97-11965. Simplification of Deposit Insurance Rules  

  • [Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
    [Proposed Rules]
    [Pages 26435-26449]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 97-11965]
    
    
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    FEDERAL DEPOSIT INSURANCE CORPORATION
    
    12 CFR Part 330
    
    RIN 3064-AB73
    
    
    Simplification of Deposit Insurance Rules
    
    AGENCY: Federal Deposit Insurance Corporation (FDIC).
    
    ACTION: Proposed rule.
    
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    SUMMARY: The FDIC is seeking comment on specific proposed revisions to 
    the FDIC's deposit insurance regulations. The intended effect of the 
    proposed rule is to simplify and revise the FDIC's regulations on 
    deposit insurance by making several technical revisions and certain 
    substantive revisions.
    
    DATES: Written comments must be received by the FDIC on or before 
    August 12, 1997.
    
    ADDRESSES: Written comments are to be addressed to the Office of the 
    Executive Secretary, Federal Deposit Insurance Corporation, 550 17th 
    Street, N.W.,
    
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    Washington, D.C. 20429. Comments may be hand-delivered to Room F-402, 
    1776 F Street, N.W., Washington, D.C. 20429, on business days between 
    8:30 a.m. and 5 p.m. (FAX number: (202) 898-3838; Internet address: 
    [email protected]). Comments will be available for inspection in the 
    FDIC Public Information Center, room 100, 801 17th Street, N.W., 
    Washington, D.C., between 9:00 a.m. and 5:00 p.m. on business days.
    
    FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Counsel, Legal 
    Division, (202) 898-7349, Federal Deposit Insurance Corporation, 550 
    17th Street, N.W., Washington, D.C. 20429.
    
    SUPPLEMENTARY INFORMATION:
    
    Background
    
        One of the FDIC's corporate operating projects under its Strategic 
    Plan is to simplify the deposit insurance rules. The purpose is to 
    promote public understanding of deposit insurance and to increase 
    financial institution and consumer understanding of deposit insurance. 
    This effort to simplify the FDIC's insurance regulations, found in 12 
    CFR part 330 (part 330), is also intended to satisfy the provisions in 
    section 303(a) of the Riegle Community Development and Regulatory 
    Improvement Act of 1994, 12 U.S.C. 4803(a), to reduce regulatory burden 
    and improve efficiency.
        The FDIC revised its insurance regulations twice in the recent 
    past. The first time, in 1990, was necessitated by the termination of 
    the Federal Savings and Loan Insurance Corporation (FSLIC). The 
    Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
    (FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)) required the FDIC to 
    issue uniform insurance regulations for deposits in all insured 
    depository institutions, including those previously insured by the 
    FSLIC. The second set of recent changes in the FDIC insurance rules 
    were made pursuant to provisions in the Federal Deposit Insurance 
    Corporation Improvement Act of 1991 (FDICIA) (Pub. L. 102-242 (1991)). 
    A provision in FDICIA, in essence, limited the insurance coverage of 
    employee benefit and retirement plans. Also, in February 1995, the FDIC 
    issued disclosure requirements in connection with the limited 
    availability of insurance for employee benefit plan accounts, 60 FR 
    7701 (Feb. 9, 1995), codified at 12 CFR 330.12.
        The amendments made to the insurance rules in 1990 reconciled 
    differences between the FSLIC insurance regulations and the then-
    existing FDIC regulations. They also revised the insurance regulations 
    to, among other things, better organize and define terms used in the 
    regulations, convert long-standing interpretive opinions into 
    regulations, resolve outstanding issues and clarify ambiguous 
    provisions. Although the insurance rules were revised in 1990 and, to a 
    lesser extent in 1993 and 1995, the Board of Directors believes that 
    the revisions in the proposed rule would be helpful. The need for these 
    changes has been brought to the FDIC's attention in several ways, 
    especially through the steady receipt of letters and phone calls on 
    insurance questions. Experience with bank and thrift failures also has 
    enabled the staff to identify procedural aspects of the regulations 
    which, when applied in accordance with the regulations, may prove 
    unfair to certain depositors in some situations.
        The FDIC must be mindful of the applicable statutory parameters in 
    considering whether and to what extent to modify the insurance 
    regulations. The general statutory basis for and guidance on deposit 
    insurance is found in section 11(a) of the Federal Deposit Insurance 
    Act (FDI Act), 12 U.S.C. 1821(a), which provides, in relevant part, 
    that depositors are insured up to $100,000 based on the ``right'' and 
    ``capacity'' in which the deposits are maintained. The statute does not 
    define ``depositor,'' ``right'' or ``capacity.'' The FDIC regulations 
    implementing the ``right-and-capacity'' language recognize different 
    categories of insured accounts based on an analysis of ownership. Thus, 
    the rules provide ``separate'' insurance coverage for different types 
    of accounts which are owned in different ways. For example, accounts 
    owned by an individual are not added to joint accounts in which that 
    same individual has an ownership interest. ``Separate'' insurance means 
    that each category of account in which a person has an ownership 
    interest is covered for up to $100,000 separately insured from the 
    funds in other categories of accounts.
    
    Advance Notice of Proposed Rulemaking
    
        In May 1996 the FDIC issued an Advance Notice of Proposed 
    Rulemaking (ANPR), 61 FR 25596 (May 22, 1996), soliciting preliminary 
    views on whether and, if so, how the FDIC should simplify its deposit 
    insurance regulations. The ANPR requested comment on all aspects of 
    streamlining, simplifying and clarifying the insurance rules, including 
    the likely effect of such changes on consumers and the banking 
    industry. The FDIC also sought comment on several specific revisions to 
    the insurance rules that the Board was then considering.
        The possible areas of simplification identified in the ANPR were: 
    (1) Rewriting certain parts of the rules to make them clearer and 
    easier to understand; (2) eliminating step one of the two steps 
    involved in determining the insurance coverage for joint accounts; (3) 
    revising the recordkeeping rules allowing the FDIC more flexibility 
    (for the benefit of depositors) in determining the ownership of 
    deposits held in a custodial or fiduciary capacity; (4) changing the 
    rules on ``payable upon death'' accounts; (5) modifying the way the 
    FDIC insures certain types of accounts upon the death of the owner(s) 
    of the accounts; (6) recommending to Congress that the FDI Act be 
    amended to change the way employee benefit plans are insured; and (7) 
    revising the rules on living trust accounts.
        The comment period for the ANPR closed on August 20, 1996. The FDIC 
    received sixty-eight comments on the ANPR, almost all of which 
    supported the FDIC's deposit insurance simplification efforts. The FDIC 
    considered the comments received on the ANPR in preparing the specific 
    revisions in the proposed rule. Comments on the ANPR are identified and 
    discussed below in the context of specific issues and proposed 
    revisions.
    
    Approach to Deposit Insurance Simplification
    
        The Board believes that certain technical revisions and moderate 
    substantive revisions to the deposit insurance rules are warranted. The 
    technical changes are described below in the section-by-section 
    discussion of the proposed rule. They consist of numerous wording and 
    organizational changes to the insurance rules intended to make the 
    rules clearer and easier to understand. The technical changes also 
    encompass the addition of several examples in the insurance regulations 
    illustrating the application of the various deposit insurance rules. 
    The proposed substantive revisions in the proposed rule are as follows.
    
    Proposed Substantive Revisions
    
    1. The Recordkeeping Rules for Fiduciary Accounts
        The insurance regulations impose specific recordkeeping 
    requirements as a precondition for insuring parties other than those 
    whose names appear on the depository institution's deposit account 
    records. 12 CFR 330.4(a). 1 For example,
    
