FDIC Federal Register Citations

Mr. Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Re: Comment to Notice of Proposed Rulemaking: "Being Engaged in the Business of Receiving Deposits Other Than Trust Funds"

Dear Mr. Feldman:

The Georgia Department of Banking and Finance ("Department") appreciates this opportunity to comment on your proposed rulemaking as referenced above. Georgia has paid close attention to the recent case known as Heaton v Monogram Credit Card Bank of Georgia, 2001 WL 15635 (E. D. La. January 5, 2001) ("Monogram"). The Department, in conjunction with the FDIC, had determined that Monogram Credit Card Bank was "engaged in the business of receiving deposits other than trust funds" and was therefore a state bank. Questions and challenges have now been raised regarding that determination, and the Department agrees that this has created a serious situation that potentially threatens the federal system of deposit insurance.

When the Banking Act of 1933 established the FDIC to oversee the system of federal deposit insurance, the overriding concern of government was to establish confidence in the public that funds determined by the FDIC to be insured would be secure. The principles of safety and soundness applied to such banks assist in protecting the funds. State statutes and direct supervision reinforce those principles.

Although states review carefully and thoroughly all applications for bank charters, they do rely upon the FDIC to determine whether the proposed bank is worthy of insurance. Georgia is one of the states that requires deposit insurance as a condition to acceptance of deposits (O.C.G.A. §7-1-244), and Georgia has never approved a bank to open for business without FDIC insurance coverage. Once the FDIC has made the decision to offer deposit insurance, a chain of events proceeds with attendant reliances by the state of charter and any person or company who places deposits in that institution. Any challenge to the FDIC's authority to determine when deposit insurance is granted and when deposit accounts are insured at the very least raises questions about the reliability of what most consumers view as a basic consumer protection. A threat to those reliances, which we believe these case law challenges to be, flies in the face of a basic government establishment and tenet, deposit insurance and the security of the banking system.

Consequently, since a clear determination by the state and the FDIC that a state bank was "engaged in the business of receiving deposits other than trust funds" has been questioned, the Georgia Department agrees and urges strongly that a final rule be enacted with no delay, to clarify the FDIC position, and to assure consistency and reliability in its decisions. We believe such clarity is essential to the maintenance of public confidence in the federal deposit insurance system and the banking system as a whole.

As to specific aspects of the proposed rule, the Department suggests as follows:

1. A regulatory standard as proposed should be adopted.

2. Use of a minimum of $500,000 in a non trust deposit or deposits is viewed by this Department to be an appropriate dollar amount. We do not believe this amount is large enough to stifle the development of new types of banks, but we do encourage an exception be allowed in cases of de novo banks, for example, to allow up to 90 days to reach the dollar minimum.

3. No number or type of accounts should be necessary, nor need the accounts be from any particular type of entity. All accepted customer deposit accounts should be worthy of insurance.

4. It would seem equitable that all institutions should meet the same minimum standard. The dollar amount represents a figure which is viewed by the regulators as necessary to operate a banking business, just as other safety and soundness standards are necessary. If a bank should drop below that dollar minimum, it should be handled as with any other supervisory problem at an institution, considering all of the circumstances. The safety of the depositors' funds should be paramount in those considerations.

5. The definition of state bank for federal purposes currently includes only those institutions "engaged in the business of receiving deposits other than trust funds." This definition should be consistent with any rule which clarifies the meaning of those words.

Thank you for your consideration of these comments.

Very truly yours
Steven D. Bridges
Commissioner
Georgia Department of Banking and Finance
(770) 986-1627