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Financial Institution Letters


[Federal Register: December 29, 1994]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 304 and 327

RIN 3064-AB45

 
Assessments; Forms, Instructions, and Reports

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 regulation on assessments 
to provide for the quarterly collection of insurance premiums by means 
of FDIC-originated direct debits through the Automated Clearing House 
(ACH) network, based on invoices prepared by the FDIC using data 
reported by insured institutions in their quarterly reports of 
condition. The intended purpose of the amendments is to provide for a 
more efficient collection process, to the benefit of the deposit 
insurance funds and insured institutions, and to reduce the regulatory 
burden on insured institutions. The Board is further amending the 
assessments regulation to clarify the obligation of acquiring 
institutions to pay assessments on deposits assumed from institutions 
terminating their insured status; to delete from the assessments 
regulation the existing references to experience factors, which are not 
available for use after 1994; and to include such amendments to the 
FDIC's regulation on forms as are necessitated by the foregoing changes 
to the assessments regulation. With a few very limited exceptions, the 
amendments made by the final rule to the existing regulation are those 
previously proposed by the Board for public comment.

EFFECTIVE DATE: The final rule is effective April 1, 1995.

FOR FURTHER INFORMATION CONTACT: Connie Brindle, Chief, Assessment 
Operations Section, Division of Finance, (703) 516-5553, or Martha 
Coulter, Counsel, (202) 898-7348, regarding quarterly collections; 
William Farrell, Chief, Assessment Management Section, Division of 
Finance, (703) 516-5546, or Jules Bernard, Counsel, (202) 898-3731, 
regarding assessment obligations of acquiring institutions; Federal 
Deposit Insurance Corporation, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Collection Improvement Proposal

A. Background

    Earlier this year, the Board issued for public comment a proposal 
to revise the existing process for collecting deposit insurance 
assessments. 59 FR 29965 (June 10, 1994). The Board is adopting the 
revisions as proposed along with technical adjustments to conform the 
provisions of the FDIC's assessment regulations at 12 CFR Part 327 to 
the new collection process. Implementation of the new system will begin 
with the semiannual assessment period that starts July 1, 1995.
    At present, the FDIC's assessment regulations require the payment 
of deposit insurance premiums twice a year, in an amount computed by 
the institution. The computation, and the resulting assessment amount, 
is shown on a certified statement submitted by the institution along 
with a check for the full amount of the assessment. The payment must be 
postmarked no later than January 31 for the first semiannual period of 
the year (January through June), and July 31 for the second semiannual 
period (July through December).
    Under the proposal published in June, assessment payments would be 
made in quarterly installments, in amounts computed by the FDIC from 
data reported by each institution in its quarterly report of condition 
for the preceding quarter.1 Institutions would be invoiced on 
November 30 and February 28 for the first semiannual assessment period 
of each year and on May 30 and August 30 for the second semiannual 
period. Quarterly payment would be due one month later--December 30, 
March 30, June 30, and September 30, respectively--and would be 
collected by means of ACH debits originated by the FDIC. The first-
quarterly installment for the period beginning January 1 (due two days 
earlier, on December 30) would be based on data reported in the 
institution's report of condition for the preceding September 30. The 
second-quarterly installment for that period (due February 28) would be 
based on the report of condition for the preceding December 31. The 
first-quarterly payment for the semiannual period beginning July 1 (due 
June 30) would be based on the March 31 report of condition, and the 
second-quarterly payment (due September 30) would be based on the June 
30 report of condition. The following chart summarizes this schedule:
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    \1\For banks, the report of condition is called the Report of 
Income and Condition; for thrift institutions, the Thrift Financial 
Report; and for insured branches of foreign banks, the Report of 
Assets and Liabilities of U.S. Branches and Agencies of Foreign 
Banks.

------------------------------------------------------------------------
                                                              Report of 
   Semiannual assessment               Invoice     Payment    condition 
      period covered        Quarter     date        date       used for 
                                                             preparation
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Jan.-June.................        1  Nov. 30...  Dec. 30...  Sep. 30.   
                                  2  Feb. 28...  Mar. 30...  Dec. 31.   
July-Dec..................        1  May 30....  June 30...  Mar. 31.   
                                  2  Aug. 30...  Sep. 30...  June 30.   
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    The proposal required that each institution designate a deposit 
account to be electronically debited by the FDIC for assessment 
payments. It also provided a procedure for institutions to request 
revision of the FDIC invoice showing the quarterly payment to be 
debited. It further included a procedure to be followed if, for some 
reason, a quarterly invoice was not timely received by an institution.
    Under section 7(c) of the Federal Deposit Insurance Act, 12 U.S.C. 
1817(c), each insured depository institution is required to file with 
the FDIC a certified statement containing such assessment information 
as the FDIC may require for determining the institution's assessment 
for the semiannual period. Under the proposal, pursuant to this 
statutory provision, the second quarterly invoice for each semiannual 
period would include a statement showing both the first- and second-
quarter assessment data. Each institution would be required to certify 
its agreement with the assessment computation as shown on the form as 
received from the FDIC or, alternatively, its agreement with that 
computation as amended in a manner specified by the institution.