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    if A is acting as an agent for B, C, and D and places funds belonging 
    to them in an insured bank or thrift, the institution's deposit account 
    records must show that A is holding the account as an agent in order 
    for the FDIC to recognize the ownership interests of B, C, and D. The 
    FDIC will then insure the account as if it were held directly by B, C, 
    and D (the owners of the account) as long as either the institution's 
    deposit account records or the agent's records (maintained in ``good 
    faith and in the regular course of business'') evidence B, C, and D's 
    ownership interests in the account. Id. at 330.4(b). In this context, 
    we say that the insurance ``passes-through'' the agent to the owner(s) 
    of the account. The same ``pass-through'' principle applies to other 
    types of custodial and fiduciary accounts, including those that 
    constitute a separate right and capacity, such as irrevocable trust 
    accounts and employee benefit plan accounts. Id. at 330.10 & 330.12.
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        \1\  The rules derive from section 12(c) of the FDI Act (12 
    U.S.C. 1822(c)) which provides that the FDIC is not required to 
    recognize as the owner of a deposit any claimant whose name or 
    interest as owner is not disclosed on the records of the depository 
    institution if such recognition would increase the aggregate amount 
    of the insured deposits in the institution.
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        The concept of ``pass-through'' insurance stems from and is 
    consistent with the statutory principle that insurance is provided 
    according to the right and capacity in which the funds are owned. In 
    this agency situation B, C, and D's ownership interests in the agency 
    account would be added to any other funds held at the same bank or 
    thrift by or for them (in the same ownership capacity) and insured to a 
    limit of $100,000. Id. at 330.6(a). Thus, if A had an individual 
    account at a bank and an agent was holding funds for him or her at the 
    same bank, the funds in the individual account would be added to his or 
    her ownership interest in the agency account and insured to a combined 
    limit of $100,000, assuming compliance with the recordkeeping 
    requirements explained above. Id. at 330.4.
        The reasons the FDIC imposes recordkeeping requirements for ``pass-
    through'' insurance purposes are: (1) To safeguard against fraud when 
    an insured institution fails and the FDIC is called upon to pay 
    insurance claims and (2) to enable the FDIC to estimate the amount of 
    insured deposits when considering the resolution options for a failing 
    insured depository institution. 2
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        \2\ In many cases where an insured institution is declared 
    insolvent, the FDIC transfers some or all of the assets and deposit 
    liabilities to another institution. In such cases, speed and 
    accuracy in accounting for the assets and liabilities being 
    transferred is critical to the consummation of the transaction. 
    Permitting the FDIC to rely on the account records facilitates these 
    transactions and prevents post-default fraudulent claims to increase 
    insurance coverage.
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        The recordkeeping requirements intentionally limit the FDIC's 
    ability to consider evidence outside the deposit account records of an 
    insured institution in determining the ownership of deposits. They 
    establish a presumption that deposited funds are actually owned in the 
    manner indicated on the account records. Those records are binding on 
    the depositor if they are ``clear and unambiguous.'' Id. at 330.4(a). 
    The FDIC has the discretion, however, to decide whether records are 
    clear and unambiguous. If the FDIC determines that the records are 
    unclear or ambiguous, then it may consider evidence other than the 
    deposit account records. The issue the FDIC has faced from time to time 
    is whether this discretion provides the FDIC with sufficient 
    flexibility to recognize beneficial and/or multiple ownership of 
    accounts when such ownership is not reflected on the bank or thrift's 
    deposit account records. In other words, if the deposit account records 
    are not unclear or ambiguous, the regulations restrict the FDIC from 
    considering extraneous evidence in determining the ownership interest 
    of the deposits, even if such evidence exists and would demonstrate 
    ownership other than that reflected in the institution's deposit 
    account records.
        A specific situation at a recent bank failure involved a deposit 
    account held by a title company as agent for customers in the process 
    of buying and selling houses. Because the bank's deposit account 
    records did not indicate the agency nature of the account, the funds 
    were deemed to be owned by the title company and insured to a limit of 
    $100,000; thus, the funds were not afforded the ``pass-through'' 
    coverage (for each customer of the title company) that would have 
    applied if the bank's records had indicated that the title company was 
    acting as an agent.
        The revisions to the deposit insurance recordkeeping rules in the 
    proposed rule are intended to provide the FDIC with more flexibility in 
    considering the actual ownership interests in deposit accounts held by 
    fiduciaries and thereby prevent possible hardships. The approach used 
    in the proposed rule is to allow the FDIC to look beyond the deposit 
    accounts records of the depository institution where account titles are 
    indicative of a fiduciary relationship. Two examples would be accounts 
    held by escrow agents and those held by entities such as title 
    companies, who commonly hold funds for others.3 Another 
    situation would be where an account is held in the name of an entity, 
    or the nominee of that entity, whose primary business is to hold, for 
    safekeeping reasons, deposits for others.
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        \3\ This option also would encompass multi-tiered fiduciary 
    relationships where, for example, an agent maintains a deposit 
    account for a party who also is an agent. The current regulations 
    include special recordkeeping rules for such situations. 12 CFR 
    330.4(b)(3).
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        The FDIC received forty-two comments on the ANPR concerning this 
    possible revision to the insurance coverage recordkeeping rules. The 
    vast majority of those who commented encouraged the FDIC to revise the 
    recordkeeping rules to allow the FDIC more flexibility in determining 
    the ownership of account funds. Others commented that the FDIC should 
    relax the recordkeeping rules only if it can be done without increasing 
    the compliance burden on insured banks and thrifts.
        The FDIC requests specific comment on whether the recordkeeping 
    rules for ``multi-tiered fiduciary relationships'' should be revised. 
    12 CFR 330.4(b)(3). Those rules specify alternative requirements in 
    situations where a fiduciary is holding funds for another party who 
    also is a fiduciary. The rules were added to the FDIC's insurance 
    regulations in 1990 to codify the FDIC staff views on the recordkeeping 
    requirements for such multi-tiered (or multiple pass-through) fiduciary 
    accounts. Preliminarily, the FDIC believes that the rules provide 
    certainty to the industry on the subject and, thus, should be retained. 
    As indicated, however, the FDIC seeks comments on the necessity and 
    clarity of these special recordkeeping rules.
    2. Treatment of Accounts Upon the Death of the Owner(s) of the Accounts
        Depending on the applicable state law, the ownership interest of a 
    deposit account often changes upon the death of the owner of a deposit 
    account. For deposit insurance purposes, the FDIC has adopted this 
    general principle of state law 4 and thus, under the FDIC's 
    current position, if the beneficiaries/executor of the decedent do not 
    act immediately after the decedent's death to restructure the 
    account(s), insurance coverage of the decedent's accounts may be 
    decreased, sometimes significantly. For example, if a husband and wife 
    hold a joint account, a POD account and two individual accounts in 
    their respective names, the death of one spouse would
    
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    result in the surviving spouse's becoming the sole owner of the joint 
    account and the POD account. Thus, the accounts would be aggregated 
    with the surviving spouse's individual account, possibly resulting in a 
    substantial reduction in insurance coverage.
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        \4\ The FDIC's insurance regulations provide that, while 
    ownership under state law is a necessary condition for deposit 
    insurance, ownership under state law is not decisive in determining 
    deposit insurance coverage. 12 CFR 330.3(h).
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        Over the years the FDIC has received several questions and 
    complaints about the treatment of deposit accounts, for deposit 
    insurance purposes, upon the death of the owner of the deposits. A 
    question of fairness has been raised about whether a survivor of a 
    decedent should be ``penalized'' for not rearranging the decedent's 
    bank accounts quickly enough after the decedent's death so as not to 
    cause a reduction in deposit insurance coverage. Some have complained 
    that time is needed after the death of an accountholder before proof 
    can be shown to the depository institution of the decedent's death. 
    Specifically, a delay is sometimes occasioned before death certificates 
    are available. Moreover, state laws are not consistent about when, 
    after the death of a depositor, the ownership interests in deposit 
    accounts actually change.
        The ANPR requested comment on whether the FDIC should provide a 
    ``grace period'' after the death of a depositor during which the 
    accounts would be insured as if the depositor had not died. Almost all 
    of those who commented on this issue expressed support for such a grace 
    period, noting that it seemed fair and was within the FDIC's authority 
    to provide. The FDIC believes that there is merit in allowing survivors 
    a limited amount of time to attend to a decedent's deposit accounts, 
    particularly if in some situations the survivors would have no control 
    over the decedent's accounts until certain administrative and probate 
    requirements are satisfied. Although it is infrequent that a depositor 
    dies and his or her depository institution closes at or about the same 
    time, there have been and will be situations where individuals were and 
    will be faced with this unfortunate sequence of events. Although, for 
    purposes of national uniformity, the FDIC currently deems the ownership 
    interests in deposit accounts to change immediately upon the death of a 
    depositor, the laws of all the states are not uniform on this issue.
        For these reasons, the proposed rule would permit a six-month 
    period after the death of an accountholder during which time the 
    insurance coverage of the accounts in which the decedent has an 
    ownership interest would not change, unless those authorized to do so 
    restructure the account(s), thereby rendering the grace period 
    inapplicable.\5\ The use of the six-month grace period is not intended 
    to result in a reduction in coverage. The regulation therefore provides 
    that the grace period is optional and shall not be applied if the 
    result would be a decrease in deposit insurance coverage. The FDIC 
    specifically requests comment on whether the proposed six months is the 
    appropriate length of time for the grace period.
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        \5\ The former FSLIC, as a matter of policy, allowed a grace 
    period of six months following the death of a depositor for the 
    decedent's deposits to be restructured. If an insured thrift failed 
    during the grace period and additional insurance would be available 
    if the decedent had not died, the FSLIC insured the account(s) based 
    on the account ownership shown on the institution's records as if 
    the decedent were still living. The reason for the FSLIC policy was 
    to ``lessen the hardship'' that might be caused otherwise.
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    3. The Rules on Living Trust Accounts
        A ``living trust'' is a formal trust in which the owner retains 
    control of the trust assets during his or her lifetime and designates 
    the beneficiaries of the assets upon his or her death. The owner may 
    revoke or change the terms of the trust during his or her lifetime. In 
    1993 the FDIC Legal Division prepared guidelines on the insurance of 
    revocable accounts, with an emphasis on living trusts. The guidelines 
    were updated in 1994. FDIC Adv. Op. 94-32 (May 18, 1994) (Guidelines). 
    The Guidelines are necessarily detailed and somewhat complex. At the 
    same time the Legal Division prepared the Guidelines, the FDIC also 
    adopted an informal policy not to review complex living trust documents 
    to determine POD coverage but, instead, to make copies of the 
    Guidelines available and recommend that persons inquiring about such 
    coverage consult with the lawyer who drafted the living trust. Despite 
    the availability of the FDIC's Guidelines and the existence of the 
    FDIC's current policy not to review trust documents, the FDIC still 
    receives numerous questions about the insurance of POD accounts held in 
    connection with living trusts.
        Over the years the FDIC has found that the vast majority of deposit 
    accounts held pursuant to a living trust are not eligible for insurance 
    coverage under the POD rules because the trusts contain ``defeating 
    contingencies.'' As explained in the Guidelines, a defeating 
    contingency exists when a named beneficiary in a living trust would 
    not, simply by operation of the settlor's death, become the owner of 
    the trust assets. A contingency of some sort has to be satisfied before 
    the beneficiary becomes entitled to the assets. One example would be 
    that the beneficiary must be married at the time of the settlor's death 
    to be entitled to the assets. The existence of a defeating contingency 
    in a living trust would disqualify the portion of the funds in the POD 
    account corresponding to the unqualified beneficiary for POD insurance 
    coverage treatment, because POD coverage is conditioned in part upon 
    the intention of the owner that the funds in the account pass to the 
    named beneficiary(ies) upon the owner's death. 12 CFR 330.8(a). In such 
    situations, the funds in the POD account corresponding to an 
    unqualified beneficiary would be treated as single-ownership funds of 
    the owner of the account. Id. at 330.8(b).
        Because, in the FDIC's experience, it seems that at least a 
    majority of POD accounts held in connection with living trusts do not 
    qualify for POD coverage, an argument can be made that, to avoid 
    depositor confusion, the FDIC should simply amend its regulations to 
    indicate accounts held pursuant to living trusts would not qualify for 
    insurance coverage under the POD account category. In fact, the FDIC 
    suggested this option in the ANPR. As indicated in some of the comments 
    received on this alternative, however, the POD coverage category is 
    broader than just POD accounts and includes all types of accounts held 
    in connection with revocable trusts that satisfy the requirements in 
    the POD insurance coverage regulations. It seems inappropriate, 
    therefore, to exclude accounts held in connection with living trusts 
    from POD insurance treatment where the requirements of the regulation 
    are otherwise satisfied.
        As an alternative to eliminating the living trust deposit accounts 
    from the POD insurance category, the FDIC is proposing to amend the POD 
    rules to indicate that those rules might apply to accounts held in 
    connection with living trusts, but only if the requirements of the POD 
    regulation are satisfied. The revised rules would specify that the 
    existence of a ``defeating contingency'' would prevent corresponding 
    funds in a POD account from receiving POD deposit insurance coverage, 
    as to the beneficiary whose interest in the assets of the living trust 
    is subject to the defeating contingency.
    
