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Financial Institution Letters


[Federal Register: May 11, 1998 (Volume 63, Number 90)]
[Rules and Regulations]
[Page 25750-25764]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11my98-3]

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB73


Simplification of Deposit Insurance Rules

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is revising its deposit insurance regulations by
adopting three substantive amendments and numerous technical
amendments. The purpose of these amendments is to increase the public's
understanding of the regulations through simplification. The
substantive amendments in the final rule will: Relax the FDIC's
recordkeeping requirements for certain agency or fiduciary accounts;
create a six-month ``grace period'' following the death of a depositor
for the restructuring of accounts; and clarify the insurance coverage
of revocable trust accounts when an account is held by the depositor
pursuant to a formal ``living trust'' agreement.

EFFECTIVE DATE: July 1, 1998.

FOR FURTHER INFORMATION CONTACT: Christopher L. Hencke, Counsel, (202)
898-8839, or Joseph A. DiNuzzo, Senior Counsel, (202) 898-7349, Legal
Division, Federal Deposit Insurance Corporation, 550 17th Street, N.W.,
Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    Simplifying the deposit insurance regulations is one of the FDIC's
corporate operating projects under its Strategic Plan. The purpose is
to promote public understanding of deposit insurance and, particularly,
to clarify and illustrate rules that have been misunderstood. The
public's misunderstanding of certain of the rules has been reflected in
the large volume of letters and phone calls received by the FDIC
concerning deposit insurance. Also, this simplification effort is in
furtherance of section 303(a) of the Riegle Community Development and
Regulatory Improvement Act of 1994, 12 U.S.C. 4803(a), requiring the
federal banking agencies to reduce regulatory burden and improve
efficiency.
    The FDIC's insurance regulations are codified at 12 CFR part 330.
In recent years, the FDIC has revised these regulations twice (not
including a third revision that dealt only with certain disclosure
requirements). In 1980, following the termination of the Federal
Savings and Loan Insurance Corporation (FSLIC), the FDIC issued uniform
regulations applicable to deposits in all insured depository
institutions including those previously insured by the FSLIC. The
issuance of uniform regulations was mandated by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
(Pub. L. 101-73 (1989)). In 1993, the FDIC revised the rules applicable
to the deposits of employee benefit plans and retirement plans. This
revision was mandated by the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) (Pub. L. 102-242 (1991)).
Notwithstanding these relatively recent revisions, the Board of
Directors (Board) believes that the final rule is necessary for the
purpose of simplification.
    All revisions to the insurance regulations must be consistent with
section 11(a) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C.
1821(a). Section 11(a) provides that deposits maintained by a depositor
in the same capacity and the same right at the same insured depository
institution must be aggregated and insured up to $100,000. The FDI Act
does not define ``depositor'', ``capacity'' or ``right''. Through the
insurance regulations, the FDIC has implemented these terms by
recognizing different categories of accounts based on ownership. Each
type of account is entitled to separate insurance up to the $100,000
limit if it satisfies certain requirements. For example, single
ownership accounts owned by a particular depositor are not added to
qualifying joint accounts partly owned by the same depositor.
    The final rule is the product of a process that began in May of
1996. At that time, the FDIC published an Advance Notice of Proposed
Rulemaking (ANPR). See 61 FR 25596 (May 22, 1996). The ANPR was
followed, in May of 1997, by the publication of a proposed rule. See 62
FR 26435 (May 14, 1997). The evolution of the final rule is discussed
in greater detail below.
    The final rule does not complete the FDIC's simplification efforts.
As discussed below, the FDIC is still studying other possible revisions
to its

[[Page 25751]]

insurance regulations pertaining to joint accounts and ``payable-on-
death'' accounts.

II. The Proposed Rule

    Through the ANPR (61 FR 25596), the FDIC broadly solicited comments
on how the insurance regulations could be simplified. Also, the FDIC
sought comments on a number of specific revisions. The comment period
ended on August 20, 1996. Almost all of the comments (sixty-eight in
number) supported the FDIC's simplification efforts.
    The FDIC did not include some of the revisions mentioned in the
ANPR in the proposed rule (62 FR 26435). In particular, the proposed
rule did not include revisions that would: (1) Eliminate the first step
in the two-step process for determining the insurance coverage of joint
accounts under current Sec. 330.7 (new Sec. 330.9); and (2) expand the
list of qualifying beneficiaries for revocable trust accounts under
current Sec. 330.8 (new Sec. 330.10). In publishing the proposed rule,
the FDIC explained that these revisions required additional study.
Before deciding on these revisions, the Board wished to learn more
about the extent to which the revisions would affect the scope of
deposit insurance coverage.
    The proposed rule suggested three substantive revisions to the
insurance regulations: (1) Relaxing the recordkeeping rules for
fiduciary accounts; (2) providing a ``grace period'' following the
death of a depositor; and (3) clarifying the operation of the revocable
trust account rules in cases in which an account is held by a depositor
in connection with a ``living trust.'' Each of these revisions is
discussed in detail below.

A. Recordkeeping Rules for Fiduciary Accounts

    The FDIC's recordkeeping rules are largely premised on the concept
of ``pass-through'' insurance. If an agent on behalf of a principal
deposits funds at an insured depository institution, the FDIC does not
treat the agent as the owner of the deposit for purposes of the
$100,000 insurance limit. Rather, the FDIC insures the funds to the
principal or actual owner. In other words, the insurance coverage
``passes through'' the agent to the owner. See 12 CFR 330.6 (new
330.7).
    The fact that agency accounts are insured on a ``pass-through''
basis does not mean that agency accounts represent a separate category
of ownership or that agency accounts are entitled to insurance up to
$100,000 separate from all other accounts. On the contrary, agency
accounts are subject to aggregation with any other accounts maintained
by or for the principal in the same right and capacity at the same
insured depository institution. For example, funds in an account held
by an agent for a principal, in the principal's single ownership
capacity, will be aggregated with any single ownership accounts held
directly by the principal.
    ``Pass-through'' insurance as described above is subject to an
important qualification. Under section 12(c) of the FDI Act (12 U.S.C.
1822(c)), the FDIC is not required to recognize as the owner of a
deposit any person whose interest is not disclosed on the records of
the failed depository institution. In other words, in the absence of
adequate disclosure, an account held by an agent is not entitled to
``pass-through'' insurance coverage. The FDIC has implemented section
12(c) by establishing certain recordkeeping rules for accounts held by
agents or fiduciaries.
    Under the FDIC's recordkeeping rules, the deposit account records
of the failed depository institution must expressly disclose, by way of
specific references, the existence of any fiduciary relationship
including, but not limited to, relationships involving a trustee,
agent, nominee, guardian, executor or custodian, pursuant to which
funds in an account are deposited and on which a claim for insurance
coverage is based. See 12 CFR 330.4(b)(1) (new 330.5(b)(1)). Assuming
such disclosure, the details of the relationship and the interests of
other parties in the account must be ascertainable either from the
deposit account records of the insured depository institution or from
records maintained, in good faith and in the regular course of
business, by the depositor or by some person or entity that has
undertaken to maintain such records for the depositor. See 12 CFR
330.4(b)(2) (new 330.5(b)(2)).
    The rules quoted above are based upon a basic principle: In paying
insurance, the FDIC is entitled to rely on the account records of the
failed depository institution. If the FDIC, in its sole discretion,
determines that the deposit account records of the insured depository
institution are clear and unambiguous, those records are considered
binding on the depositor, and no other records shall be considered, as
to the manner in which the funds are owned. See 12 CFR 330.4(a)(1). In
other words, under the current regulations, the account records must be
unclear or ambiguous before the FDIC will consider evidence outside of
the account records in determining the ownership of an account.
    The FDIC's strict reliance on the account records serves multiple
purposes. First, it enables the FDIC to estimate the amount of insured
deposits when considering resolution options for a failing insured
depository institution. Speed and accuracy in accounting for the assets
and liabilities of the failing institution are critical when the
institution is resolved through a purchase and assumption agreement
(i.e., a transfer of some assets and liabilities, including the deposit
liabilities, to a healthy depository institution). Second, strict
reliance on the account records enables the FDIC to pay insurance very
quickly following the failure of an institution. If the FDIC could not
rely on the records, depositors would not receive their insurance until
the FDIC had completed a lengthy investigation as to the actual legal
ownership of the accounts. Third, strict reliance on the records
discourages the making of fraudulent claims for insurance. If
depositors were not bound by the account records, some depositors over
the $100,000 limit might be tempted to fabricate outside evidence (such
as agency or trust agreements) as to the actual ownership of their
accounts.
    For the reasons stated above, the insurance regulations
purposefully restrict the FDIC's ability to consider outside evidence
(i.e., evidence outside of the deposit account records) in determining
the ownership of an account for insurance purposes. Again, under the
current or unrevised regulations, outside evidence will not be
considered unless the FDIC determines--in its own discretion--that the
account records are unclear or ambiguous.
    At times, the restrictions on the FDIC's ability to consider
outside evidence has produced results that could be viewed as severe.
At one failed bank, for example, a deposit account was held by a title
company as agent for customers who were buying or selling houses.
Because the bank's deposit account records did not indicate the agency
nature of the account, the funds were deemed to be owned by the title
company and insured to a limit of $100,000. The funds were not insured
up to $100,000 on a ``pass-through'' basis for the interest of each
customer (in aggregation with any other account(s) that each customer
might have held at the same bank). This result was severe because the
name of the agent by itself was suggestive of a possible agency or
fiduciary relationship.
    The proposed rule addressed the problem by adding a provision to
the

[[Page 25752]]

regulations that would relax the FDIC's recordkeeping requirements in
certain situations. Specifically, the proposed rule provided that the
FDIC would be free to consider outside evidence of ownership if the
titling of the deposit account and the underlying deposit account
records sufficiently indicate the existence of a fiduciary
relationship. Examples of accounts covered by the proposed rule would
be accounts in the name of escrow agents or title companies.
    In requesting comments on this part of the proposed rule, the FDIC
also requested comments on the recordkeeping requirements applicable to
accounts held by multiple levels of fiduciaries. See 12 CFR 330.4(b)(3)
(new 330.5(b)(3)). These requirements specify two methods for
disclosing such multi-tiered relationships. Under the second method,
according to the current regulations, the deposit account records must
state that the depositor is acting in a fiduciary capacity on behalf of
certain persons or entities who may, in turn, be acting in a fiduciary
capacity for others. See 12 CFR 330.4(b)(3)(ii)(A). In complying with
this requirement, fiduciaries have opened accounts with awkward and
unwieldy account titles. To alleviate this problem, the FDIC proposed
to require--under the second method--that the account records merely
indicate that there are multiple levels of fiduciary relationships.