B. Discussion of Comments Received

    The FDIC received 51 letters in response to its request for comment 
on the proposal. Among the respondents were 40 depository institutions, 
2 bank holding companies, 3 ACH associations, and 2 governmental 
entities. Comment letters were also received from the American Bankers 
Association, the Independent Bankers Association of America, the 
Savings & Community Bankers of America, and the Independent Bankers 
Association of Texas.
    All of the responding bankers associations and ACH associations 
generally supported the proposal, subject to certain recommendations 
and concerns. According to one national bankers association, ``banker 
response to the proposal has been overwhelmingly positive''. In 
addition, 14 of the individual institutions favored the proposal. The 
two bank holding companies generally supported the proposal, although 
each objected to one particular element (but not the same one). Of the 
remaining 28 commenters, 23 individual institutions generally opposed 
the proposal, three institutions expressed support for some major 
elements and opposition to other major elements, and 2 related 
government agencies submitted letters expressing concern on a single 
specific issue.
    Significant issues raised by the comment letters are addressed 
below. Included with the discussion of each issue is an explanation of 
the FDIC's conclusions regarding that issue.
1. Quarterly Collection
    One of the elements receiving the most attention from commenters 
was the increased frequency of assessment payments, from semiannually 
to quarterly. Of the 24 commenters specifically addressing this issue, 
three bankers associations and seven individual institutions supported 
it and 14 individual institutions opposed it. The final rule includes 
this element as proposed.
    The principal reasons given in support of quarterly collection were 
that it would simplify the assessment calculation by basing each 
quarterly payment on only one report of condition instead of an average 
of two, and that it would reduce reporting and calculation errors by 
moving payment dates further away from the date of the underlying 
report-of-condition data, thereby allowing more time for refinement of 
the relevant data. The reason most commonly given in opposition was 
that increased frequency of payment would result in additional work or 
increased costs for institutions. Two institutions objected to 
quarterly assessment payments on the grounds that they generally 
receive their interest income only semiannually, and one institution 
preferred basing assessments on an average of two quarterly reports of 
condition.
    The issue of whether the proposal might result in increased costs 
to institutions was expressly addressed in the comments received from a 
national bankers association, which observed that any additional 
expenses resulting from the proposed system should be offset by an 
overall savings in paperwork and a reduction in assessment prepayment 
interest expense. Another bankers association indicated that some 
community banks were concerned about the additional work of verifying 
the FDIC's calculation four times a year, and recommended that the 
FDIC's quarterly assessment invoice be designed in a readily-verifiable 
format. A fifth commenter indicated that most banks have automated 
their assessment calculations and could use that capability to verify 
the FDIC's invoice.
    The Board believes that, while a shift to quarterly payments will 
add two new collection dates each year and thus require institutions to 
go through the payment process more often, the new collection procedure 
on the whole will result in an overall reduction in the amount of time 
devoted by institutions to assessment collections. Although it is 
expected that institutions will want to verify the numbers shown on the 
FDIC's invoice, it is also expected that institutions will need less 
time to verify four FDIC quarterly invoices than they currently use to 
compute their own assessments and prepare two semiannual assessment 
statements. The numbers shown on the FDIC's invoice will be the 
institution's own numbers, taken from its report of condition for the 
preceding quarter. Institutions will need only to check the numbers to 
satisfy themselves that they were accurately transferred from the 
institution's report of condition. Although the numbers will be 
electronically processed by the FDIC to determine an assessment amount, 
the assessment calculation on the invoice will be based on only one 
report of condition and thus require less time to verify than the 
current calculation, which is based on a combination of two reports of 
condition. Moreover, the FDIC intends to present the invoice in a 
format designed for ease of verification.
    In addition, there is more time under the new system between the 
end of the applicable reporting period and the assessment payment date. 
As a result, there is more time for rechecking the quarterly report 
data and making corrections before payment of the assessment that is 
derived from that data. The availability of more refined data for the 
assessment computation should reduce the amount of time spent by 
institutions in revising assessment calculations subsequently rendered 
erroneous because of corrections in report-of-condition data.
    It is possible that some commenters' opposition to quarterly 
payments is based on a perception that because institutions will be 
making an assessment payment earlier than they do now, they will lose 
interest income on the funds used for the earlier payment. However, 
this view ignores the fact that only a portion of an institution's 
semiannual assessment will be paid earlier; approximately one-half will 
be paid later. At present, the two due dates for assessment payments 
are January 31 and July 31. Under the new system, the first-quarterly 
payment dates will be December 30 and June 30, one month earlier. Thus, 
institutions will lose interest income for one month on approximately 
one-half of their semiannual assessments. However, the second-quarterly 
payment dates--March 30 and September 30--are two months later than the 
existing payment dates. Therefore, in contrast to a one-month loss of 
income on the accelerated portion, institutions will gain two months of 
income on the delayed portion. This would seem to balance out in 
institutions' favor, rather than to their detriment.2
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    \2\Several commenters suggested that the purpose of quarterly 
collection, with an accelerated payment, is to increase the FDIC's 
cash flow. However, when one considers that the accelerated payment 
is due only one month earlier than the existing payment date, while 
the delayed payment date comes two months after the existing payment 
date, the flaw in this suggestion is clear.
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    Another possible concern for some institutions might be that basing 
assessments on only one quarterly report of condition rather than on an 
average of the two previous reports could increase their 
assessments.3 Although elimination of averaging should not affect 
the actual amount of semiannual assessments paid by an institution, 
some institutions might have higher or lower cost-of-funds expenses 
than they would if averaging were retained. Institutions whose deposits 
are increasing might pay slightly less in assessment payments in the 
first quarter of a semiannual assessment period and slightly more in 
the second quarter, while the converse would apply to institutions 
whose assessable deposits decline through the period. However, on both 
an institution-by-institution and industry-wide basis, elimination of 
averaging is expected to simplify the assessment process without 
affecting the actual amount of semiannual assessments paid.4
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    \3\One institution cited loss of averaging as the sole basis for 
its opposition to the proposal. Yet in the example given in its 
comment letter (receipt of a deposit of $2 million on the last day 
of June, which was transferred out a few days later), the retention 
of two-quarter report-of-condition averaging would not eliminate the 
problem described. Assuming that the institution has deposits of $28 
million (including the $2 million just received) at the end of June 
30, and $26 million on the previous March 31 (the companion quarter-
end for the same semiannual period), its ``average'' deposits across 
the semiannual period would be $27 million. Whether its average 
deposits of $27 million is multiplied by one-half its annual 
assessment rate (as under the existing system) or March's $26 
million and June's $28 million are each multiplied by one-quarter of 
the rate (as under the new system) and then added together to 
determine the amount across the two quarters, the result is the 
same.
    \4\A national bankers association noted in its comments that 
most bankers believe that, while there will be more volatility in 
the payment amount for each quarter under the proposed system than 
under the existing system, the total annual payment should remain 
about the same.
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2. ACH Direct Debit by the FDIC
    Another key element of the collection improvement plan is the use 
of ACH direct debits originated by the FDIC as the method of 
collection. Of the 28 comment letters addressing this component, 17 
were in favor and 11 were opposed. The supporters included ten 
individual institutions, two national bankers associations, two bank 
holding companies, and three ACH associations. The opposing commenters 
were 11 individual institutions. The Board has decided to adopt this 
element as proposed.
    Increased efficiency over the existing paper-based collection 
process was the reason cited most often by supporters of electronic 
payment. The principal concern among the opponents seemed to be a loss 
of payment flexibility. Also mentioned was the difficulty of correcting 
errors in an electronic environment.
    The FDIC believes that the existing assessment collection process 
will be improved substantially by utilizing an electronic payment 
process, to the benefit of insured depository institutions and the 
federal deposit insurance funds. Because the existing process is paper-
based, it is more time consuming and less efficient, both for the 
industry and for the FDIC, than an improved collection process making 
fuller use of advanced payment technology.
    It was not clear from the comment letters how the use of an 
electronic collection procedure might reduce payment flexibility for 
institutions. At present, institutions can submit their assessment 
payment by check at any time after they know the amount due, up until 
the payment deadline. This covers a maximum period of one month, from 
the last day of the latter quarter on which the assessment calculations 
are based (December 30 or June 30) through the payment due date 
(January 31 or July 31). Under the electronic procedure, institutions 
could fund the account designated for the assessment debit (the 
equivalent of writing a check) at any time between receipt of the FDIC 
invoice and the payment due date, again a period of approximately 30 
days. There are also payment deadlines under both the existing and new 
systems; for the former, it is the date by which the check must be 
postmarked, and under the latter it is the debit date. In these 
respects, both the existing and new systems appear to be equally 
flexible.
    One institution objected to having the FDIC in its ``electronic 
back pocket'', which seems to reflect a concern that the FDIC might 
originate unexpected debits. This would not be the case, but 
institutions with that concern could readily address it by funding 
accounts designated for assessment payments only for the exact 
assessment amount due and only for the assessment due date.
    Another possible concern might be the loss of float resulting from 
a change away from paper checks to electronic payments. However, the 
amount of cost-savings resulting from other elements of the new 
procedure--such as the reduction in prepayment interest expense--should 
more than compensate for the loss of float.
    The other concern indicated by opponents of electronic collection 
was an increased difficulty of error resolution in an electronic 
environment. The FDIC believes that, to the contrary, error resolution 
will be significantly more efficient under the new system than under 
the existing system. Collection by ACH debits will allow the FDIC to 
identify within approximately two days of the debit any discrepancies 
between the amount due and the amount received, and the FDIC expects to 
contact immediately any institutions for which discrepancies appear. At 
present, identification of differences between the amounts due and the 
amounts paid takes two to three months because the FDIC must await 
reports and reconciliations of certified statement forms and paper 
checks from lock-box processors.
    The three ACH associations from which we received comment letters 
on the proposal suggested that the FDIC permit institutions preferring 
to pay by institution-initiated ACH credits the option of doing so. 
While we recognize that providing such an option might benefit some 
institutions, the FDIC's experience, based on live testing of ACH 
assessments collection for the two semiannual assessment periods in 
1994, is that the error rate for direct-debit collection is 
significantly lower.5
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    \5\ In January 1994, an ACH-credit test was conducted with 36 
small institutions. Despite careful monitoring, significant input 
errors occurred (incorrect certificate numbers, absence of bank 
name). For the July 1994 payment, testing was expanded to include 
183 institutions. Of this group, 19 elected to originate payment 
themselves, while the remaining 164 paid by FDIC-initiated debits. 
No errors occurred with the debit transactions, in contrast with 
errors in six (approximately 30 percent) of the credit transactions 
(failure to include certificate numbers).
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    Three commenters recommended that, in using the ACH system, the 
FDIC comply with the rules of the National Automated Clearing House 
Association. It is, and has been, the FDIC's intent to do so.
3. Assessment Computation Review Procedure; Quarterly Adjustment
    Under the proposal, the assessment-base data included on the 
quarterly assessment invoice provided to the institution by the FDIC 
would be taken directly from the institution's most recent report of 
condition. Because of the source of the data and given the mechanical 
nature of the assessment calculation, it was anticipated that there 
would be only limited occasion for institutions to disagree with the 
invoices. However, a procedure for resolving any such disagreements was 
included in the proposal. With one exception, regarding the timing of 
FDIC response, the Board has decided to adopt the proposed procedure.
    The proposed procedure would apply only to disagreements identified 
in Sec. 327.3(h) of the proposed regulation, such as where the 
institution believes the rate multiplier applied by the FDIC is 
inconsistent with the assessment risk classification assigned to the 