    Other Possible Substantive Changes Mentioned in the ANPR
    
        In the ANPR the FDIC requested comments on three additional 
    possible substantive revisions to the deposit insurance rules. For the 
    reasons indicated below, however, those possible revisions are not 
    included as part of the proposed rule.
    
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    1. The Joint Account Rules
        Joint ownership is one of the account categories that qualifies for 
    separate insurance coverage. 12 CFR 330.7. Thus, a depositor who has an 
    individual deposit and interests in joint accounts at the same insured 
    bank or thrift is insured for up to $100,000 per category of account. 
    Currently deposit insurance for joint accounts is determined by a two-
    step process: first, all joint accounts that are identically owned 
    (i.e., held by the same combination of individuals) are added together 
    and the combined total is insurable up to the $100,000 maximum; second, 
    each person's interests in joint accounts involving different 
    combinations of individuals are combined and the total is insured up to 
    the $100,000 maximum. The general rules are: (1) No one joint account 
    can be insured for over $100,000, (2) multiple joint accounts with 
    identical ownership cannot be insured for over $100,000 in the 
    aggregate, and (3) no one person's insured interest in the joint 
    account category can exceed $100,000.
        These rules governing joint accounts are somewhat complex and 
    sometimes misunderstood by both consumers and bankers. Thus, in the 
    ANPR the FDIC raised the possibility of simplifying the current joint 
    account rules by eliminating the first step of the two-step process. 
    Under this alternative, all funds held in joint accounts would be 
    allocated among the owners and each owner's interests in all joint 
    accounts (held at the same depository institution) would be added and 
    insured up to $100,000 in the aggregate. The ANPR comments on this 
    possible revision to the joint account rules were uniformly favorable. 
    Members of the banking industry and others, however, have raised 
    questions about the potential ``moral hazard'' of expanding deposit 
    insurance coverage beyond current limits. The moral hazard exists, in 
    this context, because insured depositors do not have an incentive to 
    monitor and discipline their institutions. The managers of those 
    insured banks and thrifts, consequently, may take more risks than they 
    otherwise would. Members of Congress also have expressed concerns about 
    expanding federal deposit insurance coverage. Moreover, there are 
    legislative proposals that take the opposite approach by seeking to 
    limit FDIC insurance.
        The FDIC acknowledges that, while the possible amendment to the 
    joint account rules mentioned in the ANPR would simplify and likely 
    improve public understanding of the joint account rules, it also could 
    increase deposit insurance coverage significantly. For example, under 
    the current rules a qualifying joint deposit account held by A&B for 
    $200,000 would be insured for $100,000 based on the ``step one'' rule 
    that no joint account owned by the same combination of individuals can 
    be insured for more than $100,000. If step one were eliminated, that 
    same account would be insured for up to $200,000. In this connection, 
    the staff of the Board of Governors of the Federal Reserve System 
    performed an analysis in 1992 in conjunction with the FDIC study, The 
    Costs, Feasibility and Privacy Implications of Tracking Deposits. The 
    Federal Reserve analysis concluded that eliminating step one of the 
    joint account rules would result in a $22 billion increase in insurance 
    coverage. Although the FDIC is uncertain that the Federal Reserve 
    analysis is an accurate measurement of the potential increase in 
    deposit insurance, the analysis raises concerns that require further 
    consideration.
        For these reasons, the FDIC has decided to further study the 
    policy, economic and other implications of eliminating step one of the 
    joint account rules. The FDIC staff will conduct such a study and 
    report its findings to the Board. The objective is to simplify the 
    joint account rules without significantly increasing deposit insurance.
    2. The Rules on ``Payable on Death'' Accounts
        The insurance rules provide for separate coverage for funds owned 
    by an individual and deposited into any account commonly referred to as 
    a ``payable-on-death'' account, tentative or ``Totten'' trust account, 
    revocable trust account, or similar account (POD accounts). 12 CFR 
    330.8. The regulation limits qualifying beneficiaries to the owner's 
    spouse, children and grandchildren. Id. at 330.8(a). The owner is 
    insured up to $100,000 as to each such named qualifying beneficiary, 
    separately from any other accounts of the owner or the beneficiaries. 
    Thus, if the individual names his spouse, three children and two 
    grandchildren as beneficiaries, the account would be insured up to 
    $600,000, assuming the other requirements of the regulation are 
    satisfied. Over the years the FDIC has received numerous questions on 
    why other types of relatives of POD account owners are not included 
    within the qualifying degree of kinship. Thus, in the ANPR the FDIC 
    requested comment on whether and, if so, how the POD insurance rules 
    should be changed. The FDIC received fifty-one ANPR comments on this 
    issue. The majority of those who commented encouraged the FDIC to 
    expand the qualifying beneficiaries to include those likely to be named 
    by a POD account owner/settlor. Others commented that the current rules 
    seem fair and should be retained. As with the possible amendments to 
    the joint account rules mentioned in the ANPR, however, members of the 
    banking industry and others have raised questions about the potential 
    ``moral hazard'' of expanding deposit insurance coverage. Members of 
    Congress also have expressed concerns about expanding federal deposit 
    insurance.
        Expanding the list of qualifying beneficiaries in the POD accounts 
    rules would provide additional depositors with access to POD insurance 
    and could significantly expand the scope of deposit insurance. Thus, at 
    this time the FDIC believes that the best alternative is to retain the 
    current POD rules and to continue to study the nature and scope of POD 
    coverage. The staff will conduct such a study and report its findings 
    to the Board.
    3. Statutory Requirements Regarding Employee Benefit Plans
        Under an amendment to the FDI Act made by FDICIA, pass-through 
    insurance coverage is not available to employee benefit plan deposits 
    that are accepted by an insured bank or thrift when the institution 
    does not meet prescribed capital requirements. 12 U.S.C. 1821(a)(1)(D). 
    If an institution accepts employee benefit plan deposits at a time when 
    it is not sufficiency capitalized, such deposits are insured only up to 
    $100,000 per plan (as opposed to $100,000 per participant of the plan). 
    This FDICIA-originated provision is the only one in the FDI Act and the 
    FDIC's regulations to base insurance coverage on the capital 
    sufficiency of the insured institution where the deposits are placed. 
    Section 330.12 of the FDIC's insurance regulations implements this 
    statutory limitation on pass-through coverage for employee benefit plan 
    deposits. 12 CFR 330.12. The FDIC believes that the statute is complex 
    and difficult for the industry and the public to understand.
        The FDIC raised this matter in the ANPR. Based on the varied 
    comments received, the FDIC intends to study the issue further to 
    determine what, if any, action need be taken by the FDIC.
    
    Section-by-Section Discussion of the Proposed Rule
    
        The following is an identification and, where appropriate, an 
    explanation of the various proposed revisions to each section of the 
    FDIC's insurance regulations.
    
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    Section 330.1--Definitions
        Various clarifying and technical changes are proposed to be made to 
    this definitional section of part 330. Some definitions provided in 
    other provisions of part 330 (for example, the definition of 
    ``independent activity'' in section 330.9) are moved to this section. 
    The definition of ``Corporation'' (meaning the FDIC) is added to the 
    section.
    Section 330.2--Authority and Purpose
        This section is reduced to simply stating the purpose of part 330. 
    The narrative description of the FDIC's authority to issue deposit 
    insurance regulations is eliminated as no longer necessary.
    Section 330.3--General Principles
        Certain examples are added to this section. Because of its 
    importance, paragraph (g) on the continuation of separate insurance 
    after a merger of depository institutions is moved to a new separate 
    Sec. 330.4. The rules on the insurance coverage of bank investment 
    contracts and the relevant definitions are moved from the current 
    Sec. 330.13 to this section. Section 330.13 is thereby eliminated.
        A new paragraph (j) is added to provide a six-month grace period 
    for insurance coverage after a deposit owner dies, if allowing for such 
    a grace period would not result in a reduction of insurance coverage.
    Section 330.4--Continuation of Separate Deposit Insurance After Merger 
    of Insured Depository Institutions
        This is a new section comprised of the provisions in the current 
    Sec. 330.3(g). The FDIC receives numerous questions on the deposit 
    insurance implications of bank mergers and acquisitions. It seems 
    appropriate for these provisions to be contained in a separate, more 
    easily accessible section of the regulations.
    Section 330.5--Recognition of Deposit Ownership and Recordkeeping 
    Requirements
        The section would amend the current Sec. 330.4. The recordkeeping 
    requirements would be amended to provide an exception to the general 
    rule that the deposit account records of a depository institution must 
    expressly disclose the existence of a fiduciary relationship in order 
    for the FDIC to recognize the fiduciary nature of the account. The 
    exception provides that the general requirement would not apply if the 
    FDIC determines, in its discretion, that the titling of the account and 
    the underlying deposit account records of the depository institution 
    indicate the existence of a fiduciary relation. The section specifies 
    that the exception might apply, for example, where the deposit account 
    title or records indicate that the account is held by an escrow agent, 
    title company, or an entity (or its agent or nominee) whose business is 
    to hold, for safekeeping reasons, deposits for others.
        This section also would be amended to allow for the grace period 
    provided for in the proposed Sec. 330.3(j).
    Section 330.6--Single Ownership Accounts
        This is essentially the same as the current Sec. 330.5. The 
    language has been modified slightly and an example is provided. Also, 
    the ``decedent's account'' provision in this section would cross-
    reference the grace period provided for in the proposed Sec. 330.3(j).
    Section 330.7--Accounts Held by an Agent, Nominee, Guardian, Custodian 
    or Conservator
        This is the current Sec. 330.6. The language of the section has 
    been modified slightly. The provision on mortgage servicing accounts 
    has been clarified to indicate that such accounts are not entitled to 
    separate insurance, but are insured as custodial accounts under the 
    general rules of the section. The provision on annuity contract 
    accounts has been moved to a new, separate Sec. 330.8.
    Section 330.8--Annuity Contract Accounts
        This is a new section comprised of the provisions in current 
    Sec. 330.6(f). Funds in such accounts are entitled to separate 
    insurance coverage. It is appropriate, therefore, that the provisions 
    be in a separate section of the regulations.
    Section 330.9--Joint Ownership Accounts
        This is the current Sec. 330.7. Examples have been added to 
    illustrate how the joint account rules operate. The language of other 
    parts of the section has been modified.
    Section 330.10--Revocable Trust Accounts
        This is the current Sec. 330.8. Examples are provided on the 
    general rule and the rule involving the interests of nonqualifying 
    beneficiaries. A paragraph on living trusts has been added to clarify 
    when accounts held in connection with living trusts would be insured 
    under this provision. Other parts of the section have been clarified.
    Section 330.11--Accounts of a Corporation, Partnership or 
    Unincorporated Association
        These are the rules currently provided in Sec. 330.9. The 
    definition of ``independent activity'' is moved to Sec. 330.1. The 
    language of other parts of the section has been modified slightly.
    Section 330.12--Accounts Held by a Depository Institution as the 
    Trustee of an Irrevocable Trust
        This is the current Sec. 330.10. The language is modified slightly.
    Section 330.13--Irrevocable Trust Accounts
        This is the current Sec. 330.11. The definitions of ``trust 
    interest'' and ``non-contingent trust interest'' are moved to 
    Sec. 330.1. The language of other parts of the section is modified 
    slightly.
    Section 330.14--Retirement and Other Employee Benefit Plan Accounts
        This is the current Sec. 330.12. No changes are proposed to this 
    provision.
    The Current Section 330.13--Bank Investment Contracts
        The substantive parts of this regulation are moved to Sec. 330.1 
    and the remainder is eliminated. The FDIC is proposing to delete this 
    section because it is largely definitional and essentially reiterates 
    the corresponding statutory provisions.
    Section 330.15--Public Unit Accounts
        This is the current Sec. 330.14 and is essentially unchanged.
    The Current Section 330.15--Notice to Depositors
        The FDIC proposes to eliminate this section as no longer necessary.
    Section 330.16--Effective Dates
        Changes have been made to this section to indicate that the 
    designated effective dates apply to former changes to part 330. The 
    FDIC proposes to retain the substance of this section because the 
    effective dates might be relevant in connection with time deposits 
    issued prior to December 19, 1991, that have not yet matured.
    