B. ``Grace Period'' Following the Death of a Depositor

    The second substantive revision included in the proposed rule was
the creation of a ``grace period'' following the death of a depositor.
Under the deposit contract or applicable state law, the death of a
depositor may result in an immediate and automatic change in ownership
of the deposit account. This is significant for insurance purposes
because deposit insurance is based primarily on legal ownership. Though
ownership under state law is not sufficient for, or decisive in,
determining deposit insurance coverage, the regulations provide that
ownership under state law of deposited funds is a necessary condition
for deposit insurance. See 12 CFR 330.3(h) (new 330.3(h)).
    Under the current regulations, the FDIC presumes--for certain types
of accounts--that the ownership of the account changes immediately upon
the death of a depositor. This presumption is applied to accounts
characterized by survivorship rights, i.e., joint accounts and
revocable trust or ``payable-on-death'' (POD) accounts. For the sake of
uniformity, the FDIC applies this presumption irrespective of the laws
of the state in which the depository institution is located. In some
cases, following the death of a depositor, the presumption will cause a
dramatic decrease in deposit insurance coverage.
    For example, a husband and wife could hold a joint account, a joint
revocable trust (or POD) account for the benefit of their child, and
two individual accounts in their respective names. Assuming the
satisfaction of all applicable requirements, these four accounts could
be insured up to a total of $500,000. Upon the death of either the
husband or wife, however, the surviving spouse would become the sole
owner of the joint account and the joint revocable trust account. Under
the FDIC's established interpretation of the current regulations, the
joint account would be transformed into a single ownership account
subject to aggregation with the surviving spouse's individual account.
(The single ownership account in the name of the deceased spouse would
continue to be insured separately from the other accounts.) Moreover,
the maximum coverage of the joint revocable trust account would be
reduced from $200,000 to $100,000 (i.e., $100,000 for each combination
of settlors and qualifying beneficiaries). In total, the maximum
coverage of the four accounts would be reduced--immediately upon the
death of the husband or wife--from $500,000 to $300,000.
    If the depository institution failed before the surviving spouse
restructured the accounts or transferred funds to another institution,
in the example above, the loss to the surviving spouse could be very
substantial. (For the single ownership account in the name of the
deceased spouse, the insurance money would be paid to the trustee of
the decedent's estate.)
    The interpretation described above has been criticized as
``penalizing'' the survivors of deceased depositors. Some people have
complained that the immediate restructuring of an account upon the
death of a depositor may not be practicable. For example, in order to
restructure an account, the survivor of an accountholder may be
required to present proof of the accountholder's death to the
depository institution. Also, during a time of grief, the survivors may
not view the restructuring of bank accounts as a matter of high
priority.
    Another criticism of the FDIC's interpretation of the current
regulations is that some state laws might not provide for the immediate
change in ownership presumed by the FDIC.
    In response to the criticisms and concerns described above, the
proposed rule created a ``grace period'' of six months following the
death of a depositor. During this ``grace period,'' the insurance
coverage of the decedent's accounts would not change unless the
accounts were restructured by those authorized to take such action.
Because the six-month ``grace period'' was not intended to reduce
coverage, the proposed rule also provided that the ``grace period''
would not be applied if its application would result in a decrease in
deposit insurance coverage.
    The six-month ``grace period'' prescribed by the proposed rule was
consistent with a policy applied by the former FSLIC. The rationale of
that policy was to ``lessen hardship.''
    In publishing the proposed rule, the FDIC specifically requested
comments as to whether six months was the appropriate length of time
for the ``grace period.''

C. The Insurance Coverage of ``Living Trust'' Accounts

    The third substantive revision included in the proposed rule was
the insertion into the regulations of language clarifying the insurance
coverage of accounts held pursuant to ``living trust'' agreements. A
``living trust'' is a formal revocable trust in which the owner retains
control of the trust assets during his or her lifetime. Upon the
owner's death, the trust generally becomes irrevocable.
    As a type of revocable trust account, a ``living trust'' account is
subject to the rules prescribed by Sec. 330.8 (new Sec. 330.10).
Subject to the requirements discussed below, that section of the
regulations provides that funds deposited in a revocable trust account
(also referred to as a ``payable-on-death'' or ``POD'' account or
``Totten trust'' account) shall be insured up to $100,000 for the
prospective interest of each of the owner's designated beneficiaries.
Such insurance is separate from the insurance coverage afforded to any
single ownership accounts held by the owner or beneficiary at the same
insured depository institution. The revocable trust account will not be
entitled to such separate insurance, however, unless the account
satisfies certain requirements. First, each of the designated
beneficiaries must be the owner's spouse, child or grandchild. Second,
the beneficiaries must be specifically named (i.e., named by name) in
the account records of the depository institution. Third, the title of
the account must include a term such as ``in trust for'' or ``payable-
on-death to'' (or any acronym therefor). Fourth, the revocable trust
agreement must provide unequivocally that the funds shall belong to the
designated beneficiaries

[[Page 25753]]

upon the death of the owner. See 12 CFR 330.8(a) (new 330.10(a)).
    In many cases, the trust agreement is simply the signature card for
the account. Generally, in these cases, the fourth requirement above
does not present a problem because the signature card will not include
any conditions upon the interests of the designated beneficiaries. In
other words, the signature card--in simple language--will provide that
the funds shall belong to the beneficiaries upon the death of the
owner. In contrast, most formal ``living trust'' agreements provide
that the funds might belong to the beneficiaries depending upon various
conditions. The FDIC refers to such conditions as ``defeating
contingencies'' if they create the possibility that the beneficiaries
or the estate or heirs of the beneficiaries will never receive the
funds following the death of the owner. In the presence of a
``defeating contingency,'' the revocable trust account will not be
entitled to separate insurance coverage under Sec. 330.8 (new
Sec. 330.10). Rather, the account will be aggregated with any single
ownership accounts held by the owner at the same insured depository
institution.
    The subject of ``defeating contingencies'' is explained at length
in FDIC Advisory Opinion 94-32 (May 18, 1994). That advisory opinion is
entitled ``Guidelines for Insurance Coverage of Revocable Trust
Accounts (Including `Living Trust' Accounts).'' Though this advisory
opinion is available upon request, the FDIC continues to receive
numerous inquiries regarding the insurance coverage of ``living trust''
accounts. Moreover, even people who have read the Guidelines often
remain confused about the coverage of such accounts.
    In response to the public's confusion, the proposed rule inserted
clarifying language into the regulations. Specifically, the proposed
rule stated that the presence of a ``defeating contingency'' in a
``living trust'' agreement would prevent the account from receiving
separate insurance coverage (i.e., separate from any single ownership
accounts held by the owner at the same insured depository institution).

III. The Final Rule

    The FDIC received twenty-six written comments on the proposed rule.
Most of the comments were submitted by depository institutions or their
holding companies. Several comments were submitted by bankers'
associations; several others were submitted by financial services
companies. The FDIC also received a small number of comments from
individuals and one comment from a building company. The comments are
discussed below as they relate to the various components of the final
rule.

A. Recordkeeping Rules for Fiduciary Accounts

    Sixteen commenters addressed the proposed relaxation of the FDIC's
recordkeeping requirements for agency or fiduciary accounts. All of the
commenters expressed support for the proposed rule but some also
expressed reservations. The concern expressed by some commenters was
that the proposed rule might impose additional recordkeeping
obligations or other regulatory burdens on insured depository
institutions. The FDIC does not intend to create any such additional
burdens. The proposed rule was directed at the FDIC itself and not at
depository institutions. As previously explained, the proposed rule
granted greater flexibility to the FDIC in considering outside evidence
(i.e., evidence other than the deposit account records) in determining
the ownership of an account. Specifically, the proposed rule provided
that the FDIC would be free to consider outside evidence if the FDIC
determined, in its sole discretion, that the titling of the account and
the underlying deposit account records sufficiently indicate the
existence of a fiduciary relationship. Examples are accounts in the
names of escrow agents, title companies or entities (or nominees of
such entities) whose primary business is to hold--for safekeeping
reasons--deposits of others.
    The Board has decided to adopt, in the final rule, the proposed
revision to its recordkeeping requirements. As revised, these
requirements will be codified at Sec. 330.5. The revised requirements
will increase the FDIC's ability to pay insurance to the real owners of
some deposits without undercutting the general rule that unambiguous
deposit account records of a failed depository institution are binding
on depositors.
    Also, the final rule includes two revisions to the recordkeeping
requirements applicable to accounts held by multiple levels of
fiduciaries. As revised, these requirements will be codified at
paragraph (b)(3) of Sec. 330.5. First, the FDIC has changed the
regulation to clarify that there are two and not three methods of
satisfying these recordkeeping requirements. Second, in connection with
the second method of satisfying the requirements, the FDIC has removed
the necessity of stating in the account records that the depositor is
acting in a fiduciary capacity on behalf of certain persons or entities
who may, in turn, be acting in a fiduciary capacity for others.
Instead, the deposit account records must expressly indicate that there
are multiple levels of fiduciary relationships. The FDIC has made this
change in recognition of the fact that fiduciaries have been placing
the required information in the titles of deposit accounts. As a result
of this revision, the titles of multi-tiered fiduciary accounts should
be less unwieldy. Several commenters expressed support for this
provision.

