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Inactive Financial Institution Letters 


[Federal Register: May 14, 1997 (Volume 62, Number 93)]
[Proposed Rules]
[Page 26435-26449]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14my97-36]

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB73


Simplification of Deposit Insurance Rules

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Proposed rule.

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SUMMARY: The FDIC is seeking comment on specific proposed revisions to
the FDIC's deposit insurance regulations. The intended effect of the
proposed rule is to simplify and revise the FDIC's regulations on
deposit insurance by making several technical revisions and certain
substantive revisions.

DATES: Written comments must be received by the FDIC on or before
August 12, 1997.

ADDRESSES: Written comments are to be addressed to the Office of the
Executive Secretary, Federal Deposit Insurance Corporation, 550 17th
Street, N.W.,

[[Page 26436]]

Washington, D.C. 20429. Comments may be hand-delivered to Room F-402,
1776 F Street, N.W., Washington, D.C. 20429, on business days between
8:30 a.m. and 5 p.m. (FAX number: (202) 898-3838; Internet address:
comments@FDIC.gov). Comments will be available for inspection in the
FDIC Public Information Center, room 100, 801 17th Street, N.W.,
Washington, D.C., between 9:00 a.m. and 5:00 p.m. on business days.

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

SUPPLEMENTARY INFORMATION:

Background

    One of the FDIC's corporate operating projects under its Strategic
Plan is to simplify the deposit insurance rules. The purpose is to
promote public understanding of deposit insurance and to increase
financial institution and consumer understanding of deposit insurance.
This effort to simplify the FDIC's insurance regulations, found in 12
CFR part 330 (part 330), is also intended to satisfy the provisions in
section 303(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994, 12 U.S.C. 4803(a), to reduce regulatory burden
and improve efficiency.
    The FDIC revised its insurance regulations twice in the recent
past. The first time, in 1990, was necessitated by the termination of
the Federal Savings and Loan Insurance Corporation (FSLIC). The
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)) required the FDIC to
issue uniform insurance regulations for deposits in all insured
depository institutions, including those previously insured by the
FSLIC. The second set of recent changes in the FDIC insurance rules
were made pursuant to provisions in the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) (Pub. L. 102-242 (1991)).
A provision in FDICIA, in essence, limited the insurance coverage of
employee benefit and retirement plans. Also, in February 1995, the FDIC
issued disclosure requirements in connection with the limited
availability of insurance for employee benefit plan accounts, 60 FR
7701 (Feb. 9, 1995), codified at 12 CFR 330.12.
    The amendments made to the insurance rules in 1990 reconciled
differences between the FSLIC insurance regulations and the then-
existing FDIC regulations. They also revised the insurance regulations
to, among other things, better organize and define terms used in the
regulations, convert long-standing interpretive opinions into
regulations, resolve outstanding issues and clarify ambiguous
provisions. Although the insurance rules were revised in 1990 and, to a
lesser extent in 1993 and 1995, the Board of Directors believes that
the revisions in the proposed rule would be helpful. The need for these
changes has been brought to the FDIC's attention in several ways,
especially through the steady receipt of letters and phone calls on
insurance questions. Experience with bank and thrift failures also has
enabled the staff to identify procedural aspects of the regulations
which, when applied in accordance with the regulations, may prove
unfair to certain depositors in some situations.
    The FDIC must be mindful of the applicable statutory parameters in
considering whether and to what extent to modify the insurance
regulations. The general statutory basis for and guidance on deposit
insurance is found in section 11(a) of the Federal Deposit Insurance
Act (FDI Act), 12 U.S.C. 1821(a), which provides, in relevant part,
that depositors are insured up to $100,000 based on the ``right'' and
``capacity'' in which the deposits are maintained. The statute does not
define ``depositor,'' ``right'' or ``capacity.'' The FDIC regulations
implementing the ``right-and-capacity'' language recognize different
categories of insured accounts based on an analysis of ownership. Thus,
the rules provide ``separate'' insurance coverage for different types
of accounts which are owned in different ways. For example, accounts
owned by an individual are not added to joint accounts in which that
same individual has an ownership interest. ``Separate'' insurance means
that each category of account in which a person has an ownership
interest is covered for up to $100,000 separately insured from the
funds in other categories of accounts.

Advance Notice of Proposed Rulemaking

    In May 1996 the FDIC issued an Advance Notice of Proposed
Rulemaking (ANPR), 61 FR 25596 (May 22, 1996), soliciting preliminary
views on whether and, if so, how the FDIC should simplify its deposit
insurance regulations. The ANPR requested comment on all aspects of
streamlining, simplifying and clarifying the insurance rules, including
the likely effect of such changes on consumers and the banking
industry. The FDIC also sought comment on several specific revisions to
the insurance rules that the Board was then considering.
    The possible areas of simplification identified in the ANPR were:
(1) Rewriting certain parts of the rules to make them clearer and
easier to understand; (2) eliminating step one of the two steps
involved in determining the insurance coverage for joint accounts; (3)
revising the recordkeeping rules allowing the FDIC more flexibility
(for the benefit of depositors) in determining the ownership of
deposits held in a custodial or fiduciary capacity; (4) changing the
rules on ``payable upon death'' accounts; (5) modifying the way the
FDIC insures certain types of accounts upon the death of the owner(s)
of the accounts; (6) recommending to Congress that the FDI Act be
amended to change the way employee benefit plans are insured; and (7)
revising the rules on living trust accounts.
    The comment period for the ANPR closed on August 20, 1996. The FDIC
received sixty-eight comments on the ANPR, almost all of which
supported the FDIC's deposit insurance simplification efforts. The FDIC
considered the comments received on the ANPR in preparing the specific
revisions in the proposed rule. Comments on the ANPR are identified and
discussed below in the context of specific issues and proposed
revisions.

Approach to Deposit Insurance Simplification

    The Board believes that certain technical revisions and moderate
substantive revisions to the deposit insurance rules are warranted. The
technical changes are described below in the section-by-section
discussion of the proposed rule. They consist of numerous wording and
organizational changes to the insurance rules intended to make the
rules clearer and easier to understand. The technical changes also
encompass the addition of several examples in the insurance regulations
illustrating the application of the various deposit insurance rules.
The proposed substantive revisions in the proposed rule are as follows.

