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Financial Institution Letters

Deposit Shifting

February 18, 1997


SUBJECT: Proposed Rule to Implement New Statute on the Prevention of Deposit Shifting

The FDIC Board of Directors has issued for public comment the attached proposed rule on the recently enacted deposit-shifting statute, a provision of the Deposit Insurance Funds Act of 1996. The statute requires the FDIC, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Office of Thrift Supervision to take appropriate actions to prevent insured depository institutions and their holding companies from facilitating or encouraging the shifting of SAIF- assessable deposits to BIF-assessable deposits to evade assessments imposed on SAIF-assessable deposits.

The proposed rule consists of two basic provisions:

  • Under the proposed rule, the federal banking agencies would deny applications (or object to notices) if the underlying transaction is for the purpose of evading assessments imposed on SAIF-assessable deposits.

  • The proposed rule would establish a rebuttable presumption under which entrance and exit fees would be imposed upon depository institutions that engage in deposit shifting for the purpose of evading assessments imposed on SAIF-assessable deposits.

The FDIC believes that the proposed rule may be the most effective means of enforcing the requirements of the deposit-shifting statute without imposing an undue burden on depository institutions.

The FDIC requests comments on all aspects of the proposed rule, particularly the following:

    whether there are alternate means of implementing and enforcing the deposit-shifting statute;

    what factors should be considered in determining whether prohibited deposit-shifting has occurred (i.e., what conduct and activities of a depository institution the FDIC should interpret as encouraging or facilitating deposit-shifting); and

    the meaning of the rule of construction provided in the statute, which states the statute shall not be construed as prohibiting conduct or activity "undertaken in the ordinary course of business . . . and . . . not directed towards the depositors of an insured depository institution affiliate . . . ."

The FDIC will accept written comments on the proposed rule through April 14, l997. For more information, please contact Joseph A. DiNuzzo, Counsel, Legal Division, on (202) 898-7349; Richard J. Osterman, Senior Counsel, Legal Division, on (202) 898-3523; or George Hanc, Associate Director, Division of Research and Statistics, on (202) 898-8719.

Nicholas J. Ketcha Jr.

Attachment: Federal Register, Vol. 62, No. 28, pp 6139-6142. (Visit our website -- -- to access attachment.)

Distribution: All Insured Banks and Savings Associations

Note: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street, N.W., Room 100, Washington, D.C. 20434 (800-276-6003 or (703) 562-2200).

Last Updated 07/16/1999

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