[Federal Register: October 29, 2008 (Volume 73, Number 210)]
[Rules and Regulations]
[Page 64179-64191]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29oc08-2]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 370
RIN 3064-AD37
Temporary Liquidity Guarantee Program
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Interim rule with request for comments.
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SUMMARY: The FDIC is issuing this Interim Rule following a
determination of systemic risk pursuant to section 13(c)(4)(G) of the
Federal Deposit Insurance Act. As a result of this
[[Page 64180]]
systemic risk determination, and in an effort to avoid or mitigate
serious adverse effects on economic conditions or financial stability,
the FDIC is establishing the Temporary Liquidity Guarantee Program. As
further described in the Interim Rule, the Temporary Liquidity
Guarantee Program has two primary components: the Debt Guarantee
Program, by which the FDIC will guarantee the payment of certain newly-
issued senior unsecured debt, and the Transaction Account Guarantee
Program, by which the FDIC will guarantee certain noninterest-bearing
transaction accounts.
DATES: The Interim Rule becomes effective on October 23, 2008, except
for paragraphs (h)(2) and (h)(3) of Sec. 370.5 which will become
effective December 1, 2008. Coverage under the Temporary Liquidity
Guarantee Program was established by the Board of Directors of the FDIC
as of October 14, 2008. Comments on the rule must be received by
November 13, 2008.
ADDRESSES: You may submit comments on the Interim Rule, by any of the
following methods:
Agency Web Site:
http://www.FDIC.gov/regulations/laws/federal/notices.html.
Follow instructions for submitting comments on
the Agency Web Site.
E-mail: Comments@FDIC.gov. Include RIN 3064-AD37
on the subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street Building (located on F
Street) on business days between 7 a.m. and 5 p.m.
Instructions: All comments received will be posted generally
without change to
http://www.fdic.gov/regulations/laws/federal/propose.html,
including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Diane Ellis, Associate Director,
Financial Risk Management, Division of Insurance and Research, (202)
898-8978 or dellis@fdic.gov; William V. Farrell, Manager, Assessment
Operations Section, Division of Finance, (703) 562-6168 or
wfarrell@fdic.gov; Donna Saulnier. Manager, Assessment Policy Section,
Division of Finance, (703) 562-6167 or dsaulnier@fdic.gov; Richard
Bogue, Counsel, Legal Division, (202) 898-3726 or
rbogue@fdic.gov;
Robert Fick, Counsel, Legal Division, (202) 898-8962 or
rfick@fdic.gov;
A. Ann Johnson, Counsel, Legal Division, (202) 898-3573 or
aajohnson@fdic.gov; Gail Patelunas, Deputy Director, Division of
Resolutions and Receiverships, (202) 898-6779 or
gpatelunas@fdic.gov;
John Corston, Associate Director (Large Bank Supervision), Division of
Supervision and Consumer Protection, (202) 898-6548 or
jcorston@fdic.gov; Serena L. Owens, Associate Director, Supervision and
Applications Branch, Division of Supervision and Consumer Protection,
(202) 898-8996 or sowens@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
In light of the unprecedented disruption in the nation's credit
markets, the Congress, the Department of the Treasury, and the Federal
Deposit Insurance Corporation (FDIC), along with other federal banking
regulators, have taken steps to preserve the nation's confidence in its
financial institutions and in the American and global economy. Congress
recently passed the Emergency Economic Stabilization Act of 2008; \1\
the Department of the Treasury provided for capital injections into
banks; the Board of Governors of the Federal Reserve System made
available commercial paper facilities; Congress temporarily raised
deposit insurance limits and the FDIC issued interim regulations
accordingly.\2\ Nonetheless, many insured depository institutions have
responded to the market turmoil by retaining cash and severely
tightening their lending standards. Disruptions in money markets have
significantly impaired the ability of creditworthy companies to issue
commercial paper, particularly at longer maturities. Interest rates on
commercial paper continue to be extremely high. Issuances of
residential and commercial mortgage-backed securities in the first half
of 2008 have fallen by more than 90 percent from levels one year ago,
and issuances of asset-backed securities have fallen 68 percent over
the same period. As a result of this market volatility, economic
concern has intensified, and short-term funding markets have slowed
significantly.
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\1\ Public Law No. 110-343 (Oct. 3, 2008).
\2\ 73 FR 61658 (Oct. 17, 2008).
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FDIC analysis suggests that a five percent reduction in uninsured
deposits would reduce Gross Domestic Product growth by 1.2 percent per
year in a normal economy and 2.0 percent per year in a stressed
economy. With U.S. economic growth currently stressed, a run of this
magnitude could result in, or deepen and prolong, recession. FDIC data
indicate rapid and substantial outflows of uninsured deposits from
institutions that are perceived to be stressed. The systemic nature of
this threat is further evidenced by the increasing number of bank
failures.
II. Systemic Risk Determination
The severity of today's financial conditions affects more than just
a single insured depository institution: the financial stability of a
significant number of financial institutions is being threatened, and
the nation's entire financial system appears to be at risk.
Section 141 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA) \3\ added section 13(c)(4)(G) to the
Federal Deposit Insurance Act (FDI Act). 12 U.S.C. 1823(c)(4)(G). That
section provides a blueprint that authorizes action by the Federal
government in circumstances involving such systemic risk. This
provision permits the FDIC to take action or provide assistance as
necessary to avoid or mitigate the effects of the perceived risks,
following a recommendation of the existence of systemic risk by the
Board, with the written concurrence of the Board of Governors of the
Federal Reserve System (FRB) and an eventual determination of systemic
risk by the Secretary of the Treasury (after consultation with the
President).
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\3\ Public Law No. 102-242 (Dec. 19, 1991).
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The Secretary of the Treasury (after consultation with the
President) made a determination of systemic risk following receipt of
the written recommendation of the Board on October 13, 2008, along with
the written recommendation of the FRB, in accordance with section
13(c)(4)(G) to the FDI Act. 12 U.S.C. 1823(c)(4)(G). The determination
of systemic risk allowed the FDIC to take certain actions to avoid or
mitigate serious adverse effects on economic conditions and financial
stability. The FDIC announced a number of initiatives aimed at reducing
the systemic risks that exist in the market, specifically relating to
noninterest-bearing transaction accounts at insured depository
institutions and senior unsecured debt of insured depository
institutions and most U.S. holding companies of such insured depository
institutions. Collectively these initiatives are described more fully
in the Interim Rule that follows, and are referred to as the FDIC's
Temporary Liquidity Guarantee Program (TLG Program).
In making its written recommendation regarding systemic risk and
providing for the TLG Program, the Board reviewed a number of factors
concerning current economic conditions and the nation's troubled
financial
[[Page 64181]]
stability. Among the economic factors that the Board considered in
making its determination were unduly tightened lending standards and
terms, decreased borrowing, rapid outflows of deposits, reduced
issuances of commercial paper and asset- and mortgage-backed
securities, decreased and costly alternative funding mechanisms, and a
lack of confidence in financial institutions based on embedded and
uncertain balance sheet losses.
III. Authority To Implement the TLG Program
In addition to the authority granted to the FDIC by the systemic
risk determination made under Section 13(c)(4) of the FDI Act, 12
U.S.C. 1823(c)(4), as described above, the FDIC is authorized under
Section 9(a) Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth, to
prescribe, by its Board of Directors, such rules and regulations as it
may deem necessary to carry out the provisions of the FDI Act. The
Board has determined that this Interim Rule is necessary to implement
the TLG Program. Similarly the FDIC has authority to adopt regulations
governing the operations of its receiverships pursuant to Section
11(d)(1) of the FDI Act, 12 U.S.C. 1821(d)(1) and the broad authority
granted by 12 U.S.C. 1823(c)(1).
IV. The Interim Rule
The TLG Program described in the Interim Rule will address the
systemic risk recognized by the FDIC and the other agencies. The TLG
Program is designed to preserve confidence and encourage liquidity in
the banking system in order to ease lending to creditworthy businesses
and consumers. The TLG Program is a voluntary and time-limited program
that will be funded through special fees without reliance on taxpayer
funding. Subject to the conditions set forth in the regulation, the
program consists of two basic components: A temporary guarantee of
newly-issued senior unsecured debt (the Debt Guarantee Program) and a
temporary unlimited guarantee of funds in noninterest-bearing
transaction accounts at FDIC-insured institutions (the Transaction
Account Guarantee Program). At the expiration of the TLG Program, if
funds remain after the FDIC has satisfied all eligible claims, the
surplus funds will remain in the Deposit Insurance Fund and will be
included in the future calculation of the reserve ratio.