Proposed Substantive Revisions

1. The Recordkeeping Rules for Fiduciary Accounts
    The insurance regulations impose specific recordkeeping
requirements as a precondition for insuring parties other than those
whose names appear on the depository institution's deposit account
records. 12 CFR 330.4(a). 1 For example,

[[Page 26437]]

if A is acting as an agent for B, C, and D and places funds belonging
to them in an insured bank or thrift, the institution's deposit account
records must show that A is holding the account as an agent in order
for the FDIC to recognize the ownership interests of B, C, and D. The
FDIC will then insure the account as if it were held directly by B, C,
and D (the owners of the account) as long as either the institution's
deposit account records or the agent's records (maintained in ``good
faith and in the regular course of business'') evidence B, C, and D's
ownership interests in the account. Id. at 330.4(b). In this context,
we say that the insurance ``passes-through'' the agent to the owner(s)
of the account. The same ``pass-through'' principle applies to other
types of custodial and fiduciary accounts, including those that
constitute a separate right and capacity, such as irrevocable trust
accounts and employee benefit plan accounts. Id. at 330.10 & 330.12.
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    \1\  The rules derive from section 12(c) of the FDI Act (12
U.S.C. 1822(c)) which provides that the FDIC is not required to
recognize as the owner of a deposit any claimant whose name or
interest as owner is not disclosed on the records of the depository
institution if such recognition would increase the aggregate amount
of the insured deposits in the institution.
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    The concept of ``pass-through'' insurance stems from and is
consistent with the statutory principle that insurance is provided
according to the right and capacity in which the funds are owned. In
this agency situation B, C, and D's ownership interests in the agency
account would be added to any other funds held at the same bank or
thrift by or for them (in the same ownership capacity) and insured to a
limit of $100,000. Id. at 330.6(a). Thus, if A had an individual
account at a bank and an agent was holding funds for him or her at the
same bank, the funds in the individual account would be added to his or
her ownership interest in the agency account and insured to a combined
limit of $100,000, assuming compliance with the recordkeeping
requirements explained above. Id. at 330.4.
    The reasons the FDIC imposes recordkeeping requirements for ``pass-
through'' insurance purposes are: (1) To safeguard against fraud when
an insured institution fails and the FDIC is called upon to pay
insurance claims and (2) to enable the FDIC to estimate the amount of
insured deposits when considering the resolution options for a failing
insured depository institution. 2
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    \2\ In many cases where an insured institution is declared
insolvent, the FDIC transfers some or all of the assets and deposit
liabilities to another institution. In such cases, speed and
accuracy in accounting for the assets and liabilities being
transferred is critical to the consummation of the transaction.
Permitting the FDIC to rely on the account records facilitates these
transactions and prevents post-default fraudulent claims to increase
insurance coverage.
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    The recordkeeping requirements intentionally limit the FDIC's
ability to consider evidence outside the deposit account records of an
insured institution in determining the ownership of deposits. They
establish a presumption that deposited funds are actually owned in the
manner indicated on the account records. Those records are binding on
the depositor if they are ``clear and unambiguous.'' Id. at 330.4(a).
The FDIC has the discretion, however, to decide whether records are
clear and unambiguous. If the FDIC determines that the records are
unclear or ambiguous, then it may consider evidence other than the
deposit account records. The issue the FDIC has faced from time to time
is whether this discretion provides the FDIC with sufficient
flexibility to recognize beneficial and/or multiple ownership of
accounts when such ownership is not reflected on the bank or thrift's
deposit account records. In other words, if the deposit account records
are not unclear or ambiguous, the regulations restrict the FDIC from
considering extraneous evidence in determining the ownership interest
of the deposits, even if such evidence exists and would demonstrate
ownership other than that reflected in the institution's deposit
account records.
    A specific situation at a recent bank failure involved a deposit
account held by a title company as agent for customers in the process
of buying and selling houses. Because the bank's deposit account
records did not indicate the agency nature of the account, the funds
were deemed to be owned by the title company and insured to a limit of
$100,000; thus, the funds were not afforded the ``pass-through''
coverage (for each customer of the title company) that would have
applied if the bank's records had indicated that the title company was
acting as an agent.
    The revisions to the deposit insurance recordkeeping rules in the
proposed rule are intended to provide the FDIC with more flexibility in
considering the actual ownership interests in deposit accounts held by
fiduciaries and thereby prevent possible hardships. The approach used
in the proposed rule is to allow the FDIC to look beyond the deposit
accounts records of the depository institution where account titles are
indicative of a fiduciary relationship. Two examples would be accounts
held by escrow agents and those held by entities such as title
companies, who commonly hold funds for others.3 Another
situation would be where an account is held in the name of an entity,
or the nominee of that entity, whose primary business is to hold, for
safekeeping reasons, deposits for others.
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    \3\ This option also would encompass multi-tiered fiduciary
relationships where, for example, an agent maintains a deposit
account for a party who also is an agent. The current regulations
include special recordkeeping rules for such situations. 12 CFR
330.4(b)(3).
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    The FDIC received forty-two comments on the ANPR concerning this
possible revision to the insurance coverage recordkeeping rules. The
vast majority of those who commented encouraged the FDIC to revise the
recordkeeping rules to allow the FDIC more flexibility in determining
the ownership of account funds. Others commented that the FDIC should
relax the recordkeeping rules only if it can be done without increasing
the compliance burden on insured banks and thrifts.
    The FDIC requests specific comment on whether the recordkeeping
rules for ``multi-tiered fiduciary relationships'' should be revised.
12 CFR 330.4(b)(3). Those rules specify alternative requirements in
situations where a fiduciary is holding funds for another party who
also is a fiduciary. The rules were added to the FDIC's insurance
regulations in 1990 to codify the FDIC staff views on the recordkeeping
requirements for such multi-tiered (or multiple pass-through) fiduciary
accounts. Preliminarily, the FDIC believes that the rules provide
certainty to the industry on the subject and, thus, should be retained.
As indicated, however, the FDIC seeks comments on the necessity and
clarity of these special recordkeeping rules.
2. Treatment of Accounts Upon the Death of the Owner(s) of the Accounts
    Depending on the applicable state law, the ownership interest of a
deposit account often changes upon the death of the owner of a deposit
account. For deposit insurance purposes, the FDIC has adopted this
general principle of state law 4 and thus, under the FDIC's
current position, if the beneficiaries/executor of the decedent do not
act immediately after the decedent's death to restructure the
account(s), insurance coverage of the decedent's accounts may be
decreased, sometimes significantly. For example, if a husband and wife
hold a joint account, a POD account and two individual accounts in
their respective names, the death of one spouse would

