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FDIC Federal Register Citations
[Federal Register: February 21, 2006 (Volume 71, Number 34)]
[Rules and Regulations]
[Page 8789-8792]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21fe06-1]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 307
RIN 3064-AC93
Certification of Assumption of Deposits and Notification of Changes of Insured Status
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The FDIC is adopting a final rule which clarifies and
simplifies the procedures to be used when all of the deposit
liabilities of an insured depository institution have been assumed by
another insured depository institution or institutions. The final
regulation would modify the current rule's requirements by: Making
clear that an insured institution is required to file a
``certification'' when all of its deposits are assumed, but no
certification is required if only a portion of its deposits are
assumed; and requiring that the transferring institution, or its legal
successor, file the certification rather than the assuming institution.
The rule also clarifies that the transferring institution's status as
an insured institution automatically terminates upon the FDIC's receipt
of an accurate certification stating that: All of its deposits have
been assumed by an insured depository institution or institutions, and
the legal authority of the transferring institution to accept deposits
has been terminated contemporaneously with the deposit assumption. In
such a situation, and in a situation in which the FDIC has been
appointed receiver of an insured institution, little practical purpose
would be served by an order terminating deposit insurance, and the
final rule provides that no such order will be issued in such
situations. Finally, the rule would provide more specificity concerning
how notice is given to depositors when an insured depository
institution voluntarily terminates its insured status without the
assumption of all of its deposits by an insured institution. In sum,
the revisions would make the insurance termination process somewhat
easier for insured depository institutions, and somewhat more efficient
for the FDIC.
DATES: This rule will be effective on March 23, 2006.
FOR FURTHER INFORMATION CONTACT: Donald R. Hamm, Review Examiner,
Division of Supervision and Consumer Protection, (202) 898-3528; Thomas
Nixon, Counsel, Legal Division, (202) 898-8766; Federal Deposit
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
On October 14, 2005, the FDIC published a notice of proposed
rulemaking concerning its Part 307 (12 CFR) ``Notification of Changes
in Insured Status.'' (70 FR 60015) The rule currently has two sections.
Section 307.1 applies to situations where one or more insured
institutions have assumed the deposit liabilities of another insured
institution. Section 307.2 applies to situations where an insured
institution seeks to terminate its insured status without its deposit
liabilities being assumed. The FDIC received no comments in response to
the notice of proposed rulemaking. The FDIC has determined to make its
October 2005 proposed revision to Part 307 final. A section-by-section
analysis follows.
II. Revised Caption; New Section 307.1--Scope and Purpose
The caption of the Part would be changed from ``Notification of
Changes of Insured Status'' to ``Certification of Assumption of
Deposits and Notification of Changes of Insured Status'' to make it
more descriptive of the Part's content and alert institutions that the
Part addresses deposit assumptions as well as changes in insured
status.
The current Part 307 does not have a scope and purpose section. In
addition, since Part 307 had not been revised since 1983, Sec. Sec.
307.1 and 307.2 continued to refer to an ``insured bank'' rather than
to an ``insured depository institution,'' consistent with the changes
made to the FDIC's responsibilities and terminology by sections 201 and
202 of the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989.\1\ The final rule adds a new Sec. 307.1 to describe the
purpose of the Part and to indicate that the Part applies to insured
depository institutions as defined in section 3(c)(2) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(c)(2), FDI Act). The existing
Sec. Sec. 307.1 and 307.2 are redesignated as Sec. Sec. 307.2 and
307.3, respectively.
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\1\ Pub. L. 101-73, 103 Stat. 103.
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III. Section 307.2--Certification of Assumption of Deposit Liabilities
The current section 307.1 implements section 8(q) of the FDI Act
(12 U.S.C. 1818(q)), which states:
Whenever the liabilities of an insured depository institution
for deposits shall have been assumed by another insured depository
institution or depository institutions, whether by way of merger,
consolidation, or other statutory assumption, or pursuant to
contract
(1) The insured status of the depository institution whose
liabilities are so assumed shall terminate on the date of receipt by
the Corporation of satisfactory evidence of such assumption;
(2) The separate insurance of all deposits so assumed shall
terminate at the end of six months from the date such assumption
takes effect or, in the case of any time deposit, the earliest
maturity date after the six-month period * * *
All assumptions of insured deposit liabilities, whether a ``total''
assumption of all the transferring institution's deposits or an
assumption of only a portion of its deposits (a ``partial''
assumption), by an insured institution are subject to the Bank Merger
Act and require the prior written approval of the ``responsible
agency.'' \2\ The responsible agency is the primary Federal regulator
of the assuming institution.