The following entities are eligible to participate in the program
subject to any restrictions that might be imposed by the FDIC in
consultation with the primary regulator: FDIC-insured depository
institutions, any U.S. bank holding company or financial holding
company, and any U.S. savings and loan holding company that either
engages only in activities that are permissible for financial holding
companies to conduct under section (4)(k) of the Bank Holding Company
Act of 1956 (BHCA) or has at least one insured depository institution
subsidiary that is the subject of an application that was pending on
October 13, 2008, pursuant to section 4(c)(8) of the BHCA, or any
affiliate of these entities approved by the FDIC after a written
request made by, and the positive recommendation of, the appropriate
Federal banking agency. (eligible entities). To be an eligible entity
and issue guaranteed debt pursuant to the Debt Guarantee Program, a
bank or savings and loan holding company must have at least one
chartered, insured, and operating bank or savings association within
its holding company structure.
The TLG Program became effective on October 14, 2008. For the first
30 days of the program, all eligible entities are covered under the TLG
Program, and the guarantees provided by the TLG Program will be offered
at no cost to eligible entities. On or before November 12, 2008,
however, eligible entities must inform the FDIC whether they will opt-
out of the TLG Program, and they may notify the FDIC on or before that
date of their intent to participate in the program. If an eligible
entity opts out of the TLG Program, the FDIC's guarantee of its newly-
issued senior unsecured debt and noninterest-bearing transaction
deposit accounts will expire at the earlier of 11:59 pm EST on
November, 12, 2008, or at the time of the FDIC's receipt of the
eligible entity's opt-out decision, regardless of the term of the
instrument. An eligible entity that chooses not to opt out of either or
both programs will become a participating entity in the program.
An eligible entity may elect to opt out of either the Debt
Guarantee Program or the Transaction Account Guarantee Program or of
both components of the TLG Program. All eligible entities within a U.S.
Banking Holding Company or a U.S. Savings and Loan Holding Company
structure must make the same decision regarding continued participation
in each component of the TLG Program or none of the members of the
holding company structure will be eligible for participation in that
component of the TLG Program.
In order to notify depositors and lenders when they are dealing
with an institution that is covered by the TLG Program, an eligible
entity's decision to opt out of either component of the TLG Program
will be made publicly available. The FDIC will maintain and will post
on its Web site a list of those entities that have opted out of either
or both components of the TLG Program. Each eligible entity must make
clear to relevant parties whether or not it has chosen to participate
in either or both components of the TLG Program. Eligible entities that
do not opt out of the Debt Guarantee Program on or before November 12,
2008, will be unable to select which newly issued senior unsecured debt
is guaranteed debt as they issue such debt. All senior unsecured debt
issued during the initial 30-day period by the participating entity
will become guaranteed debt as and when issued.
If an eligible entity remains in the Debt Guarantee Program of the
TLG Program, it must clearly disclose to interested lenders and
creditors, in writing and in a commercially reasonable manner, what
debt it is offering and whether the debt is guaranteed under this
program. Debt guaranteed by the FDIC under the Debt Guarantee Program,
must be clearly identified as ``guaranteed by the FDIC'' and properly
disclosed to creditors.
If an eligible entity remains in the Transaction Account Guarantee
Program, the participating entity must prominently disclose in writing
at its main office and at all branches at which deposits are taken its
decision to participate in or opt-out of the Transaction Account
Guarantee Program. These disclosures must be provided in simple,
readily understandable text indicating the institution's participation
or nonparticipation in the Transaction Account Guarantee Program. The
disclosure must clearly state whether or not covered noninterest-
bearing transaction accounts are fully insured by the FDIC. If the
institution uses sweep arrangements or takes other actions that result
in funds in a noninterest-bearing transaction account being transferred
to or reclassified as an interest-bearing account or a non-transaction
account, the institution also must disclose those actions to the
affected customers and clearly advise them in writing that such actions
will void the transaction account guarantee.
A. The Debt Guarantee Program
The Debt Guarantee Program temporarily will guarantee all newly-
issued senior unsecured debt up to prescribed limits that is issued by
participating entities on or after October 14, 2008, through and
including June 30, 2009. As a result, the unpaid balance
[[Page 64182]]
of this newly-issued senior unsecured debt will be paid by the FDIC
upon the failure of the issuing institution or the filing of a
bankruptcy petition with respect to the issuing holding company. As
more fully explained in the interim rule, senior unsecured debt
includes, without limitation, federal funds purchased, promissory
notes, commercial paper, unsubordinated unsecured notes, certificates
of deposit standing to the credit of a bank, bank deposits in an
international banking facility (IBF) of an insured depository
institution, and Eurodollar deposits standing to the credit of a bank.
Senior unsecured debt may be denominated in foreign currency. The term
``bank'' means an insured depository institution or a depository
institution regulated by a foreign bank supervisory agency. To be
eligible for the Debt Guarantee Program, senior unsecured debt must be
noncontingent. It must be evidenced by a written agreement, contain a
specified and fixed principal amount to be paid on a date certain, and
not be subordinated to another liability.
The primary purpose of the Debt Guarantee Program is to provide
liquidity to the inter-bank lending market and promote stability in the
unsecured funding market for banks. The purpose is not to encourage
innovative, exotic or complex funding structures or to protect lenders
who make high-risk loans in hopes of high returns. Thus, for purposes
of the Debt Guarantee Program, senior unsecured debt excludes, for
example, obligations from guarantees or other contingent liabilities,
derivatives, derivative-linked products, debt paired with any other
security, convertible debt, capital notes, the unsecured portion of
otherwise secured debt, negotiable certificates of deposit, and
deposits in foreign currency and Eurodollar deposits that represent
funds swept from individual, partnership or corporate accounts held at
insured depository institutions. Also excluded are loans to affiliates,
including parents and subsidiaries, or to institution affiliated
parties, including controlling shareholders, directors, and officers.
Eligible debt must be issued on or before June 30, 2009. For
eligible debt issued by that date, the FDIC will provide the guarantee
coverage for such debt until the earlier of the maturity date of the
debt or until June 30, 2012. This final effective date for coverage is
absolute; coverage will expire at 11:59 p.m. EST on June 30, 2012,
regardless of whether the liability has matured at that time. If an
eligible entity chooses to opt out of the Debt Guarantee Program, the
FDIC's debt guarantee will terminate on the earlier of 11:59 p.m. EST
p.m. on November 12, 2008, or at the time of the eligible entity's opt-
out decision. In order for the newly-issued senior unsecured debt to be
guaranteed, the debt instrument must be clearly identified in writing
in a commercially reasonable manner on the face of any documentation as
``guaranteed by the FDIC,'' and this fact must be properly disclosed to
the creditors. The Debt Guarantee Program will not apply to debt that
is contractually subordinated to other debt of the entity.
The FDIC will temporarily guarantee newly issued unsubordinated
debt in a total amount up to 125 percent of the par or face value of
senior unsecured debt outstanding, excluding debt extended to
affiliates, as of September 30, 2008, that is scheduled to mature on or
before June 30, 2009. This maximum guaranteed amount will be calculated
for each individual participating entity within a holding company
structure. Under procedures to be detailed shortly, the FDIC will
require that each participating entity calculate its outstanding senior
unsecured debt as of September 30, 2008, and provide that information--
even if the amount of the senior unsecured debt is zero--to the FDIC.
The 125 percent limit may be adjusted for certain participating
entities if the FDIC, in consultation with any appropriate Federal
banking agency, determines it is necessary. Additionally, after written
request and positive recommendation by the appropriate Federal banking
agency, the FDIC, in its sole discretion and on a case-by-case basis,
may allow an affiliate of a participating entity to take part in the
Debt Guarantee Program. The FDIC may grant a participating entity
authority to temporarily exceed the 125 percent limitation or limit a
participating entity to less than 125 percent. These decisions will be
made on a case-by-case basis.
A participating entity may not represent that its debt is
guaranteed by the FDIC if it does not comply with the rules governing
the Debt Guarantee Program. If the issuing entity has opted out of the
Debt Guarantee Program, it may no longer represent that its newly-
issued debt is guaranteed by the FDIC. Similarly, once an entity has
reached its 125 percent limit, it may not represent that any additional
debt is guaranteed by the FDIC, and must specifically disclose that
such debt is not guaranteed.
After consultation with a participating entity's appropriate
Federal banking agency, the FDIC may determine in its discretion that
the entity shall not be permitted to participate in the TLG Program.
Termination of participation will have only a prospective effect, and
the entity must notify its customers and creditors that it is no longer
issuing guaranteed debt.