institution for the semiannual period for which the payment is due. The 
procedure would not apply to disputes regarding the appropriateness of 
the assessment risk classification assigned to the institution; such 
disputes would continue to be covered by the risk classification review 
procedure in the existing regulations.6
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    \6\ Under the final rule, as under the proposal, assessment risk 
classifications will be assigned, and applied, semiannually. No 
comments were received on this subject, although one commenter 
supported the proposal to combine the semiannual risk classification 
notice with the first-quarter invoice for the semiannual period.
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    Under the new procedure, the period within which an institution 
could file a request for revision of an invoice would generally 
terminate 60 days from the date of the invoice. However, where the 
revision would result from an institution-initiated amendment to its 
report of condition, the filing deadline for the request for revision 
would be 60 days from the date on which such amendment is filed. The 
amendment of the report of condition would not automatically trigger an 
assessment adjustment. Instead, institutions would need to utilize the 
new procedure to provide notice to the FDIC of the requested revision 
resulting from the amendment.
    This proposed procedure was specifically addressed by four 
commenters, all of which were bankers associations. Each of these 
commenters expressed some concern regarding the procedure. One 
association indicated that the procedure seemed reasonable, but 
recommended that it be revised to include a schedule for FDIC response 
to requested revisions. Another association agreed with the need for a 
deadline for FDIC response, and also urged the FDIC to reevaluate its 
procedures for resolving disputes concerning assessment risk 
classifications. According to the latter commenter, the resolution of 
risk classification disputes can often be protracted and confusing.
    A third bankers association urged the FDIC to establish clear 
assessment computation review procedures so that institutions would 
know who to contact. The remaining association reported that some of 
its members had expressed doubt that the new system would result in 
fewer errors and greater ease of error resolution. This association 
recommended that, in order to increase the likelihood of these results, 
the FDIC make a special effort to provide clear and complete 
instructions and forms to institutions and to provide adequate staffing 
in the initial stages of the new procedure to answer institutions' 
questions.
    Regarding the addition of a schedule for FDIC response to requested 
revisions, the Board has decided to include in the final rule a 
requirement that the FDIC respond in writing within 60 days of receipt 
of the request (or, if additional information is sought by the FDIC 
regarding the request, within 60 days of receipt of the additional 
information). It is anticipated that in most cases, the response would 
be in the form of a notice of the FDIC's decision on the request. 
However, in instances in which decision within 60 days is not feasible, 
the response is expected to consist of a status report.
    The Board notes the suggestion that the FDIC reconsider the 
existing procedure for institutions requesting review of their 
assessment risk classifications. This is a matter to which the Board 
has given its attention on several occasions, beginning with its 
initial consideration of the risk-based assessment system in 1992. It 
is also an area the FDIC continues to monitor, in order to identify 
potential refinements.
    Regarding the remaining two comments, the FDIC appreciates the 
significance of the impact the new assessment collection procedures 
will have on insured institutions, and fully intends to do its best to 
make the change from the existing system as smooth as possible. This 
will include staffing an FDIC telephone ``hotline'' for institutions 
with questions concerning the new procedures, mailing relevant 
information and guidance to each insured institution, and initiating 
the formal collection from each institution of the data needed by the 
FDIC to identify the accounts designated for the ACH debits.
    A matter related to the error-resolution procedure concerns the 
manner in which assessment payments are adjusted once an error has been 
identified and corrected. The proposal included a ``rolling'' 
correction process in which necessary adjustments in the assessment 
amount would be made on a quarterly basis. Thus, the FDIC would add to 
or subtract from the amount that would otherwise be due for the next 
quarterly payment the amount of any under- or over-payment from earlier 
quarters, with interest to be paid to or by the FDIC determined on a 
full-quarter basis. The Board has decided to adopt this procedure as 
proposed, with one very limited modification.
    One commenter specifically addressing the ``rolling'' adjustment 
procedure (a national bankers association) opined that such a system is 
reasonable, but requested that the FDIC initiate a special procedure 
for large-dollar errors in the FDIC's favor (apparently referring to 
assessment overpayments) to enable such errors to be resolved more 
quickly, ideally before the payment due date. However, another 
commenter applauded the symmetrical treatment given by the proposal to 
overpayments and underpayments, in terms of quarterly adjustment and 
the payment of interest. The latter commenter noted that the payment of 
interest on a quarterly basis for both overpayments and underpayments 
would minimize the incentive for the FDIC to delay recognition of 
overpayments and reduce the incentive of institutions to delay 
identification and reporting of underpayments. A third commenter 
observed that it seems inappropriate to charge interest on 
underpayments when the FDIC is calculating the assessments, and that 
any error would seem to be that of the FDIC and not the institution.
    Regarding the source of errors leading to either underpayments or 
overpayments, the Board notes that the data used by the FDIC in 
computing the assessments due is taken from reports filed by the 
institutions. Thus, the FDIC is not the sole possible source of over- 
or under-calculating the payments due. Similarly, while the FDIC 
intends to try to resolve errors as quickly as possible--and, to the 
extent possible, prior to the payment date--we do not consider it to be 
the fairest approach to single out for special treatment large-dollar 
errors in the FDIC's favor. Such treatment could be seen as giving 
individual institutions priority over the interest of the deposit 
insurance funds (and, thus, the industry as a whole) and could possibly 
reduce the incentive of institutions to exercise care in reporting the 
relevant data.
    Under the proposal, as under the existing regulation, the amount of 
the assessment payment due from an institution is determined by 
multiplying its assessment base by its assessment rate (see 
Secs. 327.3(c) and (d) of the final rule). These elements determine the 
amount due, despite any miscalculations or other errors that, under the 
existing rule, might now be made by the institution or, under the final 
rule, might be made by either the institution or the FDIC. As discussed 
above, under both the proposed and final rule, correction of such 
errors would be made by adjustments to subsequent quarterly invoices, 
with interest to be paid by the FDIC if the adjustment resulted in a 
credit to the institution and by the institution if the adjustment 
resulted in an additional payment. This is the procedure intended by 
the FDIC in its proposal and, based on the comments received, the 
procedure as understood by those addressing the adjustment process.
    However, in order to avoid any confusion or misunderstanding that 
might otherwise arise regarding this procedure, the final rule includes 
additional language in Sec. 327.3(g), which addresses adjustments to 
the quarterly invoices, more specifically indicating that such 
adjustments can be necessitated by miscalculations or other similar 
actions by either the FDIC or the institution.
4. Invoice/Payment Schedule
    The final rule adopts the proposed invoice and payment schedule. 
One favorable and two unfavorable comments were received on the 
proposed schedule. The unfavorable comments concerned the December 30 
payment date, which both commenters argued should be moved to January. 
The basis for this request was that a December due-date would result in 
assessment payments in 1995 covering five quarters (all four quarters 
in 1995 and the first quarter of 1996). According to one of the 
commenters objecting to this result, this would cause a 25 percent 
increase in its 1995 assessment expenses.\7\
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    \7\This commenter also questions whether the FDIC has the 
authority to require payments in a single year in excess of the 
total for two semiannual periods. The Board believes that section 7 
of the Federal Deposit Insurance Act, 12 U.S.C. 1817, grants to the 
FDIC the authority to establish the collection schedule provided for 
in the final rule, including the December 30 payment date for the 
quarterly installment for the first quarter of 1996. In particular, 
section 7(c)(2)(B) provides that assessment payments are to be made 
in such manner and at such time or times as the Board prescribes by 
regulation.
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    The Board appreciates that this could present a one-time problem 
for some institutions. However, it should be noted that this is purely 
a timing issue caused by the shift from semiannual to quarterly 
collection; it does not involve an ``extra'' assessment payment. It 
affects only institutions that use cash-basis accounting, rather than 
accrual accounting, and has only a temporary impact (which would be 
offset with the March 30, 1996, payment).
    The solution recommended by the opposing commenters was to move the 
December payment date to January. Because doing so only for the 
December 1995 payment would not cure the problem, but merely delay it 
until December 1996, a more permanent change in the payment date would 
be needed. Such a change would have a continuing adverse cost-of-funds 
impact on the deposit insurance funds, in contrast to the temporary 
impact the December payment date would have on a limited number of 
institutions. Accordingly, the final rule retains the December payment 
date provided for in the proposal.
5. Other Comments
    Under the proposal, the second quarterly invoice for each 
semiannual period would include a statement showing both the first- and 
second-quarter assessment data. Each institution would be required to 
certify its agreement with the computation of its semiannual assessment 
as shown on the invoice or, alternatively, its agreement with that 
computation as amended in a manner specified by the institution. One 
national bankers association suggested that the FDIC require such a 
certified statement only on an annual basis, while two other commenters 
suggested that such statements were unnecessary and burdensome and 
should be eliminated.
    Section 7(c)(1) of the FDI Act requires that each insured 
depository institution file with the FDIC a certified statement 
containing such information as the FDIC may require for determining the 
institution's semiannual assessment. The FDIC agrees that, as a 
practical matter, the significance of such statements may be reduced 
substantially under the collection system established by the final 
rule. However, in light of the statutory language, the Board has 
decided to retain the regulatory requirement for a semiannual certified 
statement. The FDIC plans to explore the question of whether the 
requirement can or should be modified.
    Comment letters were received from two federal agencies, the 
Financing Corporation (FICO) and the Federal Housing Finance Board 
(FICO's regulator). Both of these letters addressed a specific 
provision in the existing assessments regulation that was eliminated by 
the proposed rule. That provision, at 12 CFR 327.23, deals with the use 
of an intermediary ``collection agent'' by the FDIC to receive 
assessment payments for the Savings Association Insurance Fund (SAIF) 
from savings associations. According to the Federal Housing Finance 
Board's comments (presumably with reference to the use of a collection 
agent), Sec. 327.23 is critical to FICO's operations because it 
establishes the process through which FICO assessments are paid. The 
letter opines that, without Sec. 327.23, the proposal is silent as to 
how FICO will obtain its SAIF assessments.
    According to FICO's comment letter, it believes that the existing 
provision regarding the collection agent ``is essential for the 
distribution of SAIF premiums between FICO and the FDIC''. FICO states 
that there is no provision in law that expressly grants to the FDIC the 
power to collect assessments on behalf of FICO or to pay funds over to 
FICO. It further asserts that the presence of a third-party collection 
agent provides FICO bondholders with greater assurance that the SAIF 
premiums will be available for interest payments, and that the absence 
of reference to the collection agent in the proposed regulation creates 
some risk to FICO bondholders that their claim to assessments collected 
by the FDIC will be subject to competing claims of the FDIC's other 
creditors.
    It is not clear to the FDIC how the collection-agent provision in 
Sec. 327.23(a) has the significance the Federal Housing Finance Board 
and FICO attribute to it. It does not establish--or even address--the 
process through which FICO receives assessment payments or the 
distribution of SAIF payments between FICO and the FDIC. Even if 
Sec. 327.23(a) is retained, the assessments regulation will still be 
silent as to how FICO obtains its assessment payments. In addition, 
Sec. 327.23 does not appear to affect the priority of claims on SAIF 
assessments. The source of obligations and authorities regarding the 
distribution of SAIF assessments between FICO and the FDIC, as well as 
FICO's prior claim to SAIF assessments, is the FICO statute, codified 
at 12 U.S.C. 1441. The collection-agent provision of 12 CFR 327.23 
neither adds to nor subtracts from those statutory obligations and 
authorities. The statute clearly indicates that FICO has first priority 
to make SAIF assessments, and that, with the approval of the FDIC, it 
can make such assessments.
    Accordingly, the FDIC does not share the concerns expressed by FICO 
and the Federal Housing Finance Board. However, it does not appear that 
retention of a SAIF collection-agent provision in the final rule would 
have any meaningful impact on the new system. In issuing its proposal, 
the FDIC had already anticipated that, were the proposal adopted, the 
Federal Reserve Bank of Richmond would participate in a capacity that 
meets the description of a ``collection agent'' in the existing 
regulation. Thus, in order to accommodate the concerns expressed by 
FICO and the Federal Housing Finance Board, the final rule retains the 
SAIF collection-agent provision from Sec. 327.23(a).