B. ``Grace Period'' Following the Death of a Depositor

    Nineteen commenters addressed the proposed creation of a six-month
``grace period'' following the death of a depositor. As previously
explained, this ``grace period'' primarily would affect the insurance
coverage of deposit accounts with survivorship rights (i.e., joint
accounts and revocable trust or ``payable-on-death'' accounts). During
this ``grace period,'' the insurance coverage of such accounts would
not change unless the accounts are restructured by those authorized to
take such action. The FDIC would apply the ``grace period'' only if its
application would increase rather than decrease deposit insurance
coverage.
    Only one commenter opposed the creation of a ``grace period.'' That
commenter stated that deposit insurance should be based on the
ownership of accounts. If ownership changes upon the death of a
depositor, in the opinion of this commenter, the insurance coverage
also should change. Another commenter did not oppose a ``grace period''
but expressed concern that it would create additional recordkeeping
obligations on the depository institution. A third commenter supported
a ``grace period'' but favored a ninety-day period as opposed to a six-
month period. With the exceptions noted above, the commenters supported
the proposed rule.
    The Board has decided to adopt the proposed creation of a six-month
``grace period.'' The rule will be codified at paragraph (j) of
Sec. 330.3. The FDIC believes that the ``grace period'' is consistent
with the general principle that insurance coverage is based on
ownership but also based on the satisfaction of recordkeeping
requirements. Following the death of a depositor, the actual ownership
of an account will not be reflected by the account records unless the
account is restructured. For example, a joint account immediately
following the death of one of two co-owners will

[[Page 25754]]

appear to remain a joint account. By themselves, the account records
will not indicate that the account is a single ownership account until
the account has been restructured by the survivor. The FDIC's strict
reliance on ownership, under these circumstances, contrasts with the
FDIC's general reliance on the account records.
    The FDIC believes that a six-month ``grace period'' will create an
equitable balance between ownership and recordkeeping in cases
involving deceased depositors. Also, the FDIC does not believe that the
``grace period'' will create any recordkeeping burdens on the
depository institution because the ``grace period'' is directed solely
at the FDIC itself and the survivors of deceased depositors. The FDIC
would apply the ``grace period'' only after the depository institution
had failed.
    In the case of a revocable trust account, the ``grace period'' will
be triggered by the death of the owner but not by the death of a
beneficiary. Similarly, in the case of an irrevocable trust account,
the ``grace period'' will be triggered by the death of the legal owner
or settlor but not by the death of a beneficiary. The death of the
settlor may or may not be significant under the terms of the
irrevocable trust agreement.
    Under many ``living trust'' agreements (discussed in greater detail
below), a revocable trust becomes irrevocable upon the death of the
owner. Through the operation of the ``grace period,'' such ``living
trust'' accounts that qualify as revocable trust accounts for insurance
purposes could be insured up to six months as revocable trust
accounts--rather than irrevocable trust accounts--notwithstanding the
death of the owner.
    As mentioned above, only one commenter thought that six months was
not the appropriate length of time for the ``grace period.'' That
commenter favored a period of ninety days. As noted by other
commenters, however, a six-month period is consistent with the six-
month period of ``separate insurance'' following the assumption of the
deposits of one insured depository institution by another insured
depository institution (e.g., a merger). See 12 U.S.C. 1818(q). The
FDIC agrees with the majority of the commenters that a period of six
months is reasonable.

C. The Insurance Coverage of ``Living Trust'' Accounts

    Twelve commenters addressed the proposed insertion into the
regulations of language clarifying the insurance coverage of revocable
trust accounts held pursuant to ``living trust'' agreements. As
previously explained, this language would state expressly that the
presence of a ``defeating contingency'' in the ``living trust''
agreement would prevent the account from receiving separate insurance
coverage (i.e., separate from any single ownership accounts held by the
owner at the same insured depository institution).
    Ten commenters supported the proposed revision as a means of
reducing depositors' confusion regarding the coverage of such accounts.
The other two commenters did not oppose the insertion of clarifying
language into the regulations but urged the FDIC to take stronger
measures. Specifically, they urged the FDIC to abolish the concept of
``defeating contingencies'' altogether so that a ``living trust''
account would be entitled to separate insurance coverage irrespective
of any such contingencies. The approach recommended by these commenters
would represent an abrupt departure from the FDIC's established
interpretation of the regulations. See FDIC Advisory Opinion 94-32 (May
18, 1994), entitled ``Guidelines for Insurance Coverage of Revocable
Trust Accounts (Including `Living Trust' Accounts).'' Though this
approach would remove one source of confusion regarding the operation
of the insurance regulations, the recommended approach could create
other problems. For example, an owner's ``living trust'' agreement with
various contingencies could specify that one qualifying beneficiary
could assume ownership of the trust funds under one set of
circumstances but that two qualifying beneficiaries (or no qualifying
beneficiaries) could assume ownership of the funds under another set of
circumstances. Following the failure of the depository institution, the
FDIC would be faced with the problem of deciding whether the maximum
separate insurance coverage of the account is $100,000 (one qualifying
beneficiary) or $200,000 (two qualifying beneficiaries).
    At this time, the FDIC is not prepared to abandon its long-standing
interpretation of its regulations regarding the insurance coverage of
``living trust'' accounts. As a means of reducing some of the confusion
surrounding these accounts, however, the Board has adopted--in the
final rule--the proposed clarifying language. This language will be
codified at paragraph (f) of Sec. 330.10.

IV. Comments on Other Aspects of the Proposed Rule

    In addition to addressing the three substantive revisions discussed
above, some commenters addressed other aspects of the proposed rule.
For example, several commenters applauded the insertion into the
regulations of examples. Another commenter criticized the renumbering
of the sections. Specifically, this commenter stated that the
renumbering of the sections will affect the accuracy of training
materials. Though this concern is understandable, the FDIC believes
that renumbering is necessary as a means of increasing depositors'
understanding of certain rules. For example, the placement of current
paragraph (g) of Sec. 330.3 in new Sec. 330.4 will highlight this rule
governing the continuation of separate deposit insurance after merger
of insured depository institutions.
    A number of commenters addressed the revisions in the ANPR that
were not included in the proposed rule. Notably, several voiced
disappointment that the FDIC had not included in the proposed rule
revisions to the joint account and POD account rules. They emphasized
that the current joint account rules, in particular, are very confusing
to both the industry and the public. The Board is mindful of these
comments and has instructed the staff to continue studying the policy,
economic and other implications of amending the joint account and POD
account rules. If the Board determines that such amendments are
warranted, it will authorize the issuance of a proposed rule to obtain
public comment on specific changes to those rules.
    A comment regarding the insurance coverage of annuity contract
accounts is addressed below in connection with new Sec. 330.8.

V. Section-by-Section Discussion of the Final Rule

Section 330.1--Definitions

    This section has been expanded to include some definitions
currently placed in other sections of part 330. Also, ``Corporation''
has been defined as the FDIC.

Section 330.2--Purpose

    This section has been reduced by eliminating a narrative
description of the FDIC's authority to issue deposit insurance
regulations. This information is unnecessary.

Section 330.3--General principles

    This section has been amended in several ways. First, examples have
been added to illustrate some of the general principles. Second, in
recognition of its importance, current paragraph (g) of Sec. 330.3 has
been moved from this

[[Page 25755]]

section to new Sec. 330.4 dealing with the continuation of separate
deposit insurance after merger of insured depository institutions.
Third, current Sec. 330.13 has been added to this section as new
paragraph (g) dealing with bank investment contracts. Fourth, a new
provision has been added to provide the survivors of deceased
depositors with a six-month ``grace period'' for the restructuring of
accounts. The provision is new paragraph (j). It is discussed in detail
above.

Section 330.4--Continuation of separate deposit insurance after merger
of insured depository institutions

    This is a new section composed of the provisions in current
paragraph (g) of Sec. 330.3. It addresses the deposit insurance
implications of bank mergers and acquisitions. The placement of the
rule in a separate section of the regulations should make the rule more
accessible.

Section 330.5--Recognition of deposit ownership and recordkeeping
requirements

    This section is current Sec. 330.4 with two substantive amendments.
First, the FDIC's recordkeeping requirements have been amended by
adding an exception to the general rule that the deposit account
records of a depository institution must expressly disclose the
existence of a fiduciary relationship in order for the FDIC to
recognize the fiduciary nature of the account. The exception provides
that the general requirement would not apply if the FDIC determines, in
its sole discretion, that the titling of the account and the underlying
deposit account records of the depository institution indicate the
existence of a fiduciary relationship. The section specifies that the
exception might apply, for example, where the deposit account title or
records indicate that the account is held by an escrow agent, title
company, or an entity (or its agent or nominee) whose business is to
hold, for safekeeping reasons, deposits for others. Second, the
recordkeeping requirements for accounts held pursuant to multi-tiered
fiduciary relationships (current paragraph (b)(3) of Sec. 330.3 and new
paragraph (b)(3) of Sec. 330.5) have been modified so that the titles
of such accounts can be less unwieldy. These revisions are discussed
above.

Section 330.6--Single ownership accounts

    This section is current Sec. 330.5. The definition of a ``sole
proprietorship'' has been moved from this section to new Sec. 330.1.
Also, in the section dealing with a decedent's account, a cross-
reference has been added to new paragraph (j) of Sec. 330.3. The latter
provides a six-month ``grace period'' for the restructuring of accounts
following the death of a depositor.

Section 330.7--Accounts held by an agent, nominee, guardian, custodian
or conservator

    This section is current Sec. 330.6. The provision on mortgage
servicing accounts has been clarified to indicate that such accounts
are not entitled to separate insurance. Rather, they are insured as
custodial or agency accounts subject to aggregation with other accounts
held by the owner at the same insured depository institution. Also, the
provisions on annuity contract accounts have been moved from this
section to new Sec. 330.8.

Section 330.8--Annuity contract accounts

    This is a new section composed of the provisions in current
paragraph (f) of Sec. 330.6. Under this section, funds held by an
insurance company for the sole purpose of funding life insurance or
annuity contracts are insured up to $100,000 per annuitant if certain
requirements are satisfied. The FDIC is placing this rule in a separate
section of the regulations--rather than keeping the rule in the section
dealing with the ``pass-through'' coverage of agency accounts--because
annuity contract accounts represent a separate category of insurance.
Also, in stating that such accounts shall be insured separately in the
amount of up to $100,000 per annuitant, the FDIC is adding the word
``separately.''
    One commenter objected to the addition of the word ``separately.''
In the opinion of this commenter, the addition of this word would
result in a windfall for insurance companies by creating a new category
of insured deposits.
    Subject to the requirements in the regulation, the FDIC's long-
standing staff position is that annuity contract accounts represent a
separate category of insured deposits. In other words, the revision
does not create a new category of insured deposits but simply clarifies
the existing coverage of such accounts. The need for such clarification
is emphasized by the comment.
    While adding the word ``separately,'' the FDIC has removed the
phrase ``different right and capacity.'' The phrase is unnecessary and
confusing.