Entities who choose to participate in the Debt Guarantee Program
and who issue guaranteed debt agree to supply information requested by
the FDIC, as well as to be subject to FDIC on-site reviews as needed
after consultation with the appropriate Federal banking agency to
determine compliance with the terms and requirements of the Debt
Guarantee Program. Participating entities also agree that they will be
bound by the FDIC's decisions, in consultation with the appropriate
federal banking agency, regarding the management of the TLG Program.
The FDIC's agreement arising from the Debt Guarantee Program in no
way exempts any participating entity from complying with federal and
state securities laws and with any other applicable laws.
B. The Transaction Account Guarantee Program
Under the Transaction Account Guarantee Program, the FDIC has
provided a temporary full guarantee for funds held at FDIC-insured
depository institutions in noninterest-bearing transaction accounts
above the existing deposit insurance limit. The FDIC anticipates that
these accounts will include payment-processing accounts, such as
payroll accounts, frequently used by an insured depository
institution's business customers, and further anticipates that the
Transaction Account Guarantee Program will stabilize these and other
similar accounts. This coverage became effective on October 14, 2008,
and will continue through December 31, 2009 (assuming that the insured
depository institution does not opt out of this component of the TLG
Program).
Under the Interim Rule, a ``noninterest-bearing transaction
account'' is defined as a transaction account with respect to which
interest is neither accrued nor paid and on which the insured
depository institution does not reserve the right to require advance
notice of an intended withdrawal. This definition encompasses
traditional demand deposit checking accounts that allow for an
unlimited number of deposits and withdrawals at any time. It also
encompasses official checks issued by an insured depository
institution. This definition, however, does not encompass negotiable
order of
[[Page 64183]]
withdrawal (NOW) accounts or money market deposit accounts (MMDAs).
Depository institutions sometimes waive fees or provide fee-
reducing credits for customers with checking accounts. Such account
features do not prevent an account from qualifying under the
Transaction Account Guarantee Program as a noninterest-bearing
transaction account, as long as the account otherwise satisfies the
definition.
The guarantee provided for noninterest-bearing transaction accounts
is in addition to and separate from the coverage provided under the
FDIC's general deposit insurance regulations at 12 CFR Part 330.
Although the unlimited coverage for noninterest-bearing transaction
accounts under the TLG Program is intended primarily to apply to
transaction accounts held by businesses, it applies to all such
accounts held by any depositor. Thus, for example, if a consumer has a
$250,000 certificate of deposit and a noninterest-bearing checking
account for $50,000, he or she would be fully insured for $300,000
(assuming the depositor has no other funds at the same institution).
First, coverage of $250,000 would be provided for the certificate of
deposit under the FDIC's general rules for deposit insurance coverage.
See 12 CFR 330.1(n) (providing that the standard maximum deposit
insurance amount is $250,000 through December 31, 2009). Separately,
full coverage of the $50,000 checking account would be provided under
the Transaction Account Guarantee Program.
The Interim Rule includes a provision relating to sweep accounts.
Under this provision, the FDIC will treat funds in sweep accounts in
accordance with the usual rules and procedures for determining sweep
balances at a failed depository institution. Under these procedures,
funds may be swept or transferred from a noninterest-bearing
transaction account to another type of deposit or nondeposit account.
The FDIC will treat the funds as being in the account to which the
funds were transferred. An exception will exist, however, for funds
swept from a noninterest-bearing transaction account to a noninterest-
bearing savings account. Such swept funds will be treated as being in a
noninterest-bearing transaction account. As a result of this treatment
funds swept into a noninterest-bearing savings account will be
guaranteed by the Transaction Account Guarantee Program.
C. Fees for the TLG Program
Beginning on November 13, 2008, any eligible entity that has not
chosen to opt out of the debt guarantee program will be assessed fees
for continued coverage. All eligible debt issued from October 14, 2008
(and still outstanding on November 13, 2008), through June 30, 2009,
will be charged an annualized fee equal to 75 basis points multiplied
by the amount of debt issued, and calculated for the maturity period of
that debt or June 30, 2012, whichever is earlier. The fee charged will
take into account that no fees will be charged during the first 30 days
of the program. If any participating entity issues eligible debt
guaranteed by the Debt Guarantee Program, the participating entity's
assessment will be based on the total amount of debt issued and the
maturity date at issuance. If the guaranteed debt is ultimately retired
before its scheduled maturity, fees will not be refunded.
If an eligible entity does not opt out, all newly-issued senior
unsecured debt up to the maximum amount will become guaranteed as and
when issued. Participating entities are prohibited from issuing
guaranteed debt in excess of the maximum amount for the institution.
Participating entities are also prohibited from issuing non-guaranteed
debt until the maximum allowable amount of guaranteed debt has been
issued. A participating entity can then issue non-guaranteed debt in
any amount and for any maturity. If a participating entity nonetheless
issues debt identified as ``guaranteed by the FDIC'' in excess of the
limit established by the FDIC, it will have its assessment rate for
guaranteed debt increased to 150 basis points on all outstanding
guaranteed debt, and the participating entity and its institution-
affiliated parties will be subject to enforcement actions including the
assessment of civil money penalties, as appropriate.
Participating entities can take part in the guaranteed debt program
as outlined above without any further action on their part. If a
participating entity wants to have the option of issuing certain non-
guaranteed senior unsecured debt before issuing the maximum amount of
guaranteed debt, it must elect to do so through FDICconnect on or
before 11:59 p.m. EST on November 12, 2008. Election of this option
would require a participating entity to pay a nonrefundable fee in
exchange for which it will be able to issue, at any time and without
regard to the cap, non-guaranteed senior unsecured debt with a maturity
date after June 30, 2012. The fee would be applied to the par or face
value of senior unsecured debt, excluding debt extended to affiliates,
outstanding as of September 30, 2008, that is scheduled to mature on or
before June 30, 2009. The fee will equal the 75 basis point annual rate
charged for six months (or 37.5 basis points). The six-month period is
based upon estimates of the weighted average remaining maturity of
existing debt that matures on or before June 30, 2009. It recognizes
that much of the outstanding debt as of September 30, 2008, which is
not guaranteed, will be rolled over into guaranteed debt only when the
outstanding debt matures. The nonrefundable fee will be collected in
six equal monthly installments. An entity electing the nonrefundable
fee option will also be billed as it issues guaranteed debt under the
Debt Guarantee Program, and the amounts paid as a nonrefundable fee
will be applied to offset these bills until the nonrefundable fee is
exhausted. Thereafter, the institution will have to pay additional
assessments on guaranteed debt as it issues the debt.
Under the Transaction Account Guarantee Program, the FDIC provides
a full guarantee for deposits held at FDIC-insured institutions in
noninterest-bearing transaction accounts. This coverage became
effective on October 14, 2008, and will expire at 11:59 p.m. EST on
December 31, 2009 (assuming the insured depository institution does not
opt out of the Transaction Account Guarantee Program). The Interim Rule
provides that all insured depository institutions are automatically
enrolled in the Transaction Account Guarantee Program for an initial
thirty-day period (from October 14, 2008, through November 12, 2008).
Insured depository institutions are not required to pay any assessments
for participating in the Transaction Account Guarantee Program for this
initial 30-day period.
Beginning on November 13, 2008, insured depository institutions
that have not opted out of the Transaction Account Guarantee Program
will be assessed on a quarterly basis an annualized 10 basis point
assessment on balances in noninterest-bearing transaction accounts that
exceed the existing deposit insurance limit of $250,000. Under the
Interim Rule, the FDIC will collect such assessments at the same time
and in the same manner as it collects an institution's quarterly
deposit insurance assessments under Part 327 of the FDIC's rules and
regulations. Assessments associated with the Transaction Account
Guarantee Program will be in addition to an institution's risk-based
assessment imposed under Part 327 of the FDIC's rules and regulations.
The Interim Rule requires the FDIC to impose an emergency systemic
risk assessment on insured depository institutions if the fees and
assessments
[[Page 64184]]
collected under the TLG Program are insufficient to cover any loss
incurred as a result of the TLG Program. In addition, if at the
conclusion of these programs there are any excess funds collected from
the fees associated with the TLG Program, the funds will remain as part
of the Deposit Insurance Fund.
D. Payment of Claims by the FDIC Pursuant to the Transaction Account
Guarantee Program
The Interim Rule sets forth the process for payment and recovery of
FDIC guarantees of ``noninterest-bearing transaction accounts,'' as
that term is defined in the Interim Rule. Under the rule, the FDIC's
obligation to make payment, in its capacity as guarantor of deposits
held in noninterest-bearing transaction accounts, arises upon the
failure of a participating federally insured depository institution.
The payment and claims process for satisfying claims under the
Transaction Account Guarantee Program generally will follow the
procedures prescribed for deposit insurance claims pursuant to section
11(f) of the FDI Act (12 U.S.C. 1821(f)), and the FDIC will be
subrogated to the rights of depositors against the institution pursuant
to section 11(g) of the FDI Act (12 U.S.C. 1821(g)).
