.
The FDIC believes that the regulatory burden placed on institutions
can be mitigated if adequate time is given to establish policies and
procedures. Accordingly, the final rule contains a delayed effective
date of July 1, 1995. In addition, the capital information to be
disclosed is based on the most recently available data and need not be
as of the date of the deposit. The FDIC believes that insured
institutions should not have to develop any new, specific procedures to
develop the capital information required by this portion of the rule.
For example, institutions that are clearly ``well capitalized'' and
have experienced only minor variations in their capital ratios since
the filing of their last quarterly Consolidated Report of Condition and
Income (Call Report) may use the capital ratios calculated at that
time.
An institution's capital category and the availability of ``pass-
through'' insurance are, in almost all cases, believed to be derived
from financial information currently available. Further, only a very
few insured depository institutions are not eligible for employee
benefit plan ``pass-through'' deposit insurance coverage. (Based on
September 30, 1994 regulatory reporting data only 279 of 12,774 insured
depository institutions were less than ``well capitalized''.)
Therefore, it is estimated that the regulatory impact of this portion
of the rule will be insignificant.
Some commenters recommended that depositor requests be in writing
and be mailed to a central location. The FDIC believes that once
procedures are developed it should be no more burdensome to honor an
oral request than a written one. In addition, imposing restrictions on
existing depositors that request this information would hamper the
purpose of providing timely information. Therefore, the FDIC has
decided that depositor requests can be made orally or in writing to
designated bank employees.
B. Disclosure Upon Opening an Account
The proposed rule also would have required that, upon the opening
of any employee benefit plan account, the insured depository
institution provide a written notice to the depositor of the
institution's PCA capital category and whether or not such deposits are
eligible for ``pass-through'' insurance coverage. Commenters generally
expressed support for this provision. Some, however, questioned whether
disclosing capital information was meaningful to an employee benefit
plan depositor.
The FDIC continues to believe that it is essential that an employee
plan depositor be notified about whether ``pass-through'' coverage is
available for deposits placed with a depository institution. Moreover,
based on the comments received on this and related issues, the FDIC
also believes that when opening an employee benefit plan account
depositors should be informed (or reminded of) the basic requirements
of the law and regulations regarding the availability of ``pass-
through'' insurance coverage for employee benefit plan deposits. Thus,
the FDIC has revised this provision of the final rule to require that
the written notice provided to an employee benefit plan depositor
include an accurate explanation of the requirements for ``pass-
through'' deposit insurance coverage. (A sample disclosure of this
information is provided below.) Therefore, the final rule retains the
requirement that the written disclosure statement indicate the
institution's PCA capital category and whether, in the institution's
judgment, the funds being deposited are eligible for deposit insurance
coverage. The sample disclosure also contains language informing
employee benefit plan depositors that additional information on the
institution's capital condition may be requested.
C. Timing of Disclosures
The proposed rule would have required that certain information be
provided within two business days to current or prospective employee
plan depositors in three different situations: (1) When an institution
received a request for information from an employee benefit plan
depositor; (2) when an institution's capital category changed from
``well capitalized'' to ``adequately capitalized''; and (3) when an
institution's capital category fell below ``adequately capitalized''.
Regardless of whether or when notice is provided to the depositor,
``pass-through'' insurance coverage on new, rolled over or renewed
deposits may cease immediately upon notice to the insured depository
institution that its PCA capital category has been lowered. Thus, the
proposed rule requested comments on the feasibility of compliance with
the two-day notification requirement and, specifically, on whether a
longer time frame might increase the period for which a depositor's
employee benefit plan funds would be uninsured.
Of the 42 commenters that specifically addressed the time frame
requirement, 40 stated that the two-business-day period was too short.
The commenters recommended extending the time requirement from the
proposed period of two business days to periods of time ranging from
five days to 30 days. The most common recommendation was to extend the
period to 10 business days, the same [[Page 7704]] period of time as
required under the Federal Reserve's Regulation DD (12 CFR part 230),
which implements the Truth in Savings Act. Seven commenters recommended
five business days indicating that the required disclosures could be
made within five business days once policies and procedures had been
established to ensure compliance with the regulation.
Based on the comments received on this issue, the Board has decided
to require that the disclosures to be made upon request be made within
five business days--the shortest period of time that it believes an
institution could be expected to meet the time requirements. In
arriving at this time period the FDIC attempted to balance the
feasibility of complying with the requirement with the need for
employee benefit plan depositors to know, on a timely basis, whether
deposits are and will continue to be eligible for ``pass-through''
insurance coverage. Institutions are encouraged to provide the required
disclosures sooner, if possible.
The five business day time frame begins upon the bank's receipt of
the request and ends when the institution mails or delivers the
required information to the depositor. ``Receipt'' means when an
institution receives a request, not when it is received by a designated
department of the institution.
Secondly, the FDIC has decided to extend to 10 business days the
notification time frame when an insured institution must provide notice
that new, renewed or roll-over employee benefit plan deposits placed
with an institution will not be eligible for ``pass-through'' insurance
coverage. The FDIC recognizes that this disclosure is more extensive
than an individual request from an employee benefit plan depositor and
generally will occur when an institution is experiencing financial
problems. Institutions in this situation frequently have management
deficiencies and weak internal controls. For these reasons, adoption of
a slightly longer time frame is believed appropriate. Institutions are
encouraged to provide disclosures sooner, if possible.
Despite its decision to extend the periods in which insured
institutions must comply with the disclosure requirements of the final
rule, the Board continues to be concerned about employee benefit plan
funds that are deposited with an institution before the institution is
required to notify depositors of the discontinuation of the
availability of ``pass-through'' coverage on such deposits. An example
would be where an institution becomes ``undercapitalized'' on Day 1 and
a customer deposits employee benefit plan funds before the expiration
of the 10 days within which the institution is required to notify
employee benefit plan depositors that ``pass-through'' insurance will
not be available for deposits placed after Day 1. Under the FDI Act and
Sec. 330.12, such deposits would not be eligible for ``pass-through''
coverage because at the time they were ``accepted'' the institution was
undercapitalized--and, thus, not permitted to accept brokered deposits.