II. Mergers Resulting in the Termination of Business of the Merged 
Institution

A. Background

    The proposed rule set forth special rules for adjusting the 
assessment base of an institution (buyer) that acquires deposits in 
bulk (deposit-transfer) from another institution (seller).8 The 
final rule adopts these rules substantially as proposed, with minor 
revisions as described below.
---------------------------------------------------------------------------

    \8\ Deposit-transfers can take many forms, including statutory 
mergers, consolidations, statutory assumptions, and contractual 
arrangements in which a buyer purchases assets and assumes deposits 
from a seller. Furthermore, a seller may transfer its deposits to a 
single buyer or to several buyers, and may do so either in a single 
transaction or in a series of transactions. Section 327.6(a)'s 
special rules cover all such cases.
---------------------------------------------------------------------------

    As proposed, the special rules would come into play only when the 
following two conditions are satisfied:
    (1) The seller goes out of business (or otherwise ceases to be 
obliged to pay subsequent assessments) by or at the end of the 
semiannual period in which the deposit-transfer takes place; and
    (2) The deposit-transfer occurs during the second half of a 
semiannual assessment period (April 1 through June 30, or October 1 
through December 31).
    The special rules would have the effect of increasing the buyer's 
June 30 (or December 30) assessment payment. This payment represents 
the first installment on the assessment due from the buyer for the 
following semiannual period. Under the proposal, the increase in the 
buyer's payment was intended to provide compensation to the FDIC for 
accepting the insurance risk attributable to the deposits assumed by 
the buyer.
    The special rules would accomplish this goal by providing for an 
adjustment of a buyer's March (or September) assessment base. When a 
deposit-transfer occurs during the second half of an assessment period, 
the buyer does not assume the deposits in question until after it has 
filed its March (or September) report of condition. Absent the 
adjustment, the buyer's March (or September) assessment base would not 
include these deposits, and the buyer's June 30 (or December 30) 
payment would not fully compensate the FDIC for insuring the deposits 
in the upcoming semiannual period. The adjustment augments the buyer's 
March (or September) assessment base by an amount reflecting the 
deposits that the buyer has assumed.
    In addition, the proposal eliminated the requirement that the 
transferring institution file a final certified statement. Such filings 
are not needed under the new assessment collection system. In 
connection with this change, the proposal eliminated form FDIC 6420/11 
(``Final Certified Statement'') from part 304 of the FDIC's 
regulations, pertaining to forms.

B. Discussion of Comments Received

    The FDIC received three comments that addressed the topic of 
assessment-base adjustments. One commenter said it approved of the 
FDIC's proposal in general, without remarking on any particular aspect. 
The other two commenters made substantive comments. Both opposed the 
proposal.
    One of the opposing commenters, a bank holding company, said there 
was no need to adjust a buyer's assessment base to reflect the risk 
presented by the transferred deposits, because the buyer's Federal 
banking supervisor would not approve a merger or acquisition unless the 
buyer's risk of default is low. The FDIC considers, however, that the 
transferred deposits present an insurance risk to the FDIC, just as the 
buyer's other deposits do.
    This commenter also questioned the rationale offered by the FDIC 
for proposing to adjust buyers' assessment bases. When proposing this 
rule, the FDIC said that adjustments of this kind are needed in 
connection with the conversion from a semiannual payment schedule to a 
quarterly one: absent such adjustments, the FDIC would not be 
compensated for insuring the transferred deposits under the new 
quarterly payment schedule. The commenter asserted that the prior 
payment procedures, which required two semiannual payments, suffered 
from this same defect.
    The FDIC does not agree that its prior procedures were defective in 
this regard. But in any event, it remains true that adjustments of this 
kind are necessary to provide appropriate compensation to the FDIC with 
respect to transferred deposits in the context of a quarterly payment 
schedule. When a deposit-transfer occurs during the second half of an 
assessment period, the buyer does not assume the deposits in question 
until after it has filed its March (or September) report of condition. 
Absent the adjustment, the buyer's March (or September) assessment base 
would not include these deposits, and the buyer's June 30 (or December 
30) payment would not fully compensate the FDIC for insuring the 
deposits in the upcoming semiannual period. To avoid this circumstance, 
the adjustment augments the buyer's March (or September) assessment 
base by an amount reflecting the deposits that the buyer has assumed.
    The FDIC has chosen this approach in order to carry out the 
directive set forth in section 7(b)(1) of the FDI Act. Section 7(b)(1) 
calls for the FDIC to establish an assessment system in which an 
institution's assessment is based on the probability that the 
appropriate deposit insurance fund will incur a loss with respect to 
the institution, and on the likely amount of any such loss. See 12 
U.S.C. 1817(b)(1). The FDIC considers that the buyer presents a 
continuing insurance risk to the FDIC with respect to the transferred 
deposits, and that accordingly the buyer's assessment payment should 
reflect the additional risk that flows from its increase in deposits.
    The other commenter, a trade association, first said that it 
opposed the proposal, but then declared:

    If healthy institutions merge in either quarter of the 
semiannual period, the resulting institution's assessment for the 
next payment date should be based on the combined deposits of the 
merged institutions on the date of the previous quarter-end report 
of condition.

This, in substance, was the effect of the proposal--and now, of the 
final rule--although these are somewhat more generous to buyers than 
the commenter's suggestion. The new rule, both as proposed and adopted, 
says that if the seller's volume of deposits declines between the 
seller's report-date and the date of the deposit-transfer transaction, 
the buyer's next payment will be based on the seller's lower 
transaction-date deposits, not on the seller's report-date deposits.
    The same commenter also suggested that, if the seller were a 
troubled institution, the buyer's assessment liability would ordinarily 
be taken into account in the course of the negotiations surrounding the 
acquisition. The FDIC believes that this point is well taken, and has 
incorporated it into the final rule. Under the proposal, the 
assessment-base adjustment provisions would not come into play if the 
seller is a failed institution; under the final rule these provisions 
would also not be triggered if the FDIC contributes its own resources 
to induce the buyer to assume the seller's liabilities. The FDIC 
considers that, in such cases, the net price paid by the buyer 
implicitly includes compensation to the FDIC for accepting, in its 
corporate capacity, the insurance risk with respect to the deposits 
assumed by the buyer.
    Somewhat contradictorily, however, the same commenter continued as 
follows:

    If, on the other hand, an institution acquires the deposits of 
an independent, unaffiliated institution that fails during the same 
quarter, but after the deposit transfer, the institution acquiring 
the deposits should not be liable for the increase in the deposits 
at the next assessment payment date. Rather, the acquired deposits 
should be reflected in the aquirer's [sic] next quarterly report of 
condition, the same as internal deposit growth would be treated. The 
FDIC should be responsible for collecting the assessments due from 
failed institutions via a claim on the receivership.

The FDIC does not agree. For the reasons given above, the FDIC 
considers that, when the seller goes out of business (or otherwise 
ceases to be obliged to pay assessments) prior to the end of the 
semiannual period, the buyer's payment should reflect the risk 
presented by the transferred deposits.
    No comments were received on the proposed elimination of the final 
certified statement. These provisions are adopted as proposed.

C. Other Changes to the Proposed Rule

    In addition to the change already referred to regarding troubled 
institutions, the final rule modifies the proposed rule in minor 
respects. The proposed rule said that the seller's March (or September) 
assessment base would be reduced in amounts corresponding to the amount 
by which the buyers' assessment bases were increased. The final rule 
eliminates this provision. There is no need for it: A seller is not 
required to make an assessment payment based on its March or September 
report of condition (and if a seller does so anyway, the buyer is given 
credit for the payment). The final rule also eliminates an improper 
reference, and renumbers certain paragraphs.
    The final rule clarifies and simplifies the terminology that was 
originally used in the proposed rule. The final rule makes it clear 
that the term ``deposit-transfer transaction'' refers to any deposit-
transfer that occurs during a semiannual assessment period if the 
seller goes out of business (or otherwise ceases to be obligated to pay 
assessments) by the end of that assessment period. The final rule does 
not use or define the term ``transfer period''.
    The final rule also clarifies the intent of the proposed rule, 
which spoke of applying the special rules when the seller's ``status as 
an insured institution has terminated or is expected to terminate''. A 
seller that transfers some of its deposits and then voluntarily 
terminates its insurance may still remain in business, however, and may 
still be obliged to pay assessments to the FDIC for some period after 
termination. The FDIC considers that in such a case the seller's 
regular June 30 (or December 30) payment will compensate the FDIC for 
the risk presented by the transferred deposits during the following 
semiannual period. Accordingly, the final rule specifies that 
Sec. 327.6(a)'s special rules come into play when the seller goes out 
of business, or otherwise ceases to be obliged to pay subsequent 
assessments.

