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]

========================================================================

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.

--------------------------------------------------------------------------------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\1\ Pub. L. 101-73, 103 Stat. 103.

---------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\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 * * *

---------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\3\ Pub. L. 104-208, Sept. 30, 1996, 12 U.S.C. 3311.

---------------------------------------------------------------------------

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\

---------------------------------------------------------------------------

\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.

---------------------------------------------------------------------------

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.

---------------------------------------------------------------------------

\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).

---------------------------------------------------------------------------

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