The Board believes that Congress should consider amendments to the
insurance provisions of the FDI Act to address this potential pitfall
for employee benefit plan depositors and, particularly, the ultimate
plan participants.
One commenter recommended that when an institution notifies
existing employee benefit plan depositors that ``pass-through''
insurance coverage is no longer available, the affected depositors not
be assessed a withdrawal penalty. This would pertain particularly to
the situation where a depositor places employee benefit plan funds with
an institution between the time that such deposits become ineligible
for ``pass-through'' coverage and the time the institution notifies the
depositor of the ineligibility of new deposits for such coverage.
Because the ``pass-through'' coverage of only newly deposited funds is
potentially affected by this time gap and then only if the institution
fails, the FDIC has decided not to address the withdrawal penalty issue
in the final rule. The institution and its employee benefit plan
customers are free to negotiate this matter. The FDIC anticipates that
insured institutions will waive any penalty fees in appropriate
circumstances.
D. Disclosure When an Institution's PCA Capital Category Changes but
``Pass-Through'' Insurance Coverage Is Still Available
The proposed rule would have required an insured depository
institution to provide a written notice to all employee benefit plan
depositors when the institution's PCA capital category changed from
``well capitalized'' to ``adequately capitalized'', irrespective of
whether employee benefit plan deposits still would be eligible for
``pass-through'' insurance coverage. The FDIC requested comment on
whether a disclosure should be required upon such a reduction in an
institution's PCA capital category but the institution had obtained a
waiver from the FDIC under Sec. 337.6 of the FDIC's regulations to
accept brokered deposits, and thus, there would be no change in the
availability of ``pass-through'' deposit insurance coverage for
employee benefit plan deposits.
Of the 46 commenters that specifically addressed this issue, 40
were against requiring any disclosures if the availability of ``pass-
through'' coverage had not changed. Commenters noted that providing
disclosures would cause confusion among depositors, create an increased
regulatory burden on the institution in having to explain to affected
depositors why the notice was being sent even though the availability
of ``pass-through'' insurance coverage had not changed, encourage
disintermediation, promote financial instability within institutions,
and encourage bank ``runs''. They also indicated that such a disclosure
requirement would be contrary to the FDIC goals of promoting a safe and
sound banking system and of limiting losses to the deposit insurance
funds.
The FDIC concludes that this requirement would be an unnecessary
burden and has decided to eliminate this provision from the final rule.
Although a reduction in an institution's PCA capital category to
``adequately capitalized'' reflects a decline in an institution's
capital level and, thus, may be helpful information for an employee
benefit plan depositor, this change is only one of many factors that an
employee benefit plan depositor should consider when monitoring the
financial condition of an insured depository institution. In addition,
the final rule requires that employee benefit plan depositors be
notified if and when new, renewed or rolled-over employee benefit plan
deposits will no longer be eligible for ``pass-through'' insurance
coverage. Also, under the final rule, information on an institution's
PCA capital category and whether ``pass-through'' coverage is available
can be obtained from an institution under the ``upon request''
provision of the final rule.
E. Form of Disclosures
In the proposed rule the FDIC solicited specific comment on the
form of disclosure. The five specific areas addressed were whether: (1)
the required disclosures should have to be in a separate mailing; (2) a
written acknowledgement from the intended recipient of the disclosure
should be required; (3) the disclosure should be required to be
prominent and conspicuous (for example, requiring bold type); (4) the
disclosure should be part of the deposit agreement; and (5) other
related information may be disclosed. [[Page 7705]]
The FDIC received only a few comments on each of these areas. In
general, commenters favored the option of using a separate mailing, the
requirement that disclosures be ``prominent and conspicuous'', and the
ability to include other related information in the disclosure--such as
explaining why an institution had a capital deficiency. The respondents
opposed requiring an institution to obtain a written acknowledgement
from employee benefit plan depositors or requiring that the disclosures
be part of the deposit agreement.
The FDIC has decided not to establish any specific forms or
procedures on the required disclosures except for a general requirement
that the required disclosures be ``clear and conspicuous.'' This phrase
is believed to be more representative of the standard that disclosures
must be in a reasonably understandable form. It does not require that
disclosures be segregated from other material or located in any
particular place or be in any particular type size.
Institutions may, at their discretion, use any of the above or
other disclosure methods as long as it meets the ``clear-and-
conspicuous'' standard and the time requirements. For example, an
institution that is opening an employee benefit plan account may
provide a separate written disclosure statement to the customer or
reference the specific section of the deposit agreement that contains
the disclosure information.
A reasonableness standard will be used when reviewing compliance
with this section of the regulation. Institutions should consider the
level of sophistication of a depositor when providing required
disclosures to assure that they are communicated in a clear and
understandable fashion. The FDIC believes that, in general, managers
and administrators of employee benefit plans are more sophisticated
financial persons than the average depositor.
F. Discussion of Sample Disclosures
The FDIC requested comment on whether the final rule should include
a specific notice that institutions would have to provide to employee
benefit plan depositors when an institution's PCA capital category
changed from ``well capitalized'' to ``adequately capitalized'' or to a
level below ``adequately capitalized.'' The majority of commenters
specifically addressing this issue suggested that the FDIC provide
sample language in the final rule but recommended that any sample
disclosures be optional and that additional information be permitted to
be disclosed to the employee benefit plan depositor--such as the
reasons for an institution's capital deficiency. Other commenters
expressed concern about the tone of the sample language included in the
proposed rule while others suggested alternate language.