III. Deletion of References to Experience Factors

    The FDIC's assessment regulations currently permit the use of 
``experience factors'' in the computation of an institution's 
assessment base, for the purpose of quantifying unposted debits and 
credits. However, under the existing regulations, the use of experience 
factors will no longer be permitted for assessments due for assessment 
periods beginning after 1994. Accordingly, the FDIC proposed to delete 
all references to experience factors from the regulations. No comments 
were received on the proposal, and the Board is amending the 
regulations to delete experience factors.

IV. Paperwork Reduction Act

    The final rule contains a revision to an existing collection of 
information. The revision has been reviewed and approved by the Office 
of Management and Budget (OMB) in accordance with the requirements of 
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) Comments 
regarding the accuracy of the burden estimate, and suggestions for 
reducing the burden, should be addressed to the Office of Management 
and Budget, Paperwork Reduction Project (3064-0057), Washington, D.C. 
20503, with copies to Steven F. Hanft, Assistant Executive Secretary 
(Administration), Federal Deposit Insurance Corporation, Room F-400, 
550 17th St, NW, Washington, D.C. 20429.
    At present, each insured depository institution is required to 
compute its own semiannual assessment. Under the final rule, 
assessments will be computed by the FDIC using information reported by 
the institution in its quarterly reports of condition. The institution 
will be required to certify its agreement with the computation shown on 
the certified statement form as received from the FDIC or, 
alternatively, its agreement with that computation as amended in a 
manner specified by the institution. It is expected that, prior to 
certification, an institution will compare the information on the form 
with its own records--which it collects and maintains for purposes of 
filing its reports of condition--and, if necessary, indicate any 
amendments. This process should constitute a substantially smaller 
burden for the institution than preparing and reporting its own 
assessment computation. The requirements concerning the certified 
statement are found in Sec. 327.2 of the final rule.
    The annual reporting burden for the collection of information under 
the final rule, as approved by OMB on August 12, 1994, is estimated as 
follows:

Approximate number of respondents: 13,400
Number of responses per respondent: 2
Total approximate annual responses: 26,800
Average time per response: 30 minutes
Total average annual burden hours: 13,400

V. Regulatory Flexibility Act

    The Board hereby certifies that the final rule 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.).
    Under the rule, as adopted, the FDIC will compute the assessment 
payments due from each insured depository institution, a task currently 
required of the institution. Thus, the rule would reduce an existing 
burden. Moreover, to the extent any burden would remain, the FDIC 
believes that it would be proportionate to the size of the institution 
and, accordingly, that the proposal would not have a disparate impact 
of the nature contemplated by the Regulatory Flexibility Act.

List of Subjects

12 CFR Part 304

    Bank deposit insurance, Banks, banking, Freedom of information, 
Reporting and recordkeeping requirements.

12 CFR Part 327

    Assessments, Bank deposit insurance, Financing Corporation, Savings 
associations.

    For the reasons stated in the preamble, the Board amends 12 CFR 
parts 304 and 327 as follows:

PART 304--FORMS, INSTRUCTIONS AND REPORTS

    1. The authority citation for part 304 continues to read as 
follows:

    Authority: 5 U.S.C. 552; 12 U.S.C. 1817, 1818, 1819, 1820; 
Public Law 102-242, 105 Stat. 2251 (12 U.S.C. 1817 note).

    2. Section 304.3 is revised to read as follows:


Sec. 304.3  Certified statements.

    The certified statements required to be filed by insured depository 
institutions under the provisions of section 7 of the Federal Deposit 
Insurance Act as amended (12 U.S.C. 1817) shall be filed in accordance 
with part 327 of this chapter. The applicable forms are as follows:
    (a) Form 6420/07: Certified Statement. Form 6420/07 shows the 
computation of the semiannual assessment due to the Corporation from an 
insured depository institution. As provided for in part 327 of this 
chapter, the form will be furnished to insured depository institutions 
by the Corporation twice each calendar year and the completed statement 
must be returned to the Corporation by each institution, except that 
newly insured institutions must submit their first certified statement 
on Form 6420/10.
    (b) Form 6420/10: First Certified Statement. Form 6420/10 shows the 
computation of the semiannual assessment due to the Corporation from an 
institution in the first semiannual period after the semiannual period 
during which the institution becomes an insured depository institution, 
as provided for in part 327 of this chapter.

Appendix A to Part 304--[Amended]

    3. Appendix A to part 304 is amended by removing the entries for 
FDIC 6400/01, Consolidated Statement Amending Certified Statements, and 
FDIC 6420/11, Final Certified Statement.

PART 327--ASSESSMENTS

    1. The table of contents for part 327 is revised to read as 
follows:

Subpart A--In General

Sec.
327.1  Purpose and scope.
327.2  Certified statements.
327.3  Payment of semiannual assessments.
327.4  Annual assessment rate.
327.5  Assessment base.
327.6  Deposit-transfer transactions; other terminations of 
insurance.
327.7  Payment of interest on assessment underpayments and 
overpayments.
327.8  Definitions.
327.9  Assessment rate schedules.
Subpart B--Insured Depository Institutions Participating in Section 
5(d)(3) Transactions
327.31  Scope.
327.32  Computation and payment of assessment.

    2. The authority citation for part 327 continues to read as 
follows:

    Authority: 12 U.S.C. 1441, 1441b, 1817-1819.

    3. Section 327.2 is revised to read as follows:


Sec. 327.2  Certified statements.

    (a) Required. Each insured depository institution shall file a 
certified statement during each semiannual period.
    (b) Time of filing. Certified statements for any semiannual period 
must be filed no later than the second-quarterly payment date specified 
in Sec. 327.3(d)(2). Certified statements postmarked on or before such 
date are deemed to be timely filed.
    (c) Form. The Corporation will provide to each insured depository 
institution a certified statement form showing the amount and 
computation of the institution's semiannual assessment. The president 
of the insured depository institution, or such other officer as the 
institution's board of directors or trustees may designate, shall 
review the information shown on the form.
    (d) Certification--(1) Form accepted. If such officer agrees that 
to the best of his or her knowledge and belief the information shown on 
the certified statement form is true, correct and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued thereunder, the officer shall so certify.
    (2) Form amended--(i) In general. If such officer determines that 
to the best of his or her knowledge and belief the information shown on 
the certified statement form is not true, correct and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued thereunder, the officer shall make such amendments to the 
information as he or she believes necessary. The officer shall certify 
that to the best of his or her knowledge and belief the information 
shown on the form, as so amended, is true, correct and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued thereunder.
    (ii) Request for revision. The certification and filing of an 
amended form under paragraph (d)(2) of this section does not constitute 
a request for revision by the Corporation of the information shown on 
the form. Any such request to the Corporation for revision of the 
information shown on the form shall be submitted separately from the 
certified statement and in accordance with the provisions of 
Sec. 327.3(h).
    (iii) Rate multiplier. The rate multiplier shown on the certified 
statement form shall be amended only if it is inconsistent with the 
assessment risk classification assigned to the institution in writing 
by the Corporation for the current semiannual period pursuant to 
Sec. 327.4(a). Agreement with the rate multiplier shall not be deemed 
to constitute agreement with the assessment risk classification 
assigned.


Sec. 327.5  [Removed]

    4. Section 327.5 is removed.


Secs. 327.3 and 327.4  [Redesignated as Secs. 327.4 and 327.5]

    5. Sections 327.3 and 327.4 are redesignated as Secs. 327.4 and 
327.5, respectively, and a new Sec. 327.3 is added to read as follows:


Sec. 327.3  Payment of semiannual assessments.

