[Federal Register Volume 59, Number 110 (Thursday, June 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14008]
[[Page Unknown]]
[Federal Register: June 9, 1994]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AB46
Assessments
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The Board of Directors (Board) of the Federal Deposit
Insurance Corporation (FDIC) is amending its regulations governing
computation of an institution's assessment base to provide for the
subtraction of certain liabilities arising under depository institution
investment contracts. The subject liabilities are those not treated as
insured deposits under section 11(a)(8) of the Federal Deposit
Insurance Act (FDI Act). Under the final rule, these liabilities would
be excluded from the deposit base on which deposit insurance premiums
are assessed, thereby reducing assessment payments for affected
institutions. The purpose of the amendment is to give effect, by
regulation, to apparent congressional intent.
EFFECTIVE DATE: July 11, 1994.
FOR FURTHER INFORMATION CONTACT: William Farrell, Chief, Assessments
Management Section, Division of Finance, (703) 516-5546; or Gerald J.
Gervino, Senior Attorney, (202) 898-3723; Federal Deposit Insurance
Corporation, Washington D.C. 20429.
SUPPLEMENTARY INFORMATION: Prior to December 1993, liabilities arising
under bank or thrift investment contracts (BICs) that qualified as
deposits under section 3(l) of the FDI Act, 12 U.S.C. 1813(l), were
insured in accordance with the statutory and regulatory provisions
governing federal deposit insurance coverage. Similarly, BIC
liabilities that qualified as deposits were included in an
institution's deposit base for the purpose of calculating the
institution's deposit insurance premiums.
Effective December 19, 1993, a new section 11(a)(8) was added to
the FDI Act by section 311(a)(1) of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA). Under this new provision,
codified at 12 U.S.C. 1821(a)(8), liabilities arising under certain
depository institution investment contracts are no longer treated as
insured deposits.
A companion provision to the new section 11(a)(8) was a new
subparagraph (D) added to section 7(b)(6) of the FDI Act (12 U.S.C.
1817(b)(6)) by section 311(a)(2) of FDICIA, which also became effective
December 19, 1993. Section 7(b)(6)(D) excluded from an institution's
insurance assessment base any liability of the institution not treated
as an insured deposit pursuant to section 11(a)(8).
Although section 11(a)(8) continues in force, its companion
provision does not. Section 7(b)(6), as amended effective December 19,
1993, was superseded as of January 1, 1994, by a totally revised
version of section 7(b) that provides for a risk-based assessment
system. The existing section 7(b), 12 U.S.C. 1817(b), as amended by
section 302(a) of FDICIA, omits all provisions of the superseded
section 7(b) that dealt with the computation of an institution's
deposit insurance assessment base. Under the existing provisions,
definition of the assessment base is to be determined by the FDIC.
The Board believes that it is appropriate and desirable to give
continued effect, by regulation, to the intent of Congress, as
reflected in superseded section 7(b)(6), that investment contract
liabilities not treated as insured deposits under section 11(a)(8) of
the FDI Act should be excluded from the universe of deposits on which
insurance assessments are paid. The amendment maintains the balance the
Board believes Congress intended in enacting the former section 7(b)(6)
as a companion to section 11(a)(8).
The FDIC invited comments on the proposal. 59 FR 9687 (March 1,
1994). Four comments were received. Two were furnished by trade
associations and two by financial institutions. One comment letter from
each group supported the proposal. One association commenter and one
institutional commenter opposed the proposal. An association commenter
strongly opposed the proposal, indicating that the amendment would
favor larger banks since, according to the commenter, small banks
generally do not have deposit liabilities arising under these
investment contracts. It also asked that the change not be addressed
until a larger review of the assessment base is made by the FDIC.
Citing congressional intent, the other trade association supported the
proposal. However, they suggested that the FDIC make it clear that the
exclusion of BICs is a special case and should not be construed as
indicative of other actions that the FDIC may take to change the
assessment base.
The two institutions offered diametrically opposed comments. One
felt that the exemption should be adopted quickly enough to be used in
the first quarter of this year. The other institution was totally
against excluding BICs from the insurance assessment. It felt that BICs
were useful for large money center banks with the resources to enter
complicated arrangements. It felt that any argument that BICs should
not be assessed, if they are not insured, was inappropriate. The
commenter noted that it pays assessments on behalf of customer deposits
that are not insured because the deposits exceed $100,000. In the
commenter's view, principles of fairness require that BICs be assessed
for FDIC insurance purposes.
The Board has carefully considered the comments of each of the four
commenters. The Board believes that the amendment is designed to give
continued effect to congressional intent to exclude investment contract
liabilities, that are not treated as insured deposits, from the deposit
base on which premiums are assessed. Since the amendment is designed to
carry out congressional intent, the Board does not believe it is
appropriate to delay the amendment pending further study of the
assessment base. This amendment does not reflect any policy judgment of
the FDIC relating to the assessment base.
The Board does not believe that the proposal is designed to favor
large banks. Any insured institution, regardless of size, may deduct
deposit liabilities arising under these investment contracts from its
assessment base. Any bank may potentially use the investment contracts
described in the regulation.
Accordingly, the Board is amending its assessments regulation to
exclude from an institution's assessment base, as computed under
Sec. 327.4, those investment contract liabilities not treated as
insured deposits under section 11(a)(8) of the FDI Act.
Paperwork Reduction Act
No collections of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this
final rule. Consequently, no information has been submitted to the
Office of Management and Budget for review.
Regulatory Flexibility Act
The Board hereby certifies that the amendments to part 327 will not
have a significant economic impact on a substantial number of small
entities within the meaning of the Regulatory Flexibility Act (5 U.S.C.
601 et seq.). In light of this certification, the Regulatory
Flexibility Act requirements (at 5 U.S.C. 603, 604) to prepare initial
and final regulatory flexibility analyses do not apply.
List of Subjects in 12 CFR Part 327
Assessments, Bank deposit insurance, Financing corporation, Savings
associations.
For the reasons stated in the preamble, 12 CFR part 327 is amended
as follows:
PART 327--[AMENDED]
1. The authority citation for part 327 continues to read as
follows:
Authority: 12 U.S.C. 1441, 1441b, 1817-1819.
2. Section 327.4 is amended by removing the period at the end of
paragraph (b)(2)(iv)(B) and adding a semicolon in lieu thereof, and by
adding paragraph (b)(2)(v) to read as follows:
Sec. 327.4 Average assessment base.
* * * * *
(b) * * *
(2) * * *
(v) Liabilities arising from a depository institution investment
contract that are not treated as insured deposits under section
11(a)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(8)).
* * * * *
By order of the Board of Directors.
Dated at Washington, D.C., this 24th day of May 1994.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 94-14008 Filed 6-8-94; 8:45 am]
BILLING CODE 6714-01-P