One commenter recommended that the FDIC also provide a sample
disclosure when a depositor opens an employee benefit plan account.
Other commenters suggested a disclosure that only informs the depositor
whether employee benefit plan deposits would be eligible for ``pass-
through'' coverage under the regulations.
Based on these comments, the FDIC has provided below two sample
disclosure notices. One applies when a depositor opens an employee
benefit plan account and includes a description of the requirements for
``pass-through'' insurance coverage. The other is when new, renewed or
rolled-over employee benefit plan deposits would not be eligible for
``pass-through'' insurance coverage.
Additional information can be included with the disclosure as long
as the overall disclosure statement meets the clear-and-conspicuous
standard in the regulation. This may include, for example, additional
information on an institution's capital deficiency and when, in the
institution's opinion, the deficiency is expected to be corrected.
A few commenters noted that the sample disclosure statements
indicate that the FDIC is not bound, in its insurance determinations,
by information provided by insured institutions to depositors on the
eligibility of the employee benefit plan deposits to ``pass-through''
insurance coverage. It is correct that the FDIC is not bound in its
insurance determinations by information provided by an insured
institution to its customers. The FDIC also is not responsible for or
bound by a depository institution's failure to provide the required
disclosure statements.
Although it may be helpful for an insured institution to inform
employee benefit plan depositors that the FDIC is not bound by
information provided by an insured institution to its customers, the
Board believes the inclusion of that information in the required
disclosure statements should be optional. The thrust of the disclosure
requirements imposed by the final rule is to alert employee benefit
plan depositors to the rules regarding ``pass-through'' insurance
coverage and, in particular, to inform them when such coverage is no
longer available. Requiring insured institutions to indicate whether
the FDIC would be bound by incorrect information in the disclosure
statements goes beyond the necessary scope of the required disclosure.
G. Separate Enforcement Provision
The FDIC requested comment on whether a free-standing enforcement
and/or penalty provision should be included in the final rule. The few
commenters that addressed this question requested that any sanctions
imposed be limited to cases of intentional disregard or willful
noncompliance and that civil money penalties should not be assessed. In
the proposed rule, the FDIC indicated that violations of regulatory
requirements would be subject to the full array of enforcement
sanctions (including the imposition of civil monetary penalties)
contained in section 8 of the FDI Act (12 U.S.C. 1818).
The FDIC has decided that separate enforcement provisions are not
required to enforce the requirements of the final rule. The current
provisions in section 8 of the FDI Act (12 U.S.C. 1818) are considered
adequate and will be used to enforce compliance when deemed
appropriate.
H. Inclusion of Information in Call Reports
The FDIC requested comment on whether the capital ratios and PCA
category of an institution should be made a general disclosure
requirement in, for example, quarterly Consolidated Reports of
Condition and Income (Call Reports). In this way, existing and
prospective employee benefit plan depositors and other interested
parties would be able to obtain an official, publicly available
statement of an institution which clearly indicates this important
information.
Of the 15 commenters that addressed this issue, 12 favored adding
the information to the Call Reports. Those in favor suggested that
including this information would provide depositors with an efficient
and independent means of obtaining relevant financial data on an
insured institution. They also recognized that employee benefit plan
administrators have a fiduciary obligation to determine the capital
status of an insured institution. Two commenters also recommended that
this information be disclosed on Thrift Financial Reports (TFRs). Two
others suggested that this information be in lieu of the required
disclosures in the proposed rule. One commenter specifically opposed
any revision to the Call Report indicating that plan administrators had
the sophistication to determine an institution's capital ratios and PCA
capital category. [[Page 7706]]
Two other commenters suggested that a ``yes/no'' box be included on
the Call Report that would indicate whether ``pass-through'' coverage
was available. They opined that this one disclosure would provide
employee benefit plan depositors with an explicit statement on a
quarterly basis on whether an institution could provide ``pass-
through'' coverage and would avoid the question whether an institution
classified as ``adequately capitalized'' was able to offer ``pass-
through'' insurance coverage.
The FDIC does not have the authority to change the Call Report or
the TFR on its own and has decided not to reach a conclusion at this
time. Instead it will recommend to the Federal Financial Institutions
Examination Council that it consider whether the Call Report and the
TFR should be amended to include a line item for designating an
institution's PCA capital category.
Although public disclosure of this information would be beneficial
to the public, it also could be misleading without further information
or investigation. For example, the continued availability of ``pass-
through'' coverage would not be known in the case of institutions
reporting an ``adequately capitalized'' condition, although this
information would raise a ``red flag'' that depositors could
investigate further. In addition, a Call Report disclosure is as of the
date of the report and it may not reflect interim events between Call
Report dates. Moreover, an institution's PCA capital category may not
constitute an accurate representation of an institution's overall
financial condition or future prospects--factors that employee benefit
plan depositors also need to consider. Finally, it should be noted that
the PCA rules do not prohibit an institution from disclosing its PCA
capital category in response to inquiries from investors, depositors,
or other third parties. However, such disclosures should include
appropriate caveats in order to avoid misleading the public.
The FDIC considered the recommendation of including a ``yes/no''
box on the Call Report but does not favor this proposal out of a
concern that the disclosure would be more prone to reporting error and
would create a greater regulatory burden on institutions.
I. Definition of ``Employee Benefit Plan Depositor''
The FDIC indicated in the preamble of the proposed rule that the
required information may be provided to an employee benefit plan
administrator or manager instead of to each participant in a plan. One
commenter recommended that the final rule define the term ``employee
benefit plan depositor'' to mean managers or administrators of such
plans. Thus, it would make clear that the required disclosures only
need be made to the administrator or manager of an employee benefit
plan and not to each individual beneficiary of the plan. The FDIC has
decided to include such a definition in the final rule. The final rule
also specifies that, for purposes of the requirements of the final
rule, the definition of the term ``employee benefit plan'' includes
eligible deferred compensation plans described in section 457 of the
Internal Revenue Code (26 U.S.C. 457).