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\2\ FDI Act section 18(c)(2), (12 U.S.C. 1828(c)(2)), reads as
follows:
No insured depository institution shall merge or consolidate
with any other insured depository institution or, either directly or
indirectly, acquire the assets of, or assume liability to pay any
deposits made in, any other insured depository institution except
with the prior written approval of the responsible agency * * *
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The present section 307.1 requires the institution assuming
deposits to certify to the FDIC that it has assumed the deposits. It
does not specify whether a certification is required only where a total
deposit assumption occurs or
[[Page 8790]]
whether a certification is also required for a partial deposit
assumption, for example, when a single branch of an institution is
sold. This rule clarifies that a certification is required only when
there has been a total assumption of deposits. No certification is
required in the case of a partial transfer of deposits. Clarifying that
no certification is necessary for a partial assumption is consistent
with the FDIC's goal of reducing regulatory burden pursuant to Section
2222 of the Economic Growth and Regulatory Paperwork Reduction Act of
1996 \3\ while obtaining sufficient information for the proper
implementation of section 8(q) of the FDI Act.
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\3\ Pub. L. 104-208, Sept. 30, 1996, 12 U.S.C. 3311.
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There may be situations in which an insured depository institution
disposes of all of its deposits through a series of simultaneous
partial deposit assumptions involving multiple assuming institutions,
rather than through a single total deposit assumption by one assuming
institution. An example of this would be where all of the deposits of a
transferring institution were assumed through a series of branch
acquisitions by different assuming institutions that occurred on the
same day. Viewed cumulatively, these partial assumptions would amount
to a total assumption of the deposits of the transferring institution
making certification necessary. In this situation, this final rule
would require that the transferring institution file a certification.
The current section 307.1 also does not distinguish between a
deposit assumption involving operating institutions versus an
assumption involving an institution in default and in FDIC
receivership. The FDIC plays an integral role in the transfer and
assumption of deposit liabilities when it is appointed as receiver for
an insured depository institution in default, and has in its possession
information regarding the deposit transfer and assumption transaction.
Section 307.2(a) of this final rule creates an explicit exception from
the certification requirement when the deposit liabilities are being
transferred from an insured depository institution in default and the
FDIC has been appointed as receiver.
Who must make the certification. As noted, the current section
307.1 requires the assuming institution to provide certification to the
FDIC. This final rule requires the transferring institution, or its
legal successor (``transferring institution''), to make the
certification. Generally, an institution transferring deposit
liabilities will be in a better position than the assuming institution
to know whether the transfer constitutes all of its deposits, thus
triggering application of Part 307 and FDI Act section 8(q). This is
particularly true in the case of an institution that transfers all of
its deposit liabilities through multiple transfers to a variety of
assuming institutions. In such a situation, it may be difficult for the
assuming institutions to have sufficient knowledge of key facts in
order to make certifications that make clear whether the transferring
institution continues to hold insured deposits. In a merger or
consolidation there may be only one surviving entity which is the legal
successor to both the transferring and assuming institutions. In such
instances, that surviving entity would provide any required
certification.
Content and form of the certification. Section 307.2(b) of this
final rule establishes the certification's content. The requirements
are similar to the current section 307.1 but clarify certain issues,
such as where certifications should be filed with the FDIC, and the
need for the certification to be on the letterhead of the transferring
institution or its legal successor and to be signed by an authorized
official. The rule also requires an institution that is
contemporaneously relinquishing its authority to engage in the business
of receiving deposits to provide the date that its authority terminated
(or will terminate) as well as the method of termination (e.g., whether
by the surrender of its charter, the cancellation of its charter or
license to conduct a banking business, or otherwise). As discussed
below, this information will be used by the FDIC to evaluate the need
to issue an order terminating insurance. To assist the industry with
compliance, the rule provides a template (Appendix A) that may be used
to satisfy the section 307.2 certification requirements.