[[Page 26438]]

result in the surviving spouse's becoming the sole owner of the joint
account and the POD account. Thus, the accounts would be aggregated
with the surviving spouse's individual account, possibly resulting in a
substantial reduction in insurance coverage.
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    \4\ The FDIC's insurance regulations provide that, while
ownership under state law is a necessary condition for deposit
insurance, ownership under state law is not decisive in determining
deposit insurance coverage. 12 CFR 330.3(h).
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    Over the years the FDIC has received several questions and
complaints about the treatment of deposit accounts, for deposit
insurance purposes, upon the death of the owner of the deposits. A
question of fairness has been raised about whether a survivor of a
decedent should be ``penalized'' for not rearranging the decedent's
bank accounts quickly enough after the decedent's death so as not to
cause a reduction in deposit insurance coverage. Some have complained
that time is needed after the death of an accountholder before proof
can be shown to the depository institution of the decedent's death.
Specifically, a delay is sometimes occasioned before death certificates
are available. Moreover, state laws are not consistent about when,
after the death of a depositor, the ownership interests in deposit
accounts actually change.
    The ANPR requested comment on whether the FDIC should provide a
``grace period'' after the death of a depositor during which the
accounts would be insured as if the depositor had not died. Almost all
of those who commented on this issue expressed support for such a grace
period, noting that it seemed fair and was within the FDIC's authority
to provide. The FDIC believes that there is merit in allowing survivors
a limited amount of time to attend to a decedent's deposit accounts,
particularly if in some situations the survivors would have no control
over the decedent's accounts until certain administrative and probate
requirements are satisfied. Although it is infrequent that a depositor
dies and his or her depository institution closes at or about the same
time, there have been and will be situations where individuals were and
will be faced with this unfortunate sequence of events. Although, for
purposes of national uniformity, the FDIC currently deems the ownership
interests in deposit accounts to change immediately upon the death of a
depositor, the laws of all the states are not uniform on this issue.
    For these reasons, the proposed rule would permit a six-month
period after the death of an accountholder during which time the
insurance coverage of the accounts in which the decedent has an
ownership interest would not change, unless those authorized to do so
restructure the account(s), thereby rendering the grace period
inapplicable.\5\ The use of the six-month grace period is not intended
to result in a reduction in coverage. The regulation therefore provides
that the grace period is optional and shall not be applied if the
result would be a decrease in deposit insurance coverage. The FDIC
specifically requests comment on whether the proposed six months is the
appropriate length of time for the grace period.
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    \5\ The former FSLIC, as a matter of policy, allowed a grace
period of six months following the death of a depositor for the
decedent's deposits to be restructured. If an insured thrift failed
during the grace period and additional insurance would be available
if the decedent had not died, the FSLIC insured the account(s) based
on the account ownership shown on the institution's records as if
the decedent were still living. The reason for the FSLIC policy was
to ``lessen the hardship'' that might be caused otherwise.
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3. The Rules on Living Trust Accounts
    A ``living trust'' is a formal trust in which the owner retains
control of the trust assets during his or her lifetime and designates
the beneficiaries of the assets upon his or her death. The owner may
revoke or change the terms of the trust during his or her lifetime. In
1993 the FDIC Legal Division prepared guidelines on the insurance of
revocable accounts, with an emphasis on living trusts. The guidelines
were updated in 1994. FDIC Adv. Op. 94-32 (May 18, 1994) (Guidelines).
The Guidelines are necessarily detailed and somewhat complex. At the
same time the Legal Division prepared the Guidelines, the FDIC also
adopted an informal policy not to review complex living trust documents
to determine POD coverage but, instead, to make copies of the
Guidelines available and recommend that persons inquiring about such
coverage consult with the lawyer who drafted the living trust. Despite
the availability of the FDIC's Guidelines and the existence of the
FDIC's current policy not to review trust documents, the FDIC still
receives numerous questions about the insurance of POD accounts held in
connection with living trusts.
    Over the years the FDIC has found that the vast majority of deposit
accounts held pursuant to a living trust are not eligible for insurance
coverage under the POD rules because the trusts contain ``defeating
contingencies.'' As explained in the Guidelines, a defeating
contingency exists when a named beneficiary in a living trust would
not, simply by operation of the settlor's death, become the owner of
the trust assets. A contingency of some sort has to be satisfied before
the beneficiary becomes entitled to the assets. One example would be
that the beneficiary must be married at the time of the settlor's death
to be entitled to the assets. The existence of a defeating contingency
in a living trust would disqualify the portion of the funds in the POD
account corresponding to the unqualified beneficiary for POD insurance
coverage treatment, because POD coverage is conditioned in part upon
the intention of the owner that the funds in the account pass to the
named beneficiary(ies) upon the owner's death. 12 CFR 330.8(a). In such
situations, the funds in the POD account corresponding to an
unqualified beneficiary would be treated as single-ownership funds of
the owner of the account. Id. at 330.8(b).
    Because, in the FDIC's experience, it seems that at least a
majority of POD accounts held in connection with living trusts do not
qualify for POD coverage, an argument can be made that, to avoid
depositor confusion, the FDIC should simply amend its regulations to
indicate accounts held pursuant to living trusts would not qualify for
insurance coverage under the POD account category. In fact, the FDIC
suggested this option in the ANPR. As indicated in some of the comments
received on this alternative, however, the POD coverage category is
broader than just POD accounts and includes all types of accounts held
in connection with revocable trusts that satisfy the requirements in
the POD insurance coverage regulations. It seems inappropriate,
therefore, to exclude accounts held in connection with living trusts
from POD insurance treatment where the requirements of the regulation
are otherwise satisfied.
    As an alternative to eliminating the living trust deposit accounts
from the POD insurance category, the FDIC is proposing to amend the POD
rules to indicate that those rules might apply to accounts held in
connection with living trusts, but only if the requirements of the POD
regulation are satisfied. The revised rules would specify that the
existence of a ``defeating contingency'' would prevent corresponding
funds in a POD account from receiving POD deposit insurance coverage,
as to the beneficiary whose interest in the assets of the living trust
is subject to the defeating contingency.

Other Possible Substantive Changes Mentioned in the ANPR

    In the ANPR the FDIC requested comments on three additional
possible substantive revisions to the deposit insurance rules. For the
reasons indicated below, however, those possible revisions are not
included as part of the proposed rule.