J. Sample Disclosures
1. A sample disclosure that an insured depository institution may
use when a depositor opens an account consisting of employee benefit
plan deposits is as follows:
Under federal law, whether an employee benefit plan deposit is
entitled to per-participant (or ``pass-through'') deposit insurance
coverage is based, in part, upon the capital status of the insured
institution at the time each deposit is made. Specifically, ``pass-
through'' coverage is not provided if, at the time an employee
benefit plan deposit is accepted by an FDIC-insured bank or savings
association, the institution may not accept brokered deposits under
the applicable provisions of the Federal Deposit Insurance Act.
Whether an institution may accept brokered deposits depends, in
turn, upon the institution's capital level. If an institution's
capital category is either ``well capitalized,'' or is ``adequately
capitalized'' and the institution has received the necessary broker
deposit waiver from the FDIC, then the institution may accept
brokered deposits. If an institution is either ``adequately
capitalized'' without a waiver from the FDIC or is in a capital
category below ``adequately capitalized,'' then the institution may
not accept brokered deposits. The FDI Act and FDIC regulations
provide an exception from this general rule on the availability of
``pass-through'' insurance coverage for employee benefit plan
deposits when, although an institution is not permitted to accept
brokered deposits, the institution is ``adequately capitalized'' and
the depositor receives a written statement from the institution
indicating that such deposits are eligible for insurance coverage on
a ``pass-through'' basis. The availability of ``pass-through''
insurance coverage for employee benefit plan deposits also is
dependent upon the institution's compliance with FDIC recordkeeping
requirements.
[Name of institution]'s capital category currently is [insert
prompt corrective action capital category]. Thus, in our best
judgment, employee benefit plan deposits are currently eligible for
``pass-through'' insurance coverage under the applicable federal law
and FDIC insurance regulations.
Under the FDIC's insurance regulations on employee benefit plan
deposits, an insured bank or savings association must notify
employee benefit plan depositors if new, rolled-over or renewed
employee benefit plan deposits would be ineligible for ``pass-
through'' insurance and must provide certain ratios on the
institution's capital condition to employee benefit plan depositors
who request such information. If you would like additional
information on [name of institution]'s capital condition, please
make a request [describe procedures for obtaining the additional
capital information].
2. A sample disclosure that an insured depository institution may
use when new, renewed or rolled-over employee benefit plan deposits
will not be eligible for ``pass-through'' insurance coverage is as
follows:
On [date] [name of institution]'s capital category changed from
[previous PCA category] to [current PCA category]. Because of this
change in [name of institution]'s capital category and the
institution's inability otherwise to satisfy the applicable FDIC
requirements in this regard, any employee benefit plan funds
deposited, rolled-over or renewed with [name of institution] after
[date] will NOT be eligible for ``pass-through'' (or per-
participant) deposit insurance coverage under Sec. 330.12 of the
FDIC's regulations. Accordingly, plan deposits made, rolled-over or
renewed after [date] will be aggregated and insured only up to
$100,000. This unavailability of ``pass-through'' insurance coverage
on new, rolled-over or renewed deposits will continue until the
institution's capital category improves and/or other applicable
requirements are satisfied. Deposits made over the period of time
when ``pass-through'' insurance coverage is unavailable will not be
eligible for ``pass-through'' coverage unless and until these
deposits are rolled-over or renewed at a time when ``pass-through''
insurance coverage is again available. ``Pass-through'' insurance
coverage on deposits made before [insert date when ``pass-through''
coverage no longer is available] is not affected.
K. Delayed Effective Date of the Disclosure Requirements
Four commenters recommended that the effective date of the final
rule be delayed 150 to 180 days to permit institutions the time needed
to develop automation systems, and policies and procedures to ensure
compliance. Many commenters indicated they presently do not have a
recordkeeping system that will identify employee benefit plan accounts.
Some commenters indicated that they would have to notify all existing
depositors in order to develop such a recordkeeping system.
As indicated in Sec. 330.12 of the FDIC's regulations, in order for
employee benefit plan deposits to be eligible for pass-through
insurance coverage, among other things, the recordkeeping requirements
of Sec. 330.4 of the FDIC's [[Page 7707]] regulations (12 CFR 330.4)
must be satisfied. Under Sec. 330.4, in order for pass-through
insurance to be available for fiduciary-type accounts (in which one
party has deposited funds for the benefit of others) the bank's deposit
account records must disclose the existence of the fiduciary
relationship, and the details of the relationship and the interests of
the other party(ies) must be ascertainable from the deposit account
records of the insured depository institution or records maintained by
the depositor, or a third party who has contracted with the depositor
to maintain such records on his/her behalf.
Some insured depository institutions that commented on the proposed
rule stated that their records did not classify deposits specifically
as employee benefit plan deposits; thus, they contended that it would
be burdensome to develop and implement a new system for purposes of
complying with the proposed disclosure requirements. The FDIC believes
the final rule addresses this issue. A list can be maintained for new
accounts going forward and a list of existing customers can be
established over time. An event triggering the required disclosures
when an institution no longer can offer ``pass-through'' insurance
coverage is believed to be an infrequent occurrence.
The changes made by FDICIA to insurance coverage applicable to
employee benefit plan deposits have been in effect since December 1992.
Thus, institutions should be aware of the need to provide customers
with timely disclosures on the availability of ``pass-through''
coverage for employee benefit plan deposits. We assume that this
already has been done by a general or specific mailing by institutions
to affected depositors.