    (a) Required--(1) In general. Except as provided in paragraph (b) 
of this section, each insured depository institution shall pay to the 
Corporation, in two quarterly payments, a semiannual assessment 
determined in accordance with this part 327.
    (2) Notice of designated deposit account. For the purpose of making 
such payments, each insured depository institution shall designate a 
deposit account for direct debit by the Corporation. No later than 30 
days prior to the next payment date specified in paragraphs (c)(2) and 
(d)(2) of this section, each institution shall provide written notice 
to the Corporation of the account designated, including all information 
and authorizations needed by the Corporation for direct debit of the 
account. After the initial notice of the designated account, no further 
notice is required unless the institution designates a different 
account for assessment debit by the Corporation, in which case the 
requirements of the preceding sentence apply.
    (b) Newly insured institutions. A newly insured institution shall 
not be required to pay an assessment for the semiannual period during 
which it becomes an insured institution. For the semiannual period 
following the period during which it becomes an insured institution, it 
shall pay its full semiannual assessment at the time and in the manner 
provided for in paragraph (d) of this section, in an amount that is the 
product of its assessment base for the prior semiannual period, as 
provided for in Sec. 327.5(c), multiplied by one-half of the annual 
assessment rate corresponding to the assessment risk classification 
assigned to the institution pursuant to Sec. 327.4(a). For the purpose 
of making such payment, the institution shall provide to the 
Corporation no later than the payment date specified in paragraph 
(d)(2) of this section the notice required by paragraph (a)(2) of this 
section.
    (c) First-quarterly payment--(1) Invoice. No later than 30 days 
prior to the payment date specified in paragraph (c)(2) of this 
section, the Corporation will provide to each insured depository 
institution an invoice showing the amount of the assessment payment due 
from the institution for the first quarter of the upcoming semiannual 
period, and the computation of that amount. Subject to paragraph (g) of 
this section and to subpart B of this part, the invoiced amount shall 
be the product of the following: The assessment base of the institution 
for the preceding September 30 (for the semiannual period beginning 
January 1) or March 31 (for the semiannual period beginning July 1) 
computed in accordance with Sec. 327.5; multiplied by one-quarter of 
the annual assessment rate corresponding to the assessment risk 
classification assigned to the institution pursuant to Sec. 327.4(a).
    (2) Payment date and manner. On December 30 (for the semiannual 
period beginning the following January 1) and on June 30 (for the 
semiannual period beginning the following July 1), the Corporation will 
cause the amount stated in the applicable invoice to be directly 
debited from the deposit account designated by the insured depository 
institution for that purpose.
    (d) Second-quarterly payment--(1) Invoice. No later than 30 days 
prior to the payment date specified in paragraph (d)(2) of this 
section, the Corporation will provide to each insured depository 
institution an invoice showing the amount of the assessment payment due 
from the institution for the second quarter of that semiannual period, 
and the computation of that amount. Subject to paragraph (g) of this 
section and to subpart B of this part, the invoiced amount shall be the 
product of the following: The assessment base of the institution for 
the preceding December 31 (for the semiannual period beginning January 
1) or June 30 (for the semiannual period beginning July 1) computed in 
accordance with Sec. 327.5; multiplied by one-quarter of the annual 
assessment rate corresponding to the assessment risk classification 
assigned to the institution pursuant to Sec. 327.4(a).
    (2) Payment date and manner. On March 30 (for the semiannual period 
beginning the preceding January 1) and on September 30 (for the 
semiannual period beginning the preceding July 1), the Corporation will 
cause the amount stated in the applicable invoice to be directly 
debited from the deposit account designated by the insured depository 
institution for that purpose.
    (e) Necessary action, sufficient funding by institution. Each 
insured depository institution shall take all actions necessary to 
allow the Corporation to debit assessments from the institution's 
designated deposit account and, prior to each payment date indicated in 
paragraphs (c)(2) and (d)(2) of this section, shall ensure that funds 
in an amount at least equal to the invoiced amount are available in the 
designated account for direct debit by the Corporation. Failure to take 
any such action or to provide such funding of the account shall be 
deemed to constitute nonpayment of the assessment.
    (f) Business days. If a payment date specified in paragraph (c) or 
(d) of this section falls on a day that is not a business day, the 
applicable date shall be the previous business day.
    (g) Payment adjustments in succeeding quarters. The quarterly 
assessment invoices provided by the Corporation may reflect 
adjustments, initiated by the Corporation or an institution, resulting 
from such factors as amendments to prior quarterly reports of 
condition, retroactive revision of the institution's assessment risk 
classification, and revision of the Corporation's assessment 
computations for prior quarters.
    (h) Request for revision of computation of quarterly assessment 
payment--(1) In general. An institution may submit a request for 
revision of the computation of the institution's quarterly assessment 
payment as shown on the quarterly invoice. Such revision may be 
requested in the following circumstances:
    (i) The institution disagrees with the computation of the 
assessment base as stated on the invoice;
    (ii) The institution determines that the rate multiplier applied by 
the Corporation is inconsistent with the assessment risk classification 
assigned to the institution in writing by the Corporation for the 
semiannual period for which the payment is due; or
    (iii) The institution believes that the invoice does not fully or 
accurately reflect adjustments provided for in paragraph (g) of this 
section.
    (2) Inapplicability. This paragraph (h) is not applicable to 
requests for review of an institution's assessment risk classification, 
which are covered by Sec. 327.4(d).
    (3) Requirements. Any such request for revision must be submitted 
within 60 days of the date of the quarterly assessment invoice for 
which revision is requested, except that requests for revision 
resulting from detection by the institution of an error or omission for 
which the institution files an amendment to its quarterly report of 
condition must be submitted within 60 days of the filing date of the 
amendment to the quarterly report of condition. The request for 
revision shall be submitted to the Chief of the Assessment Operations 
Section and shall provide documentation sufficient to support the 
revision sought by the institution. If additional information is 
requested by the Corporation, such information shall be provided by the 
institution within 21 days of the date of the Corporation's request for 
additional information. Any institution submitting a timely request for 
revision will receive written response from the Corporations's Chief 
Financial Officer (or his or her designee) within 60 days of receipt by 
the Corporation of the request for revision or, if additional 
information has been requested by the Corporation, within 60 days of 
receipt of the additional information. Whenever feasible, the response 
will notify the institution of the determination of the Chief Financial 
Officer (or designee) as to whether the requested revision is 
warranted. In all instances in which a timely request for revision is 
submitted, the Chief Financial Officer (or designee) will make a 
determination on the request as promptly as possible and notify the 
institution in writing of the determination.
    (i) Assessment notice not received. Any institution that has not 
received an assessment invoice for any quarterly payment by the 
fifteenth day of the month in which the quarterly payment is due shall 
promptly notify the Corporation. Failure to provide prompt notice to 
the Corporation shall not affect the institution's obligation to make 
full and timely assessment payment. Unless otherwise directed by the 
Corporation, the institution shall preliminarily pay the amount shown 
on its assessment invoice for the preceding quarter, subject to 
subsequent correction.
    6. Newly designated Sec. 327.4 is revised to read as follows:


Sec. 327.4  Annual assessment rate.