Evidence of Assumption. Similar to the current section 307.1,
section 307.2(d) of this final rule states that the receipt by the FDIC
of an accurate certification for a total assumption as required by
paragraphs (a), (b) and (c) of section 307.2 shall constitute
satisfactory evidence of such deposit assumption, as required by
section 8(q) of the FDI Act, and the insured status of the transferring
institution shall terminate on the date of the receipt of the
certification. The term ``accurate'' has been included to indicate that
a materially inaccurate certification will not trigger the automatic
termination of the transferring institution's insured status. Section
307.2(d) allows the FDIC to consider other evidence, in addition to a
certification, of a total deposit assumption to constitute satisfactory
evidence of an assumption for the purposes of section 8(q).
Issuance of an Order. As noted in the October 2005 notice of
proposed rulemaking, section 8(q) can be construed as automatically
terminating an institution's insured status upon the FDIC's receipt of
satisfactory evidence of a total assumption. The FDIC did not generally
issue orders terminating the insured status of transferring
institutions before 1983 when the rule was last revised, and the
current section 307.1 does not discuss the issuance of such orders. In
most cases of total deposit assumptions, the transferring institution's
authority to engage in banking is contemporaneously cancelled. In such
a situation, an FDIC order terminating insurance has no practical
effect and is unnecessary. Accordingly, under this final rule no order
terminating an institution's insured status will generally be issued
when the transferring institution's authority to engage in banking is
cancelled contemporaneously (i.e., generally within five business days
after all deposits have been assumed). The rule also will not require
orders when deposits are transferred and assumed after a default when
the FDIC has been appointed as receiver of an insured institution.
The rule does provide for the issuance of an FDIC order terminating
the insured status of a transferring institution in the relatively
limited circumstance in which a total transfer of deposit liabilities
has occurred but the transferring institution's charter is not
contemporaneously cancelled (the proposed rule had referred to this as
an order confirming the termination of insurance). Absent the entry of
an order terminating insured status, an institution in such a situation
might attempt to resume accepting deposits sometime after the
assumption transaction occurs. An institution might also attempt to
sell its charter, which could allow what is in fact a new entity to
conduct banking operations without FDIC review and approval.\4\
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\4\ Such a sale would require prior approval by the primary
Federal regulator under the Bank Merger Act or the Change in Bank
Control Act.
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IV. Section 307.3--Notice to Depositors When Insurance Is Voluntarily
Terminated and Deposits Are Not Assumed
An insured depository institution that proposes to voluntarily
terminate its insured status without transferring all of its deposits
to an FDIC-insured
[[Page 8791]]
institution must obtain the FDIC's permission.\5\ The current Sec.
307.2 requires an insured bank or insured branch of a foreign bank
seeking to voluntarily terminate its insured status, but whose deposits
will not be assumed by another insured depository institution, to
provide notice to its depositors of the date its insured status will
terminate. A copy of this notice must be provided to and approved by
the appropriate Regional Director of the Division of Supervision and
Consumer Protection prior to the notice being distributed to the
institution's depositors. This final rule clarifies that the notice
must be on the institution's letterhead, signed by a duly authorized
officer and sent to the depositor's last known address on the
institution's books. To assist the industry with compliance, the rule
provides a template (Appendix B) that may be used to satisfy the
section 307.3 certification requirements.
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\5\ FDI Act section 18(i)(3), 12 U.S.C. 1828(i)(3). This rule
does not affect the requirements for FDIC approval of voluntary
deposit insurance terminations under sections 8(a) and 8(p) of the
FDI Act or for prior written consent for the conversion of an
insured depository institution into a noninsured bank or institution
as required by section 18(i)(3).
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V. Regulatory Analysis and Procedure
A. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.), the FDIC may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid Office of Management and Budget (OMB) control number.
The collection of information contained in this rule was submitted to
OMB for review and was approved under control number 3064-0124, which
will expire on December 31, 2008.
B. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), the FDIC certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
The rule will reduce regulatory burden by eliminating the need for a
certification to be filed with the FDIC when the liability for some,
but not all, of the deposits of an insured institution are transferred
to another institution. A certification requires a minimal amount of
time and resources since it reports information readily available to
the institution making the certification.
C. Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA) (Title II, Pub. L. 104-121) provides generally for agencies to
report rules to Congress and the General Accounting Office (GAO) for
review. The reporting requirement is triggered when a Federal agency
issues a final rule. The FDIC will file the appropriate reports with
Congress and the GAO as required by SBREFA. The Office of Management
and Budget has determined that the rule does not constitute a ``major
rule'' as defined by SBREFA.
List of Subjects in 12 CFR Part 307
Bank deposit insurance, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, the Board of Directors of
the FDIC hereby revises Part 307 of Title 12 of the Code of Federal
Regulations to read as follows:
PART 307--CERTIFICATION OF ASSUMPTION OF DEPOSITS AND NOTIFICATION
OF CHANGES OF INSURED STATUS
Sec.
307.1 Scope and purpose.
307.2 Certification of assumption of deposit liabilities.
307.3 Notice to depositors when insured status is voluntarily
terminated and deposits are not assumed.
Appendix A to Part 307--Transferring Institution Letterhead
Appendix B to Part 307--Institution Letterhead
Authority: 12 U.S.C. 1818(a)(6); 1818(q); and 1819(a) [Tenth].
Sec. 307.1 Scope and purpose.
(a) Scope. This Part applies to all insured depository
institutions, as defined in section 3(c)(2) of the Federal Deposit
Insurance Act (FDI Act) (12 U.S.C. 1813(c)(2)).
(b) Purpose. This Part sets forth the rules governing:
(1) The time and manner for providing certification to the FDIC
regarding the assumption of all of the deposit liabilities of an
insured depository institution by one or more insured depository
institutions; and
(2) The notification that an insured depository institution shall
provide its depositors when a depository institution's insured status
is being voluntarily terminated without its deposits being assumed by
one or more insured depository institutions.
Sec. 307.2 Certification of assumption of deposit liabilities.
(a) When certification is required. Whenever all of the deposit
liabilities of an insured depository institution are assumed by one or
more insured depository institutions by merger, consolidation, other
statutory assumption, or by contract, the transferring insured
depository institution, or its legal successor, shall provide an
accurate written certification to the FDIC that its deposit liabilities
have been assumed. No certification shall be required when deposit
liabilities are assumed by an operating insured depository institution
from an insured depository institution in default, as defined in
section 3(x)(1) of the FDI Act (12 U.S.C. 1813(x)(1)), and that has
been placed under FDIC receivership.
(b) Certification requirements. The certification required by
paragraph (a) of this section shall be provided on official letterhead
of the transferring insured depository institution or its legal
successor, signed by a duly authorized official, and state the date the
assumption took effect. The certification shall indicate the date on
which the transferring institution's authority to engage in banking has
terminated or will terminate as well as the method of termination
(e.g., whether by the surrender of its charter, by the cancellation of
its charter or license to conduct a banking business, or otherwise).
The certification may follow the form contained in Appendix A of this
part. In a merger or consolidation where there is only one surviving
entity which is the legal successor to both the transferring and
assuming institutions, the surviving entity shall provide any required
certification.
(c) Filing. The certification required by paragraph (a) of this
section shall be provided within 30 calendar days after the assumption
takes effect, and shall be submitted to the appropriate Regional
Director of the FDIC's Division of Supervision and Consumer Protection,
as defined in 12 CFR 303.2(g).
(d) Evidence of assumption. The receipt by the FDIC of an accurate
certification for a total assumption as required by paragraphs (a), (b)
and (c) of this section shall constitute satisfactory evidence of such
deposit assumption, as required by section 8(q) of the FDI Act (12
U.S.C. 1818(q)), and the insured status of the transferring institution
shall terminate on the date of the receipt of the certification. In
appropriate circumstances, the FDIC, in its sole discretion, may
require additional information, or may consider other evidence of a
deposit assumption to
[[Page 8792]]
constitute satisfactory evidence of such assumption for purposes of
section 8(q).
