The FDIC moved ahead today in its ongoing review of policies
and regulations as the Corporation's Board of Directors voted to
seek comment on how to simplify rules governing deposit insurance
coverage and recordkeeping requirements for securities
In addition to approving the two advance notices of
proposed rulemaking, the FDIC's Board of Directors also rescinded
two policy statements that are either no longer applicable or
covered elsewhere in the agency's regulations. The first deals
with capital forbearance and the second with bank purchases of
so-called "leeway securities," which are issued to fund civic and
community related projects.
"The board's action today is another step by the FDIC to
clear away regulations that frustrate bankers as well as their
customers," said Director Joe Neely, who is leading the agency's
top-to-bottom review of rules and procedures.
"The rules governing deposit insurance coverage can be
complex and confusing for both bankers and their customers in
this regard, and we are asking bankers and consumers to advise
us on what steps we should take to make life easier for the
nation's depositors," he added.
"The recordkeeping requirements for securities transactions
have become burdensome for banks and confusing for customers,"
Director Neely continued.
FDIC chairman Ricki Helfer, who asked Mr. Neely to direct
the agency's regulatory review, said the process will result in
rules that are easier for customers of banks to understand.
"We know, for example, from the letters and phone calls we
receive, that bank depositors have trouble understanding some
provisions in our deposit insurance regulations," Chairman Helfer
Among the possible changes the FDIC is considering in the
area of deposit insurance simplification is whether to have one
simple test for determining joint account coverage. The current
rules, which are complex and often misunderstood by bank
customers, employ a two-step test. First, all joint accounts
with the same combination of owners are added together and the
$100,000 limit is applied. Next, each person's share of insured
accounts is totaled and the $100,000 limit is again applied.
Under the first test, a two-person joint account with $150,000
would carry only $100,000 of insurance, even if the individuals
owning it had no other accounts in that institution.
The FDIC is considering insuring each person's share in all
joint accounts at the same institution for up to $100,000 in the
aggregate -- a change that would greatly simplify the rules
without decreasing coverage for depositors. Moreover, in the
example above, the account would be fully insured since each
owner would be entitled to $100,000 in insurance.
Other elements of the proposal include:
- Changing the rules on the insurance coverage of
"payable-on-death" accounts. These trust accounts, also
often called tentative, "Totten" or revocable trusts, can
qualify for special insurance coverage if the beneficiary is
a spouse, child or grandchild of the account's owner.
- Providing for a grace period after a depositor's death
before adjusting the insurance coverage on that person's
accounts. For example, under current rules a joint account
for a husband and wife automatically could become the
surviving spouse's money when the other dies. That alone
could limit the survivor of a joint account's insurance
coverage to $100,000.
Among the other regulations identified by the FDIC for
possible revision are the rules dealing with funds that employers
place in employee benefit plan accounts (such as pension plans
and 401(k) plans) and with revocable trusts.
Comments on deposit insurance simplification will be due 90
days after the FDIC's notice appears in the Federal Register.
The FDIC is also soliciting comments on its recordkeeping
and confirmation requirements for securities transactions by
state nonmember banks. The regulations now in effect were issued
in 1979. The agency has identified a number of issues that
should be addressed to modernize the regulations to reflect
changes in securities activities since the regulations were
issued and the role of other Federal agencies that supervise
In particular, the FDIC would like public participation in
defining the term "effecting a securities transaction" and
whether and when banks should disclose the source and amount of
remuneration received from securities transactions.
The FDIC currently interprets the term "effecting a
securities transaction" to include transactions executed by bank
employees as well as those conducted by third parties located on
bank premises for which the bank receives transaction-based
compensation. Specifically, the FDIC is interested in whether
third-party transactions should be excluded and, if so, how.
The FDIC is also interested in comments on the need for
disclosure of the source of remuneration and, if necessary, when
that disclosure should be made. As banks have become more
heavily involved in executing securities transactions for their
customers, the FDIC has become aware of practical problems
relating to the timely disclosure of the source and amount of the
Comments on that advance notice of proposed rulemaking
will be due 30 days after publication in the Federal Register.
"Today's action is an example of the FDIC's commitment to
streamline, consolidate and eliminate rules that contribute
unnecessarily to the industry's regulatory burden," Director
Neely added. "Bankers can look forward to many more announcements
in the weeks and months ahead."
Congress created the Federal Deposit Insurance Corporation in
1933 to restore public confidence in the nation's banking system.
The FDIC insures deposits at the nation's 12,000 banks and
savings associations and it promotes the safety and soundness of
these institutions by identifying, monitoring and addressing
risks to which they are exposed.
FDIC press releases and other documents are available on the
Internet via the World Wide Web at www.fdic.gov.
They may also be obtained through the FDIC's Public Information
Center, 801 17th St. NW, Room 100, Washington, DC,