    (a) Assessment risk classification. For the purpose of determining 
the annual assessment rate for BIF members under Sec. 327.9(a) and the 
annual assessment rate for SAIF members under Sec. 327.9(c), each 
insured depository institution will be assigned an ``assessment risk 
classification''. Notice of the assessment risk classification 
applicable to a particular semiannual period will be provided to the 
institution with the first-quarterly invoice provided pursuant to 
Sec. 327.3(c)(1). Each institution's assessment risk classification, 
which will be composed of a group and a subgroup assignment, will be 
based on the following capital and supervisory factors:
    (1) Capital factors. Institutions will be assigned to one of the 
following three capital groups on the basis of data reported in the 
institution's Report of Income and Condition, Report of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks, or Thrift 
Financial Report containing the necessary capital data, for the report 
date that is closest to the last day of the seventh month preceding the 
current semiannual period.
    (i) Well capitalized. For assessment risk classification purposes, 
the short-form designation for this group is ``1''.
    (A) Except as provided in paragraph (a)(1)(i)(B) of this section, 
this group consists of institutions satisfying each of the following 
capital ratio standards: Total risk-based ratio, 10.0 percent or 
greater; Tier 1 risk-based ratio, 6.0 percent or greater; and Tier 1 
leverage ratio, 5.0 percent or greater. New insured depository 
institutions coming into existence after the report date specified in 
paragraph (a)(1) of this section will be included in this group for the 
first semiannual period for which they are required to pay assessments.
    (B) For purposes of assessment risk classification, an insured 
branch of a foreign bank will be deemed to be ``well capitalized'' if 
the insured branch:
    (1) Maintains the pledge of assets required under 12 CFR 346.19; 
and
    (2) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
108 percent or more of the average book value of the insured branch's 
third-party liabilities for the quarter ending on the report date 
specified in paragraph (a)(1) of this section.
    (ii) Adequately capitalized. For assessment risk classification 
purposes, the short-form designation for this group is ``2''.
    (A) Except as provided in paragraph (a)(1)(ii)(B) of this section, 
this group consists of institutions that do not satisfy the standards 
of ``well capitalized'' under this paragraph but which satisfy each of 
the following capital ratio standards: Total risk-based ratio, 8.0 
percent or greater; Tier 1 risk-based ratio, 4.0 percent or greater; 
and Tier 1 leverage ratio, 4.0 percent or greater.
    (B) For purposes of assessment risk classification, an insured 
branch of a foreign bank will be deemed to be ``adequately 
capitalized'' if the insured branch:
    (1) Maintains the pledge of assets required under 12 CFR 346.19;
    (2) Maintains the eligible assets prescribed under 12 CFR 346.20 at 
106 percent or more of the average book value of the insured branch's 
third-party liabilities for the quarter ending on the report date 
specified in paragraph (a)(1) of this section; and
    (3) Does not meet the definition of a well capitalized insured 
branch of a foreign bank.
    (iii) Undercapitalized. For assessment risk classification 
purposes, the short-form designation for this group is ``3''. This 
group consists of institutions that do not qualify as either ``well 
capitalized'' or ``adequately capitalized'' under paragraphs (a)(1) (i) 
and (ii) of this section.
    (2) Supervisory risk factors. Within its capital group, each 
institution will be assigned to one of three subgroups based on the 
Corporation's consideration of supervisory evaluations provided by the 
institution's primary federal regulator. The supervisory evaluations 
include the results of examination findings by the primary federal 
regulator, as well as other information the primary federal regulator 
determines to be relevant. In addition, the Corporation will take into 
consideration such other information (such as state examination 
findings, if appropriate) as it determines to be relevant to the 
institution's financial condition and the risk posed to the BIF or 
SAIF. Authority to set dates applicable to the determination of 
supervisory subgroup assignments is delegated to the Corporation's 
Director of the Division of Supervision (or his or her designee). The 
three supervisory subgroups are:
    (i) Subgroup ``A''. This subgroup consists of financially sound 
institutions with only a few minor weaknesses;
    (ii) Subgroup ``B''. This subgroup consists of institutions that 
demonstrate weaknesses which, if not corrected, could result in 
significant deterioration of the institution and increased risk of loss 
to the BIF or SAIF; and
    (iii) Subgroup ``C''. This subgroup consists of institutions that 
pose a substantial probability of loss to the BIF or SAIF unless 
effective corrective action is taken.
    (b) Payment of assessment at rate assigned. Institutions shall make 
timely payment of assessments based on the assessment risk 
classification assigned in the notice provided to the institution 
pursuant to paragraph (a) of this section. Timely payment is required 
notwithstanding any request for review filed pursuant to paragraph (d) 
of this section. An institution for which the assessment risk 
classification cannot be determined prior to an invoice date specified 
in Sec. 327.3(c)(1) or (d)(1) shall preliminarily pay on that invoice 
at the assessment rate applicable to the classification designated 
``2A'' in the appropriate rate schedule set forth in Sec. 327.9. If 
such institution is subsequently assigned for that semiannual period an 
assessment risk classification other than that designated as ``2A'', or 
if the classification assigned to an institution in the notice is 
subsequently changed, any excess assessment paid by the institution 
will be credited by the Corporation, with interest, and any additional 
assessment owed shall be paid by the institution, with interest, in the 
next quarterly assessment payment after such subsequent assignment or 
change. Interest payable under this paragraph shall be determined in 
accordance with Sec. 327.7.
    (c) Classification for certain types of institutions. The annual 
assessment rate applicable to institutions that are bridge banks under 
12 U.S.C. 1821(n) and to institutions for which either the Corporation 
or the Resolution Trust Corporation has been appointed conservator 
shall in all cases be the rate applicable to the classification 
designated as ``2A'' in the schedules set forth in Secs. 327.9(a) and 
327.9(c).
    (d) Requests for review. An institution may submit a written 
request for review of its assessment risk classification. Any such 
request must be submitted within 30 days of the date of the assessment 
risk classification notice provided by the Corporation pursuant to 
paragraph (a) of this section. The request shall be submitted to the 
Corporation's Director of the Division of Supervision in Washington, 
DC, and shall include documentation sufficient to support the 
reclassification sought by the institution. If additional information 
is requested by the Corporation, such information shall be provided by 
the institution within 21 days of the date of the request for the 
additional information. Any institution submitting a timely request for 
review will receive written notice from the Corporation regarding the 
outcome of its request. Upon completion of a review, the Director of 
the Division of Supervision (or his or her designee) shall promptly 
notify the institution in writing of the FDIC's determination of 
whether reclassification is warranted. Notice of the procedures 
applicable to reviews will be included with the assessment risk 
classification notice to be provided pursuant to paragraph (a) of this 
section.
    (e) Disclosure restrictions. The supervisory subgroup to which an 
institution is assigned by the Corporation pursuant to paragraph (a) of 
this section is deemed to be exempt information within the scope of 
Sec. 309.5(c)(8) of this chapter and, accordingly, is governed by the 
disclosure restrictions set out at Sec. 309.6 of this chapter.
    (f) Limited use of assessment risk classification. The assignment 
of a particular assessment risk classification to a depository 
institution under this part 327 is for purposes of implementing and 
operating a risk-based assessment system. Unless permitted by the 
Corporation or otherwise required by law, no institution may state in 
any advertisement or promotional material the assessment risk 
classification assigned to it pursuant to this part.
    (g) Lifeline accounts. Notwithstanding any other provision of this 
part 327, the portion of an institution's assessment base that is 
attributable to deposits in lifeline accounts pursuant to the Bank 
Enterprise Act, 12 U.S.C. 1834, will be assessed at such rate as may be 
established by the Corporation pursuant to 12 U.S.C. 1834 and section 
7(b)(2)(H) of the Federal Deposit Insurance Act, as amended, 12 U.S.C. 
1817(b)(2)(H).
    7. Newly designated Sec. 327.5 is revised to read as follows:


Sec. 327.5  Assessment base.

    (a) Computation of assessment base. Except as provided in paragraph 
(c) of this section, the assessment base of an insured depository 
institution for any date on which the institution is required to file a 
quarterly report of condition shall be computed by:
    (1) Adding--
    (i) All demand deposits--
    (A) That the institution reported as such in the quarterly report 
of condition for that date;
    (B) That belong to subsidiaries of the institution and were 
eliminated in consolidation;
    (C) That are held in any insured branches of the institution that 
are located in the territories and possessions of the United States;
    (D) That represent any uninvested trust funds required to be 
separately stated in the quarterly report for that date;
    (E) That represent any unposted credits to demand deposits, as 
determined in accordance with the provisions of paragraph (b)(1) of 
this section; and
    (ii) All time and savings deposits, together with all interest 
accrued and unpaid thereon--
    (A) That the institution reported as such in the quarterly report 
of condition for that date;
    (B) That belong to subsidiaries of the institution and were 
eliminated in consolidation;
    (C) That are held in any insured branches of the institution that 
are located in the territories and possessions of the United States;
    (D) That represent any unposted credits to time and savings 
deposits, as determined in accordance with the provisions of paragraph 
(b)(1) of this section; then
    (2) Subtracting, in the case of any institution that maintains such 
records as will readily permit verification of the correctness of its 
assessment base--
    (i) Any unposted debits;
    (ii) Any pass-through reserve balances;
    (iii) 16\2/3\ percent of the amount computed by subtracting, from 
the amount specified in paragraph (a)(1)(i) of this section, the sum 
of:
    (A) Unposted debits allocated to demand deposits pursuant to the 
provisions of paragraph (b)(2) of this section; plus
    (B) Pass-through reserve balances representing demand deposits;
    (iv) 1 percent of the amount computed by subtracting, from the 
amount specified in paragraph (a)(1)(ii) of this section, the sum of:
    (A) Unposted debits allocated to time and savings deposits pursuant 
to the provisions of paragraph (b)(2) of this section; plus
    (B) Pass-through reserve balances representing time and savings 
deposits;
    (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)).
    (b) Methods of reporting unposted credits and unposted debits--(1) 
Unposted credits. Each insured depository institution shall report 
unposted credits in quarterly reports of condition for addition to the 
assessment base in the following manner:
    (i) If the institution's records show the total actual amount of 
unposted credits segregated into demand deposits and time and savings 
deposits, the institution must report the segregated amounts for 
addition to demand deposits and time and savings deposits, 
respectively.
    (ii) If the institution's records show the total actual amount of 
unposted credits but do not segregate the amount as stated in paragraph 
(b)(1)(i) of this section, the institution must report the total actual 
amount of the unposted credits for addition to time and savings 
deposits.
    (2) Unposted debits. Unposted debits may be reported in the same 
manner as stated in paragraph (b)(1) of this section for deduction from 
the assessment base, except that unsegregated amounts may be reported 
for deduction only from demand deposits.
    (c) Newly insured institutions. In the case of a newly insured 
institution, the assessment base for the last date for which insured 
depository institutions are required to file quarterly reports of 
condition within the semiannual period in which the newly insured 
institution became an insured institution shall be deemed to be its 
assessment base for that semiannual period. If the institution has not 
filed such a report by the due date for such reports from insured 
depository institutions, it shall promptly provide to the Corporation 
such information as the Corporation may require to prepare the 
certified statement form for the institution for the current semiannual 
period.
    8. Section 327.6 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec. 327.6  Deposit-transfer transactions; other terminations of 
insurance.

    (a) Deposit transfers--(1) Assessment base computation. If a 
deposit-transfer transaction occurs at any time in the second half of a 
semiannual period, each acquiring institution's assessment base (as 
computed pursuant to Sec. 327.5) for the first half of that semiannual 
period shall be increased by an amount equal to such institution's pro 
rata share of the transferring institution's assessment base for such 
first half.
    (2) Pro rata share. For purposes of paragraph (a)(1) of this 
section, the phrase pro rata share means a fraction the numerator of 
which is the deposits assumed by the acquiring institution from the 
transferring institution during the second half of the semiannual 
period during which the deposit-transfer transaction occurs, and the 
denominator of which is the total deposits of the transferring 
institution as required to be reported in the quarterly report of 
condition for the first half of that semiannual period.
    (3) Other assessment-base adjustments. The Corporation may in its 
discretion make such adjustments to the assessment base of an 
institution participating in a deposit-transfer transaction, or in a 
related transaction, as may be necessary properly to reflect the likely 
amount of the loss presented by the institution to its insurance fund.
    (4) Limitation on aggregate adjustments. The total amount by which 
the Corporation may increase the assessment bases of acquiring or other 
institutions under this paragraph (a) shall not exceed, in the 
aggregate, the transferring institution's assessment base as reported 
in its quarterly report of condition for the first half of the 
semiannual period during which the deposit-transfer transaction occurs.
* * * * *
    9. Section 327.7 is amended by revising the section heading and 
paragraph (a), to read as follows:


Sec. 327.7  Payment of interest on assessment underpayments and 
overpayments.