Taking into consideration the period of time the revised ``pass-
through'' insurance rules have been in effect but factoring in the
``lead-time'' several commenters said was needed to develop and
implement the mechanisms required to comply with the ``upon-request''
disclosure provisions of the final rule, the Board has decided to delay
the effective date of the revisions to Sec. 330.12 until July 1, 1995.
This should provide insured depository institutions a sufficient period
of time to satisfy all of the disclosure requirements of the final
rule. This delay in the effective date also takes into consideration
section 302 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Pub. L. 103-325) (RCDRIA), which states, in
part, that any new regulations and amendments to existing regulations
which impose reporting, disclosure, or other requirements on insured
depository institutions may only take effect on the first day of a
calendar quarter unless certain exceptions are met.
L. Explanation of the Disclosure Requirements Under Sec. 330.12,
Including the Requirement Affecting Existing Deposits on the Effective
Date of the Final Rule That Are Not Eligible for ``Pass-Through''
Insurance Coverage
The final rule will apply with respect to employee benefit plan
funds on deposit with an insured depository institution on the
effective date of the final rule and such funds deposited on and after
that date. Institutions with employee benefit plan deposits on the
effective date of the final rule that, when deposited, were not
eligible for ``pass-through'' insurance coverage (under Sec. 330.12(a)
and (b) of the FDIC's regulations) must provide to such existing
depositors the disclosure statement and notice that ordinarily are
required under Sec. 330.12(h)(2) of the final rule when an employee
benefit plan account is opened. This requirement encompasses employee
benefit plan funds deposited between December 19, 1992 (the effective
date of the applicable provisions of FDICIA) and the effective date of
the final rule. These depositors otherwise would not come within the
scope of the final rule and thus, would not receive the disclosures
otherwise required. The disclosure documents referred to above must be
provided within 10 business days after the effective date of the final
rule.
After the effective date of the final rule, insured depository
institutions that accept employee benefit plan deposits that are not
eligible for ``pass-through'' insurance coverage are subject to the
disclosure requirements contained in Sec. 330.12(h)(3) of the final
rule.
M. Coordination With Other Federal Agencies
The FDIC has consulted with the other federal banking and thrift
regulators in developing the final rule and intends to continue to work
with the other federal regulators to assure, among other things,
consistent and minimally burdensome implementation of the final rule.
Technical Amendments to Part 330 Unrelated to the Proposed Amendments
to Sec. 330.12
The following is a discussion of the technical amendments to Part
330 made by the final rule that are unrelated to the proposed
amendments to Sec. 330.12. The amendments pertain to commingled
accounts of bankruptcy trustees, joint accounts, accounts for which an
insured depository institution is acting in a fiduciary capacity, and
accounts for which an insured depository institution is acting as the
trustee of an irrevocable trust. Because, as discussed below, the
amendments merely clarify current rules applicable to deposit insurance
coverage, they are outside the scope of section 302 of RCDRIA. Thus,
they need not take effect on the first day of a calendar quarter;
instead, the technical amendments will become effective 30 days after
the final rule is published in the Federal Register.
A. Commingled Accounts of Bankruptcy Trustees
One technical amendment codifies the FDIC's long-standing staff
interpretation of the insurance coverage available to a commingled
bankruptcy trustee's account. For many years, the FDIC's staff has
advised bankruptcy trustees and other interested parties that, when a
bankruptcy trustee appointed under title 11 of the United States Code
commingles the funds of two or more bankruptcy estates in the same
trust account (such an account is viewed as the account of a statutory
irrevocable trust created by one of the chapters of title 11 of the
United States Code), the funds of each title 11 bankruptcy estate will
receive pass-through coverage--that is, each bankruptcy estate will be
separately insured for up to $100,000--provided that the recordkeeping
requirements of 12 CFR 330.4(b) are met.3 However, in spite of the
FDIC's staff interpretation, the Department of Justice's Executive
Office for United States Trustees (Executive Office), the organization
charged with supervising the administration of bankruptcy estates and
trustees, has declined to recognize that there is pass-through
insurance for such accounts. In accordance with section 345 of the
Bankruptcy Code, 11 U.S.C. 345, the Executive Office has required banks
holding such bankruptcy trustee accounts to provide collateral for any
such funds that are not insured by the FDIC. But because the Executive
Office does not recognize pass-through insurance for such accounts,
banks holding such accounts are being required to pledge more
collateral than is actually necessary. The Executive Office has stated
that it will recognize pass-through coverage, and reduce its
[[Page 7708]] collateral requirements accordingly, provided that the
FDIC Board takes formal action assuring such accounts pass-through
coverage. For this reason, the Board has decided to include an
amendment to the FDIC's insurance regulations, in the form of a new
Sec. 330.11(d), confirming that pass-through insurance coverage will be
provided for such bankruptcy trustee accounts.
\3\FDIC Advisory Opinions published on this subject include
FDIC-93-59 (August 17, 1993), FDIC 89-21 (June 13, 1989), FDIC-88-74
(November 9, 1988), FDIC 87-17 (October 9, 1987), and FDIC-82-8
(March 25, 1982).
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The technical amendment codifying the long-standing interpretation
by FDIC staff of the insurance coverage available to the commingled
account of a bankruptcy trustee qualifies as an interpretative rule;
thus, it is exempt from the prior notice and comment requirements
ordinarily imposed by the Administrative Procedure Act, 5 U.S.C.
553(b)(3)(A).