The FDIC will make payment to the depositor for the guaranteed
amount under the Transaction Account Guarantee Program or will make
such guaranteed amount available in an account at another insured
depository institution at the same time it fulfills its deposit
insurance obligation under Part 330. The payment made pursuant to the
Transaction Account Guarantee Program will be made as soon as possible
after the FDIC, in its sole discretion, determines whether the deposit
is eligible and what amount is ultimately guaranteed. In most cases,
the FDIC will make the entire amount of a qualifying transaction
account available to the depositor on the next business day following
the failure of an institution that participates in the Transaction
Account Guarantee Program. If there is no acquiring institution for a
transaction account guaranteed by the Transaction Account Guarantee
Program, the FDIC will mail a check to the depositor for the full
amount of the guaranteed account within days of the insured depository
institution's failure.
As a result of assuming the receiver's responsibility for making
payment on the transaction account, the FDIC will be subrogated to all
rights of the depositor against the institution with respect to
noninterest-bearing transaction accounts guaranteed by the Transaction
Account Guarantee Program. This subrogation right includes the right of
the FDIC to receive dividends from the proceeds of the receivership
estate of the institution. As is currently the case, the FDIC as
manager of the Deposit Insurance Fund, will be entitled to receive
dividends in the deposit class for that portion of the account. (See 12
U.S.C. 1821(d)(11)(A)(ii)). Similarly, the FDIC would be entitled to
receive dividends from the receiver for assuming its obligation with
regard to the uninsured portion of the guaranteed transactional deposit
accounts.
As it does in satisfying claims for insured deposits, the FDIC will
rely on the books and records of the insured depository institution to
establish ownership and coverage for payment of deposits subject to the
Transaction Account Guarantee Program. In making its determination
about what amounts are guaranteed, the FDIC will be entitled to the
same discretion it has under section 11(f)(2) of the FDI Act (12 U.S.C.
1821(f)(2)), in requiring the depositor to file a proof of claim (POC).
The FDIC does not anticipate that a POC will be required during the
normal course of guarantee determination and payment pursuant to the
Transaction Account Guarantee Program, but situations requiring a POC
to be filed may arise. The FDIC's determination of the guaranteed
amount will be final and will be considered a final administrative
determination subject to judicial review in accordance with Chapter 7
of Title 5, similar to that provided for in sections 11(f)(4) and (5)
of the FDI Act (12 U.S.C. 1821(f)(4) and (5)), regarding judicial
review of insured deposit claims. A noninterest-bearing transaction
account depositor may seek judicial review of the FDIC's determination
on payment of the guaranteed amount in the United States district court
for the federal judicial district where the principal place of business
of the depository institution is located within 60 days of the date on
which the FDIC's final determination is issued.
E. Payment of Claims by the FDIC Pursuant to the Debt Guarantee
Program: Insured Depository Institution Debt
Pursuant to the Debt Guarantee Program the FDIC will guarantee
senior unsecured debt, as that term is defined, for institutions that
have chosen to participate in the Debt Guarantee Program. The FDIC's
obligation to make payment, in its capacity as guarantor of senior
unsecured debt issued by participating insured depository institutions,
arises upon the failure of a participating insured depository
institution. The FDIC will use the well-established receivership claims
process to process guarantee requests. The FDIC will not consider any
evidence provided by the debt holder that is not presented to the FDIC
within 90 days of the publication of the claims notice by the receiver
for the failed institution. The FDIC anticipates that many debt
holders, particularly sellers of federal funds, will be paid on the
next business day immediately following the failure of an insured
depository institution. In all instances, the FDIC commits to pay
claims related to its debt guarantee expeditiously and will strive to
make payment on the next business day after the claim is determined to
be valid. .
The FDIC will be subrogated to the rights of any creditor it pays
under the program.
F. Payment of Claims by the FDIC Pursuant to the Debt Guarantee
Program: Holding Company Debt
With respect to senior unsecured debt of holding companies eligible
for payment based on the Debt Guarantee Program, when the holding
company files for bankruptcy protection, the FDIC will make payment to
the debt holder for the principal amount of the debt and interest to
the date of the filing of a bankruptcy petition by the issuing
institution. As with claims for debt issued by insured depository
institutions, the FDIC will strive to expedite the claims payment
process, but the FDIC generally will not make payment on the guaranteed
amount for a debt asserted against a bankruptcy estate, unless and
until the claim for the unsecured senior debt has been determined to be
an allowed claim against the bankruptcy estate and such claim in not
subject to reconsideration under 11 U.S.C. 502(j). If the FDIC does not
pay eligible guaranteed debt within one business day of the filing of a
bankruptcy petition with respect to a participating bank or savings and
loan holding company, the FDIC will pay interest until payment is made
on the eligible debt at the 90-day T-bill rate in effect when the
bankruptcy petition was filed.
To properly establish ownership and coverage under this aspect of
the TLG Program, the FDIC normally will require the holder to file a
POC within 90 days of the published bar date of the bankruptcy
proceeding. The FDIC may also consider the books and records of the
holding company and its affiliates to determine the holder of the
unsecured senior debt and the amount eligible for payment under the
Debt Guarantee Program. The holder of the unsecured
[[Page 64185]]
senior debt of a holding company will also be required to timely file a
bankruptcy POC against the holding company's bankruptcy estate and to
present evidence of such timely filed bankruptcy POC in order to be
eligible for a debt guarantee payment under the TLG Program.
To receive payment under the Debt Guarantee Program, the holder of
the unsecured senior debt shall be required to assign its rights, title
and interest in the unsecured senior debt to the FDIC and to transfer
its validated claim in bankruptcy to the FDIC. This assignment shall
include the right of the FDIC to receive principal and interest
payments on the unsecured senior debt from the proceeds of the
bankruptcy estate of the holding company. If the holder of the
unsecured senior debt receives any distribution from the bankruptcy
estate prior to the FDIC's payment under the guarantee, the guaranteed
amount paid by the FDIC shall be reduced by the amount the holder has
received in the distribution from the bankruptcy estate. In the case of
a bankruptcy estate, the FDIC as assignee of the unsecured senior debt
shall be entitled to receive distributions from the liquidation or
other resolution of the bankruptcy estate in accordance with 11 U.S.C.
726 or a confirmed plan of reorganization or liquidation in accordance
with 11 U.S.C. 1129. The POC must be filed with the FDIC within 90 days
of the published bar date of the bankruptcy proceeding.
Request for Comments
The FDIC invites comments on all aspects of the Temporary Liquidity
Guarantee Program as described in the Interim Rule and suggestions for
its implementation.
In particular, the FDIC specifically requests suggestions on ways
in which the claims process for the Debt Guarantee Program may be
modified to speed payment to eligible claimants without putting at risk
the funds administered by the FDIC.
Negotiable order of withdrawal (NOW) accounts are excepted from the
definition of definition of ``noninterest-bearing transaction account''
in the Interim Rule. Should the definition be modified and the FDIC's
transaction guarantee be extended to include coverage for NOW accounts
held by sole proprietorships, non-profit religious, philanthropic,
charitable organizations and the like, or governmental units for the
deposit of public funds if the interest paid is de minimis?
The Interim Rule provides for a number of disclosures relative to
the FDIC's Debt Guarantee Program. Does the certainty of payment
provided by the required disclosures to lenders and creditors outweigh
the burden on participating entities in providing the disclosures? Are
there alternative, less burdensome ways to achieve the same result and
foster creditor confidence in the Debt Guarantee Program?
Regulatory Analysis and Procedure
A. Administrative Procedure Act
Pursuant to section 553(b)(B) of the Administrative Procedure Act
(APA), notice and comment are not required prior to the issuance of a
final rule if an agency for good cause finds that notice and public
procedure thereon are impracticable, unnecessary, or contrary to the
public interest. In addition, section 553(d)(3) of the APA provides
that an agency, for good cause found and published with the rule, does
not have to comply with the requirements that a final rule be published
not less than 30 days before its effective date. The FDIC finds good
cause to adopt this Interim Rule without prior notice and comment and
without the 30-day delayed effective date.
The FDIC's finding is based upon the severe financial conditions
that threaten the stability of the nation's economy generally and the
banking system in particular, the serious adverse effects on economic
conditions and financial stability that would result from any delay of
the effective date of the Interim Rule, and the fact that the Temporary
Liquidity Guarantee Program became effective on October 14, 2008.