(e) Issuance of an order. The Executive Secretary, upon request
from the Director of the Division of Supervision and Consumer
Protection and with the concurrence of the General Counsel, or their
respective designees, shall issue an order terminating the insured
status of the transferring insured depository institution as of the
date of receipt by the FDIC of satisfactory evidence of such
assumption, pursuant to section 8(q) of the FDI Act and this
regulation. Generally, no order shall be issued, under this paragraph,
and insured status shall be cancelled by operation of law:
(1) If the charter of the transferring institution has been
cancelled, revoked, rescinded, or otherwise terminated by operation of
applicable state or federal statutes or regulations, or by action of
the chartering authority for the transferring institution essentially
contemporaneously, that is, generally within five business days after
all deposits have been assumed; or
(2) If the transferring institution is an insured depository
institution in default and for which the FDIC has been appointed
receiver.
Sec. 307.3 Notice to depositors when insured status is voluntarily
terminated and deposits are not assumed.
(a) Notice required. An insured depository institution that has
obtained authority from the FDIC to terminate its insured status under
sections 8(a), 8(p) or 18(i)(3) of the FDI Act without its deposit
liabilities being assumed by one or more insured depository
institutions shall provide to each of its depositors, at the
depositor's last known address of record on the books of the
institution, prior written notification of the date the institution's
insured status shall terminate.
(b) Prior approval of notice. The insured depository institution
shall provide the appropriate Regional Director of the FDIC's Division
of Supervision and Consumer Protection, as defined in 12 CFR 303.2(g),
a copy of the proposed notice for approval. After being approved, the
notice shall be provided to depositors by the insured depository
institution at the time and in the manner specified by the appropriate
Regional Director.
(c) Form of notice. The notice to depositors required by paragraph
(a) of this section shall be provided on the official letterhead of the
insured depository institution, shall bear the signature of a duly
authorized officer, and, unless otherwise specified by the appropriate
Regional Director, may follow the form of the notice contained in
Appendix B of this part.
(d) Other requirements possible. The FDIC may require the insured
depository institution to take such other actions as the FDIC considers
necessary and appropriate for the protection of depositors.
Appendix A to Part 307--Transferring Institution Letterhead
[Date]
[Name and Address of appropriate FDIC Regional Director]
SUBJECT: Certification of Total Assumption of Deposits
This certification is being provided pursuant to 12 U.S.C.
1818(q) and 12 CFR 307.2. On [state the date the deposit assumption
took effect], [state the name of the depository institution assuming
the deposit liabilities] assumed all of the deposits of [state the
name and location of the transferring institution whose deposits
were assumed]. [If applicable, state the date and method by which
the transferring institution's authority to engage in banking was or
will be terminated.] Please contact the undersigned, at [telephone
number], if additional information is needed.
Sincerely,
By:
[Name and Title of Authorized Representative]
Appendix B to Part 307--Institution Letterhead
[Date]
[Name and Address of Depositor]
SUBJECT: Notice to Depositor of Voluntary Termination of Insured
Status
The insured status of [name of insured depository institution],
under the provisions of the Federal Deposit Insurance Act, will
terminate as of the close of business on [state the date]
(``termination date''). Insured deposits in the [name of insured
depository institution] on the termination date, less all
withdrawals from such deposits made subsequent to that date, will
continue to be insured by the Federal Deposit Insurance Corporation,
to the extent provided by law, until [state the date]. The Federal
Deposit Insurance Corporation will not insure any new deposits or
additions to existing deposits made by you after the termination
date.
This Notice is being provided pursuant to 12 CFR 307.3.
Please contact [name of institution official in charge of
depositor inquiries], at [name and address of insured depository
institution] if additional information is needed regarding this
Notice or the insured status of your account(s).
Sincerely,
By:
[Name and Title of Authorized Representative]
By order of the Board of Directors, at Washington, DC, on this
10th day of February, 2006.
Federal Deposit Insurance Corporation.
Robert Feldman,
Executive Secretary.
[FR Doc. 06-1568 Filed 2-17-06; 8:45 am]
BILLING CODE 6714-01-P
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