[[Page 26439]]

1. The Joint Account Rules
    Joint ownership is one of the account categories that qualifies for
separate insurance coverage. 12 CFR 330.7. Thus, a depositor who has an
individual deposit and interests in joint accounts at the same insured
bank or thrift is insured for up to $100,000 per category of account.
Currently deposit insurance for joint accounts is determined by a two-
step process: first, all joint accounts that are identically owned
(i.e., held by the same combination of individuals) are added together
and the combined total is insurable up to the $100,000 maximum; second,
each person's interests in joint accounts involving different
combinations of individuals are combined and the total is insured up to
the $100,000 maximum. The general rules are: (1) No one joint account
can be insured for over $100,000, (2) multiple joint accounts with
identical ownership cannot be insured for over $100,000 in the
aggregate, and (3) no one person's insured interest in the joint
account category can exceed $100,000.
    These rules governing joint accounts are somewhat complex and
sometimes misunderstood by both consumers and bankers. Thus, in the
ANPR the FDIC raised the possibility of simplifying the current joint
account rules by eliminating the first step of the two-step process.
Under this alternative, all funds held in joint accounts would be
allocated among the owners and each owner's interests in all joint
accounts (held at the same depository institution) would be added and
insured up to $100,000 in the aggregate. The ANPR comments on this
possible revision to the joint account rules were uniformly favorable.
Members of the banking industry and others, however, have raised
questions about the potential ``moral hazard'' of expanding deposit
insurance coverage beyond current limits. The moral hazard exists, in
this context, because insured depositors do not have an incentive to
monitor and discipline their institutions. The managers of those
insured banks and thrifts, consequently, may take more risks than they
otherwise would. Members of Congress also have expressed concerns about
expanding federal deposit insurance coverage. Moreover, there are
legislative proposals that take the opposite approach by seeking to
limit FDIC insurance.
    The FDIC acknowledges that, while the possible amendment to the
joint account rules mentioned in the ANPR would simplify and likely
improve public understanding of the joint account rules, it also could
increase deposit insurance coverage significantly. For example, under
the current rules a qualifying joint deposit account held by A&B for
$200,000 would be insured for $100,000 based on the ``step one'' rule
that no joint account owned by the same combination of individuals can
be insured for more than $100,000. If step one were eliminated, that
same account would be insured for up to $200,000. In this connection,
the staff of the Board of Governors of the Federal Reserve System
performed an analysis in 1992 in conjunction with the FDIC study, The
Costs, Feasibility and Privacy Implications of Tracking Deposits. The
Federal Reserve analysis concluded that eliminating step one of the
joint account rules would result in a $22 billion increase in insurance
coverage. Although the FDIC is uncertain that the Federal Reserve
analysis is an accurate measurement of the potential increase in
deposit insurance, the analysis raises concerns that require further
consideration.
    For these reasons, the FDIC has decided to further study the
policy, economic and other implications of eliminating step one of the
joint account rules. The FDIC staff will conduct such a study and
report its findings to the Board. The objective is to simplify the
joint account rules without significantly increasing deposit insurance.
2. The Rules on ``Payable on Death'' Accounts
    The insurance rules provide for separate coverage for funds owned
by an individual and deposited into any account commonly referred to as
a ``payable-on-death'' account, tentative or ``Totten'' trust account,
revocable trust account, or similar account (POD accounts). 12 CFR
330.8. The regulation limits qualifying beneficiaries to the owner's
spouse, children and grandchildren. Id. at 330.8(a). The owner is
insured up to $100,000 as to each such named qualifying beneficiary,
separately from any other accounts of the owner or the beneficiaries.
Thus, if the individual names his spouse, three children and two
grandchildren as beneficiaries, the account would be insured up to
$600,000, assuming the other requirements of the regulation are
satisfied. Over the years the FDIC has received numerous questions on
why other types of relatives of POD account owners are not included
within the qualifying degree of kinship. Thus, in the ANPR the FDIC
requested comment on whether and, if so, how the POD insurance rules
should be changed. The FDIC received fifty-one ANPR comments on this
issue. The majority of those who commented encouraged the FDIC to
expand the qualifying beneficiaries to include those likely to be named
by a POD account owner/settlor. Others commented that the current rules
seem fair and should be retained. As with the possible amendments to
the joint account rules mentioned in the ANPR, however, members of the
banking industry and others have raised questions about the potential
``moral hazard'' of expanding deposit insurance coverage. Members of
Congress also have expressed concerns about expanding federal deposit
insurance.
    Expanding the list of qualifying beneficiaries in the POD accounts
rules would provide additional depositors with access to POD insurance
and could significantly expand the scope of deposit insurance. Thus, at
this time the FDIC believes that the best alternative is to retain the
current POD rules and to continue to study the nature and scope of POD
coverage. The staff will conduct such a study and report its findings
to the Board.
3. Statutory Requirements Regarding Employee Benefit Plans
    Under an amendment to the FDI Act made by FDICIA, pass-through
insurance coverage is not available to employee benefit plan deposits
that are accepted by an insured bank or thrift when the institution
does not meet prescribed capital requirements. 12 U.S.C. 1821(a)(1)(D).
If an institution accepts employee benefit plan deposits at a time when
it is not sufficiency capitalized, such deposits are insured only up to
$100,000 per plan (as opposed to $100,000 per participant of the plan).
This FDICIA-originated provision is the only one in the FDI Act and the
FDIC's regulations to base insurance coverage on the capital
sufficiency of the insured institution where the deposits are placed.
Section 330.12 of the FDIC's insurance regulations implements this
statutory limitation on pass-through coverage for employee benefit plan
deposits. 12 CFR 330.12. The FDIC believes that the statute is complex
and difficult for the industry and the public to understand.
    The FDIC raised this matter in the ANPR. Based on the varied
comments received, the FDIC intends to study the issue further to
determine what, if any, action need be taken by the FDIC.

Section-by-Section Discussion of the Proposed Rule

    The following is an identification and, where appropriate, an
explanation of the various proposed revisions to each section of the
FDIC's insurance regulations.