Nevertheless, the FDIC desires to have the benefit of public comment
before adopting a permanent final rule and thus invites interested
parties to submit comments during a 15-day comment period. The 15-day
comment period will allow the FDIC to receive comments in a timely
manner and provide the industry with a final rule as quickly as
possible, given the Interim Rule's October 23, 2008, effective date. In
adopting the final regulation, the FDIC will revise the Interim Rule,
if appropriate, in light of the comments received on the Interim Rule.
B. Community Development and Regulatory Improvement Act
The Riegle Community Development and Regulatory Improvement Act
requires that any new rule prescribed by a Federal banking agency that
imposes additional reporting, disclosures, or other new requirements on
insured depository institutions take effect on the first day of a
calendar quarter unless the agency determines, for good cause published
with the rule, that the rule should become effective before such
time.\4\ Based upon the severe financial conditions that threaten the
stability of the nation's economy generally and the banking system in
particular, the serious adverse effects on economic conditions and
financial stability that would result from any delay of the effective
date of the Interim Rule, and the fact that the Temporary Liquidity
Guarantee Program has been in effect since October 14, 2008, the FDIC
invokes the good cause exception to make the Interim Rule effective on
October 23, 2008.
---------------------------------------------------------------------------
\4\ 12 U.S.C. 4802.
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C. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the Interim
Rule is not a ``major rule'' within the meaning of the relevant
sections of the Small Business Regulatory Enforcement Act of 1996
(SBREFA), 5 U.S.C. 801 et seq. As required by SBREFA, the FDIC will
file the appropriate reports with Congress and the General Accounting
Office so that the rule may be reviewed.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires an agency that is
issuing a proposed rule to prepare and make available for public
comment an initial regulatory flexibility analysis that describes the
impact of a proposed rule on small entities. Because this rulemaking
does not involve the issuance of a notice of proposed rulemaking, the
requirements of the RFA do not apply.
E. Paperwork Reduction Act
This interim rule contains information collection requirements
subject to the Paperwork Reduction Act (PRA). The FDIC has submitted a
request for review and approval of a collection of information under
the emergency processing procedures in Office of Management and Budget
(OMB) regulation, 5 CFR 1320.13. The FDIC is requesting approval by
October 23, 2008, of reporting requirements on amounts of senior
unsecured debt, decisions to opt in or opt out of the TLG Program or
either of its components, issuance of guaranteed debt and debt holder
guarantee claims against a receivership; disclosure requirements
regarding participation in the debt guarantee component, participation
in the transaction account guarantee component, and termination of
participation in the TLG Program.
These reporting and disclosure requirements are needed immediately
to facilitate the FDIC's administration of
[[Page 64186]]
the Temporary Liquidity Guarantee Program and to ensure notice to the
public about which entities are participating in the program. The use
of emergency clearance procedures is necessary because of the sudden,
unanticipated systemic risks posed to the nation's financial system by
recent economic conditions and because public harm is reasonably likely
to result if liquidity is not restored to financial markets. The burden
for reporting requirements on the amount of uninsured deposits and
reporting and recordkeeping requirements will be accounted for, as
appropriate, by an amendment to Consolidated Reports of Condition and
Income (OMB No. 3064-0052) and Thrift Financial Reports or by
adjustments to the information collection for this interim rule.
The proposed burden estimate is as follows:
Title: Temporary Liquidity Guarantee Program.
OMB Number: New collection.
Frequency of Response:
Initial report of amount of senior unsecured debt--once.
Subsequent reports on amount of senior unsecured debt--4.
Opt-out/opt-in notice--once.
Notice of debt guarantee--once.
Notice of transaction account guarantee--once.
Notice of issuance of debt guarantee--26 to 250.
Notice of termination of participation--once.
Debt-holder guarantee claims--once.
Bankruptcy POC/evidence of POC--once.
Affected Public: FDIC-insured depository institutions, thrift
holding companies, bank and financial holding companies.
Estimated Number of Respondents:
Initial report of amount of senior unsecured debt--14,400.
Subsequent reports on amount of senior unsecured debt--14,400.
Opt-out/opt-in notice--1,600.
Notice of debt guarantee--9,150.
Notice of transaction account guarantee--8,000.
Notice of issuance of debt guarantee--13,650.
Notice of termination of participation--300.
Debt-holder guarantee claims--2,300.
Bankruptcy POC/evidence of POC--300.
Average time per response:
Initial report of amount of senior unsecured debt--1 hour.
Subsequent reports on amount of senior unsecured debt hour--1.
Opt-out/opt-in notice--0.5 hour.
Notice of debt guarantee--1 to 2 hours.
Notice of transaction account guarantee--2 hours.
Notice of issuance of debt guarantee--0.5 to 3 hours.
Notice of termination of participation--3 hours.
Debt-holder guarantee claims--3 hours.
Bankruptcy POC/evidence of POC--1 hour.
Estimated Annual Burden:
Initial report of amount of senior unsecured debt--14,400 hours.
Subsequent reports on amount of senior unsecured debt--57,600
hours.
Opt-out/opt-in notice--800 hours.
Notice of debt guarantee--15,300 hours.
Notice of transaction account guarantee--16,000 hours.
Notice of issuance of debt guarantee--2,086,900 hours.
Notice of termination of participation--900 hours.
Debt-holder guarantee claims--6,900 hours.
Bankruptcy POC/evidence of POC--300 hours.
Total annual burden--2,199,100 hours.
The FDIC plans to follow this emergency request with a request for
standard 3-year approval. Although this program, including most of the
burden on participating entities, will be largely ended by the end of
2009, a few elements will be ongoing until 2012. The request will be
processed under OMB's normal clearance procedures in accordance with
the provisions of OMB regulation 5 CFR 1320.10. To facilitate
processing of the emergency and normal clearance submissions to OMB,
the FDIC invites the general public to comment on: (1) Whether this
collection of information is necessary for the proper performance of
the FDIC's functions, including whether the information has practical
utility; (2) the accuracy of the estimates of the burden of the
information collection, including the validity of the methodologies and
assumptions used; (3) ways to enhance the quality, utility, and clarity
of the information to be collected; and (4) ways to minimize the burden
of the information collection on respondents, including through the use
of automated collection techniques or other forms of information
technology; and (5) estimates of capital or start up costs, and costs
of operation, maintenance and purchase of services to provide the
information.
List of Subjects in 12 CFR Part 370
Banks, Banking, Bank deposit insurance, Holding companies, National
banks, Reporting and recordkeeping requirements, Savings associations.
0
For the reasons stated above, the Board of Directors of the Federal
Deposit Insurance Corporation amends title 12 of the Code of Federal
Regulations by adding new Part 370 as follows:
PART 370--TEMPORARY LIQUIDITY GUARANTEE PROGRAM
Sec.
370.1 Scope.
370.2 Definitions.
370.3 Debt Guarantee Program.
370.4 Transaction Account Guarantee Program.
370.5 Participation.
370.6 Assessments under the Debt Guarantee Program.
370.7 Assessments for the Transaction Account Guarantee Program.
370.8 Systemic Risk Emergency Special Assessment to recover loss.
370.9 Recordkeeping requirements.
370.10 Oversight.
370.11 Enforcement mechanisms.
370.12 Payment of claims.
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818,
1819(a)(Tenth); 1820(f), 1821(a); 1821(c); 1821(d); 1823(c)(4).
Sec. 370.1 Scope.
0
This part sets forth the eligibility, limitations, procedures,
requirements, and other provisions related to participation in the
FDIC's temporary liquidity guarantee program.
Sec. 370.2 Definitions.
As used in this part, the terms listed in this section are defined
as indicated below. Other terms used in this part that are defined in
the Federal Deposit Insurance Act (FDI Act) have the meanings given
them in the FDI Act except as otherwise provided herein.
(a) Eligible entity. The term ``eligible entity'' means any of the
following:
(1) An insured depository institution;
(2) A U.S. bank holding company, provided that it has at least one
chartered and operating insured depository institution within its
holding company structure;
(3) A U.S. savings and loan holding company, provided that it has
at least one chartered and operating insured depository institution
within its holding company structure or
(4) Other affiliates of insured depository institutions that the
FDIC after consultation with the appropriate Federal banking agency,
designates as eligible entities which affiliates, by seeking and
obtaining such designation, will have opted in to the debt guarantee
program.
(b) Insured Depository Institution. The term ``insured depository
institution'' means an insured depository institution as defined in
section 3(c)(2) of the FDI
[[Page 64187]]
Act, 12 U.S.C. 1813(c)(2), except that it does not include an ``insured
branch'' of a foreign bank as defined in section 3(s)(3) of the FDI
Act, 12 U.S.C. 1813(s)(3), for purposes of the debt guarantee program.
