Home > Regulation & Examinations > Large Bank Rule
FAQ Update – May 18, 2010
When Covered Institutions (and their Technology Service Providers) are
testing for compliance with provisions of the Large-Bank Rule how should
FDIC generated debits
and credits to retirement accounts, such as IRAs, be handled? Should debits give rise to income tax reporting or penalty assessments? Likewise should credits be treated as deposits, reportable on form 5498 or subject to other IRS reporting?
During the resolution of a failed financial institution, deposit accounts that are determined to be in excess of the deposit insurance limit may have both a debit and credit transaction. The debit represents funds in the account considered to be uninsured while the credit represents an advanced dividend that is paid to uninsured depositors.
For IRS Reporting purposes, the debit and credit transactions should be viewed as a FDIC seizure of funds that will not trigger retirement account reporting, IRS or otherwise, generally associated with typical retirement account activity.
As the FDIC is concluding Technology Service Provider (TSP) testing we have discovered that in certain instances sweep investment vehicle balances may not have been properly identified and as a result are not being accounted for accurately both in the provisional hold process or in the data extracts.
It is the Covered Institution’s responsibility to assess the extent to which sweep investment vehicles are used and that they are treated according to the Large-Bank Rule provisions. If an institution uses its core deposit TSP processing system to house sweep investment vehicles, including repurchase agreements, Euro, Cayman, Fed Funds and other sweep products, the TSP needs to be aware of this use and either provide a solution within the core application or the CI should make other arrangements. Sweep investment vehicles are subject to different provisional hold thresholds and percentages than insurance-eligible deposit accounts. Sweep investment vehicle data is reportable separately in the Sweep/Automated Credit File Structure found in Appendix D to Section 360.9.
Section 7 of the Detailed Self Assessment Test Plan, published on September 11, 2009, contains certain required financial data reconciliations including general ledger, deposit systems, and Call Report data. As part of this FAQ update, is a spreadsheet template (xls) that has been distributed on a limited basis previously to assist in performing the reconciliation. Use of the template is not required but may be useful when collecting and presenting details of the reconciliation.
It is recommended that the reconciliation used is as of a quarter-end date
corresponding to a recent quarterly Call or TFR Report filing. The template
provides instructions for use.
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