[[Page 26440]]

Section 330.1--Definitions
    Various clarifying and technical changes are proposed to be made to
this definitional section of part 330. Some definitions provided in
other provisions of part 330 (for example, the definition of
``independent activity'' in section 330.9) are moved to this section.
The definition of ``Corporation'' (meaning the FDIC) is added to the
section.
Section 330.2--Authority and Purpose
    This section is reduced to simply stating the purpose of part 330.
The narrative description of the FDIC's authority to issue deposit
insurance regulations is eliminated as no longer necessary.
Section 330.3--General Principles
    Certain examples are added to this section. Because of its
importance, paragraph (g) on the continuation of separate insurance
after a merger of depository institutions is moved to a new separate
Sec. 330.4. The rules on the insurance coverage of bank investment
contracts and the relevant definitions are moved from the current
Sec. 330.13 to this section. Section 330.13 is thereby eliminated.
    A new paragraph (j) is added to provide a six-month grace period
for insurance coverage after a deposit owner dies, if allowing for such
a grace period would not result in a reduction of insurance coverage.
Section 330.4--Continuation of Separate Deposit Insurance After Merger
of Insured Depository Institutions
    This is a new section comprised of the provisions in the current
Sec. 330.3(g). The FDIC receives numerous questions on the deposit
insurance implications of bank mergers and acquisitions. It seems
appropriate for these provisions to be contained in a separate, more
easily accessible section of the regulations.
Section 330.5--Recognition of Deposit Ownership and Recordkeeping
Requirements
    The section would amend the current Sec. 330.4. The recordkeeping
requirements would be amended to provide an exception to the general
rule that the deposit account records of a depository institution must
expressly disclose the existence of a fiduciary relationship in order
for the FDIC to recognize the fiduciary nature of the account. The
exception provides that the general requirement would not apply if the
FDIC determines, in its discretion, that the titling of the account and
the underlying deposit account records of the depository institution
indicate the existence of a fiduciary relation. The section specifies
that the exception might apply, for example, where the deposit account
title or records indicate that the account is held by an escrow agent,
title company, or an entity (or its agent or nominee) whose business is
to hold, for safekeeping reasons, deposits for others.
    This section also would be amended to allow for the grace period
provided for in the proposed Sec. 330.3(j).
Section 330.6--Single Ownership Accounts
    This is essentially the same as the current Sec. 330.5. The
language has been modified slightly and an example is provided. Also,
the ``decedent's account'' provision in this section would cross-
reference the grace period provided for in the proposed Sec. 330.3(j).
Section 330.7--Accounts Held by an Agent, Nominee, Guardian, Custodian
or Conservator
    This is the current Sec. 330.6. The language of the section has
been modified slightly. The provision on mortgage servicing accounts
has been clarified to indicate that such accounts are not entitled to
separate insurance, but are insured as custodial accounts under the
general rules of the section. The provision on annuity contract
accounts has been moved to a new, separate Sec. 330.8.
Section 330.8--Annuity Contract Accounts
    This is a new section comprised of the provisions in current
Sec. 330.6(f). Funds in such accounts are entitled to separate
insurance coverage. It is appropriate, therefore, that the provisions
be in a separate section of the regulations.
Section 330.9--Joint Ownership Accounts
    This is the current Sec. 330.7. Examples have been added to
illustrate how the joint account rules operate. The language of other
parts of the section has been modified.
Section 330.10--Revocable Trust Accounts
    This is the current Sec. 330.8. Examples are provided on the
general rule and the rule involving the interests of nonqualifying
beneficiaries. A paragraph on living trusts has been added to clarify
when accounts held in connection with living trusts would be insured
under this provision. Other parts of the section have been clarified.
Section 330.11--Accounts of a Corporation, Partnership or
Unincorporated Association
    These are the rules currently provided in Sec. 330.9. The
definition of ``independent activity'' is moved to Sec. 330.1. The
language of other parts of the section has been modified slightly.
Section 330.12--Accounts Held by a Depository Institution as the
Trustee of an Irrevocable Trust
    This is the current Sec. 330.10. The language is modified slightly.
Section 330.13--Irrevocable Trust Accounts
    This is the current Sec. 330.11. The definitions of ``trust
interest'' and ``non-contingent trust interest'' are moved to
Sec. 330.1. The language of other parts of the section is modified
slightly.
Section 330.14--Retirement and Other Employee Benefit Plan Accounts
    This is the current Sec. 330.12. No changes are proposed to this
provision.
The Current Section 330.13--Bank Investment Contracts
    The substantive parts of this regulation are moved to Sec. 330.1
and the remainder is eliminated. The FDIC is proposing to delete this
section because it is largely definitional and essentially reiterates
the corresponding statutory provisions.
Section 330.15--Public Unit Accounts
    This is the current Sec. 330.14 and is essentially unchanged.
The Current Section 330.15--Notice to Depositors
    The FDIC proposes to eliminate this section as no longer necessary.
Section 330.16--Effective Dates
    Changes have been made to this section to indicate that the
designated effective dates apply to former changes to part 330. The
FDIC proposes to retain the substance of this section because the
effective dates might be relevant in connection with time deposits
issued prior to December 19, 1991, that have not yet matured.

Request for Comment

    The Board of Directors of the FDIC is seeking comment on all of the
above-mentioned possible means of simplifying the deposit insurance
rules, including the likely effect of such changes on consumers and the
banking industry. Comments are specifically requested on the identified
proposed substantive revisions. The Board also is seeking suggestions
on any other ways

[[Page 26441]]

that the rules might be streamlined, simplified or clarified.

Paperwork Reduction Act

    The proposed rule is intended to simplify the rules governing FDIC
deposit insurance. No collections of information pursuant to the
Paperwork Reduction Act are contained in the proposed rule.
Consequently, no information has been submitted to the Office of
Management and Budget for review.

Regulatory Flexibility Act

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

List of Subjects in 12 CFR Part 330

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

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

PART 330--DEPOSIT INSURANCE COVERAGE

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

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

Sec. 330.1  Definitions.

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

Sec. 330.2  Purpose.

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

Sec. 330.3  General principles.

    (a) Ownership rights and capacities. The insurance coverage
provided by the Act and this part are based upon the ownership rights
and capacities in which deposit accounts are maintained at insured
depository institutions. All deposits in an insured depository
institution which are maintained in the same right and capacity (by or
for the benefit of a particular depositor or depositors) shall be added
together and insured in accordance with this part. Deposits maintained
in different rights and capacities, as recognized under this part,
shall be insured separately from each other. (Example: single ownership
accounts and joint ownership accounts are insured separately from each
other.)
    (b) Deposits maintained in separate insured depository institutions
or in separate branches of the same insured depository institution. Any
deposit accounts maintained by a depositor at one insured depository
institution are insured separately from, and without regard to, any
deposit accounts that the same depositor maintains at any other
separately chartered and insured depository institution, even if two or
more separately chartered and insured depository institutions are
affiliated through common ownership. (Example: Deposits held by the
same individual at two different banks owned by the same bank holding
company would be insured separately, per bank.) The deposit accounts of
a depositor maintained in the same right and capacity at different
branches or offices of the same insured depository institution are not
separately insured; rather they shall be added together and insured in
accordance with this part.