Section 330.9--Joint ownership accounts

    This section is current Sec. 330.7. Though it has not been changed
substantively, the section has been clarified through the addition of
several examples.

Section 330.10--Revocable trust accounts

    This section is current Sec. 330.8. For the purpose of
clarification, the section has been rephrased and examples have been
added. Also, a paragraph has been added to clarify the insurance
coverage of revocable trust accounts held pursuant to formal ``living
trust'' agreements. The paragraph states specifically that the presence
of a ``defeating contingency'' in the trust agreement would prevent a
beneficiary's interest from receiving separate insurance under this
section. The addition of this new paragraph is explained in detail
above.

Section 330.11--Accounts of a corporation, partnership or
unincorporated association

    This section is current Sec. 330.9. The definition of ``independent
activity'' has been moved from this section to Sec. 330.1.

Section 330.12--Accounts held by a depository institution as the
trustee of an irrevocable trust

    This section is current Sec. 330.10. The modifications are slight
and not substantive.

Section 330.13--Irrevocable trust accounts

    This section is current Sec. 330.11. The definitions of ``trust
interest'' and ``non-contingent trust interest'' have been moved from
this section to Sec. 330.1.

Section 330.14--Retirement and other employee benefit plan accounts

    This section is current Sec. 330.12. It is unchanged except for the
deletion of current paragraph (h)(2)(ii) of Sec. 330.12, which required
a notice to certain depositors within ten business days after July 1,
1995. That provision is obsolete.

Section 330.15--Public unit accounts

    This section is current Sec. 330.14. It is essentially unchanged.

Section 330.16--Effective dates

    Changes have been made to this section to indicate that the
designated effective dates apply to former changes to part 330. The
FDIC has retained this information in part 330 because the effective
dates might be relevant in connection with time deposits issued prior
to December 19, 1991, until the maturity date of such deposits.
    In addition to the changes explained above, two sections have been

[[Page 25756]]

eliminated by the final rule. First, current Sec. 330.13 (``Bank
investment contracts'') has been reduced and moved to new paragraph (g)
of Sec. 330.3. Second, current Sec. 330.15 (``Notice to depositors'')
has been removed altogether as unnecessary.

VI. Paperwork Reduction Act

    No collection of information pursuant to the Paperwork Reduction
Act is contained in the final rule. Consequently, no information has
been submitted to the Office of Management and Budget for review.

VII. Regulatory Flexibility Act

    The Board of Directors certifies that the final rule will not have
a significant economic impact on a substantial number of small
businesses within the meaning of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.). The revisions to the deposit insurance rules will
impose no new reporting, recordkeeping or other compliance requirements
upon those entities. Accordingly, the Act's requirements relating to an
initial and final regulatory flexibility analysis are not applicable.

VIII. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final
rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Fairness Act of
1996 (SBREFA) (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC
will file the appropriate reports with Congress and the General
Accounting Office so that the final rule may be reviewed. The effective
date is July 1, 1998.

List of Subjects in 12 CFR Part 330

    Bank deposit insurance, Banks, Banking, Reporting and recordkeeping
requirements, Savings and loan associations, Trusts and trustees.

    The Board of Directors of the Federal Deposit Insurance Corporation
hereby revises part 330 of chapter III of title 12 of the Code of
Federal Regulations to read as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

Sec.
330.1  Definitions.
330.2  Purpose.
330.3  General principles.
330.4  Continuation of separate deposit insurance after merger of
insured depository institutions.
330.5  Recognition of deposit ownership and recordkeeping
requirements.
330.6  Single ownership accounts.
330.7  Accounts held by an agent, nominee, guardian, custodian or
conservator.
330.8  Annuity contract accounts.
330.9  Joint ownership accounts.
330.10  Revocable trust accounts.
330.11  Accounts of a corporation, partnership or unincorporated
association.
330.12  Accounts held by a depository institution as the trustee of
an irrevocable trust.
330.13  Irrevocable trust accounts.
330.14  Retirement and other employee benefit plan accounts.
330.15  Public unit accounts.
330.16  Effective dates.

    Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q),
1819(Tenth), 1820(f), 1821(a), 1822(c).

Sec. 330.1  Definitions.

    For the purposes of this part:
    (a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et
seq.).
    (b) Corporation means the Federal Deposit Insurance Corporation.
    (c) Default has the same meaning as provided under section 3(x) of
the Act (12 U.S.C. 1813(x)).
    (d) Deposit has the same meaning as provided under section 3(l) of
the Act (12 U.S.C. 1813(l)).
    (e) Deposit account records means account ledgers, signature cards,
certificates of deposit, passbooks, corporate resolutions authorizing
accounts in the possession of the insured depository institution and
other books and records of the insured depository institution,
including records maintained by computer, which relate to the insured
depository institution's deposit taking function, but does not mean
account statements, deposit slips, items deposited or cancelled checks.
    (f) FDIC means the Federal Deposit Insurance Corporation.
    (g) Independent activity. A corporation, partnership or
unincorporated association shall be deemed to be engaged in an
``independent activity'' if the entity is operated primarily for some
purpose other than to increase deposit insurance.
    (h) Insured branch means a branch of a foreign bank any deposits in
which are insured in accordance with the provisions of the Act.
    (i) Insured deposit has the same meaning as that provided under
section 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).
    (j) Insured depository institution is any depository institution
whose deposits are insured pursuant to the Act, including a foreign
bank having an insured branch.
    (k) Natural person means a human being.
    (l) Non-contingent trust interest means a trust interest capable of
determination without evaluation of contingencies except for those
covered by the present worth tables and rules of calculation for their
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations
(26 CFR 20.2031-7) or any similar present worth or life expectancy
tables which may be adopted by the Internal Revenue Service.
    (m) Sole proprietorship means a form of business in which one
person owns all the assets of the business, in contrast to a
partnership or corporation.
    (n) Trust estate means the determinable and beneficial interest of
a beneficiary or principal in trust funds but does not include the
beneficial interest of an heir or devisee in a decedent's estate.
    (o) Trust funds means funds held by an insured depository
institution as trustee pursuant to any irrevocable trust established
pursuant to any statute or written trust agreement.
    (p) Trust interest means the interest of a beneficiary in an
irrevocable express trust (other than an employee benefit plan) created
either by written trust instrument or by statute, but does not include
any interest retained by the settlor.

Sec. 330.2  Purpose.

    The purpose of this part is to clarify the rules and define the
terms necessary to afford deposit insurance coverage under the Act and
provide rules for the recognition of deposit ownership in various
circumstances.

Sec. 330.3  General principles.

    (a) Ownership rights and capacities. The insurance coverage
provided by the Act and this part is based upon the ownership rights
and capacities in which deposit accounts are maintained at insured
depository institutions. All deposits in an insured depository
institution which are maintained in the same right and capacity (by or
for the benefit of a particular depositor or depositors) shall be added
together and insured in accordance with this part. Deposits maintained
in different rights and capacities, as recognized under this part,
shall be insured separately from each other.

    (Example: Single ownership accounts and joint ownership accounts
are insured separately from each other.)

    (b) Deposits maintained in separate insured depository institutions
or in separate branches of the same insured depository institution. Any
deposit accounts maintained by a depositor at one insured depository
institution are insured separately from, and without regard to, any
deposit accounts that the same depositor maintains at any other

[[Page 25757]]

separately chartered and insured depository institution, even if two or
more separately chartered and insured depository institutions are
affiliated through common ownership.

    (Example: Deposits held by the same individual at two different
banks owned by the same bank holding company would be insured
separately, per bank.)

    The deposit accounts of a depositor maintained in the same right
and capacity at different branches or offices of the same insured
depository institution are not separately insured; rather they shall be
added together and insured in accordance with this part.
    (c) Deposits maintained by foreigners and deposits denominated in
foreign currency. The availability of deposit insurance is not limited
to citizens and residents of the United States. Any person or entity
that maintains deposits in an insured depository institution is
entitled to the deposit insurance provided by the Act and this part. In
addition, deposits denominated in a foreign currency shall be insured
in accordance with this part. Deposit insurance for such deposits shall
be determined and paid in the amount of United States dollars that is
equivalent in value to the amount of the deposit denominated in the
foreign currency as of close of business on the date of default of the
insured depository institution. The exchange rates to be used for such
conversions are the 12 PM rates (the ``noon buying rates for cable
transfers'') quoted for major currencies by the Federal Reserve Bank of
New York on the date of default of the insured depository institution,
unless the deposit agreement specifies that some other widely
recognized exchange rates are to be used for all purposes under that
agreement, in which case, the rates so specified shall be used for such
conversions.
    (d) Deposits in insured branches of foreign banks. Deposits in an
insured branch of a foreign bank which are payable by contract in the
United States shall be insured in accordance with this part, except
that any deposits to the credit of the foreign bank, or any office,
branch, agency or any wholly owned subsidiary of the foreign bank,
shall not be insured. All deposits held by a depositor in the same
right and capacity in more than one insured branch of the same foreign
bank shall be added together for the purpose of determining the amount
of deposit insurance.
    (e) Deposits payable solely outside of the United States and
certain other locations. Any obligation of an insured depository
institution which is payable solely at an office of such institution
located outside the States of the United States, the District of
Columbia, Puerto Rico, Guam, the Commonwealth of the Northern Mariana
Islands, American Samoa, the Trust Territory of the Pacific Islands,
and the Virgin Islands, is not a deposit for the purposes of this part.
    (f) International banking facility deposits. An ``international
banking facility time deposit,'' as defined by the Board of Governors
of the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or
in any successor regulation, is not a deposit for the purposes of this
part.
    (g) Bank investment contracts. As required by section 11(a)(8) of
the Act (12 U.S.C. 1821(a)(8)), any liability arising under any
investment contract between any insured depository institution and any
employee benefit plan which expressly permits ``benefit responsive
withdrawals or transfers'' (as defined in section 11(a)(8) of the Act)
are not insured deposits for purposes of this part. The term
``substantial penalty or adjustment'' used in section 11(a)(8) of the
Act means, in the case of a deposit having an original term which
exceeds one year, all interest earned on the amount withdrawn from the
date of deposit or for six months, whichever is less; or, in the case
of a deposit having an original term of one year or less, all interest
earned on the amount withdrawn from the date of deposit or three
months, whichever is less.
    (h) Application of state or local law to deposit insurance
determinations. In general, deposit insurance is for the benefit of the
owner or owners of funds on deposit. However, while ownership under
state law of deposited funds is a necessary condition for deposit
insurance, ownership under state law is not sufficient for, or decisive
in, determining deposit insurance coverage. Deposit insurance coverage
is also a function of the deposit account records of the insured
depository institution, of recordkeeping requirements, and of other
provisions of this part, which, in the interest of uniform national
rules for deposit insurance coverage, are controlling for purposes of
determining deposit insurance coverage.
    (i) Determination of the amount of a deposit--(1) General rule. The
amount of a deposit is the balance of principal and interest
unconditionally credited to the deposit account as of the date of
default of the insured depository institution, plus the ascertainable
amount of interest to that date, accrued at the contract rate (or the
anticipated or announced interest or dividend rate), which the insured
depository institution in default would have paid if the deposit had
matured on that date and the insured depository institution had not
failed. In the absence of any such announced or anticipated interest or
dividend rate, the rate for this purpose shall be whatever rate was
paid in the immediately preceding payment period.
    (2) Discounted certificates of deposit. The amount of a certificate
of deposit sold by an insured depository institution at a discount from
its face value is its original purchase price plus the amount of
accrued earnings calculated by compounding interest annually at the
rate necessary to increase the original purchase price to the maturity
value over the life of the certificate.
    (3) Waiver of minimum requirements. In the case of a deposit with a
fixed payment date, fixed or minimum term, or a qualifying or notice
period that has not expired as of such date, interest thereon to the
date of closing shall be computed according to the terms of the deposit
contract as if interest had been credited and as if the deposit could
have been withdrawn on such date without any penalty or reduction in
the rate of earnings.
    (j) Continuation of insurance coverage following the death of a
deposit owner. The death of a deposit owner shall not affect the
insurance coverage of the deposit for a period of six months following
the owner's death unless the deposit account is restructured. The
operation of this grace period, however, shall not result in a
reduction of coverage. If an account is not restructured within six
months after the owner's death, the insurance shall be provided on the
basis of actual ownership in accordance with the provisions of
Sec. 330.5(a)(1).