    Request for Comment
    
        The Board of Directors of the FDIC is seeking comment on all of the 
    above-mentioned possible means of simplifying the deposit insurance 
    rules, including the likely effect of such changes on consumers and the 
    banking industry. Comments are specifically requested on the identified 
    proposed substantive revisions. The Board also is seeking suggestions 
    on any other ways
    
    [[Page 26441]]
    
    that the rules might be streamlined, simplified or clarified.
    
    Paperwork Reduction Act
    
        The proposed rule is intended to simplify the rules governing FDIC 
    deposit insurance. No collections of information pursuant to the 
    Paperwork Reduction Act are contained in the proposed rule. 
    Consequently, no information has been submitted to the Office of 
    Management and Budget for review.
    
    Regulatory Flexibility Act
    
        The proposed rule would not 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). The proposed 
    revisions to the deposit insurance rules would apply to all FDIC-
    insured depository institutions and would impose no new reporting, 
    recordkeeping or other compliance requirements upon those entities. 
    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, Reporting and recordkeeping 
    requirements, Savings and loan associations, Trusts and trustees.
    
        The Board of Directors of the Federal Deposit Insurance Corporation 
    hereby proposes to revise part 330 of title 12 of the Code of Federal 
    Regulations to read as follows:
    
    PART 330--DEPOSIT INSURANCE COVERAGE
    
    Sec.
    330.1  Definitions.
    330.2  Purpose.
    330.3  General principles.
    330.4  Continuation of separate deposit insurance after merger of 
    insured depository institutions.
    330.5  Recognition of deposit ownership and recordkeeping 
    requirements.
    330.6  Single ownership accounts.
    330.7  Accounts held by an agent, nominee, guardian, custodian or 
    conservator.
    330.8  Annuity contract accounts.
    330.9  Joint ownership accounts.
    330.10  Revocable trust accounts.
    330.11  Accounts of a corporation, partnership or unincorporated 
    association.
    330.12  Accounts held by a depository institution as the trustee of 
    an irrevocable trust.
    330.13  Irrevocable trust accounts.
    330.14  Retirement and other employee benefit plan accounts.
    330.15  Public unit accounts.
    330.16  Effective dates.
    
        Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 
    1819(Tenth), 1820(f), 1821(a), 1822(c).
    
    
    Sec. 330.1  Definitions.
    
        For the purposes of this part:
        (a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et 
    seq.).
        (b) Corporation means the Federal Deposit Insurance Corporation.
        (c) Default has the same meaning as provided under section 3(x) of 
    the Act (12 U.S.C. 1813(x)).
        (d) Deposit has the same meaning as provided under section 3(l) of 
    the Act (12 U.S.C. 1813(l)).
        (e) Deposit account records means account ledgers, signature cards, 
    certificates of deposit, passbooks, corporate resolutions authorizing 
    accounts in the possession of the insured depository institution and 
    other books and records of the insured depository institution, 
    including records maintained by computer, which relate to the insured 
    depository institution's deposit taking function, but does not mean 
    account statements, deposit slips, items deposited or cancelled checks.
        (f) FDIC means the Federal Deposit Insurance Corporation.
        (g) Independent activity. A corporation, partnership or 
    unincorporated association shall be deemed to be engaged in an 
    ``independent activity'' if the entity is operated primarily for some 
    purpose other than to increase deposit insurance.
        (h) Insured branch means a branch of a foreign bank any deposits in 
    which are insured in accordance with the provisions of the Act.
        (i) Insured deposit has the same meaning as that provided under 
    subsection 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).
        (j) Insured depository institution is any depository institution 
    whose deposits are insured pursuant to the Act, including a foreign 
    bank having an insured branch.
        (k) Natural person means a human being.
        (l) Non-contingent trust interest means a trust interest capable of 
    determination without evaluation of contingencies except for those 
    covered by the present worth tables and rules of calculation for their 
    use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
    (26 CFR 20.2031-7) or any similar present worth or life expectancy 
    tables which may be adopted by the Internal Revenue Service.
        (m) Sole proprietorship means a form of business in which one 
    person owns all the assets of the business, in contrast to a 
    partnership or corporation.
        (n) Trust estate means the determinable and beneficial interest of 
    a beneficiary or principal in trust funds but does not include the 
    beneficial interest of an heir or devisee in a decedent's estate.
        (o) Trust funds means funds held by an insured depository 
    institution as trustee pursuant to any irrevocable trust established 
    pursuant to any statute or written trust agreement.
        (p) Trust interest means the interest of a beneficiary in an 
    irrevocable express trust (other than an employee benefit plan) created 
    either by written trust instrument or by statute, but does not include 
    any interest retained by the settlor.
    
    
    Sec. 330.2  Purpose.
    
        The purpose of this part is to clarify the rules and define the 
    terms necessary to afford deposit insurance coverage under the Act and 
    provide rules for the recognition of deposit ownership in various 
    circumstances.
    
    
    Sec. 330.3  General principles.
    
        (a) Ownership rights and capacities. The insurance coverage 
    provided by the Act and this part are based upon the ownership rights 
    and capacities in which deposit accounts are maintained at insured 
    depository institutions. All deposits in an insured depository 
    institution which are maintained in the same right and capacity (by or 
    for the benefit of a particular depositor or depositors) shall be added 
    together and insured in accordance with this part. Deposits maintained 
    in different rights and capacities, as recognized under this part, 
    shall be insured separately from each other. (Example: single ownership 
    accounts and joint ownership accounts are insured separately from each 
    other.)
        (b) Deposits maintained in separate insured depository institutions 
    or in separate branches of the same insured depository institution. Any 
    deposit accounts maintained by a depositor at one insured depository 
    institution are insured separately from, and without regard to, any 
    deposit accounts that the same depositor maintains at any other 
    separately chartered and insured depository institution, even if two or 
    more separately chartered and insured depository institutions are 
    affiliated through common ownership. (Example: Deposits held by the 
    same individual at two different banks owned by the same bank holding 
    company would be insured separately, per bank.) The deposit accounts of 
    a depositor maintained in the same right and capacity at different 
    branches or offices of the same insured depository institution are not 
    separately insured; rather they shall be added together and insured in 
    accordance with this part.
    
    [[Page 26442]]
    