B. Joint Deposit Accounts
Another technical amendment clarifies the meaning of Sec. 330.7(c)
of the FDIC's regulations (12 CFR 330.7(c)), which specifies the
requirements an account must meet to qualify for separate insurance
coverage as a joint account. Section 330.7(c) exempts certain types of
accounts, such as certificates of deposit, from the general requirement
that each co-owner must sign a signature card, but the regulation
states that ``all such deposit accounts, must, in fact, be jointly
owned''. Contrary to the FDIC's long-standing interpretation, some
courts have interpreted the quoted language to require the FDIC to
consider state law and evidence outside the deposit account records of
the insured institution to contradict otherwise unambiguous deposit
account records, in connection with claims that what appear to be joint
accounts are in fact individually-owned. The FDIC intended, however,
that depositors be bound by its recordkeeping regulation at 12 CFR
330.4(a), which requires that the deposit account records be considered
conclusive if they are unambiguous. Reliance on the deposit account
records is critical if the FDIC is to fulfill its obligation to make
insurance determinations and issue checks in a timely fashion after a
bank fails. It is also critical in preventing fraudulent claims.
Several courts have recognized the need for the FDIC to rely on such
records in making insurance determinations. Fouad & Sons v. FDIC, 898
F.2d 482 (5th Cir. 1990), In re Collins Securities Corp., 998 F.2d 551
(8th Cir. 1993), Jones v. FDIC, 748 F.2d 1400 (10th Cir. 1984).
For this reason, the amendment as presently proposed would remove
the ``but all such deposits must, in fact, be jointly owned'' language
from Sec. 330.7(c), and add that all deposit accounts which meet the
requirements for qualifying joint accounts, including those which are
exempted from the requirement that every co-owner must sign a signature
card, will be deemed to be jointly-owned if the FDIC determines that
the deposit account records are clear and unambiguous. The signatures
of two or more persons on a deposit account signature card or the names
of two or more persons on a certificate of deposit shall be conclusive
evidence of a joint account if the deposit account records are clear
and unambiguous. Only if the deposit account records are found to be
ambiguous on the issue of ownership will evidence outside the deposit
account records be considered, in accordance with the recordkeeping
provisions of Sec. 330.4(a). After taking into account the comments
received on this amendment, FDIC staff has revised the amendment
proposed earlier (and published for comment at 58 FR 64525 (December 8,
1993)) to conform more closely to the long-standing FDIC practice
articulated by Sec. 330.4(a).
The technical amendment on joint account coverage was published for
comment as part of the proposed version of this capital disclosure
regulation. 58 FR 64521 (December 8, 1993). The FDIC received two
comments on the proposed amendment clarifying what evidence is
necessary to determine the ownership of a joint account. An industry
trade group opposed the amendment because of concern that it might
permit the FDIC to ignore outside evidence of ``fundamental claims''
about the ``viability'' of a joint account under state law--for
example, evidence that an account signature was forged, that one of the
signers was incompetent when he signed, or that his signature was
coerced. A savings association cited similar concerns but suggested
that any outside evidence on such issues be considered under federal
law, not state law.
It is important to emphasize that, when the FDIC says that it will
rely on the deposit account records if they are clear and unambiguous,
it will do so only to determine the appropriate ownership category for
insurance purposes. Such reliance will not necessarily preclude a
depositor from proving that a deposit account existed when the bank's
deposit account records show no evidence of such an account, or that an
account actually contained more funds than are reflected in the bank's
deposit account records. When the FDIC determines that the deposit
account records are ambiguous or unclear, it has the discretion to
consider evidence beyond the deposit account records. Of course, the
FDIC need not find such extrinsic evidence persuasive. However, while
the FDIC understands that account records may not always accurately
reflect the intent of the parties to the account, and that
circumstances may sometimes render the accounts invalid under state
law,4 the FDIC believes that it is essential to make insurance
determinations without considering outside evidence concerning the
ownership category of accounts as long as the account records are
clear.
\4\On the subject of state law, Sec. 330.3(h) of the FDIC's
insurance regulations states that ``while ownership under state law
of deposited funds is a necessary condition for deposit insurance,
ownership under state law is not sufficient for, or decisive in,
determining deposit insurance coverage.'' Instead, ``[d]eposit
insurance coverage is also a function of the deposit account records
of the insured depository institution, of recordkeeping
requirements, and of other provisions of this part, which, in the
interest of uniform national rules for deposit insurance coverage,
are controlling for purposes of determining deposit insurance
coverage''. 12 CFR 330.3(h).
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The recordkeeping regulations, by requiring that the deposit
account records be considered conclusive if they are unambiguous, serve
several important purposes. When a bank fails, it is important that the
FDIC be permitted to make insurance determinations and issue checks to
depositors in a timely fashion, a timeliness made possible by the
FDIC's reliance on those deposit account records that are clear.
Reliance on unambiguous account records also permits the FDIC to
determine the least cost resolution of a failed institution and to
prevent fraudulent insurance claims. These purposes require that the
deposit account records, even if they do not correctly reflect the
parties' intent, be deemed conclusive if they are unambiguous. Of
course, if the records are ambiguous or unclear, the FDIC may, in its
discretion, rely on other evidence. Moreover, as the regulations
already provide, state law concerning ownership of ambiguously-owned
accounts are only the starting point for determining the ownership
issue; federal law ultimately controls.
For this reason, the Board has decided to include as part of this
final rule the proposed amendment to the FDIC's deposit insurance rules
on joint accounts. The amendment clarifies that an account holder
seeking to prove that what appears to be a joint account is actually an
account held in a right and capacity other than joint ownership (for
example, as an individually-owned account) must satisfy the
requirements of Sec. 330.4(a) of the FDIC's regulations
[[Page 7709]] (12 CFR 330.4(a)) on the recognition of deposit
ownership. Section 330.4(a) provides, in part, that, if the FDIC
determines that the deposit account records of an insured depository
institution are clear and unambiguous, no other records will be
considered as to the manner in which those funds are owned. Section
330.5(a) of the FDIC's regulations (12 CFR 330.5(a)) already explicitly
addresses the situation where more than one natural person has the
right to withdraw funds from an account that is actually viewed as
individually-owned. The amendment applies to situations involving
deposits which appear to be jointly-owned but which are claimed to be
held in other rights and capacities.