Sec. 330.4  Continuation of separate deposit insurance after merger of
insured depository institutions.

    Whenever the liabilities of one or more insured depository
institutions for deposits are assumed by another insured depository
institution, whether by merger, consolidation, other statutory
assumption or contract:
    (a) The insured status of the institutions whose liabilities have
been assumed terminates on the date of receipt by the FDIC of
satisfactory evidence of the assumption; and
    (b) The separate insurance of deposits assumed continues for six
months from the date the assumption takes effect or, in the case of a
time deposit, the earliest maturity date after the six-month period. In
the case of time deposits which mature within six months of the date
the deposits are assumed and which are renewed at the same dollar
amount (either with or without accrued

[[Page 25758]]

interest having been added to the principal amount) and for the same
term as the original deposit, the separate insurance applies to the
renewed deposits until the first maturity date after the six-month
period. Time deposits that mature within six months of the deposit
assumption and that are renewed on any other basis, or that are not
renewed and thereby become demand deposits, are separately insured only
until the end of the six-month period.

Sec. 330.5  Recognition of deposit ownership and recordkeeping
requirements.

    (a) Recognition of deposit ownership--(1) Evidence of deposit
ownership. Except as indicated in this paragraph (a)(1) or as provided
in Sec. 330.3(j), in determining the amount of insurance available to
each depositor, the FDIC shall presume that deposited funds are
actually owned in the manner indicated on the deposit account records
of the insured depository institution. If the FDIC, in its sole
discretion, determines that the deposit account records of the insured
depository institution are clear and unambiguous, those records shall
be considered binding on the depositor, and the FDIC shall consider no
other records on the manner in which the funds are owned. If the
deposit account records are ambiguous or unclear on the manner in which
the funds are owned, then the FDIC may, in its sole discretion,
consider evidence other than the deposit account records of the insured
depository institution for the purpose of establishing the manner in
which the funds are owned. Despite the general requirements of this
paragraph (a)(1), if the FDIC has reason to believe that the insured
depository institution's deposit account records misrepresent the
actual ownership of deposited funds and such misrepresentation would
increase deposit insurance coverage, the FDIC may consider all
available evidence and pay claims for insured deposits on the basis of
the actual rather than the misrepresented ownership.
    (2) Recognition of deposit ownership in custodial accounts. In the
case of custodial deposits, the interest of each beneficial owner may
be determined on a fractional or percentage basis. This may be
accomplished in any manner which indicates that where the funds of an
owner are commingled with other funds held in a custodial capacity and
a portion thereof is placed on deposit in one or more insured
depository institutions without allocation, the owner's insured
interest in the deposit in any one insured depository institution would
represent, at any given time, the same fractional share as his or her
share of the total commingled funds.
    (b) Recordkeeping requirements--(1) Disclosure of fiduciary
relationships. The ``deposit account records'' (as defined in
Sec. 330.1(e)) of an insured depository institution must expressly
disclose, by way of specific references, the existence of any fiduciary
relationship including, but not limited to, relationships involving a
trustee, agent, nominee, guardian, executor or custodian, pursuant to
which funds in an account are deposited and on which a claim for
insurance coverage is based. No claim for insurance coverage based on a
fiduciary relationship will be recognized if no fiduciary relationship
is evident from the deposit account records of the insured depository
institution. The general requirement for the express indication that
the account is held in a fiduciary capacity will not apply, however, in
instances where the FDIC determines, in its sole discretion, that the
titling of the deposit account and the underlying deposit account
records sufficiently indicate the existence of a fiduciary
relationship. This exception may apply, for example, where the deposit
account title or records indicate that the account is held by an escrow
agent, title company or a company whose business is to hold deposits
and securities for others.
    (2) Details of fiduciary relationships. If the deposit account
records of an insured depository institution disclose the existence of
a relationship which might provide a basis for additional insurance
(including the exception provided for in paragraph (b)(1) of this
section), the details of the relationship and the interests of other
parties in the account must be ascertainable either from the deposit
account records of the insured depository institution or from records
maintained, in good faith and in the regular course of business, by the
depositor or by some person or entity that has undertaken to maintain
such records for the depositor.
    (3) Multi-tiered fiduciary relationships. In deposit accounts where
there are multiple levels of fiduciary relationships, there are two
methods of satisfying paragraphs (b)(1) and (b)(2) of this section to
obtain insurance coverage for the interests of the true beneficial
owners of a deposit account.
    (i) One method is to:
    (A) Expressly indicate, on the deposit account records of the
insured depository institution, the existence of each and every level
of fiduciary relationships; and
    (B) Disclose, at each level, the name(s) and interest(s) of the
person(s) on whose behalf the party at that level is acting.
    (ii) An alternative method is to:
    (A) Expressly indicate, on the deposit account records of the
insured depository institution, that there are multiple levels of
fiduciary relationships;
    (B) Disclose the existence of additional levels of fiduciary
relationships in records, maintained in good faith and in the regular
course of business, by parties at subsequent levels; and
    (C) Disclose, at each of the levels, the name(s) and interest(s) of
the person(s) on whose behalf the party at that level is acting. No
person or entity in the chain of parties will be permitted to claim
that they are acting in a fiduciary capacity for others unless the
possible existence of such a relationship is revealed at some previous
level in the chain.
    (4) Exceptions to recordkeeping requirements--(i) Deposits
evidenced by negotiable instruments. If any deposit obligation of an
insured depository institution is evidenced by a negotiable certificate
of deposit, negotiable draft, negotiable cashier's or officer's check,
negotiable certified check, negotiable traveler's check, letter of
credit or other negotiable instrument, the FDIC will recognize the
owner of such deposit obligation for all purposes of claim for insured
deposits to the same extent as if his or her name and interest were
disclosed on the records of the insured depository institution;
provided, that the instrument was in fact negotiated to such owner
prior to the date of default of the insured depository institution. The
owner must provide affirmative proof of such negotiation, in a form
satisfactory to the FDIC, to substantiate his or her claim. Receipt of
a negotiable instrument directly from the insured depository
institution in default shall, in no event, be considered a negotiation
of said instrument for purposes of this provision.
    (ii) Deposit obligations for payment of items forwarded for
collection by depository institution acting as agent. Where an insured
depository institution in default has become obligated for the payment
of items forwarded for collection by a depository institution acting
solely as agent, the FDIC will recognize the holders of such items for
all purposes of claim for insured deposits to the same extent as if
their name(s) and interest(s) were disclosed as depositors on the
deposit account records of the insured depository institution, when
such claim for insured deposits, if otherwise payable, has been

[[Page 25759]]

established by the execution and delivery of prescribed forms. The FDIC
will recognize such depository institution forwarding such items for
the holders thereof as agent for such holders for the purpose of making
an assignment to the FDIC of their rights against the insured
depository institution in default and for the purpose of receiving
payment on their behalf.

Sec. 330.6  Single ownership accounts.

    (a) Individual accounts. Funds owned by a natural person and
deposited in one or more deposit accounts in his or her own name shall
be added together and insured up to $100,000 in the aggregate.
Exception: Despite the general requirement in this paragraph (a), if
more than one natural person has the right to withdraw funds from an
individual account (excluding persons who have the right to withdraw by
virtue of a Power of Attorney), the account shall be treated as a joint
ownership account (although not necessarily a qualifying joint account)
and shall be insured in accordance with the provisions of Sec. 330.9,
unless the deposit account records clearly indicate, to the
satisfaction of the FDIC, that the funds are owned by one individual
and that other signatories on the account are merely authorized to
withdraw funds on behalf of the owner.
    (b) Sole proprietorship accounts. Funds owned by a business which
is a ``sole proprietorship'' (as defined in Sec. 330.1(m)) and
deposited in one or more deposit accounts in the name of the business
shall be treated as the individual account(s) of the person who is the
sole proprietor, added to any other individual accounts of that person,
and insured up to $100,000 in the aggregate.
    (c) Single-name accounts containing community property funds.
Community property funds deposited into one or more deposit accounts in
the name of one member of a husband-wife community shall be treated as
the individual account(s) of the named member, added to any other
individual accounts of that person, and insured up to $100,000 in the
aggregate.
    (d) Accounts of a decedent and accounts held by executors or
administrators of a decedent's estate. Funds held in the name of a
decedent or in the name of the executor, administrator, or other
personal representative of his or her estate and deposited into one or
more deposit accounts shall be added together and insured up to
$100,000 in the aggregate; provided, however, that nothing in this
paragraph (d) shall affect the operation of Sec. 330.3(j). The deposit
insurance provided by this paragraph (d) shall be separate from any
insurance coverage provided for the individual deposit accounts of the
executor, administrator, other personal representative or the
beneficiaries of the estate.