    (a) Payment of interest--(1) Payment by institutions. Each insured 
depository institution shall pay interest to the Corporation on any 
underpayment of the institution's assessment.
    (2) Payment by Corporation. The Corporation will pay interest to an 
insured depository institution on any overpayment by the institution of 
its assessment.
    (3) Accrual of interest. Interest shall accrue under this section 
from the day following the due date, as provided for in Sec. 327.3 (c) 
and (d), of the quarterly assessment amount that was overpaid or 
underpaid, through the payment date applicable to the quarterly 
assessment invoice on which adjustment is made by the Corporation for 
the underpayment or overpayment, provided, however, that interest shall 
not begin to accrue on any overpayment until the day following the date 
such overpayment was received by the Corporation.
* * * * *
    10. Section 327.8 is amended by revising paragraph (d)(2) and by 
adding a new paragraph (h), to read as follows:


Sec. 327.8  Definitions.

* * * * *
    (d) * * *
    (2) Current semiannual period. The term current semiannual period 
means, with respect to a certified statement or an assessment, the 
semiannual period within which such certified statement is required to 
be filed or for which such assessment is required to be paid.
* * * * *
    (h) As used in Sec. 327.6, the following terms are given the 
following meanings:
    (1) Acquiring institution. The term acquiring institution means an 
insured depository institution that assumes some or all of the deposits 
of another insured depository institution in a deposit-transfer 
transaction.
    (2) Transferring institution. The term transferring institution 
means an insured depository institution some or all of the deposits of 
which are assumed by another insured depository institution in a 
deposit-transfer transaction.
    (3) Deposit-transfer transaction. The term deposit-transfer 
transaction means the assumption by one insured depository institution 
of another insured depository institution's liability for deposits, 
whether by way of merger, consolidation, or other statutory assumption, 
or pursuant to contract, when the transferring institution goes out of 
business or otherwise ceases to be obliged to pay subsequent 
assessments by or at the end of the semiannual period during which such 
assumption of liability for deposits occurs. The term deposit-transfer 
transaction does not refer to the assumption of liability for deposits 
from the estate of a failed institution, or to a transaction in which 
the FDIC contributes its own resources in order to induce an acquiring 
institution to assume liabilities of a transferring institution.
    (4) First half; second half--(i) First half. The term first half of 
a semiannual period means the months of January, February, and March in 
the case of a semiannual period that begins in January, and means the 
months of July, August, and September in the case of a semiannual 
period that begins in July.
    (ii) Second half. The term second half of a semiannual period means 
the months of April, May, and June in the case of a semiannual period 
that begins in January, and means the months of October, November, and 
December in the case of a semiannual period that begins in July.


Sec. 327.13  [Redesignated as Sec. 327.9]

    11. Section 327.13 is redesignated as Sec. 327.9, transferred to 
subpart A, and amended by revising the section heading, removing 
paragraphs (a) and (b), redesignating paragraphs (c) and (d) as new 
paragraphs (a) and (b), respectively, revising newly designated 
paragraph (a), amending newly designated paragraph (b) by revising the 
paragraph heading to read ``BIF recapitalization schedule'' and 
removing the word ``assessment'' in the first sentence, and adding a 
new paragraph (c) to read as follows:


Sec. 327.9  Assessment rate schedules.

    (a) BIF members. Subject to Sec. 327.4(c), the annual assessment 
rate for each BIF member other than a bank specified in Sec. 327.31(a) 
shall be the rate designated in the following rate schedule applicable 
to the assessment risk classification assigned by the Corporation under 
Sec. 327.4(a) to that BIF member (the schedule utilizes the group and 
subgroup designations specified in Sec. 327.4(a)):

                                Schedule                                
------------------------------------------------------------------------
                                                  Supervisory subgroup  
                Capital group                 --------------------------
                                                  A        B        C   
------------------------------------------------------------------------
1............................................       23       26       29
2............................................       26       29       30
3............................................       29       30       31
------------------------------------------------------------------------

* * * * *
    (c) SAIF members. (1) Subject to Sec. 327.4(c), the annual 
assessment rate for each SAIF member shall be the rate designated in 
the following schedule applicable to the assessment risk classification 
assigned by the Corporation under Sec. 327.4(a) to that SAIF member 
(the schedule utilizes the group and subgroup designations specified in 
Sec. 327.4(a)):

                                Schedule                                
------------------------------------------------------------------------
                                                  Supervisory subgroup  
                Capital group                 --------------------------
                                                  A        B        C   
------------------------------------------------------------------------
1............................................       23       26       29
2............................................       26       29       30
3............................................       29       30       31
------------------------------------------------------------------------

    (2) Collection agent. The amounts required to be paid by SAIF 
members pursuant to this part 327 shall be paid through a collection 
agent, which shall be any person, corporation, governmental entity, or 
any other entity that has been authorized by the Corporation to act as 
its agent for collecting assessments.
    12. Part 327 is amended by removing subparts B and C and 
redesignating subpart D as new subpart B.


Sec. 327.31  [Amended]

    13. Section 327.31 is amended by removing the reference ``subpart 
D'' and replacing it with ``subpart B'' each place it appears.


Sec. 327.32  [Amended]

    14. Section 327.32 is revised to read as follows:


Sec. 327.32  Computation and payment of assessment.

    (a) Rate of assessment--(1) BIF and SAIF member rates. (i) Except 
as provided in paragraphs (a)(2)(i) and (a)(2)(ii) of this section, and 
consistent with the provisions of Sec. 327.4, the assessment to be paid 
by a BIF member subject to this subpart B shall be computed at the rate 
applicable to BIF members and the assessment to be paid by a SAIF 
member subject to this subpart B shall be computed at the rate 
applicable to SAIF members.
    (ii) Such applicable rate shall be applied to the insured 
depository institution's assessment base less that portion of the 
assessment base which is equal to the institution's adjusted 
attributable deposit amount.
    (2) Rate applicable to the adjusted attributable deposit amount. 
(i) Notwithstanding paragraph (a)(1)(i) of this section, that portion 
of the assessment base of any acquiring, assuming, or resulting 
institution that is a BIF member which is equal to the adjusted 
attributable deposit amount of such institution shall:
    (A) Be subject to assessment at the assessment rate applicable to 
SAIF members pursuant to subpart A of this part; and
    (B) Not be taken into account in computing the amount of any 
assessment to be allocated to BIF.
    (ii) Notwithstanding paragraph (a)(1)(i) of this section, that 
portion of the assessment base of any acquiring, assuming, or resulting 
institution that is a SAIF member which is equal to the adjusted 
attributable deposit amount of such institution shall:
    (A) Be subject to assessment at the assessment rate applicable to 
BIF members pursuant to subpart A of this part; and
    (B) Not be taken into account in computing the amount of any 
assessment to be allocated to SAIF.
    (3) Adjusted attributable deposit amount. An insured depository 
institution's ``adjusted attributable deposit amount'' for any 
semiannual period is equal to the sum of:
    (i) The amount of any deposits acquired by the institution in 
connection with the transaction (as determined at the time of such 
transaction) described in Sec. 327.31(a);
    (ii) The total of the amounts determined under paragraph 
(a)(3)(iii) of this section for semiannual periods preceding the 
semiannual period for which the determination is being made under this 
section; and
    (iii) The amount by which the sum of the amounts described in 
paragraphs (a)(3)(i) and (a)(3)(ii) of this section would have 
increased during the preceding semiannual period (other than any 
semiannual period beginning before the date of such transaction) if 
such increase occurred at a rate equal to the annual rate of growth of 
deposits of the acquiring, assuming, or resulting depository 
institution minus the amount of any deposits acquired through the 
acquisition, in whole or in part, of another insured depository 
institution.
    (4) Deposits acquired by the institution. As used in paragraph 
(a)(3)(i) of this section, the term ``deposits acquired by the 
institution'' means all deposits that are held in the institution 
acquired by such institution on the date of such transaction; provided, 
that if the Corporation or the Resolution Trust Corporation (RTC) has 
been appointed as conservator or receiver for the acquired institution, 
such term:
    (i) Does not include any deposit held in the acquired institution 
on the date of such transaction which the acquired institution has 
obtained, directly or indirectly, by or through any deposit broker;
    (ii) Does not include that part of any remaining deposit held in 
the acquired institution on the date of such transaction that is in 
excess of $80,000; and
    (iii) Is limited to 80 per centum of the remaining portion of the 
aggregate of the deposits specified in paragraph (a)(4)(ii) of this 
section.
    (5) Deposit broker. As used in paragraph (a)(4) of this section, 
the term ``deposit broker'' has the meaning specified in section 29 of 
the Federal Deposit Insurance Act (12 U.S.C. 1831f).
    (b) Procedures for computation and payment. An insured depository 
institution subject to this subpart B shall follow the payment 
procedure that is set forth in subpart A of this part.


Sec. 327.33  [Removed]

    15. Sec. 327.33 is removed.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 20th day of Dec., 1994.

Federal Deposit Insurance Corporation
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 94-31662 Filed 12-28-94; 8:45 am]
BILLING CODE 6714-01-P
Last Updated 07/17/1999 communications@fdic.gov