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4000 - Advisory Opinions
An "Oakar" Bank May Not Use Secondary Reserve Credits to
Offset Payments to SAIF
FDIC-91-81
September 13, 1991
Jules Bernard, Counsel
In your letter of July 24, 1991, you describe a transaction in
which a federal savings-and-loan association has been merged into a
national bank. You cite 12 U.S.C. 215a as the authority pursuant to
which the merger was effected. I take it that the surviving bank is a
so-called "Oakar bank"--i.e., one that is obliged to
make payments both to the Bank Insurance Fund and to the Savings
Association Insurance Fund ("SAIF").
You further indicate that, prior to the merger, the association had
been credited with a secondary reserve credit, which the association
had been eligible to use as an offset to assessments imposed on the
association by the SAIF. You write:
Therefore, we request a written, legal determination as to the
FDIC's standing on the transfer of secondary reserve credit to the
surviving bank of a thrift into bank merger.
As a preliminary matter, I must caution you that the views I express
in this letter are those of the FDIC legal staff, not of the FDIC
itself. The FDIC issues formal interpretations of its rules, but only
pursuant to rule-making proceedings. See, e.g., 12 C.F.R.
§ 330.101 (interpreting insurance rules). The FDIC does not issue
formal interpretations in the form of individual letters or rulings on
particular cases.
I believe the FDIC's current position is that an Oakar bank may not
use secondary reserve credits for the purpose of offsetting payments
that the bank is required to make to the SAIF.
For one thing, section 7(m) of the Act specifies that only savings
associations--not banks--may use secondary reserve credits to offset
assessments. For another, section 7(m) limits the use of offsets to
assessments levied pursuant to section 7(b). The payments that Oakar
banks must make to the SAIF are levied pursuant to an entirely
different provision: namely, section 5(d)(3).
In any event, section 7(m)(4) states the presumption that the
secondary reserve credits may not be transferred in the context of
merger transactions unless the FDIC specifically authorizes the
transfer. The FDIC has not done so with respect to the merger
transaction that is the subject of your inquiry. Moreover, the FDIC
staff opposes such assessment-credit transfers.
You suggest that section 563--16.2(b) of the regulations of the
Federal Savings and Loan Insurance Corporation
("FSLIC")--temporarily preserved as section 385.8(b) of the
FDIC's regulations--provides the required authorization. That section
has no bearing on this case, however. Section 563-16.2(b) only spoke
of cases in which "an insured
{{12-31-91 p.4593}}institution" merged into another
"another insured institution." Section 561.1 of the FSLIC's
regulations specified that the term "insured institution" was
limited to FSLIC-insured
institutions. 1
Here the acquiring institution is a national bank that is a member of
the Bank Insurance Fund.
If you have any further questions about this matter, or if I can
help you in any other way, please call me at (202)
898-3731.
1 Although section 561.1 included FDIC-insured federal savings
banks in the term "insured institution," it is not clear section
563-16.2(b) likewise embraced them when it used this term. But that
point is not at issue here. Go Back to Text
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