        (c) Deposits maintained by foreigners and deposits denominated in 
    foreign currency. The availability of deposit insurance is not limited 
    to citizens and residents of the United States. Any person or entity 
    that maintains deposits in an insured depository institution is 
    entitled to the deposit insurance provided by the Act and this part. In 
    addition, deposits denominated in a foreign currency shall be insured 
    in accordance with this part. Deposit insurance for such deposits shall 
    be determined and paid in the amount of United States dollars that is 
    equivalent in value to the amount of the deposit denominated in the 
    foreign currency as of close of business on the date of default of the 
    insured depository institution. The exchange rates to be used for such 
    conversions are the 12 p.m. rates (the ``noon buying rates for cable 
    transfers'') quoted for major currencies by the Federal Reserve Bank of 
    New York on the date of default of the insured depository institution, 
    unless the deposit agreement specifies that some other widely 
    recognized exchange rates are to be used for all purposes under that 
    agreement, in which case, the rates so specified shall be used for such 
    conversions.
        (d) Deposits in insured branches of foreign banks. Deposits in an 
    insured branch of a foreign bank which are payable by contract in the 
    United States shall be insured in accordance with this part, except 
    that any deposits to the credit of the foreign bank, or any office, 
    branch, agency or any wholly owned subsidiary of the foreign bank, 
    shall not be insured. All deposits held by a depositor in the same 
    right and capacity in more than one insured branch of the same foreign 
    bank shall be added together for the purpose of determining the amount 
    of deposit insurance.
        (e) Deposits payable solely outside of the United States and 
    certain other locations. Any obligation of an insured depository 
    institution which is payable solely at an office of such institution 
    located outside the States of the United States, the District of 
    Columbia, Puerto Rico, Guam, the Commonwealth of the Northern Mariana 
    Islands, American Samoa, the Trust Territory of the Pacific Islands, 
    and the Virgin Islands, is not a deposit for the purposes of this part.
        (f) International banking facility deposits. An ``international 
    banking facility time deposit'', as defined by the Board of Governors 
    of the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or 
    in any successor regulation, is not a deposit for the purposes of this 
    part.
        (g) Bank investment contracts. As required by section 11(a)(8) of 
    the Act (12 U.S.C. 1828(a)(8)), any liability arising under any 
    investment contract between any insured depository institution and any 
    employee benefit plan which expressly permits ``benefit responsive 
    withdrawals'' or transfers (as defined in section 11(a)(8) of the Act) 
    are not insured deposits for purposes of this part. The term 
    ``substantial penalty or adjustment'' used in section 11(a)(8) of the 
    Act means, in the case of a deposit having an original term which 
    exceeds one year, all interest earned on the amount withdrawn from the 
    date of deposit or for six months, whichever is less; or, in the case 
    of a deposit having an original term of one year or less, all interest 
    earned on the amount withdrawn from the date of deposit or three 
    months, whichever is less.
        (h) Application of state or local law to deposit insurance 
    determinations. In general, deposit insurance is for the benefit of the 
    owner or owners of funds on deposit. However, 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. Deposit 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.
        (i) Determination of the amount of a deposit--(1) General rule. The 
    amount of a deposit is the balance of principal and interest 
    unconditionally credited to the deposit account as of the date of 
    default of the insured depository institution, plus the ascertainable 
    amount of interest to that date, accrued at the contract rate (or the 
    anticipated or announced interest or dividend rate), which the insured 
    depository institution in default would have paid if the deposit had 
    matured on that date and the insured depository institution had not 
    failed. In the absence of any such announced or anticipated interest or 
    dividend rate, the rate for this purpose shall be whatever rate was 
    paid in the immediately preceding payment period.
        (2) Discounted certificates of deposit. The amount of a certificate 
    of deposit sold by an insured depository institution at a discount from 
    its face value is its original purchase price plus the amount of 
    accrued earnings calculated by compounding interest annually at the 
    rate necessary to increase the original purchase price to the maturity 
    value over the life of the certificate.
        (3) Waiver of minimum requirements. In the case of a deposit with a 
    fixed payment date, fixed or minimum term, or a qualifying or notice 
    period that has not expired as of such date, interest thereon to the 
    date of closing shall be computed according to the terms of the deposit 
    contract as if interest had been credited and as if the deposit could 
    have been withdrawn on such date without any penalty or reduction in 
    the rate of earnings.
        (j) Continuation of insurance coverage following the death of a 
    deposit owner. When a deposit owner dies, eligibility for the category 
    of insurance coverage of the account(s) owned by that person shall be 
    unaffected until the earlier of: the restructuring of the account(s) or 
    six months after the death of the deposit owner. The operation of this 
    grace period, however, shall not result in a reduction of coverage 
    during the six-month period, unless the account(s) is (are) 
    restructured. If an account is not withdrawn or restructured within six 
    months after the depositor's death, the insurance shall be provided on 
    the basis of actual ownership in accordance with the provisions of 
    Sec. 330.5(a)(1).
    
    
    Sec. 330.4  Continuation of separate deposit insurance after merger of 
    insured depository institutions.
    
        Whenever the liabilities of one or more insured depository 
    institutions for deposits are assumed by another insured depository 
    institution, whether by merger, consolidation, other statutory 
    assumption or contract:
        (a) The insured status of the institutions whose liabilities have 
    been assumed terminates on the date of receipt by the FDIC of 
    satisfactory evidence of the assumption; and
        (b) The separate insurance of deposits assumed continues for six 
    months from the date the assumption takes effect or, in the case of a 
    time deposit, the earliest maturity date after the six-month period. In 
    the case of time deposits which mature within six months of the date 
    the deposits are assumed and which are renewed at the same dollar 
    amount (either with or without accrued interest having been added to 
    the principal amount) and for the same term as the original deposit, 
    the separate insurance applies to the renewed deposits until the first 
    maturity date after the six-month period. Time deposits that mature 
    within six months of the deposit assumption and that are renewed on any 
    other basis, or that are not renewed and thereby become demand 
    deposits, are separately insured only until the end of the six-month 
    period.
    
    [[Page 26443]]
    
    Sec. 330.5  Recognition of deposit ownership and recordkeeping 
    requirements.
    
        (a) Recognition of deposit ownership--(1) Evidence of deposit 
    ownership. Except as indicated in this paragraph (a)(1) or as provided 
    in Sec. 330.3(j), in determining the amount of insurance available to 
    each depositor, the FDIC shall presume that deposited funds are 
    actually owned in the manner indicated on the deposit account records 
    of the insured depository institution. If the FDIC, in its sole 
    discretion, determines that the deposit account records of the insured 
    depository institution are clear and unambiguous, those records shall 
    be considered binding on the depositor, and the FDIC shall consider no 
    other records on the manner in which the funds are owned. If the 
    deposit account records are ambiguous or unclear on the manner in which 
    the funds 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. Despite the general requirements of this 
    paragraph (a)(1), if the FDIC has reason to believe that the insured 
    depository institution's deposit account records misrepresent the 
    actual ownership of deposited funds and such misrepresentation would 
    increase deposit insurance coverage the FDIC may consider all available 
    evidence and pay claims for insured deposits on the basis of the actual 
    rather than the misrepresented ownership.
        (2) Recognition of deposit ownership in custodial accounts. In the 
    case of custodial deposits, the interest of each beneficial owner may 
    be determined on a fractional or percentage basis. This may be 
    accomplished in any manner which indicates that where the funds of an 
    owner are commingled with other funds held in a custodial capacity and 
    a portion thereof is placed on deposit in one or more insured 
    depository institutions without allocation, the owner's insured 
    interest in the deposit in any one insured depository institution would 
    represent, at any given time, the same fractional share as his or her 
    share of the total commingled funds.
        (b) Recordkeeping requirements--(1) Disclosure of fiduciary 
    relationships. The ``deposit account records'' (as defined in 
    Sec. 330.1) of an insured depository institution must expressly 
    disclose, by way of specific references, the existence of any fiduciary 
    relationship including, but not limited to, relationships involving a 
    trustee, agent, nominee, guardian, executor or custodian, pursuant to 
    which funds in an account are deposited and on which a claim for 
    insurance coverage is based. No claim for insurance coverage based on a 
    fiduciary relationship will be recognized if no fiduciary relationship 
    is evident from the deposit account records of the insured depository 
    institution. The general requirement for the express indication that 
    the account is held in a fiduciary capacity will not apply, however, in 
    instances where the FDIC determines, in its sole discretion, that the 
    titling of the deposit account and the underlying deposit account 
    records sufficiently indicate the existence of a fiduciary 
    relationship. This exception may apply, for example, where the deposit 
    account title or records indicate that the account is held by an escrow 
    agent, title company or a company whose business is to hold deposits 
    and securities for others.
        (2) Details of fiduciary relationships. If the deposit account 
    records of an insured depository institution disclose the existence of 
    a relationship which might provide a basis for additional insurance 
    (including the exception provided for in paragraph (b)(1) of this 
    section), the details of the relationship and the interests of other 
    parties in the account must be ascertainable either from the deposit 
    account records of the insured depository institution or from records 
    maintained, in good faith and in the regular course of business, by the 
    depositor or by some person or entity that has undertaken to maintain 
    such records for the depositor.
        (3) Multi-tiered fiduciary relationships. In deposit accounts where 
    there are multiple levels of fiduciary relationships, there are two 
    alternative methods of satisfying paragraphs (b)(1) and (b)(2) of this 
    section to obtain insurance coverage for the interests of the true 
    beneficial owners of a deposit account.
        (i) One method is to:
        (A) Expressly indicate, on the deposit account records of the 
    insured depository institution, the existence of each and every level 
    of fiduciary relationships; and
        (B) Disclose, at each level, the name(s) and interest(s) of the 
    person(s) on whose behalf the party at that level is acting.
        (ii) An alternative method is to:
        (A) Expressly indicate on the deposit account records of the 
    insured depository institution that there are multiple levels of 
    fiduciary relationships;
        (B) Disclose the existence of additional levels of fiduciary 
    relationships in records, maintained in good faith and in the regular 
    course of business, by parties at subsequent levels; and
        (C) Disclose, at each of the levels, the name(s) and interest(s) of 
    the person(s) on whose behalf the party at that level is acting. No 
    person or entity in the chain of parties will be permitted to claim 
    that they are acting in a fiduciary capacity for others unless the 
    possible existence of such a relationship is revealed at some previous 
    level in the chain.
        (4) Exceptions to recordkeeping requirements--(i) Deposits 
    evidenced by negotiable instruments. If any deposit obligation of an 
    insured depository institution is evidenced by a negotiable certificate 
    of deposit, negotiable draft, negotiable cashier's or officer's check, 
    negotiable certified check, negotiable traveler's check, letter of 
    credit or other negotiable instrument, the FDIC will recognize the 
    owner of such deposit obligation for all purposes of claim for insured 
    deposits to the same extent as if his or her name and interest were 
    disclosed on the records of the insured depository institution; 
    Provided, That the instrument was in fact negotiated to such owner 
    prior to the date of default of the insured depository institution. The 
    owner must provide affirmative proof of such negotiation, in a form 
    satisfactory to the FDIC, to substantiate his or her claim. Receipt of 
    a negotiable instrument directly from the insured depository 
    institution in default shall, in no event, be considered a negotiation 
    of said instrument for purposes of this provision.
        (ii) Deposit obligations for payment of items forwarded for 
    collection by depository institution acting as agent. Where an insured 
    depository institution in default has become obligated for the payment 
    of items forwarded for collection by a depository institution acting 
    solely as agent, the FDIC will recognize the holders of such items for 
    all purposes of claim for insured deposits to the same extent as if 
    their name(s) and interest(s) were disclosed as depositors on the 
    deposit account records of the insured depository institution, when 
    such claim for insured deposits, if otherwise payable, has been 
    established by the execution and delivery of prescribed forms. The FDIC 
    will recognize such depository institution forwarding such items for 
    the holders thereof as agent for such holders for the purpose of making 
    an assignment to the FDIC of their rights against the insured 
    depository institution in default and for the purpose of receiving 
    payment on their behalf.
    