[[Page 26442]]

    (c) Deposits maintained by foreigners and deposits denominated in
foreign currency. The availability of deposit insurance is not limited
to citizens and residents of the United States. Any person or entity
that maintains deposits in an insured depository institution is
entitled to the deposit insurance provided by the Act and this part. In
addition, deposits denominated in a foreign currency shall be insured
in accordance with this part. Deposit insurance for such deposits shall
be determined and paid in the amount of United States dollars that is
equivalent in value to the amount of the deposit denominated in the
foreign currency as of close of business on the date of default of the
insured depository institution. The exchange rates to be used for such
conversions are the 12 p.m. rates (the ``noon buying rates for cable
transfers'') quoted for major currencies by the Federal Reserve Bank of
New York on the date of default of the insured depository institution,
unless the deposit agreement specifies that some other widely
recognized exchange rates are to be used for all purposes under that
agreement, in which case, the rates so specified shall be used for such
conversions.
    (d) Deposits in insured branches of foreign banks. Deposits in an
insured branch of a foreign bank which are payable by contract in the
United States shall be insured in accordance with this part, except
that any deposits to the credit of the foreign bank, or any office,
branch, agency or any wholly owned subsidiary of the foreign bank,
shall not be insured. All deposits held by a depositor in the same
right and capacity in more than one insured branch of the same foreign
bank shall be added together for the purpose of determining the amount
of deposit insurance.
    (e) Deposits payable solely outside of the United States and
certain other locations. Any obligation of an insured depository
institution which is payable solely at an office of such institution
located outside the States of the United States, the District of
Columbia, Puerto Rico, Guam, the Commonwealth of the Northern Mariana
Islands, American Samoa, the Trust Territory of the Pacific Islands,
and the Virgin Islands, is not a deposit for the purposes of this part.
    (f) International banking facility deposits. An ``international
banking facility time deposit'', as defined by the Board of Governors
of the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or
in any successor regulation, is not a deposit for the purposes of this
part.
    (g) Bank investment contracts. As required by section 11(a)(8) of
the Act (12 U.S.C. 1828(a)(8)), any liability arising under any
investment contract between any insured depository institution and any
employee benefit plan which expressly permits ``benefit responsive
withdrawals'' or transfers (as defined in section 11(a)(8) of the Act)
are not insured deposits for purposes of this part. The term
``substantial penalty or adjustment'' used in section 11(a)(8) of the
Act means, in the case of a deposit having an original term which
exceeds one year, all interest earned on the amount withdrawn from the
date of deposit or for six months, whichever is less; or, in the case
of a deposit having an original term of one year or less, all interest
earned on the amount withdrawn from the date of deposit or three
months, whichever is less.
    (h) Application of state or local law to deposit insurance
determinations. In general, deposit insurance is for the benefit of the
owner or owners of funds on deposit. However, while ownership under
state law of deposited funds is a necessary condition for deposit
insurance, ownership under state law is not sufficient for, or decisive
in, determining deposit insurance coverage. Deposit insurance coverage
is also a function of the deposit account records of the insured
depository institution, of recordkeeping requirements, and of other
provisions of this part, which, in the interest of uniform national
rules for deposit insurance coverage, are controlling for purposes of
determining deposit insurance coverage.
    (i) Determination of the amount of a deposit--(1) General rule. The
amount of a deposit is the balance of principal and interest
unconditionally credited to the deposit account as of the date of
default of the insured depository institution, plus the ascertainable
amount of interest to that date, accrued at the contract rate (or the
anticipated or announced interest or dividend rate), which the insured
depository institution in default would have paid if the deposit had
matured on that date and the insured depository institution had not
failed. In the absence of any such announced or anticipated interest or
dividend rate, the rate for this purpose shall be whatever rate was
paid in the immediately preceding payment period.
    (2) Discounted certificates of deposit. The amount of a certificate
of deposit sold by an insured depository institution at a discount from
its face value is its original purchase price plus the amount of
accrued earnings calculated by compounding interest annually at the
rate necessary to increase the original purchase price to the maturity
value over the life of the certificate.
    (3) Waiver of minimum requirements. In the case of a deposit with a
fixed payment date, fixed or minimum term, or a qualifying or notice
period that has not expired as of such date, interest thereon to the
date of closing shall be computed according to the terms of the deposit
contract as if interest had been credited and as if the deposit could
have been withdrawn on such date without any penalty or reduction in
the rate of earnings.
    (j) Continuation of insurance coverage following the death of a
deposit owner. When a deposit owner dies, eligibility for the category
of insurance coverage of the account(s) owned by that person shall be
unaffected until the earlier of: the restructuring of the account(s) or
six months after the death of the deposit owner. The operation of this
grace period, however, shall not result in a reduction of coverage
during the six-month period, unless the account(s) is (are)
restructured. If an account is not withdrawn or restructured within six
months after the depositor's death, the insurance shall be provided on
the basis of actual ownership in accordance with the provisions of
Sec. 330.5(a)(1).

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

    Whenever the liabilities of one or more insured depository
institutions for deposits are assumed by another insured depository
institution, whether by merger, consolidation, other statutory
assumption or contract:
    (a) The insured status of the institutions whose liabilities have
been assumed terminates on the date of receipt by the FDIC of
satisfactory evidence of the assumption; and
    (b) The separate insurance of deposits assumed continues for six
months from the date the assumption takes effect or, in the case of a
time deposit, the earliest maturity date after the six-month period. In
the case of time deposits which mature within six months of the date
the deposits are assumed and which are renewed at the same dollar
amount (either with or without accrued interest having been added to
the principal amount) and for the same term as the original deposit,
the separate insurance applies to the renewed deposits until the first
maturity date after the six-month period. Time deposits that mature
within six months of the deposit assumption and that are renewed on any
other basis, or that are not renewed and thereby become demand
deposits, are separately insured only until the end of the six-month
period.

[[Page 26443]]

Sec. 330.5  Recognition of deposit ownership and recordkeeping
requirements.

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

Sec. 330.6  Single ownership accounts.