Sec. 330.7  Accounts held by an agent, nominee, guardian, custodian or
conservator.

    (a) Agency or nominee accounts. Funds owned by a principal or
principals and deposited into one or more deposit accounts in the name
of an agent, custodian or nominee, shall be insured to the same extent
as if deposited in the name of the principal(s). When such funds are
deposited by an insured depository institution acting as a trustee of
an irrevocable trust, the insurance coverage shall be governed by the
provisions of Sec. 330.13.
    (b) Guardian, custodian or conservator accounts. Funds held by a
guardian, custodian, or conservator for the benefit of his or her ward,
or for the benefit of a minor under the Uniform Gifts to Minors Act,
and deposited into one or more accounts in the name of the guardian,
custodian or conservator shall, for purposes of this part, be deemed to
be agency or nominee accounts and shall be insured in accordance with
paragraph (a) of this section.
    (c) Accounts held by fiduciaries on behalf of two or more persons.
Funds held by an agent, nominee, guardian, custodian, conservator or
loan servicer, on behalf of two or more persons jointly, shall be
treated as a joint ownership account and shall be insured in accordance
with the provisions of Sec. 330.9.
    (d) Mortgage servicing accounts. Accounts maintained by a mortgage
servicer, in a custodial or other fiduciary capacity, which are
comprised of payments by mortgagors of principal and interest, shall be
insured in accordance with paragraph (a) of this section for the
interest of each owner (mortgagee, investor or security holder) in such
accounts. Accounts maintained by a mortgage servicer, in a custodial or
other fiduciary capacity, which are comprised of payments by mortgagors
of taxes and insurance premiums shall be added together and insured in
accordance with paragraph (a) of this section for the ownership
interest of each mortgagor in such accounts.
    (e) Custodian accounts for American Indians. Paragraph (a) of this
section shall not apply to any interest an individual American Indian
may have in funds deposited by the Bureau of Indian Affairs of the
United States Department of the Interior (the ``BIA'') on behalf of
that person pursuant to 25 U.S.C. 162(a), or by any other disbursing
agent of the United States on behalf of that person pursuant to similar
authority, in an insured depository institution. The interest of each
American Indian in all such accounts maintained at the same insured
depository institution shall be added together and insured, up to
$100,000, separately from any other accounts maintained by that person
in the same insured depository institution.

Sec. 330.8  Annuity contract accounts.

    (a) Funds held by an insurance company or other corporation in a
deposit account for the sole purpose of funding life insurance or
annuity contracts and any benefits incidental to such contracts, shall
be insured separately in the amount of up to $100,000 per annuitant,
provided that, pursuant to a state statute:
    (1) The corporation establishes a separate account for such funds;
    (2) The account cannot be charged with the liabilities arising out
of any other business of the corporation; and
    (3) The account cannot be invaded by other creditors of the
corporation in the event that the corporation becomes insolvent and its
assets are liquidated.
    (b) Such insurance coverage shall be separate from the insurance
provided for any other accounts maintained by the corporation or the
annuitants at the same insured depository institution.

Sec. 330.9  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether
owned as joint tenants with right of survivorship, as tenants in common
or as tenants by the entirety, shall be insured separately from any
individually owned (single ownership) deposit accounts maintained by
the co-owners.

    (Example: If A has a single ownership account and also is a
joint owner of a qualifying joint account, A's interest in the joint
account would be insured separately from his or her interest in the
individual account.) Qualifying joint accounts in the names of both
husband and wife which are comprised of community property funds
shall be added together and insured up to $100,000, separately from
any funds deposited into accounts bearing their individual names.

    (b) Determination of insurance coverage. Step one: all qualifying
joint accounts owned by the same combination of individuals shall be
added together; the aggregate amount is insurable up to a limit of
$100,000.

    (Example: A qualifying joint account owned by ``A&B'' would be
added to a

[[Page 25760]]

qualifying joint account owned by ``B&A'' and the insurable limit on
the combined balances in those accounts would be $100,000. Moreover,
the insurable limit on a single qualifying joint account owned by
``A&B'' would be $100,000. Thus, any qualifying joint account (or
group of qualifying joint accounts owned by the same combination of
persons) with a balance over $100,000 will be over the insurance
limit.)

    Step two: the interests of each co-owner in all qualifying joint
accounts, whether owned by the same or different combinations of
persons, shall then be added together and the total shall be insured up
to $100,000.

    (Example: ``A&B'' have a qualifying joint account with a balance
of $100,000; ``A&C'' have a qualifying joint account with a balance
of $150,000; and ``A&D'' have a qualifying joint account with a
balance of $100,000. The balance in the account owned by ``A&C''
exceeds $100,000, so under step one the excess amount, $50,000,
would be uninsured. A's combined ownership interests in the
insurable amounts in the accounts would be $150,000, of which under
step two $100,000 would be insured and $50,000 would be uninsured;
B's ownership interest would be $50,000, all of which would be
insured; C's insurable ownership interest would be $50,000, all of
which would be insured; and D's ownership interest would be $50,000,
all of which would be insured.)

    (c) Qualifying joint accounts. (1) A joint deposit account shall be
deemed to be a qualifying joint account, for purposes of this section,
only if:
    (i) All co-owners of the funds in the account are ``natural
persons'' (as defined in Sec. 330.1(k)); and
    (ii) Each co-owner has personally signed a deposit account
signature card; and
    (iii) Each co-owner possesses withdrawal rights on the same basis.
    (2) The signature-card requirement of paragraph (c)(1)(ii) of this
section shall not apply to certificates of deposit, to any deposit
obligation evidenced by a negotiable instrument, or to any account
maintained by an agent, nominee, guardian, custodian or conservator on
behalf of two or more persons.
    (3) All deposit accounts that satisfy the criteria in paragraph
(c)(1) of this section, and those accounts that come within the
exception provided for in paragraph (c)(2) of this section, shall be
deemed to be jointly owned provided that, in accordance with the
provisions of Sec. 330.5(a), the FDIC determines that the deposit
account records of the insured depository institution are clear and
unambiguous as to the ownership of the accounts. If the deposit account
records are ambiguous or unclear as to the manner in which the deposit
accounts are owned, then the FDIC may, in its sole discretion, consider
evidence other than the deposit account records of the insured
depository institution for the purpose of establishing the manner in
which the funds are owned. The signatures of two or more persons on the
deposit account signature card or the names of two or more persons on a
certificate of deposit or other deposit instrument shall be conclusive
evidence that the account is a joint account (although not necessarily
a qualifying joint account) unless the deposit records as a whole are
ambiguous and some other evidence indicates, to the satisfaction of the
FDIC, that there is a contrary ownership capacity.
    (d) Nonqualifying joint accounts. A deposit account held in two or
more names which is not a qualifying joint account, for purposes of
this section, shall be treated as being owned by each named owner, as
an individual, corporation, partnership, or unincorporated association,
as the case may be, and the actual ownership interest of each
individual or entity in such account shall be added to any other single
ownership accounts of such individual or other accounts of such entity,
and shall be insured in accordance with the provisions of this part
governing the insurance of such accounts.
    (e) Determination of interests. The interests of the co-owners of
qualifying joint accounts, held as tenants in common, shall be deemed
equal, unless otherwise stated in the depository institution's deposit
account records. This section applies regardless of whether the
conjunction ``and'' or ``or'' is used in the title of a joint deposit
account, even when both terms are used, such as in the case of a joint
deposit account with three or more co-owners.

Sec. 330.10  Revocable trust accounts.

    (a) General rule. Funds owned by an individual and deposited into
an account evidencing an intention that upon the death of the owner the
funds shall belong to one or more qualifying beneficiaries shall be
insured in the amount of up to $100,000 in the aggregate as to each
such named qualifying beneficiary, separately from any other accounts
of the owner or the beneficiaries. For purposes of this provision, the
term ``qualifying beneficiaries'' means the owner's spouse, child/
children or grandchild/grandchildren.

    (Example: If A establishes a qualifying account payable upon
death to his spouse, two children and one grandchild, assuming
compliance with the requirements of this provision, the account
would be insured up to $400,000 separately from any other different
types of accounts either A or the beneficiaries may have with the
same depository institution.)

    Accounts covered by this provision are commonly referred to as
tentative or ``Totten trust'' accounts, ``payable-on-death'' accounts,
or revocable trust accounts.
    (b) Required intention. The required intention in paragraph (a) of
this section that upon the owner's death the funds shall belong to one
or more qualifying beneficiaries must be manifested in the title of the
account using commonly accepted terms such as, but not limited to, ``in
trust for,'' ``as trustee for,'' ``payable-on-death to,'' or any
acronym therefor. In addition, the beneficiaries must be specifically
named in the deposit account records of the insured depository
institution. The settlor of a revocable trust account shall be presumed
to own the funds deposited into the account.
    (c) Interests of nonqualifying beneficiaries. If a named
beneficiary of an account covered by this section is not a qualifying
beneficiary, the funds corresponding to that beneficiary shall be
treated as individually owned (single ownership) accounts of such
owner(s), aggregated with any other single ownership accounts of such
owner(s), and insured up to $100,000 per owner.

    (Examples: If A establishes an account payable upon death to his
or her nephew, the account would be insured as a single ownership
account owned by A. Similarly, if B establishes an account payable
upon death to her husband, son and nephew, two-thirds of the account
balance would be eligible for POD coverage up to $200,000
corresponding to the two qualifying beneficiaries (i.e., the spouse
and child). The amount corresponding to the non-qualifying
beneficiary (i.e., the nephew) would be deemed to be owned by B in
her single ownership capacity and insured accordingly.)

