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Each depositor insured to at least $250,000 per insured bank

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4000 - Advisory Opinions


Applicability of Exit and Entrance Fees to Acquisition of a Savings Association by BIF and SAIF Member Institutions

FDIC-90-52

October 31, 1990

Alan J. Kaplan, Senior Counsel

Your letter of October 31, which was FAXed to me this afternoon, asks me to confirm your conclusions regarding the amount of entrance and exit fees that would be required to be paid in connection with the following transaction.

Your letter states that *** Savings Bank, a BIF-member institution, is the lead bank in a group of insured depository institutions formed for the purpose of submitting a bid to the Resolution Trust Corporation (RTC) for the acquisition of *** Savings & Loan Association. The group consists of *** [Savings Bank] and three SAIF-member institutions, ***, ***, and ***. The agreement entered into by the four institutions contemplates that, if *** [Savings Bank] is the successful bidder for ***, *** [Savings Bank] will transfer to each of the three SAIF-member institutions certain of ***'s deposit liabilities transferred to it (*** [Savings Bank]) by the RTC. Your letter represents that all of these deposit transfers will occur contemporaneously with the closing between *** [Savings Bank] and the RTC, which I understand to mean that the deposits to be assumed by the institutions other than *** [Savings Bank] will be transferred to them either immediately following the deposit assumption by *** [Savings Bank] or, in any event, prior to the time that *** [Savings Bank] next opens for business following the transfer of ***'s deposits to *** [Savings Bank].

You have asked me to confirm that, under these circumstances, the applicable entrance and exit fees to be paid by *** [Savings Bank] would be based only on the deposits retained by *** [Savings Bank], not on that portion of ***'s deposit base ultimately transferred to the three SAIF-member institutions.

As described, the transactions would result in some *** deposits being transferred from a SAIF member (***) to a BIF member (*** [Savings Bank]), and some being contemporane- ously transferred back to other SAIF members. Those deposits transferred from one SAIF member to another SAIF member, albeit momentarily through a BIF-member "conduit," would essentially remain protected by the SAIF fund and would continue, without interruption, to generate assessment income for the benefit of SAIF. Such a transfer would not appear detrimental to SAIF and would not, in my opinion, require the payment of conversion fees.

Accordingly, I conclude that, with respect to the transaction described in your letter, entrance and exit fees need be paid only on the deposit base retained by *** [Savings Bank], and not on that portion of ***'s deposit base contemporaneously transferred to the three SAIF-member institutions. This conclusion assumes, of course, that the transaction in fact occurs as represented and described; any material deviations could serve to alter my conclusion.


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