    (a) Individual accounts. Funds owned by a natural person and
deposited in one or more deposit accounts in his or

[[Page 26444]]

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

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

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

Sec. 330.8  Annuity contract accounts.

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

Sec. 330.9  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether
owned as joint tenants with right of survivorship, as tenants in common
or as tenants by the entirety, shall be insured separately from any
individually owned (single ownership) deposit accounts maintained by
the co-owners. (Example: If A has a single ownership account and also
is a joint owner of a qualifying joint account, A's interest in the
joint account would be insured separately from his or her interest in
the individual account.) Qualifying joint accounts in the names of both
husband and wife which are comprised of community property funds shall
be added together and insured up to $100,000, separately from any funds
deposited into accounts bearing their individual names.
    (b) Determination of insurance coverage. Step one: all qualifying
joint accounts owned by the same combination of individuals shall first
be added together and insurable up to $100,000 in the aggregate.
(Example: A qualifying joint account owned by ``A&B'' would be added to
a qualifying joint account owned by ``B&A'' and the insurable limit on
the combined balances in those accounts would be $100,000.) Step two:
the interests of each co-owner in all qualifying joint accounts,
whether owned by the same or different combinations of persons, shall
then be added together and the total shall be insured up to $100,000.
(Example: ``A&B'' have a qualifying joint account with a balance of
$100,000; ``A&C'' have a qualifying joint account with a balance of
$150,000; and ``A&D''

[[Page 26445]]

have a qualifying joint account with a balance of $100,000. The balance
in the account owned by ``A&C'' exceeds $100,000, so under step one the
excess amount, $50,000, would be uninsured. A's combined ownership
interests in the insurable amounts in the accounts would be $150,000,
of which under step two $100,000 would be insured and $50,000 would be
uninsured; B's ownership interest would be $50,000, all of which would
be insured; C's insurable ownership interest would be $50,000, all of
which would be insured; and D's ownership interest would be $50,000,
all of which would be insured.)
    (c) Qualifying joint accounts. (1) A joint deposit account shall be
deemed to be a qualifying joint account, for purposes of this section,
only if:
    (i) All co-owners of the funds in the account are ``natural
persons'' (as defined in Sec. 330.1); and
    (ii) Each co-owner has personally signed a deposit account
signature card; and
    (iii) Each co-owner possesses withdrawal rights on the same basis.
    (2) The signature-card requirement of paragraph (c)(1)(ii) of this
section shall not apply to certificates of deposit, to any deposit
obligation evidenced by a negotiable instrument, or to any account
maintained by an agent, nominee, guardian, custodian or conservator on
behalf of two or more persons.
    (3) All deposit accounts that satisfy the criteria in paragraph
(c)(1) of this section, and those accounts that come within the
exception provided for in paragraph (c)(2) of this section, shall be
deemed to be jointly owned provided that, in accordance with the
provisions of Sec. 330.5(a), the FDIC determines that the deposit
account records of the insured depository institution are clear and
unambiguous as to the ownership of the accounts. If the deposit account
records are ambiguous or unclear as to the manner in which the deposit
accounts are owned, then the FDIC may, in its sole discretion, consider
evidence other than the deposit account records of the insured
depository institution for the purpose of establishing the manner in
which the funds are owned. The signatures of two or more persons on the
deposit account signature card or the names of two or more persons on a
certificate of deposit or other deposit instrument shall be conclusive
evidence that the account is a joint account (although not necessarily
a qualifying joint account) unless the deposit records as a whole are
ambiguous and some other evidence indicates, to the satisfaction of the
FDIC, that there is a contrary ownership capacity.
    (d) Nonqualifying joint accounts. A deposit account held in two or
more names which is not a qualifying joint account, for purposes of
this section, shall be treated as being owned by each named owner, as
an individual, corporation, partnership, or unincorporated association,
as the case may be, and the actual ownership interest of each
individual or entity in such account shall be added to any other single
ownership accounts of such individual or other accounts of such entity,
and shall be insured in accordance with the rules in this part
governing the insurance of such accounts.
    (e) Determination of interests. The interests of the co-owners of
qualifying joint accounts, held as tenants in common, shall be deemed
equal, unless otherwise stated in the depository institution's deposit
account records. This section applies regardless of whether the
conjunction ``and'' or ``or'' is used in the title of a joint deposit
account, even when both terms are used, such as in the case of a joint
deposit account with three or more co-owners.

Sec. 330.10  Revocable trust accounts.

    (a) General rule. Funds owned by an individual and deposited into
an account evidencing an intention that upon the death of the owner the
funds shall belong to one or more qualified beneficiaries shall be
insured in the amount of up to $100,000 in the aggregate as to each
such named qualifying beneficiary, separately from any other accounts
of the owner or the beneficiaries. For purposes of this provision, the
term ``qualifying beneficiaries'' means the owner's spouse, child/
children or grandchild/grandchildren. (Example: If A establishes a
qualifying account payable upon death to his spouse, two children and
one grandchild, assuming compliance with the rules of this provision,
the account would be insured up to $400,000 separately from any other
different types of accounts either A or the beneficiaries may have with
the same depository institution.) Accounts covered by this provision
are commonly referred to as a tentative or ``Totten trust'' account,
``payable-on-death'' account, or revocable trust account.
    (b) Required intention. The required intention in paragraph (a) of
this section that upon the owner's death the funds shall belong to one
or more qualifying beneficiaries must be manifested in the title of the
account using commonly accepted terms such as, but not limited to, ``in
trust for'', ``as trustee for'', ``payable-on-death to'' or any acronym
therefor. In addition, the beneficiaries must be specifically named in
the deposit account records of the insured depository institution. The
settlor of a revocable trust account shall be presumed to own the funds
deposited into the account.
    (c) Interests of nonqualifying beneficiaries. If a named
beneficiary of an account covered by this section is not a qualifying
beneficiary, the funds corresponding to that beneficiary shall be
treated as individually owned (single ownership) accounts of such
owner(s), aggregated with any other single ownership accounts of such
owners, and insured up to $100,000 per owner. (Examples: If A
establishes an account payable upon death to his or her nephew, the
account would be insured as a single ownership account owned by A.
Similarly, if B establishes an account payable upon death to her
husband, son and nephew, the POD account would be eligible for POD
coverage up to $200,000 corresponding to the two qualifying
beneficiaries (i.e., the spouse and child). The amount corresponding to
the non-qualifying beneficiary (i.e., the nephew) would be deemed to be
owned by B in her single-ownership capacity and insured accordingly.)
    (d) Joint revocable trust accounts. Where an account described in
paragraph (a) of this section is established by more than one owner and
held for the benefit of others, some or all of whom are within the
qualifying degree of kinship, the respective interests of each owner
(which shall be deemed equal unless otherwise stated in the insured
depository institution's deposit account records) held for the benefit
of each qualifying beneficiary shall be separately insured up to
$100,000. However, where a husband and a wife establish a revocable
trust account naming themselves as the sole beneficiaries, such account
shall not be insured according to the provisions of this section but
shall instead be insured in accordance with the joint account
provisions of Sec. 330.9.
    (e) Definition of ``children'' and ``grandchildren''. For the
purpose of establishing the qualifying degree of kinship set forth in
paragraph (a) of this section, the term ``children'' includes any
biological, adopted and step-children of the owner and
``grandchildren'' includes biological, adopted, or step-children of any
of the owner's children.
    (f) Living trusts. This section also applies to revocable trust
accounts held in connection with a so-called ``living trust'', a formal
trust which an owner creates and retains control over during his or her
lifetime. If a named