    
    Sec. 330.6  Single ownership accounts.
    
        (a) Individual accounts. Funds owned by a natural person and 
    deposited in one or more deposit accounts in his or
    
    [[Page 26444]]
    
    her own name shall be added together and insured up to $100,000 in the 
    aggregate. Exception: Despite the general requirement in this paragraph 
    (a), if more than one natural person has the right to withdraw funds 
    from an individual account (excluding persons who have the right to 
    withdraw by virtue of a Power of Attorney) the account shall be treated 
    as a joint ownership account (although not necessarily a qualifying 
    joint account) and shall be insured in accordance with the provisions 
    of Sec. 330.9, unless the deposit account records clearly indicate, to 
    the satisfaction of the FDIC, that the funds are owned by one 
    individual and that other signatories on the account are merely 
    authorized to withdraw funds on behalf of the owner.
        (b) Sole proprietorship accounts. Funds owned by a business which 
    is a ``sole proprietorship'' (as defined in Sec. 330.1) and deposited 
    in one or more deposit accounts in the name of the business, shall be 
    treated as the individual account(s) of the person who is the sole 
    proprietor, added to any other individual accounts of that person, and 
    insured up to $100,000 in the aggregate.
        (c) Single-name accounts containing community property funds. 
    Community property funds deposited into one or more deposit accounts in 
    the name of one member of a husband-wife community shall be treated as 
    the individual account(s) of the named member, added to any other 
    individual accounts of that person, and insured up to $100,000 in the 
    aggregate.
        (d) Accounts of a decedent and accounts held by executors or 
    administrators of a decedent's estate. Funds held in the name of a 
    decedent or in the name of the executor, administrator, or other 
    personal representative of his or her estate and deposited into one or 
    more deposit accounts shall be added together and insured up to 
    $100,000 in the aggregate; provided, however, that nothing in this 
    paragraph shall affect the operation of Sec. 330.3(j). The deposit 
    insurance provided by this paragraph (d) shall be separate from any 
    insurance coverage provided for the individual deposit accounts of the 
    executor, administrator, other personal representative or the 
    beneficiaries of the estate.
    
    
    Sec. 330.7  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 shall be governed by the 
    provisions of Sec. 330.13.
        (b) Guardian, custodian or conservator accounts. Funds held by a 
    guardian, custodian, or conservator for the benefit of his or her ward, 
    or for the benefit of a minor under the Uniform Gifts to Minors Act, 
    and deposited into one or more accounts in the name of the guardian, 
    custodian or conservator shall, for purposes of this part, be deemed to 
    be agency or nominee accounts and shall be insured in accordance with 
    paragraph (a) of this section.
        (c) Accounts held by fiduciaries on behalf of two or more persons. 
    Funds held by an agent, nominee, guardian, custodian, conservator or 
    loan servicer, on behalf of two or more persons jointly, shall be 
    treated as a joint ownership account and shall be insured in accordance 
    with the provisions of Sec. 330.9.
        (d) Mortgage servicing accounts. Accounts maintained by a mortgage 
    servicer, in a custodial or other fiduciary capacity, which are 
    comprised of payments by mortgagors of principal and interest, shall be 
    insured in accordance with paragraph (a) of this section for the 
    interest of each owner (mortgagee, investor or security holder) in such 
    accounts. Accounts maintained by a mortgage servicer, in a custodial or 
    other fiduciary capacity, which are comprised of payments by mortgagors 
    of taxes and insurance premiums shall be added together and insured in 
    accordance with paragraph (a) of this section for the ownership 
    interest of each mortgagor in such accounts.
        (e) Custodian accounts for American Indians. Paragraph (a) of this 
    section shall not apply to any interest an individual American Indian 
    may have in funds deposited by the Bureau of Indian Affairs of the 
    United States Department of the Interior the (``BIA'') on behalf of 
    that person pursuant to 25 U.S.C. 162(a), or by any other disbursing 
    agent of the United States on behalf of that person pursuant to similar 
    authority, in an insured depository institution. The interest of each 
    American Indian in all such accounts maintained at the same insured 
    depository institution shall be added together and insured, up to 
    $100,000, separately from any other accounts maintained by that person 
    in the same insured depository institution.
    
    
    Sec. 330.8  Annuity contract accounts.
    
        (a) Funds held by an insurance company or other corporation in a 
    deposit account for the sole purpose of funding life insurance or 
    annuity contracts and any benefits incidental to such contracts, shall 
    be insured separately in the amount of up to $100,000 per annuitant, 
    provided that, pursuant to a state statute:
        (1) The corporation establishes a separate account for such funds; 
    and
        (2) The account cannot be charged with the liabilities arising out 
    of any other business of the corporation; and
        (3) The account cannot be invaded by other creditors of the 
    corporation in the event that the corporation becomes insolvent and its 
    assets are liquidated.
        (b) Such insurance coverage shall be separate from the insurance 
    provided for any other accounts maintained in a different right and 
    capacity by the corporation or the annuitants at the same insured 
    depository institution.
    
    
    Sec. 330.9  Joint ownership accounts.
    
        (a) Separate insurance coverage. Qualifying joint accounts, whether 
    owned as joint tenants with right of survivorship, as tenants in common 
    or as tenants by the entirety, shall be insured separately from any 
    individually owned (single ownership) deposit accounts maintained by 
    the co-owners. (Example: If A has a single ownership account and also 
    is a joint owner of a qualifying joint account, A's interest in the 
    joint account would be insured separately from his or her interest in 
    the individual account.) Qualifying joint accounts in the names of both 
    husband and wife which are comprised of community property funds shall 
    be added together and insured up to $100,000, separately from any funds 
    deposited into accounts bearing their individual names.
        (b) Determination of insurance coverage. Step one: all qualifying 
    joint accounts owned by the same combination of individuals shall first 
    be added together and insurable up to $100,000 in the aggregate. 
    (Example: A qualifying joint account owned by ``A&B'' would be added to 
    a qualifying joint account owned by ``B&A'' and the insurable limit on 
    the combined balances in those accounts would be $100,000.) Step two: 
    the interests of each co-owner in all qualifying joint accounts, 
    whether owned by the same or different combinations of persons, shall 
    then be added together and the total shall be insured up to $100,000. 
    (Example: ``A&B'' have a qualifying joint account with a balance of 
    $100,000; ``A&C'' have a qualifying joint account with a balance of 
    $150,000; and ``A&D''
    
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    have a qualifying joint account with a balance of $100,000. The balance 
    in the account owned by ``A&C'' exceeds $100,000, so under step one the 
    excess amount, $50,000, would be uninsured. A's combined ownership 
    interests in the insurable amounts in the accounts would be $150,000, 
    of which under step two $100,000 would be insured and $50,000 would be 
    uninsured; B's ownership interest would be $50,000, all of which would 
    be insured; C's insurable ownership interest would be $50,000, all of 
    which would be insured; and D's ownership interest would be $50,000, 
    all of which would be insured.)
        (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'' (as defined in Sec. 330.1); 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 signature-card 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. 330.5(a), 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 (although not necessarily 
    a qualifying 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.
        (d) Nonqualifying joint accounts. A deposit account held in two or 
    more names which is not a qualifying joint account, for purposes of 
    this section, shall be treated as being owned by each named owner, as 
    an individual, corporation, partnership, or unincorporated association, 
    as the case may be, and the actual ownership interest of each 
    individual or entity in such account shall be added to any other single 
    ownership accounts of such individual or other accounts of such entity, 
    and shall be insured in accordance with the rules in this part 
    governing the insurance of such accounts.
        (e) Determination of interests. The interests of the co-owners of 
    qualifying joint accounts, held as tenants in common, shall be deemed 
    equal, unless otherwise stated in the depository institution's deposit 
    account records. This section applies regardless of whether the 
    conjunction ``and'' or ``or'' is used in the title of a joint deposit 
    account, even when both terms are used, such as in the case of a joint 
    deposit account with three or more co-owners.
    
    
    Sec. 330.10  Revocable trust accounts.
    
        (a) General rule. Funds owned by an individual and deposited into 
    an account evidencing an intention that upon the death of the owner the 
    funds shall belong to one or more qualified beneficiaries shall be 
    insured in the amount of up to $100,000 in the aggregate as to each 
    such named qualifying beneficiary, separately from any other accounts 
    of the owner or the beneficiaries. For purposes of this provision, the 
    term ``qualifying beneficiaries'' means the owner's spouse, child/
    children or grandchild/grandchildren. (Example: If A establishes a 
    qualifying account payable upon death to his spouse, two children and 
    one grandchild, assuming compliance with the rules of this provision, 
    the account would be insured up to $400,000 separately from any other 
    different types of accounts either A or the beneficiaries may have with 
    the same depository institution.) Accounts covered by this provision 
    are commonly referred to as a tentative or ``Totten trust'' account, 
    ``payable-on-death'' account, or revocable trust account.
        (b) Required intention. The required intention in paragraph (a) of 
    this section that upon the owner's death the funds shall belong to one 
    or more qualifying beneficiaries must be manifested in the title of the 
    account using commonly accepted terms such as, but not limited to, ``in 
    trust for'', ``as trustee for'', ``payable-on-death to'' or any acronym 
    therefor. In addition, the beneficiaries must be specifically named in 
    the deposit account records of the insured depository institution. The 
    settlor of a revocable trust account shall be presumed to own the funds 
    deposited into the account.
        (c) Interests of nonqualifying beneficiaries. If a named 
    beneficiary of an account covered by this section is not a qualifying 
    beneficiary, the funds corresponding to that beneficiary shall be 
    treated as individually owned (single ownership) accounts of such 
    owner(s), aggregated with any other single ownership accounts of such 
    owners, and insured up to $100,000 per owner. (Examples: If A 
    establishes an account payable upon death to his or her nephew, the 
    account would be insured as a single ownership account owned by A. 
    Similarly, if B establishes an account payable upon death to her 
    husband, son and nephew, the POD account would be eligible for POD 
    coverage up to $200,000 corresponding to the two qualifying 
    beneficiaries (i.e., the spouse and child). The amount corresponding to 
    the non-qualifying beneficiary (i.e., the nephew) would be deemed to be 
    owned by B in her single-ownership capacity and insured accordingly.)
        (d) Joint revocable trust accounts. Where an account described in 
    paragraph (a) of this section is established by more than one owner and 
    held for the benefit of others, some or all of whom are within the 
    qualifying degree of kinship, the respective interests of each owner 
    (which shall be deemed equal unless otherwise stated in the insured 
    depository institution's deposit account records) held for the benefit 
    of each qualifying beneficiary shall be separately insured up to 
    $100,000. However, where a husband and a wife establish a revocable 
    trust account naming themselves as the sole beneficiaries, such account 
    shall not be insured according to the provisions of this section but 
    shall instead be insured in accordance with the joint account 
    provisions of Sec. 330.9.
        (e) Definition of ``children'' and ``grandchildren''. For the 
    purpose of establishing the qualifying degree of kinship set forth in 
    paragraph (a) of this section, the term ``children'' includes any 
    biological, adopted and step-children of the owner and 
    ``grandchildren'' includes biological, adopted, or step-children of any 
    of the owner's children.
        (f) Living trusts. This section also applies to revocable trust 
    accounts held in connection with a so-called ``living trust'', a formal 
    trust which an owner creates and retains control over during his or her 
    lifetime. If a named
    