(c) U.S. Bank Holding Company. The term ``U.S. Bank Holding
Company'' means a ``bank holding company'' as defined in section 2(a)
of the Bank Holding Company Act of 1956 (``BHCA''), 12 U.S.C. 1841(a),
that is organized under the laws of any State or the District of
Columbia.
(d) U.S. Savings and Loan Holding Company. The term ``U.S. Savings
and Loan Holding Company'' means a ``savings and loan holding company''
as defined in section 10(a)(1)(D) of the Home Owners' Loan Act of 1933
(``HOLA''), 12 U.S.C. 1467a(a)(1)(D), that is organized under the laws
of any State or the District of Columbia and either:
(1) Engages only in activities that are permissible for financial
holding companies under section 4(k) of the BHCA, 12 U.S.C.1843(k), or
(2) Has at least one insured depository institution subsidiary that
is the subject of an application under section 4(c)(8) of the BHCA, 12
U.S.C. 1843(c)(8), that was pending on October 13, 2008.
(e) Senior unsecured debt. The term ``senior unsecured debt'' means
unsecured borrowing that: Is evidenced by a written agreement; has a
specified and fixed principal amount to be paid in full on demand or on
a date certain; is noncontingent; and is not, by its terms,
subordinated to any other liability.
(1) Senior unsecured debt includes, for example, federal funds
purchased, promissory notes, commercial paper, unsubordinated unsecured
notes, certificates of deposit standing to the credit of a bank, bank
deposits in an international banking facility (IBF) of an insured
depository institution, and Eurodollar deposits standing to the credit
of a bank. For purposes of this paragraph, the term ``bank'' means an
insured depository institution or a depository institution regulated by
a foreign bank supervisory agency.
(2) Senior unsecured debt may be denominated in foreign currency.
(3) Senior unsecured debt excludes, for example, obligations from
guarantees or other contingent liabilities, derivatives, derivative-
linked products, debt paired with any other security, convertible debt,
capital notes, the unsecured portion of otherwise secured debt,
negotiable certificates of deposit, and deposits in foreign currency
and Eurodollar deposits that represent funds swept from individual,
partnership or corporate accounts held at insured depository
institutions. Also excluded are loans to affiliates, including parents
and subsidiaries, and institution affiliated parties.
(f) Newly issued senior unsecured debt. The term ``newly issued
senior unsecured debt'' means senior unsecured debt issued by a
participating entity on or after October 14, 2008, and on or before:
(1) The earlier of November 12, 2008 or the date an eligible entity
opts out, for an eligible entity that opts out of the debt guarantee
program; or
(2) June 30, 2009, for an eligible entity that does not opt out of
the debt guarantee program.
(g) Participating entity. The term ``participating entity'' means:
(1) For the period from October 14, 2008, through November 12,
2008, any eligible entity that has not opted out; or
(2) For the period from November 13, 2008 through June 30, 2012, an
eligible entity that has not opted out of the debt guarantee program;
or
(3) For the period from November 13, 2008 through December 31,
2009, an eligible entity that has not opted out of the transaction
account guarantee program.
(h) Noninterest-bearing transaction account. (1) The term
``noninterest-bearing transaction account'' means a transaction account
as defined in 12 CFR 204.2 that is
(i) Maintained at an insured depository institution;
(ii) With respect to which interest is neither accrued nor paid;
and
(iii) On which the insured depository institution does not reserve
the right to require advance notice of an intended withdrawal.
(2) A noninterest-bearing transaction account does not include, for
example, a negotiable order of withdrawal (NOW) account or money market
deposit account (MMDA) as those accounts are defined in 12 CFR 204.2.
(i) FDIC-Guaranteed debt. The term ``FDIC-guaranteed debt'' means
senior unsecured debt issued by a participating entity that meets the
requirements of this part for debt that is guaranteed under the debt
guarantee program, and is clearly identified as ``guaranteed by the
FDIC.''
(j) Debt guarantee program. The term ``debt guarantee program''
refers to the protections afforded newly issued senior unsecured debt
as described in this part.
(k) Transaction account guarantee program. The term ``transaction
account guarantee program'' refers to the protections afforded funds in
noninterest-bearing transaction accounts as described in this part.
(l) Temporary liquidity guarantee program. The term ``temporary
liquidity guarantee program'' includes both the debt guarantee program
and the transaction account guarantee program.
Sec. 370.3 Debt Guarantee Program.
(a) Upon the failure of a participating entity that is an insured
depository institution or the filing of a petition in bankruptcy with
respect to any other participating entity, and subject to the other
provisions of this part, the FDIC guarantees payment of the unpaid
principal and contract interest accrued to the date of failure or
bankruptcy, as appropriate, of all FDIC-guaranteed debt issued by the
participating entity during the period from October 14, 2008, through
June 30, 2009, provided that the FDIC will pay interest at the 90-day
T-Bill bill rate if there is a delay in payment beyond the next
business day after the failure of the institution or the date of filing
of the bankruptcy petition, respectively.
(b) Absent action by the FDIC, the maximum amount of debt to be
issued under the guarantee is 125 percent of the par value of the
participating entity's senior unsecured debt, excluding debt extended
to affiliates or institution affiliated parties, outstanding as of
September 30, 2008 that was scheduled to mature on or before June 30,
2009. Under certain circumstances and subject to certain conditions,
including disclosure requirements, a participating entity may issue
senior unsecured debt that is not subject to the guarantee. If the
participating entity issues debt identified as ``guaranteed by the
FDIC'' in excess of its maximum amount, it will become subject to
assessment increases as provided in Sec. 370.6(e). The FDIC may make
exceptions to this guarantee limit, for example, allow a participating
entity to exceed the 125 percent guarantee limit, restrict a
participating entity to less than 125 percent, and/or impose other
limits or requirements. If a participating entity had no senior
unsecured debt on September 30, 2008, the entity may seek to have some
amount of debt covered by the debt guarantee program. The FDIC, after
consultation with the appropriate Federal banking agency, will decide
whether, and to what extent, such requests will be granted on a case-
by-case basis.
(1) Each participating entity shall calculate the amount of its
senior unsecured debt outstanding as of September 30, 2008 excluding
debt extended to affiliates, that was scheduled to mature on or before
June 30, 2009, using the definitions described in this regulation.
[[Page 64188]]
(2) Each participating entity will report the calculated amount to
the FDIC, even if such amount is zero, in an approved format via
FDICconnect no later than November 12, 2008.
(3) Each subsequent report to the FDIC concerning debt issuances or
balances outstanding will state whether the eligible institution has
issued guaranteed debt that exceeded its limits at any time since the
previous reporting period.
(4) All reports subject to this section will contain a
certification from the eligible institution's Chief Financial Officer
(CFO) or equivalent certifying the accuracy of the information
reported.
(c) For FDIC-guaranteed debt issued on or before June 30, 2009, the
FDIC's guarantee will terminate on the earlier of the maturity of the
debt or June 30, 2012.
(d) Debt cannot be issued and identified as guaranteed by the FDIC
if:
(1) The proceeds are used to prepay debt that is not FDIC-
guaranteed;
(2) The issuing entity has previously opted out of the debt
guarantee program;
(3) The issuing entity has had its participation in the debt
guarantee program terminated by the FDIC;
(4) The issuing entity has exceeded its authorized limit for
issuing guaranteed debt as specified in paragraph (b) of this section,
(5) The debt does not otherwise meet the requirements of this part;
or
(6) The debt is extended to an affiliate, an insider of the
participating entity, or an insider of an affiliate without FDIC
approval of the guarantee.
(e) The FDIC's agreement to include a participating entity's senior
unsecured debt in the debt guarantee program does not exempt the entity
from complying with any applicable law including, without limitation,
Securities and Exchange Commission registration or disclosure
requirements that would be applicable if the entity or liability were
not included in the program.
(f) Long term non-guaranteed debt option. On or before 11:59 p.m.,
Eastern Standard Time, November 12, 2008 a participating entity may
also notify the FDIC that it has elected to issue non-guaranteed debt
with maturities beyond June 30, 2012, at any time, in any amount, and
without regard to the guarantee limit. By making this election the
participating entity agrees to pay to the FDIC the nonrefundable fee as
provided in Sec. 370.6(f).
Sec. 370.4 Transaction Account Guarantee Program.
(a) In addition to the coverage afforded to depositors under 12 CFR
Part 330, a depositor's funds in a noninterest-bearing transaction
account maintained at a participating entity that is an insured
depository institution are insured in full (irrespective of the
standard maximum deposit insurance amount defined in 12 CFR 330.1(n))
from October 14, 2008, through the earlier of:
(1) The date of opt-out, if the entity opted out, or
(2) December 31, 2009.