C. Accounts for Which an Insured Depository Institution Acts as an
Agent, Nominee, Guardian, Custodian or Conservator
Another technical amendment concerns Sec. 330.6(a) of the FDIC's
regulations (12 CFR 330.6(a)), which governs the insurance coverage
provided for agency or fiduciary accounts. Section 330.6(a) currently
indicates that funds deposited by an insured depository institution
acting in a fiduciary capacity are governed by Sec. 330.10 of the
insurance regulations. However, in May 1993 the FDIC amended
Sec. 330.10, along with several other sections of the insurance
regulations, primarily to implement revisions to the insurance rules
made by section 311 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA, Pub. L. 102-242, 105 Stat. 2236) (58
FR 29952 (May 25, 1993)). One of those required revisions limits,
effective December 19, 1993, the separate insurance formerly applicable
to an account held by an insured depository institution in a fiduciary
capacity to an account held by an insured depository institution as a
trustee of an irrevocable trust. However, the May 1993 amendment simply
revised Sec. 330.10; Sec. 330.6 continued to refer to Sec. 330.10 but
was not revised, stating instead that ``[w]hen such funds are deposited
by an insured depository institution acting in a fiduciary capacity,
the insurance coverage shall be governed by the provisions of
Sec. 330.10 of this part''.
The present technical amendment conforms Sec. 330.6(a) to section
311 of FDICIA. The first sentence of Sec. 330.6(a) states the general
rule--that funds owned by a principal or principals and deposited into
one or more deposit accounts in the name of a fiduciary shall be
insured as if deposited in the name of the principal or principals. The
second sentence implements the FDICIA change by stating that, when such
funds are deposited by an insured depository institution acting as a
trustee of an irrevocable trust, the insurance coverage will be
governed by the provisions of Sec. 330.10.
Like the technical amendment on joint account coverage, this
technical amendment was published for comment as part of the proposed
version of this capital disclosure regulation. 58 FR 64521 (December 8,
1993). The amendment proposed to state clearly, in Sec. 330.6(a), that
only funds deposited by an insured depository institution acting as a
trustee of an irrevocable trust will be eligible for the separate
insurance coverage described in Sec. 330.10. Up until this time,
Sec. 330.6(a) had stated that funds deposited by an insured depository
institution acting in a fiduciary capacity would be insured as provided
by Sec. 330.10, while Sec. 330.10 stated that it pertains only to funds
held by an institution acting as the trustee of an irrevocable trust.
Thus, the amendment merely clarifies the language.
The FDIC received four comments on this technical amendment, all of
which were favorable. Two, however, noted that the proposed regulatory
language for Sec. 330.6(a) seemed to except deposits held by insured
depository institutions acting in a representative capacity from the
general rule that all deposits held by fiduciaries are insured as if
owned by the party represented by the fiduciary. Of course, even
deposits held by insured depository institutions acting in a
representative capacity follow this general rule. Thus, this final rule
includes the proposed amendment to Sec. 330.6(a), as revised to reflect
the suggested clarification.
D. Accounts Held by Depository Institutions in Fiduciary Capacities
The final technical amendment further conforms the FDIC's
regulations to section 311 of FDICIA, by changing the present title of
Sec. 330.10, ``Accounts held by depository institutions in fiduciary
capacities'', to ``Accounts held by a depository institution as the
trustee of an irrevocable trust''. This change conforms Sec. 330.10 to
section 311 of FDICIA and to the rest of Sec. 330.10 itself. Because
the amendment merely makes the title consistent with Sec. 330.10, and
because the text of Sec. 330.10 was itself published for comment (57 FR
49026 (October 29, 1992), it is unnecessary, under the Administrative
Procedure Act, to publish this proposed change for comment. 5 U.S.C.
553(b)(3)(B).
Paperwork Reduction Act
The final rule is intended to reduce uncertainty about whether
employee benefit plan deposits are eligible for ``pass-through''
insurance coverage and to require depository institutions to provide
timely disclosure to employee benefit plan depositors when ``pass-
through'' deposit insurance coverage is no longer available. No
collections of information pursuant to the Paperwork Reduction Act are
contained in the final rule. Consequently, no information has been
submitted to the Office of Management and Budget for review.
The technical amendments do not require any collections of
information pursuant to section 3504(h) of the Paperwork Reduction Act,
44 U.S.C. 3501 et seq. Accordingly, no information has been submitted
to the Office of Management and Budget for review.
Regulatory Flexibility Act
Neither the final rule nor the technical amendments will have a
significant impact on a substantial number of small businesses within
the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Accordingly, the Act's requirements relating to an initial and final
regulatory flexibility analysis are not applicable.
List of Subjects in 12 CFR Part 330
Bank deposit insurance, Banks, Banking, Savings and loan
associations, Trusts and trustees.
The Board of Directors of the Federal Deposit Insurance Corporation
hereby amends Part 330 of title 12 of the Code of Federal Regulations
as follows:
PART 330--DEPOSIT INSURANCE COVERAGE
1. The authority citation for Part 330 continues to read as
follows:
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q),
1819(Tenth), 1820(f), 1821(a), 1822(c).
2. Section 330.6 is amended by revising paragraph (a) to read as
follows:
Sec. 330.6 Accounts held by an agent, nominee, guardian, custodian or
conservator.
(a) Agency or nominee accounts. Funds owned by a principal or
principals and deposited into one or more deposit accounts in the name
of an agent, custodian or nominee shall be insured to the same extent
as if deposited in the name of the principal(s). When such funds are
deposited by an insured depository institution acting as a trustee of
an irrevocable trust, the insurance coverage [[Page 7710]] shall be
governed by the provisions of Sec. 330.10 of this part.