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    beneficiary in a living trust is a qualifying beneficiary under this 
    section, then the deposit account held in connection with the living 
    trust may be eligible for deposit insurance under this section, 
    assuming compliance with all the provisions of this part. If, however, 
    for example, the living trust includes a ``defeating contingent'' 
    relative to that beneficiary's interest in the trust assets, then 
    insurance coverage under this section would not be provided. For 
    purposes of this section, a ``defeating contingency'' is generally 
    defined as a condition which would prevent the beneficiary from 
    acquiring a vested and non-contingent interest in the funds in the 
    deposit account upon the owner's death.
    
    
    Sec. 330.11  Accounts of a corporation, partnership or unincorporated 
    association.
    
        (a) Corporate accounts. (1) The deposit accounts of a corporation 
    engaged in any ``independent activity'' (as defined in Sec. 330.1) 
    shall be added together and insured up to $100,000 in the aggregate. If 
    a corporation has divisions or units which are not separately 
    incorporated, the deposit accounts of those divisions or units shall be 
    added to any other deposit accounts of the corporation. If a 
    corporation maintains deposit accounts in a representative or fiduciary 
    capacity, such accounts shall not be treated as the deposit accounts of 
    the corporation but shall be treated as fiduciary accounts and insured 
    in accordance with the provisions of Sec. 330.7.
        (2) Notwithstanding any other provision of this part, any trust or 
    other business arrangement which has filed or is required to file a 
    registration statement with the Securities and Exchange Commission 
    pursuant to section 8 of the Investment Company Act of 1940 or that 
    would be required so to register but for the fact it is not created 
    under the laws of the United States or a state or but for sections 
    2(b), 3(c)(1), or 6(a)(1) of that act shall be deemed to be a 
    corporation for purposes of determining deposit insurance coverage.
        (b) Partnership accounts. The deposit accounts of a partnership 
    engaged in any ``independent activity'' (as defined in Sec. 330.1) 
    shall be added together and insured up to $100,000 in the aggregate. 
    Such insurance coverage shall be separate from any insurance provided 
    for individually owned (single ownership) accounts maintained by the 
    individual partners. A partnership shall be deemed to exist, for 
    purposes of this paragraph, any time there is an association of two or 
    more persons or entities formed to carry on, as co-owners, an 
    unincorporated business for profit.
        (c) Unincorporated association accounts. The deposit accounts of an 
    unincorporated association engaged in any independent activity shall be 
    added together and insured up to $100,000 in the aggregate, separately 
    from the accounts of the person(s) or entity(ies) comprising the 
    unincorporated association. An unincorporated association shall be 
    deemed to exist, for purposes of this paragraph, whenever there is an 
    association of two or more persons formed for some religious, 
    educational, charitable, social or other noncommercial purpose.
        (d) Non-qualifying entities. The deposit accounts of an entity 
    which is not engaged in an ``independent activity'' (as defined in 
    Sec. 330.1) shall be deemed to be owned by the person or persons owning 
    the corporation or comprising the partnership or unincorporated 
    association, and, for deposit insurance purposes, the interest of each 
    person in such a deposit account shall be added to any other deposit 
    accounts individually owned by that person and insured up to $100,000 
    in the aggregate.
    
    
    Sec. 330.12  Accounts held by a depository institution as the trustee 
    of an irrevocable trust.
    
        (a) Separate insurance coverage. ``Trust funds'' (as defined in 
    Sec. 330.1) held by an insured depository institution in its capacity 
    as trustee of an irrevocable trust, whether held in its trust 
    department, held or deposited in any other department of the fiduciary 
    institution, or deposited by the fiduciary institution in another 
    insured depository institution, shall be insured up to $100,000 of each 
    owner or beneficiary represented. This insurance shall be separate 
    from, and in addition to, the insurance provided for any other deposits 
    of the owners or the beneficiaries.
        (b) Determination of interests. The insurance for funds held by an 
    insured depository institution in its capacity as trustee of an 
    irrevocable trust shall be determined in accordance with the following 
    rules:
        (1) Allocated funds of a trust estate. If trust funds of a 
    particular ``trust estate'' (as defined in Sec. 330.1) are allocated by 
    the fiduciary and deposited, the insurance with respect to such trust 
    estate shall be determined by ascertaining the amount of its funds 
    allocated, deposited and remaining to the credit of the claimant as 
    fiduciary at the insured depository institution in default.
        (2) Interest of a trust estate in unallocated trust funds. If funds 
    of a particular trust estate are commingled with funds of other trust 
    estates and deposited by the fiduciary institution in one or more 
    insured depository institutions to the credit of the depository 
    institution as fiduciary, without allocation of specific amounts from a 
    particular trust estate to an account in such institution(s), the 
    percentage interest of that trust estate in the unallocated deposits in 
    any institution in default is the same as that trust estate's 
    percentage interest in the entire commingled investment pool.
        (c) Limitation on applicability. This section shall not apply to 
    deposits of trust funds belonging to a trust which is classified as a 
    corporation under Sec. 330.11(a)(2).
    
    
    Sec. 330.13  Irrevocable trust accounts.
    
        (a) General rule. Funds representing the ``non-contingent trust 
    interest(s)'' (as defined in Sec. 330.1) of a beneficiary deposited 
    into one or more deposit accounts established pursuant to one or more 
    irrevocable trust agreements created by the same settlor(s) 
    (grantor(s)) shall be added together and insured up to $100,000 in the 
    aggregate. Such insurance coverage shall be separate from the coverage 
    provided for other accounts maintained by the settlor(s), trustee(s) or 
    beneficiary(ies) of the irrevocable trust(s) at the same insured 
    depository institution. Each ``trust interest'' (as defined in 
    Sec. 330.1) in any irrevocable trust established by two or more 
    settlors shall be deemed to be derived from each settlor pro rata to 
    his or her contribution to the trust.
        (b) Treatment of contingent trust interests. In the case of any 
    trust in which certain trust interests do not qualify as non-contingent 
    trust interests, the funds representing those interests shall be added 
    together and insured up to $100,000 in the aggregate. Such insurance 
    coverage shall be in addition to the coverage provided for the funds 
    representing non-contingent trust interests which are insured pursuant 
    to paragraph (a) of this section.
        (c) 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.
    
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    Sec. 330.14  Retirement and other employee benefit plan accounts.
    
        (a) ``Pass-through'' insurance. Except as provided in paragraph (b) 
    of this section, any deposits of an employee benefit plan or of any 
    eligible deferred compensation plan described in section 457 of the 
    Internal Revenue Code of 1986 (26 U.S.C. 457) in an insured depository 
    institution shall be insured on a ``pass-through'' basis, in the amount 
    of up to $100,000 for the non-contingent interest of each plan 
    participant, provided that the FDIC's recordkeeping requirements, as 
    outlined in Sec. 330.5, are satisfied.
        (b) Exception. ``Pass-through'' insurance shall not be provided 
    pursuant to paragraph (a) of this section with respect to any deposit 
    accepted by an insured depository institution which, at the time the 
    deposit is accepted, may not accept brokered deposits pursuant to 
    section 29 of the Act 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.
        (c) Aggregation--(1) Multiple plans. Funds representing the non-
    contingent interests of a beneficiary in an employee benefit plan, or 
    eligible deferred compensation plan described in section 457 of the 
    Internal Revenue Code of 1986, which are deposited in one or more 
    deposit accounts shall be aggregated with any other deposited funds 
    representing such interests of the same beneficiary in other employee 
    benefit plans, or eligible deferred compensation plans described in 
    section 457 of the Internal Revenue Code of 1986, established by the 
    same employer or employee organization.
        (2) Certain retirement accounts. (i) Deposits in an insured 
    depository institution made in connection with the following types of 
    retirement plans shall be aggregated and insured in the amount of up to 
    $100,000 per participant:
        (A) Any individual retirement account described in section 408(a) 
    of the Internal Revenue Code of 1986 (26 U.S.C. 408(a));
        (B) Any eligible deferred compensation plan described in section 
    457 of the Internal Revenue Code of 1986; and
        (C) Any individual account plan defined in section 3(34) of the 
    Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and 
    any plan described in section 401(d) of the Internal Revenue Code of 
    1986 (26 U.S.C. 401(d)), to the extent that participants and 
    beneficiaries under such plans have the right to direct the investment 
    of assets held in individual accounts maintained on their behalf by the 
    plans.
        (ii) The provisions of this paragraph (c) shall not apply with 
    respect to the deposits of any employee benefit plan, or eligible 
    deferred compensation plan described in section 457 of the Internal 
    Revenue Code of 1986, which is not entitled to ``pass-through'' 
    insurance pursuant to paragraph (b) of this section. Such deposits 
    shall be aggregated and insured in the amount of $100,000 per-plan.
        (d) Determination of interests--(1) Defined contribution plans. The 
    value of an employee's non-contingent interest in a defined 
    contribution plan shall be deemed to be the employee's account balance 
    as of the date of default of the insured depository institution, 
    regardless of whether said amount was derived, in whole or in part, 
    from contributions of the employee and/or the employer to the account.
        (2) Defined benefit plans. The value of an employee's non-
    contingent interest in a defined benefit plan shall be deemed to be the 
    present value of the employee's interest in the plan, evaluated in 
    accordance with the method of calculation ordinarily used under such 
    plan, as of the date of default of the insured depository institution.
        (3) Amounts taken into account. For the purposes of applying the 
    rule under paragraph (c)(2) of this section, only the present vested 
    and ascertainable interests of each participant in an employee benefit 
    plan or ``457 Plan,'' excluding any remainder interest created by, or 
    as a result of, the plan, shall be taken into account in determining 
    the amount of deposit insurance accorded to the deposits of the plan.
        (e) Treatment of contingent interests. In the event that employees' 
    interests in an employee benefit plan are not capable of evaluation in 
    accordance with the rules contained in this section, or an account 
    established for any such plan includes amounts for future participants 
    in the plan, payment by the FDIC with respect to all such interests 
    shall not exceed $100,000 in the aggregate.
        (f) Overfunded pension plan deposits. Any portion(s) of an employee 
    benefit plan's deposits which are not attributable to the interests of 
    the beneficiaries under the plan shall be deemed attributable to the 
    overfunded portion of the plan's assets and shall be aggregated and 
    insured up to $100,000, separately from any other deposits.
        (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.
        (2) The term employee benefit plan has the same meaning given to 
    such term in section 3(3) of the Employee Retirement Income Security 
    Act of 1974 (ERISA)(29 U.S.C. 1002) and includes any plan described in 
    section 401(d) of the Internal Revenue Code of 1986.
        (3) The term employee organization means any labor union, 
    organization, employee representation committee, association, group, or 
    plan, in which employees participate and which exists for the purpose, 
    in whole or in part, of dealing with employers concerning an employee 
    benefit plan, or other matters incidental to employment relationships; 
    or any employees' beneficiary association organized for the purpose, in 
    whole or in part, of establishing such a plan.
        (4) The term non-contingent interest means an interest capable of 
    determination without evaluation of contingencies except for those 
    covered by the present worth tables and rules of calculation for their 
    use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
    (26 CFR 20.2031-7) or any similar present worth or life expectancy 
    tables as may be published by the Internal Revenue Service.
        (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
    