(b) In determining whether funds are in a noninterest-bearing
transaction account for purposes of this section, the FDIC will apply
its normal rules and procedures under Sec. 360.8 (12 CFR 360.8) for
determining account balances at a failed insured depository
institution. Under these procedures, funds may be swept or transferred
from a noninterest-bearing transaction account to another type of
deposit or nondeposit account. Unless the funds are in a noninterest-
bearing transaction account after the completion of a sweep under Sec.
360.8, the funds will not be guaranteed under the transaction account
guarantee program.
(c) Notwithstanding paragraph (b) of this section, in the case of
funds swept from a noninterest-bearing transaction account to a
noninterest-bearing savings deposit account, the FDIC will treat the
swept funds as being in a noninterest-bearing transaction account. As a
result of this treatment, the funds swept from a noninterest-bearing
transaction account to a noninterest-bearing savings account will be
guaranteed under the transaction account guarantee program.
Sec. 370.5 Participation.
(a) Initial period. All eligible entities are covered under the
temporary liquidity guarantee program for the period from October 14,
2008 through November 12, 2008, unless they opt out on or before
November 12, 2008 in which case the coverage ends on the date of the
opt-out.
(b) The issuance of FDIC-guaranteed debt subject to the protections
of the debt guarantee program is an affirmative action by a
participating entity that constitutes its agreement to be:
(1) Bound by the terms and conditions of the program, including
without limitation, being subject to the assessments provided herein;
(2) Subject to and to comply with any FDIC request to provide
information relevant to participation in the debt guarantee program and
to be subject to FDIC on-site reviews as needed after consultation with
the appropriate Federal banking agency to determine compliance with the
terms and requirements of the debt guarantee program; and
(3) Bound by the FDIC's decisions, in consultation with the
appropriate Federal banking agency, regarding the management of the
temporary liquidity guarantee program.
(c) Opt-out and Opt-In Options. From October 14, 2008 through
November 12, 2008 each eligible entity is a participating entity in
both the debt guarantee program and the transaction account guarantee
program, unless the entity opts out. No later than 11:59 p.m., Eastern
Standard Time, November 12, 2008, each eligible entity must inform the
FDIC if it desires to opt out of the debt guarantee program or the
transaction account guarantee program, or both. Failure to opt out by
11:59 p.m., Eastern Standard Time, November 12, 2008 constitutes a
decision to continue in the program after that date. Prior to November
12, 2008 an eligible entity may inform the FDIC that it will not opt
out of either or both programs (opt in).
(d) An eligible entity may elect to opt out of either the
guaranteed debt program or the transaction account guarantee program or
both. The choice to opt out, once made, is irrevocable. Similarly, the
choice to affirmatively opt in, as provided in Sec. 370.5(c), once
made, is irrevocable.
(e) All eligible entities within a U.S. bank holding company group
or U.S. savings and loan holding company group must make the same
decision regarding continued participation in each guarantee program;
failure to do so constitutes an opt out by all members of the group.
(f) Eligible entities that do not opt out on or before November 12,
2008 will not be able to select which newly issued senior unsecured
debt is guaranteed debt; all senior unsecured debt issued by a
participating entity up to the guarantee limit will become guaranteed
debt as and when issued, subject to Sec. 370.3(f).
(g) Procedures for Opting Out. The FDIC will provide procedures for
opting out and for making an affirmative decision to opt in using
FDIC's secure e-business Web site, FDICconnect. Entities that are not
insured depository institutions will select and solely use an
affiliated insured depository institution to submit their opt-out
election and to make any assessment payments required under the
temporary liquidity guarantee program.
(h) Disclosures regarding participation in the temporary liquidity
guarantee program.
(1) The FDIC will publish on its Web site:
[[Page 64189]]
(i) A list of the eligible entities that have opted out of the debt
guarantee program and
(ii) A list of the eligible entities that have opted out of the
transaction account guarantee program.
(2) If an eligible entity does not opt out of the debt guarantee
program, it must clearly identify, in writing and in a commercially
reasonable manner, to any interested lender or creditor whether the
newly issued debt it is offering is guaranteed or not.
(3) Each eligible entity that is an insured depository institution
must post a prominent notice in the lobby of its main office and each
branch clearly indicating whether the entity is participating in the
transaction account guarantee program, i.e., whether it has opted out.
If the entity is participating in the transaction account guarantee
program, the notice must also state that funds held in noninterest-
bearing transactions accounts at the entity are insured in full by the
FDIC.
(i) These disclosures must be provided in simple, readily
understandable text.
(ii) If the institution uses sweep arrangements or takes other
actions that result in funds being transferred or reclassified to an
interest-bearing account or nontransaction account, the institution
must disclose those actions to the affected customers and clearly
advise them, in writing, that such actions will void the FDIC's
guarantee.
(4) Effective date for paragraph (2) and (3) of paragraph (h).
Paragraphs (h)(2) and (h)(3) of this section are effective December 1,
2008. Prior to that date, eligible entities should provide adequate
disclosures of the substance of paragraphs (h)(2) and (h)(3) in a
commercially reasonable manner.
(i) Continued Eligibility. The FDIC will determine eligibility in
consultation with the eligible entity's appropriate Federal banking
agency.
(1) Participation by an entity organized after the expiration of
the opt-out period will be considered by the FDIC on a case-by-case
basis in consultation with the entity's appropriate Federal banking
agency.
(2) An eligible entity that is not an insured depository
institution will no longer be eligible to participate in the debt
guarantee program once it is no longer affiliated with a chartered and
operating insured depository institution.
(j) Duration--(1) Coverage for guaranteed debt. The ability of
participating entities to issue guaranteed debt under the debt
guarantee program expires on June 30, 2009. For guaranteed debt issued
on or before June 30, 2009, coverage would only be provided until the
earlier of the maturity of the liability or June 30, 2012.
(2) Coverage for noninterest-bearing transaction accounts. Funds
held in noninterest-bearing transaction accounts at eligible entities
will be guaranteed from October 14, 2008 through November 12, 2008. If
the eligible entity does not opt-out of the transaction account
guarantee program, the coverage will exist through December 31, 2009.
Sec. 370.6 Assessments under the Debt Guarantee Program.
(a) Waiver of assessment for initial period. No eligible entity
shall pay any assessment associated with the debt guarantee program for
the period from October 14, 2008, through November 12, 2008.
(b) Notice to the FDIC. No debt shall be considered guaranteed
under the FDIC's debt guarantee program unless notice of the issuance
of such debt and payment of associated assessments is provided to the
FDIC as required in paragraph (d) of this section.
(1) Any eligible entity that does not opt out of the Debt Guarantee
Program by November 12, 2008, as provided in Sec. 370.5, and issued
any guaranteed debt during the period from October 14, 2008 through
November 12, 2008 that was still outstanding on November 12, 2008,
shall notify the FDIC of that issuance via the FDIC's e-business Web
site FDICconnect by December 1, 2008, and the eligible entity's Chief
Financial Officer or equivalent shall certify that the issuances
outstanding at each point of time did not exceed the guaranteed amount
limit as set forth in Sec. 370.3.
(2) Any eligible entity that does not opt out of the program and
that issues guaranteed debt after November 12, 2008, shall notify the
FDIC of that issuance via the FDIC's e-business Web site FDICconnect
within the time period specified by the FDIC. The eligible entity's
Chief Financial Officer or equivalent shall certify that the issuance
of guaranteed debt does not exceed the guarantee limit as set forth in
Sec. 370.3.
(3) The eligible entity shall be required to provide certification
that the issuance does not exceed the guaranteed amount limit as set
forth in Sec. 370.3.
(4) The FDIC will provide procedures governing notice to the FDIC
and certification of guaranteed amount limits for purposes of this
section.
(c) Initiation of assessments. Beginning on November 13, 2008, any
eligible entity that has chosen not to opt out of the debt guarantee
program as provided in this part, will be charged assessments as set
forth in this section.
(d) Amount of assessments for debt within the guarantee limit--(1)
Calculation of assessment. The amount of assessment will be determined
by multiplying the amount of eligible guaranteed debt times the term of
the debt times an annualized 75 basis points. If the debt matures after
June 30, 2012, June 30, 2012 will be used as the maturity date.
(2) Assessment invoicing. Once the participating entity provides
notice as required in paragraphs (b)(1) and (b)(2) of this section, the
invoice for the appropriate fee will be automatically generated and
posted on FDICconnect for the account associated with the participating
entity, and the time limits for providing payment in paragraph (e)(1)
of this section will apply.
(3) No assessment reduction for early retirement of guaranteed
debt. A participating entity's assessment shall not be reduced if
guaranteed debt is retired prior to its scheduled maturity date.
(e) Increased assessments for debt exceeding the Guarantee Limit.