    (d) Joint revocable trust accounts. Where an account described in
paragraph (a) of this section is established by more than one owner and
held for the benefit of others, some or all of whom are within the
qualifying degree of kinship, the respective interests of each owner
(which shall be deemed equal unless otherwise stated in the insured
depository institution's deposit account records) held for the benefit
of each qualifying beneficiary shall be separately insured up to
$100,000. However, where a husband and a wife establish a revocable
trust account naming themselves as the sole beneficiaries, such account
shall not be insured according to the provisions of this section but
shall instead be insured

[[Page 25761]]

in accordance with the joint account provisions of Sec. 330.9.
    (e) Definition of ``children'' and ``grandchildren''. For the
purpose of establishing the qualifying degree of kinship set forth in
paragraph (a) of this section, the term ``children'' includes any
biological, adopted and step-children of the owner and
``grandchildren'' includes biological, adopted, or step-children of any
of the owner's children.
    (f) Living trusts. This section also applies to revocable trust
accounts held in connection with a so-called ``living trust,'' a formal
trust which an owner creates and retains control over during his or her
lifetime. If a named beneficiary in a living trust is a qualifying
beneficiary under this section, then the deposit account held in
connection with the living trust may be eligible for deposit insurance
under this section, assuming compliance with all the provisions of this
part. If, however, for example, the living trust includes a ``defeating
contingency'' relative to that beneficiary's interest in the trust
assets, then insurance coverage under this section would not be
provided. For purposes of this section, a ``defeating contingency'' is
defined as a condition which would prevent the beneficiary from
acquiring a vested and non-contingent interest in the funds in the
deposit account upon the owner's death.

Sec. 330.11  Accounts of a corporation, partnership or unincorporated
association.

    (a) Corporate accounts. (1) The deposit accounts of a corporation
engaged in any ``independent activity'' (as defined in Sec. 330.1(g))
shall be added together and insured up to $100,000 in the aggregate. If
a corporation has divisions or units which are not separately
incorporated, the deposit accounts of those divisions or units shall be
added to any other deposit accounts of the corporation. If a
corporation maintains deposit accounts in a representative or fiduciary
capacity, such accounts shall not be treated as the deposit accounts of
the corporation but shall be treated as fiduciary accounts and insured
in accordance with the provisions of Sec. 330.7.
    (2) Notwithstanding any other provision of this part, any trust or
other business arrangement which has filed or is required to file a
registration statement with the Securities and Exchange Commission
pursuant to section 8 of the Investment Company Act of 1940 or that
would be required so to register but for the fact it is not created
under the laws of the United States or a state or but for sections
2(b), 3(c)(1), or 6(a)(1) of that act shall be deemed to be a
corporation for purposes of determining deposit insurance coverage.
    (b) Partnership accounts. The deposit accounts of a partnership
engaged in any ``independent activity'' (as defined in Sec. 330.1(g))
shall be added together and insured up to $100,000 in the aggregate.
Such insurance coverage shall be separate from any insurance provided
for individually owned (single ownership) accounts maintained by the
individual partners. A partnership shall be deemed to exist, for
purposes of this paragraph, any time there is an association of two or
more persons or entities formed to carry on, as co-owners, an
unincorporated business for profit.
    (c) Unincorporated association accounts. The deposit accounts of an
unincorporated association engaged in any independent activity shall be
added together and insured up to $100,000 in the aggregate, separately
from the accounts of the person(s) or entity(ies) comprising the
unincorporated association. An unincorporated association shall be
deemed to exist, for purposes of this paragraph, whenever there is an
association of two or more persons formed for some religious,
educational, charitable, social or other noncommercial purpose.
    (d) Non-qualifying entities. The deposit accounts of an entity
which is not engaged in an ``independent activity'' (as defined in
Sec. 330.1(g)) shall be deemed to be owned by the person or persons
owning the corporation or comprising the partnership or unincorporated
association, and, for deposit insurance purposes, the interest of each
person in such a deposit account shall be added to any other deposit
accounts individually owned by that person and insured up to $100,000
in the aggregate.

Sec. 330.12  Accounts held by a depository institution as the trustee
of an irrevocable trust.

    (a) Separate insurance coverage. ``Trust funds'' (as defined in
Sec. 330.1(o)) held by an insured depository institution in its
capacity as trustee of an irrevocable trust, whether held in its trust
department, held or deposited in any other department of the fiduciary
institution, or deposited by the fiduciary institution in another
insured depository institution, shall be insured up to $100,000 for
each owner or beneficiary represented. This insurance shall be separate
from, and in addition to, the insurance provided for any other deposits
of the owners or the beneficiaries.
    (b) Determination of interests. The insurance for funds held by an
insured depository institution in its capacity as trustee of an
irrevocable trust shall be determined in accordance with the following
provisions:
    (1) Allocated funds of a trust estate. If trust funds of a
particular ``trust estate'' (as defined in Sec. 330.1(n)) are allocated
by the fiduciary and deposited, the insurance with respect to such
trust estate shall be determined by ascertaining the amount of its
funds allocated, deposited and remaining to the credit of the claimant
as fiduciary at the insured depository institution in default.
    (2) Interest of a trust estate in unallocated trust funds. If funds
of a particular trust estate are commingled with funds of other trust
estates and deposited by the fiduciary institution in one or more
insured depository institutions to the credit of the depository
institution as fiduciary, without allocation of specific amounts from a
particular trust estate to an account in such institution(s), the
percentage interest of that trust estate in the unallocated deposits in
any institution in default is the same as that trust estate's
percentage interest in the entire commingled investment pool.
    (c) Limitation on applicability. This section shall not apply to
deposits of trust funds belonging to a trust which is classified as a
corporation under Sec. 330.11(a)(2).

Sec. 330.13  Irrevocable trust accounts.

    (a) General rule. Funds representing the ``non-contingent trust
interest(s)'' (as defined in Sec. 330.1(l)) of a beneficiary deposited
into one or more deposit accounts established pursuant to one or more
irrevocable trust agreements created by the same settlor(s)
(grantor(s)) shall be added together and insured up to $100,000 in the
aggregate. Such insurance coverage shall be separate from the coverage
provided for other accounts maintained by the settlor(s), trustee(s) or
beneficiary(ies) of the irrevocable trust(s) at the same insured
depository institution. Each ``trust interest'' (as defined in
Sec. 330.1(p)) in any irrevocable trust established by two or more
settlors shall be deemed to be derived from each settlor pro rata to
his or her contribution to the trust.
    (b) Treatment of contingent trust interests. In the case of any
trust in which certain trust interests do not qualify as non-contingent
trust interests, the funds representing those interests shall be added
together and insured up to $100,000 in the aggregate. Such insurance
coverage shall be in addition to the coverage provided for the funds

[[Page 25762]]

representing non-contingent trust interests which are insured pursuant
to paragraph (a) of this section.
    (c) Commingled accounts of bankruptcy trustees. Whenever a
bankruptcy trustee appointed under Title 11 of the United States Code
commingles the funds of various bankruptcy estates in the same account
at an insured depository institution, the funds of each Title 11
bankruptcy estate will be added together and insured up to $100,000,
separately from the funds of any other such estate.

Sec. 330.14  Retirement and other employee benefit plan accounts.

    (a) ``Pass-through'' insurance. Except as provided in paragraph (b)
of this section, any deposits of an employee benefit plan or of any
eligible deferred compensation plan described in section 457 of the
Internal Revenue Code of 1986 (26 U.S.C. 457) in an insured depository
institution shall be insured on a ``pass-through'' basis, in the amount
of up to $100,000 for the non-contingent interest of each plan
participant, provided that the FDIC's recordkeeping requirements, as
prescribed in Sec. 330.5, are satisfied.
    (b) Exception. ``Pass-through'' insurance shall not be provided
pursuant to paragraph (a) of this section with respect to any deposit
accepted by an insured depository institution which, at the time the
deposit is accepted, may not accept brokered deposits pursuant to
section 29 of the Act (12 U.S.C. 1831f) unless, at the time the deposit
is accepted:
    (1) The institution meets each applicable capital standard; and
    (2) The depositor receives a written statement from the institution
indicating that such deposits are eligible for insurance coverage on a
``pass-through'' basis.
    (c) Aggregation--(1) Multiple plans. Funds representing the non-
contingent interests of a beneficiary in an employee benefit plan, or
eligible deferred compensation plan described in section 457 of the
Internal Revenue Code of 1986 (26 U.S.C. 457), which are deposited in
one or more deposit accounts shall be aggregated with any other
deposited funds representing such interests of the same beneficiary in
other employee benefit plans, or eligible deferred compensation plans
described in section 457 of the Internal Revenue Code of 1986,
established by the same employer or employee organization.
    (2) Certain retirement accounts. (i) Deposits in an insured
depository institution made in connection with the following types of
retirement plans shall be aggregated and insured in the amount of up to
$100,000 per participant:
    (A) Any individual retirement account described in section 408(a)
of the Internal Revenue Code of 1986 (26 U.S.C. 408(a));
    (B) Any eligible deferred compensation plan described in section
457 of the Internal Revenue Code of 1986 (26 U.S.C. 457); and
    (C) Any individual account plan defined in section 3(34) of the
Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and
any plan described in section 401(d) of the Internal Revenue Code of
1986 (26 U.S.C. 401(d)), to the extent that participants and
beneficiaries under such plans have the right to direct the investment
of assets held in individual accounts maintained on their behalf by the
plans.
    (ii) The provisions of this paragraph (c) shall not apply with
respect to the deposits of any employee benefit plan, or eligible
deferred compensation plan described in section 457 of the Internal
Revenue Code of 1986, which is not entitled to ``pass-through''
insurance pursuant to paragraph (b) of this section. Such deposits
shall be aggregated and insured in the amount of $100,000 per plan.
    (d) Determination of interests--(1) Defined contribution plans. The
value of an employee's non-contingent interest in a defined
contribution plan shall be deemed to be the employee's account balance
as of the date of default of the insured depository institution,
regardless of whether said amount was derived, in whole or in part,
from contributions of the employee and/or the employer to the account.
    (2) Defined benefit plans. The value of an employee's non-
contingent interest in a defined benefit plan shall be deemed to be the
present value of the employee's interest in the plan, evaluated in
accordance with the method of calculation ordinarily used under such
plan, as of the date of default of the insured depository institution.
    (3) Amounts taken into account. For the purposes of applying the
rule under paragraph (c)(2) of this section, only the present vested
and ascertainable interests of each participant in an employee benefit
plan or ``457 Plan,'' excluding any remainder interest created by, or
as a result of, the plan, shall be taken into account in determining
the amount of deposit insurance accorded to the deposits of the plan.
    (e) Treatment of contingent interests. In the event that employees'
interests in an employee benefit plan are not capable of evaluation in
accordance with the provisions of this section, or an account
established for any such plan includes amounts for future participants
in the plan, payment by the FDIC with respect to all such interests
shall not exceed $100,000 in the aggregate.
    (f) Overfunded pension plan deposits. Any portion of an employee
benefit plan's deposits which is not attributable to the interests of
the beneficiaries under the plan shall be deemed attributable to the
overfunded portion of the plan's assets and shall be aggregated and
insured up to $100,000, separately from any other deposits.
    (g) Definitions of ``depositor'', ``employee benefit plan'',
``employee organization'' and ``non-contingent interest''. Except as
otherwise indicated in this section, for purposes of this section:
    (1) The term depositor means the person(s) administering or
managing an employee benefit plan.
    (2) The term employee benefit plan has the same meaning given to
such term in section 3(3) of the Employee Retirement Income Security
Act of 1974 (ERISA) (29 U.S.C. 1002) and includes any plan described in
section 401(d) of the Internal Revenue Code of 1986.
    (3) The term employee organization means any labor union,
organization, employee representation committee, association, group, or
plan, in which employees participate and which exists for the purpose,
in whole or in part, of dealing with employers concerning an employee
benefit plan, or other matters incidental to employment relationships;
or any employees' beneficiary association organized for the purpose, in
whole or in part, of establishing such a plan.
    (4) The term non-contingent interest means an interest capable of
determination without evaluation of contingencies except for those
covered by the present worth tables and rules of calculation for their
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations
(26 CFR 20.2031-7) or any similar present worth or life expectancy
tables as may be published by the Internal Revenue Service.
    (h) Disclosure of capital status--(1) Disclosure upon request. An
insured depository institution shall, upon request, provide a clear and
conspicuous written notice to any depositor of employee benefit plan
funds of the institution's leverage ratio, Tier 1 risk-based capital
ratio, total risk-based capital ratio and prompt corrective action
(PCA) capital category, as defined in the regulations of the
institution's primary federal regulator, and whether, in the depository
institution's judgment, employee benefit