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    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 (h), 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).
    
    
    Sec. 330.15  Public unit accounts.
    
        (a) Extent of insurance coverage--(1) Accounts of the United 
    States. Each official custodian of funds of the United States lawfully 
    depositing such funds in an insured depository institution shall be 
    separately insured in the amount of:
        (i) Up to $100,000 in the aggregate for all time and savings 
    deposits; and
        (ii) Up to $100,000 in the aggregate for all demand deposits.
        (2) Accounts of a state, county, municipality or political 
    subdivision. Each official custodian of funds of any state of the 
    United States, or any county, municipality, or political subdivision 
    thereof, lawfully depositing such funds in an insured depository 
    institution in the state comprising the public unit or wherein the 
    public unit is located (including any insured depository institution 
    having a branch in said state) shall be separately insured in the 
    amount of:
        (i) Up to $100,000 in the aggregate for all time and savings 
    deposits; and
        (ii) Up to $100,000 in the aggregate for all demand deposits. In 
    addition, each such official custodian depositing such funds in an 
    insured depository institution outside of the state comprising the 
    public unit or wherein the public unit is located, shall be insured in 
    the amount of up to $100,000 in the aggregate for all deposits, 
    regardless of whether they are time savings or demand deposits.
        (3) Accounts of the District of Columbia. (i) Each official 
    custodian of funds of the District of Columbia lawfully depositing such 
    funds in an insured depository institution in the District of Columbia 
    (including an insured depository institution having a branch in the 
    District of Columbia) shall be separately insured in the amount of:
        (A) Up to $100,000 in the aggregate for all time and savings 
    deposits; and
        (B) Up to $100,000 in the aggregate for all demand deposits.
        (ii) In addition, each such official custodian depositing such 
    funds in an insured depository institution outside of the District of 
    Columbia shall be insured in the amount of up to $100,000 in the 
    aggregate for all deposits, regardless of whether they are time, 
    savings or demand deposits.
        (4) Accounts of the Commonwealth of Puerto Rico and other 
    government possessions and territories. (i) Each official custodian of 
    funds of the Commonwealth of Puerto Rico, the Virgin Islands, American 
    Samoa, the Trust Territory of the Pacific Islands, Guam, or The 
    Commonwealth of the Northern Mariana Islands, or of any county, 
    municipality, or political subdivision thereof lawfully depositing such 
    funds in an insured depository institution in Puerto Rico, the Virgin 
    Islands, American Samoa, the Trust Territory of the Pacific Islands, 
    Guam, or The Commonwealth of the Northern Mariana Islands, 
    respectively, shall be separately insured in the amount of:
        (A) Up to $100,000 in the aggregate for all time and savings 
    deposits; and
        (B) Up to $100,000 in the aggregate for all demand deposits.
        (ii) In addition, each such official custodian depositing such 
    funds in an insured depository institution outside of the commonwealth, 
    possession or territory comprising the public unit or wherein the 
    public unit is located, shall be insured in the amount of up to 
    $100,000 in the aggregate for all deposits, regardless of whether they 
    are time, savings or demand deposits.
        (5) Accounts of an Indian tribe. Each official custodian of funds 
    of an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an 
    agency thereof having official custody of tribal funds, lawfully 
    depositing the same in an insured depository institution shall be 
    separately insured in the amount of:
        (i) Up to $100,000 in the aggregate for all time and savings 
    deposits; and
        (ii) Up to $100,000 in the aggregate for all demand deposits.
        (b) Rules relating to the official custodian--(1) Qualifications 
    for an official custodian. In order to qualify as an ``official 
    custodian'' for the purposes of paragraph (a) of this section, such 
    custodian must have plenary authority, including control, over funds 
    owned by the public unit which the custodian is appointed or elected to 
    serve. Control of public funds includes possession, as well as the 
    authority to establish accounts for such funds in insured depository 
    institutions and to make deposits, withdrawals, and disbursements of 
    such funds.
        (2) Official custodian of the funds of more than one public unit. 
    For the purposes of paragraph (a) of this section, if the same person 
    is an official custodian of the funds of more than one public unit, he 
    or she shall be separately insured with respect to the funds held by 
    him or her for each such public unit, but shall not be separately 
    insured by virtue of holding different offices in such public unit or, 
    except as provided in paragraph (c) of this section, holding such funds 
    for different purposes.
        (3) Split of authority or control over public unit funds. If the 
    exercise of authority or control over the funds of a public unit 
    requires action by, or the consent of, two or more officers, employees, 
    or agents of such public unit, then they will be treated as one 
    ``official custodian'' for the purposes of this section.
        (c) Public bond issues. Where an officer, agent or employee of a 
    public unit has custody of certain funds which by law or under a bond 
    indenture are required to be set aside to discharge a debt owed to the 
    holders of notes or bonds issued by the public unit, any deposit of 
    such funds in an insured
    
    [[Page 26449]]
    
    depository institution shall be deemed to be a deposit by a trustee of 
    trust funds of which the noteholders or bondholders are pro rata 
    beneficiaries, and the beneficial interest of each noteholder or 
    bondholder in the deposit shall be separately insured up to $100,000.
        (d) Definition of ``political subdivision''. The term ``political 
    subdivision'' includes drainage, irrigation, navigation, improvement, 
    levee, sanitary, school or power districts, and bridge or port 
    authorities and other special districts created by state statute or 
    compacts between the states. It also includes any subdivision of a 
    public unit mentioned in paragraphs (a)(2), (a)(3) and (a)(4) of this 
    section or any principal department of such public unit:
        (1) The creation of which subdivision or department has been 
    expressly authorized by the law of such public unit;
        (2) To which some functions of government have been delegated by 
    such law; and
        (3) Which is empowered to exercise exclusive control over funds for 
    its exclusive use.
    
    
    Sec. 330.16  Effective dates.
    
        (a) Prior effective dates. Former Secs. 330.1(j), 330.10(a), 
    330.12(c), 330.12(d)(3) and 330.13 (See 12 CFR part 330, as revised 
    January 1, 1997.) became effective on December 19, 1993.
        (b) Time deposits. Except with respect to the provisions in former 
    Sec. 330.12 (a) and (b), (See 12 CFR part 330, as revised January 1, 
    1997.) and current Sec. 330.14 (a) and (b), any time deposits made 
    before December 19, 1991 that do not mature until after December 19, 
    1993, shall be subject to the rules as they existed on the date the 
    deposits were made. Any time deposits made after December 19, 1991 but 
    before December 19, 1993 shall be subject to the rules as they existed 
    on the date the deposits were made. Any rollover or renewal of such 
    time deposits prior to December 19, 1993 shall subject those deposits 
    to the rules in effect on the date of such rollover or renewal. With 
    respect to time deposits which mature only after a prescribed notice 
    period, the provisions of these rules shall be effective on the 
    earliest possible maturity date after June 24, 1993 assuming (solely 
    for purposes of this section) that notice had been given on that date.
    
        By order of the Board of Directors.
    
        Dated at Washington, D.C., this 29th day of April, 1997.
    
        Federal Deposit Insurance Corporation
    Robert E. Feldman,
    Deputy Executive Secretary.
    [FR Doc. 97-11965 Filed 5-13-97; 8:45 am]
    BILLING CODE 6714-01-P
    
    
    

Document Information

Published:
05/14/1997
Department:
Federal Deposit Insurance Corporation
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
97-11965
Dates:
Written comments must be received by the FDIC on or before August 12, 1997.
Pages:
26435-26449 (15 pages)
RINs:
3064-AB73: Simplification of Deposit Insurance Rules
RIN Links:
https://www.federalregister.gov/regulations/3064-AB73/simplification-of-deposit-insurance-rules
PDF File:
97-11965.pdf
CFR: (19)
12 CFR 330.1)
12 CFR 330.5(a)(1)
12 CFR 330.12(c)
12 CFR 330.1
12 CFR 330.2
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