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4000 - Advisory Opinions


BIF Member Which Assumes Deposit Liabilities of SAIF Member, and Vice Versa, Pursuant to Section 5(d)(3) of the FDI Act is Not Subject to Exit and Entrance Fees

FDIC-92-21

April 11, 1992

Valerie J. Best, Counsel

Thank you for your letter dated March 19, 1992, concerning section 5(d)(3) of the Federal Deposit Insurance Act ("FDIA"), as amended by the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA "), (12 U.S.C.A. 1815(d)(3) (West Supp. 1991)). We agree with your conclusion that a member of the Bank Insurance Fund ("BIF") that assumes deposit liabilities of a member of the Savings Association Insurance Fund ("SAIF"), pursuant to section 5(d)(3), is not subject to exit and entrance fees. Likewise, a SAIF member that assumes the deposit liabilities of a BIF member pursuant to section 5(d)(3) is not subject to exit and entrance fees.

Before an institution will be permitted to consummate a transaction pursuant to section 5(d)(3), it must obtain the prior written approval of its primary Federal regulator. If the acquiring institution is a subsidiary of a bank holding company, it must also obtain the prior written approval of the Board of Governors of the Federal Reserve System. In addition, certain other conditions set out at section 5(d)(3)(E) must be met.

Where the acquiring or resulting institution is a BIF member, it will be required to pay assessments to SAIF (at SAIF assessment rates) on that portion of its deposits that are attributable to the former SAIF member, under a formula prescribed at section 5(d)(3)(C). See also 12 C.F.R. 327.31-.33. Where the acquiring or resulting institution is a SAIF member, it will be required to pay assessments to BIF (at BIF assessment rates) on that portion of its deposits that are attributable to the former BIF member. Such payments could be discontinued after the moratorium expires if the institution obtains the approval of the FDIC to treat the transaction as a conversion and the institution pays any exit and entrance fees prescribed by the FDIC. 12 U.S.C. 1815(d)(3)(I). No current provision of Federal law would compel an institution that assumed deposit liabilities pursuant to section 5(d)(3) to treat the acquisition as a conversion transaction after the moratorium expires.

You also ask if an institution that has assumed deposits pursuant to section 5(d)(3) is required to notify the public on an ongoing basis that the institution pays assessments to both the BIF and the SAIF. The law does not impose such a requirement. As you may know, insured depository institutions are required to continuously display official deposit insurance signs. 12 U.S.C. 1828(a). The type of sign to be displayed is determined by reference to the depository institution's charter.1 An institution is not required to display the fact that it is a BIF member or a SAIF member. Both insurance funds are backed by the "full faith and credit of the United States."2 Consequently, no purpose would be served by requiring institutions to notify the public on an ongoing basis, that the institution's deposits are backed by BIF, as opposed to SAIF, or by both BIF and SAIF.

A BIF member does not lose its BIF membership status by virtue of assuming deposit liabilities pursuant to section 5(d)(3). The FDIA does, however, prescribe a formula for allocating costs between the BIF and SAIF in the event such an institution goes into default or is in danger of default. 12 U.S.C. 1815(d)(3)(H).

I hope this information is helpful to you.

1Savings associations are required to display the official savings association (American eagle) sign. 12 C.F.R. 328.4. Banks may display either the official bank (FDIC) sign, or they may display the official savings association sign. 12 C.F.R. 328.2. The term "bank" is defined at 12 U.S.C. 1813(a). The term "savings association" is defined at 12 U.S.C. 1813(b) and includes Federal savings banks chartered under section 5 of the Home Owners' Loan Act. Go back to Text

2See Advisory opinion FDIC-90-6, dated January 22, 1990. Go back to Text


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