[[Page 26446]]

beneficiary in a living trust is a qualifying beneficiary under this
section, then the deposit account held in connection with the living
trust may be eligible for deposit insurance under this section,
assuming compliance with all the provisions of this part. If, however,
for example, the living trust includes a ``defeating contingent''
relative to that beneficiary's interest in the trust assets, then
insurance coverage under this section would not be provided. For
purposes of this section, a ``defeating contingency'' is generally
defined as a condition which would prevent the beneficiary from
acquiring a vested and non-contingent interest in the funds in the
deposit account upon the owner's death.

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

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

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

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

Sec. 330.13  Irrevocable trust accounts.

    (a) General rule. Funds representing the ``non-contingent trust
interest(s)'' (as defined in Sec. 330.1) of a beneficiary deposited
into one or more deposit accounts established pursuant to one or more
irrevocable trust agreements created by the same settlor(s)
(grantor(s)) shall be added together and insured up to $100,000 in the
aggregate. Such insurance coverage shall be separate from the coverage
provided for other accounts maintained by the settlor(s), trustee(s) or
beneficiary(ies) of the irrevocable trust(s) at the same insured
depository institution. Each ``trust interest'' (as defined in
Sec. 330.1) in any irrevocable trust established by two or more
settlors shall be deemed to be derived from each settlor pro rata to
his or her contribution to the trust.
    (b) Treatment of contingent trust interests. In the case of any
trust in which certain trust interests do not qualify as non-contingent
trust interests, the funds representing those interests shall be added
together and insured up to $100,000 in the aggregate. Such insurance
coverage shall be in addition to the coverage provided for the funds
representing non-contingent trust interests which are insured pursuant
to paragraph (a) of this section.
    (c) Commingled accounts of bankruptcy trustees. Whenever a
bankruptcy trustee appointed under Title 11 of the United States Code
commingles the funds of various bankruptcy estates in the same account
at an insured depository institution, the funds of each Title 11
bankruptcy estate will be added together and insured for up to
$100,000, separately from the funds of any other such estate.

[[Page 26447]]

Sec. 330.14  Retirement and other employee benefit plan accounts.

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

[[Page 26448]]

explanation of the requirements for pass-through deposit insurance
coverage provided in paragraphs (a) and (b) of this section; the
institution's PCA capital category, and a determination of whether or
not, in the depository institution's judgment, the funds being
deposited are eligible for ``pass-through'' insurance coverage.
    (ii) An insured depository institution shall provide the notice
required in paragraph (h)(2)(i) of this section to depositors who have
employee benefit plan deposits with the insured depository institution
on July 1, 1995 that, at the time such deposits were placed with the
insured depository institution, were not eligible for pass-through
insurance coverage under paragraphs (a) and (b) of this section. The
notice shall be provided to the applicable depositors within ten
business days after July 1, 1995.
    (3) Disclosure when ``pass-through'' coverage is no longer
available. Whenever new, rolled-over or renewed employee benefit plan
deposits placed with an insured depository institution would no longer
be eligible for ``pass-through'' insurance coverage, the institution
shall provide a clear and conspicuous written notice to all existing
depositors of employee benefit plan funds of its new PCA capital
category, if applicable, and that new, rolled-over or renewed deposits
of employee benefit plan funds made after the applicable date shall not
be eligible for ``pass-through'' insurance coverage under paragraphs
(a) and (b) of this section. Such written notice shall be provided
within 10 business days after the institution receives notice or is
deemed to have notice that it is no longer permitted to accept brokered
deposits under section 29 of the Act and the institution no longer
meets the requirements in paragraph (b) of this section.
    (4) Definition of ``employee benefit plan''. For purposes of this
paragraph (h), the term ``employee benefit plan'' has the same meaning
as provided under paragraph (g)(2) of this section but also includes
any eligible deferred compensation plans described in section 457 of
the Internal Revenue Code of 1986 (26 U.S.C. 457).

Sec. 330.15  Public unit accounts.

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

[[Page 26449]]

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

Sec. 330.16  Effective dates.

    (a) Prior effective dates. Former Secs. 330.1(j), 330.10(a),
330.12(c), 330.12(d)(3) and 330.13 (See 12 CFR part 330, as revised
January 1, 1997.) became effective on December 19, 1993.
    (b) Time deposits. Except with respect to the provisions in former
Sec. 330.12 (a) and (b), (See 12 CFR part 330, as revised January 1,
1997.) and current Sec. 330.14 (a) and (b), any time deposits made
before December 19, 1991 that do not mature until after December 19,
1993, shall be subject to the rules as they existed on the date the
deposits were made. Any time deposits made after December 19, 1991 but
before December 19, 1993 shall be subject to the rules as they existed
on the date the deposits were made. Any rollover or renewal of such
time deposits prior to December 19, 1993 shall subject those deposits
to the rules in effect on the date of such rollover or renewal. With
respect to time deposits which mature only after a prescribed notice
period, the provisions of these rules shall be effective on the
earliest possible maturity date after June 24, 1993 assuming (solely
for purposes of this section) that notice had been given on that date.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 29th day of April, 1997.

    Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97-11965 Filed 5-13-97; 8:45 am]
BILLING CODE 6714-01-P
Last Updated 07/17/1999 communications@fdic.gov