* * * * *
3. Section 330.7 is amended by revising paragraph (c) to read as
follows:
Sec. 330.7 Joint ownership accounts.
* * * * *
(c) Qualifying joint accounts. (1) A joint deposit account shall be
deemed to be a qualifying joint account, for purposes of this section,
only if:
(i) All co-owners of the funds in the account are natural persons;
and
(ii) Each co-owner has personally signed a deposit account
signature card; and
(iii) Each co-owner possesses withdrawal rights on the same basis.
(2) The requirement of paragraph (c)(1)(ii) of this section shall
not apply to certificates of deposit, to any deposit obligation
evidenced by a negotiable instrument, or to any account maintained by
an agent, nominee, guardian, custodian or conservator on behalf of two
or more persons.
(3) All deposit accounts that satisfy the criteria in paragraph
(c)(1) of this section, and those accounts that come within the
exception provided for in paragraph (c)(2) of this section, shall be
deemed to be jointly owned provided that, in accordance with the
provisions of Sec. 330.4(a) of this part, the FDIC determines that the
deposit account records of the insured depository institution are clear
and unambiguous as to the ownership of the accounts. If the deposit
account records are ambiguous or unclear as to the manner in which the
deposit accounts are owned, then the FDIC may, in its sole discretion,
consider evidence other than the deposit account records of the insured
depository institution for the purpose of establishing the manner in
which the funds are owned. The signatures of two or more persons on the
deposit account signature card or the names of two or more persons on a
certificate of deposit or other deposit instrument shall be conclusive
evidence that the account is a joint account unless the deposit records
as a whole are ambiguous and some other evidence indicates, to the
satisfaction of the FDIC, that there is a contrary ownership capacity.
* * * * *
4. The heading of Sec. 330.10 is revised to read as follows:
Sec. 330.10 Accounts held by a depository institution as the trustee
of an irrevocable trust.
5. Section 330.11 is amended by adding a new paragraph (d) to read
as follows:
Sec. 330.11 Irrevocable trust accounts.
* * * * *
(d) Commingled accounts of bankruptcy trustees. Whenever a
bankruptcy trustee appointed under Title 11 of the United States Code
commingles the funds of various bankruptcy estates in the same account
at an insured depository institution, the funds of each Title 11
bankruptcy estate will be added together and insured for up to
$100,000, separately from the funds of any other such estate.
6. Section 330.12 is amended by revising the heading and
introductory text of paragraph (g), redesignating paragraphs (g)(1),
(g)(2) and (g)(3) as paragraphs (g)(2), (g)(3) and (g)(4),
respectively, and adding new paragraphs (g)(1) and (h) to read as
follows:
Sec. 330.12 Retirement and other employee benefit plan accounts.
* * * * *
(g) Definitions of ``depositor'', ``employee benefit plan'',
``employee organizations'' and ``non-contingent interest''. Except as
otherwise indicated in this section, for purposes of this section:
(1) The term depositor means the person(s) administering or
managing an employee benefit plan.
* * * * *
(h) Disclosure of capital status--(1) Disclosure upon request. An
insured depository institution shall, upon request, provide a clear and
conspicuous written notice to any depositor of employee benefit plan
funds of the institution's leverage ratio, Tier 1 risk-based capital
ratio, total risk-based capital ratio and prompt corrective action
(PCA) capital category, as defined in the regulations of the
institution's primary federal regulator, and whether, in the depository
institution's judgment, employee benefit plan deposits made with the
institution, at the time the information is requested, would be
eligible for ``pass-through'' insurance coverage under paragraphs (a)
and (b) of this section. Such notice shall be provided within five
business days after receipt of the request for disclosure.
(2) Disclosure upon opening of an account. (i) An insured
depository institution shall, upon the opening of any account comprised
of employee benefit plan funds, provide a clear and conspicuous written
notice to the depositor consisting of: an accurate explanation of the
requirements for pass-through deposit insurance coverage provided in
paragraphs (a) and (b) of this section; the institution's PCA capital
category; and a determination of whether or not, in the depository
institution's judgment, the funds being deposited are eligible for
``pass-through'' insurance coverage.
(ii) An insured depository institution shall provide the notice
required in paragraph (h)(2)(i) of this section to depositors who have
employee benefit plan deposits with the insured depository institution
on July 1, 1995 that, at the time such deposits were placed with the
insured depository institution, were not eligible for pass-through
insurance coverage under paragraphs (a) and (b) of this section. The
notice shall be provided to the applicable depositors within ten
business days after July 1, 1995.
(3) Disclosure when ``pass-through'' coverage is no longer
available. Whenever new, rolled-over or renewed employee benefit plan
deposits placed with an insured depository institution would no longer
be eligible for ``pass-through'' insurance coverage, the institution
shall provide a clear and conspicuous written notice to all existing
depositors of employee benefit plan funds of its new PCA capital
category, if applicable, and that new, rolled-over or renewed deposits
of employee benefit plan funds made after the applicable date shall not
be eligible for ``pass-through'' insurance coverage under paragraphs
(a) and (b) of this section. Such written notice shall be provided
within 10 business days after the institution receives notice or is
deemed to have notice that it is no longer permitted to accept brokered
deposits under section 29 of the Act and the institution no longer
meets the requirements in paragraph (b) of this section.
(4) Definition of ``employee benefit plan''. For purposes of this
paragraph, the term employee benefit plan has the same meaning as
provided under paragraph (g)(2) of this section but also includes any
eligible deferred compensation plans described in section 457 of the
Internal Revenue Code of 1986 (26 U.S.C. 457).
By order of the Board of Directors.
Dated at Washington, D.C., this 31st day of January, 1995.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95-3178 Filed 2-8-95; 8:45 am]
BILLING CODE 6714-01-P