[[Page 25763]]

plan deposits made with the institution, at the time the information is
requested, would be eligible for ``pass-through'' insurance coverage
under paragraphs (a) and (b) of this section. Such notice shall be
provided within five business days after receipt of the request for
disclosure.
    (2) Disclosure upon opening of an account. An insured depository
institution shall, upon the opening of any account comprised of
employee benefit plan funds, provide a clear and conspicuous written
notice to the depositor consisting of an accurate explanation of the
requirements for ``pass-through'' deposit insurance coverage provided
in paragraphs (a) and (b) of this section; the institution's PCA
capital category; and a determination of whether or not, in the
depository institution's judgment, the funds being deposited are
eligible for ``pass-through'' insurance coverage.
    (3) Disclosure when ``pass-through'' coverage is no longer
available. Whenever new, rolled-over or renewed employee benefit plan
deposits placed with an insured depository institution would no longer
be eligible for ``pass-through'' insurance coverage, the institution
shall provide a clear and conspicuous written notice to all existing
depositors of employee benefit plan funds of its new PCA capital
category, if applicable, and that new, rolled-over or renewed deposits
of employee benefit plan funds made after the applicable date shall not
be eligible for ``pass-through'' insurance coverage under paragraphs
(a) and (b) of this section. Such written notice shall be provided
within ten business days after the institution receives notice or is
deemed to have notice that it is no longer permitted to accept brokered
deposits under section 29 of the Act and the institution no longer
meets the requirements in paragraph (b) of this section.
    (4) Definition of ``employee benefit plan''. For purposes of this
paragraph (h), the term ``employee benefit plan'' has the same meaning
as provided under paragraph (g)(2) of this section but also includes
any eligible deferred compensation plans described in section 457 of
the Internal Revenue Code of 1986 (26 U.S.C. 457).

Sec. 330.15  Public unit accounts.

    (a) Extent of insurance coverage--(1) Accounts of the United
States. Each official custodian of funds of the United States lawfully
depositing such funds in an insured depository institution shall be
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.
    (2) Accounts of a state, county, municipality or political
subdivision. (i) Each official custodian of funds of any state of the
United States, or any county, municipality, or political subdivision
thereof, lawfully depositing such funds in an insured depository
institution in the state comprising the public unit or wherein the
public unit is located (including any insured depository institution
having a branch in said state) shall be separately insured in the
amount of:
    (A) Up to $100,000 in the aggregate for all time and savings
deposits; and
    (B) Up to $100,000 in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such
funds in an insured depository institution outside of the state
comprising the public unit or wherein the public unit is located, shall
be insured in the amount of up to $100,000 in the aggregate for all
deposits, regardless of whether they are time, savings or demand
deposits.
    (3) Accounts of the District of Columbia. (i) Each official
custodian of funds of the District of Columbia lawfully depositing such
funds in an insured depository institution in the District of Columbia
(including an insured depository institution having a branch in the
District of Columbia) shall be separately insured in the amount of:
    (A) Up to $100,000 in the aggregate for all time and savings
deposits; and
    (B) Up to $100,000 in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such
funds in an insured depository institution outside of the District of
Columbia shall be insured in the amount of up to $100,000 in the
aggregate for all deposits, regardless of whether they are time,
savings or demand deposits.
    (4) Accounts of the Commonwealth of Puerto Rico and other
government possessions and territories. (i) Each official custodian of
funds of the Commonwealth of Puerto Rico, the Virgin Islands, American
Samoa, the Trust Territory of the Pacific Islands, Guam, or The
Commonwealth of the Northern Mariana Islands, or of any county,
municipality, or political subdivision thereof lawfully depositing such
funds in an insured depository institution in Puerto Rico, the Virgin
Islands, American Samoa, the Trust Territory of the Pacific Islands,
Guam, or The Commonwealth of the Northern Mariana Islands,
respectively, shall be separately insured in the amount of:
    (A) Up to $100,000 in the aggregate for all time and savings
deposits; and
    (B) Up to $100,000 in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such
funds in an insured depository institution outside of the commonwealth,
possession or territory comprising the public unit or wherein the
public unit is located, shall be insured in the amount of up to
$100,000 in the aggregate for all deposits, regardless of whether they
are time, savings or demand deposits.
    (5) Accounts of an Indian tribe. Each official custodian of funds
of an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an
agency thereof having official custody of tribal funds, lawfully
depositing the same in an insured depository institution shall be
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.
    (b) Rules relating to the ``official custodian''--(1)
Qualifications for an ``official custodian''. In order to qualify as an
``official custodian'' for the purposes of paragraph (a) of this
section, such custodian must have plenary authority, including control,
over funds owned by the public unit which the custodian is appointed or
elected to serve. Control of public funds includes possession, as well
as the authority to establish accounts for such funds in insured
depository institutions and to make deposits, withdrawals, and
disbursements of such funds.
    (2) Official custodian of the funds of more than one public unit.
For the purposes of paragraph (a) of this section, if the same person
is an official custodian of the funds of more than one public unit, he
or she shall be separately insured with respect to the funds held by
him or her for each such public unit, but shall not be separately
insured by virtue of holding different offices in such public unit or,
except as provided in paragraph (c) of this section, holding such funds
for different purposes.
    (3) Split of authority or control over public unit funds. If the
exercise of authority or control over the funds of a public unit
requires action by, or the consent of, two or more officers, employees,
or agents of such public unit, then they will be treated as one
``official custodian'' for the purposes of this section.
    (c) Public bond issues. Where an officer, agent or employee of a
public unit has custody of certain funds which by law or under a bond
indenture are required to be set aside to discharge a debt owed to the
holders of notes or bonds issued by the public unit, any deposit of
such funds in an insured

[[Page 25764]]

depository institution shall be deemed to be a deposit by a trustee of
trust funds of which the noteholders or bondholders are pro rata
beneficiaries, and the beneficial interest of each noteholder or
bondholder in the deposit shall be separately insured up to $100,000.
    (d) Definition of ``political subdivision''. The term ``political
subdivision'' includes drainage, irrigation, navigation, improvement,
levee, sanitary, school or power districts, and bridge or port
authorities and other special districts created by state statute or
compacts between the states. It also includes any subdivision of a
public unit mentioned in paragraphs (a)(2), (a)(3) and (a)(4) of this
section or any principal department of such public unit:
    (1) The creation of which subdivision or department has been
expressly authorized by the law of such public unit;
    (2) To which some functions of government have been delegated by
such law; and
    (3) Which is empowered to exercise exclusive control over funds for
its exclusive use.

Sec. 330.16  Effective dates.

    (a) Prior effective dates. Former Secs. 330.1(j), 330.10(a),
330.12(c), 330.12(d)(3) and 330.13 (see 12 CFR part 330, as revised
January 1, 1998) became effective on December 19, 1993.
    (b) Time deposits. Except with respect to the provisions in former
Sec. 330.12 (a) and (b) (see 12 CFR part 330, as revised January 1,
l998) and current Sec. 330.14(a) and (b), any time deposits made before
December 19, 1991 that do not mature until after December 19, 1993,
shall be subject to the rules as they existed on the date the deposits
were made. Any time deposits made after December 19, 1991 but before
December 19, 1993, shall be subject to the rules as they existed on the
date the deposits were made. Any rollover or renewal of such time
deposits prior to December 19, 1993 shall subject those deposits to the
rules in effect on the date of such rollover or renewal. With respect
to time deposits which mature only after a prescribed notice period,
the provisions of this part shall be effective on the earliest possible
maturity date after June 24, 1993 assuming (solely for purposes of this
section) that notice had been given on that date.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 28th day of April, 1998.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 98-11987 Filed 5-8-98; 8:45 am]
BILLING CODE 6714-01-P
Last Updated 07/17/1999 communications@fdic.gov