Any participating entity that issues guaranteed debt represented as
being ``guaranteed by the FDIC'' exceeding its guaranteed amount limit
as set forth in Sec. 370.3(b) shall have its assessment rate for all
outstanding guaranteed debt increased to 150 basis points for purposes
of the calculations in paragraphs (d)(1) of this section. In addition,
any entity making such a misrepresentation may also be subject to
enforcement action including civil money penalties under 12 U.S.C.
1818.
(f) Long term non-guaranteed debt fee. Each participating entity
that elects to issue long term non-guaranteed debt pursuant to Sec.
370.3(f) must pay the FDIC a nonrefundable fee equal to 37.5 basis
points times the amount of the entity's senior unsecured debt (other
than debt owed to affiliates) with a maturity date on or before June
30, 2009, outstanding as of September 30, 2008.
(1) The nonrefundable fee will be collected in six equal monthly
installments.
(2) An entity electing the nonrefundable fee option will also be
billed as it issues guaranteed debt under the debt guarantee program,
and the amounts paid as a nonrefundable fee will be applied to offset
these bills until the nonrefundable fee is exhausted.
(3) Thereafter, the institution will have to pay additional
assessments on guaranteed debt as it issues the debt
(g) Collection of assessments--ACH Debit. Each participating entity
shall take all actions necessary to allow the Corporation to debit
assessments from the participating entity's designated
[[Page 64190]]
deposit account as provided for in Sec. 327.3(a)(2). Each
participating entity shall ensure that funds in an amount at least
equal to the amount of the assessment are available in the designated
account for direct debit by the Corporation on the first business day
after posting of the invoice on FDICconnect. Failure to take any such
action or to provide such funding of the account shall be deemed to
constitute nonpayment of the assessment, and such failure by any
participating entity will be subject to the penalties for failure to
timely pay assessments as provided for at Sec. 308.132(c)(3)(v).
Sec. 370.7 Assessment for the Transaction Account Guarantee Program.
(a) Waiver of assessment for initial period. No eligible entity
shall pay any assessment associated with the transaction account
guarantee program for the period from October 14, 2008, through
November 12, 2008.
(b) Initiation of assessment. For the period beginning on November
13, 2008, and continuing through December 31, 2009, any eligible entity
that has not notified the FDIC that it has opted out of the transaction
account guarantee program as provided in Sec. 370.5, will be subject
to an assessment that will be reflected on its quarterly certified
statement invoices.
(c) Amount of assessment. Any eligible entity that does not opt out
of the transaction account guarantee program shall pay quarterly an
annualized 10 basis point assessment on any deposit amounts exceeding
the existing deposit insurance limit of $250,000, as reported on its
quarterly Reports of Condition and Income or Thrift Financial Report in
any noninterest-bearing transaction accounts (as defined in Sec.
370.2(h), including any such amounts swept from a noninterest bearing
transaction account into an noninterest bearing savings deposit account
as provided in Sec. 370.4(c). This assessment shall be in addition to
an institution's risk-based assessment imposed under Part 327.
(d) Collection of assessment. Assessments for the transaction
account guarantee program shall be collected along with a participating
entity's quarterly deposit insurance payment as provided in Sec.
327.3, and subject to penalties for failure to timely pay assessments
as referenced in Sec. 308.132(c)(3)(v).
Sec. 370.8 Systemic Risk Emergency Special Assessment to recover
loss.
To the extent that the assessments provided under Sec. 370.6 or
Sec. 370.7 are insufficient to cover any loss or expenses arising from
the temporary liquidity guarantee program, the Corporation shall impose
an emergency special assessment on insured depository institutions as
provided under 12 U.S.C. 1823(c)(4)(G)(ii) of the FDI Act.
Sec. 370.9 Recordkeeping requirements.
The FDIC will establish procedures, require reports, and require
participating entities to provide and preserve any information needed
for the operation of this program.
Sec. 370.10 Oversight.
(a) Oversight. Participating entities availing themselves of the
temporary liquidity guarantee program are subject to the FDIC's
oversight regarding compliance with the terms of the temporary
liquidity guarantee program.
(b) By issuing guaranteed debt, and not opting out of the temporary
liquidity guarantee program, all participating entities agree, for the
duration of the temporary liquidity guarantee program, to be subject to
the FDIC's authority to determine compliance with the provisions and
requirements of the program.
Sec. 370.11 Enforcement Mechanisms.
(a) Termination of Participation. If the FDIC, in its discretion,
after consultation with the participating entity's appropriate Federal
banking agency, determines that the participating entity should no
longer be permitted to continue to participate in the temporary
liquidity guarantee program, the FDIC will inform the entity that it
will no longer be provided the protections of the temporary liquidity
guarantee program.
(1) Termination of participation in the temporary liquidity
guarantee program will solely have prospective effects. All previously
issued guaranteed debt will continue to be guaranteed as set forth in
this part.
(2) The FDIC will work with the participating entity and its
appropriate Federal banking agency to assure that the entity notifies
its customers and lenders or creditors that its participation in the
temporary liquidity guarantee program has ended.
(b) Enforcement Actions. Violating the terms or requirements of the
temporary liquidity guarantee program set forth in this part
constitutes a violation of a regulation and subjects the participating
entity to enforcement actions under Section 8 of the FDI Act (12 U.S.C.
1818), including the assessment of civil money penalties under section
8(i) of the FDI Act (12 U.S.C. 1818(i)). The appropriate Federal
banking agency for the participating entity will consult with the FDIC
in enforcing the provisions of this part. The appropriate Federal
banking agency and the FDIC also have enforcement authority under 12
U.S.C. 1828(a)(4)(C) to pursue an enforcement action if a person
knowingly misrepresents that any deposit liability, obligation,
certificate, or share is insured when it is not in fact insured.
Sec. 370.12 Payment of Claims.
(a) Claims for Deposits in Guaranteed Transaction Accounts.
(1) In general. The FDIC will pay guaranteed claims of depositors
who hold noninterest-bearing transaction deposit accounts in an insured
depository institution that is a participating entity as soon as
possible upon the failure of the entity. Unless otherwise provided for
in this subsection, the guaranteed claims of depositors who hold
noninterest-bearing transaction deposit accounts in such entities will
be paid in accordance with 12 U.S.C. 1821(f) and 12 CFR 330.
(2) Subrogation rights of FDIC. Upon payment of such claims, the
FDIC will be subrogated to the claims of depositors in accordance with
12 U.S.C. 1821(g).
(3) Review of final determination. The final determination of the
amount guaranteed shall be considered a final agency action of the FDIC
reviewable in accordance with Chapter 7 of Title 5, by the United
States district court for the federal judicial district where the
principal place of business of the depository institution is located.
Any request for review of the final determination shall be filed with
the appropriate district court not later than sixty (60) days of the
date on which the final determination is issued.
(b) Claims for Guaranteed Debt--(1) Guaranteed debt in
receivership.
(i) Procedure for claims determination. Holders of debt shall file
a claim with the receiver of a failed insured depository institution
that is a participating entity within ninety days after the FDIC
publishes a notice to creditors of the failed financial institution to
present claims pursuant to 12 U.S.C. 1821(d)(3)(B). The FDIC will
consider the proof of claim, if timely filed, and will make a
determination of the amount guaranteed within 180 days of the filing of
the proof of claim, unless extended by written agreement between the
claimant and the FDIC. The determination of the FDIC will be final. The
FDIC will pay interest at the 90-day T-Bill bill rate if there is a
delay in payment beyond the next business day after receivership.
[[Page 64191]]
(ii) Subrogation rights of FDIC. To receive payment under the debt
guarantee program, the holder of the unsecured senior debt shall assign
its rights, title and interest in the unsecured senior debt to the FDIC
and to transfer its validated claim to the FDIC which will be
subrogated to such rights.
(iii) Review of final determination. The debt holder shall have the
right to seek judicial review of the FDIC's final determination of the
amount guaranteed in the district or territorial court of the United
States for the district within which the depository institution's
principal place of business is located or the United States District
Court for the District of Columbia. The debt holder must file suit on
such claim before the end of the 60-day period beginning on the date of
the FDIC's final determination or before the end of the 60-day period
beginning on the 180th day after the debt holder filed the claim with
the FDIC, unless extended by mutual agreement, if the FDIC has not made
a final determination.
(2) Guaranteed debt of a participating U.S. Bank Holding Company,
or U.S. Savings and Loan Holding Company or Authorized Affiliates.
(i) Procedure for claims determination. The holder of the unsecured
senior debt of a holding company or authorized affiliate must timely
file a bankruptcy proof of claim (POC) against the company's bankruptcy
estate and present evidence of such timely filed bankruptcy POC in
order to be eligible to participate in the TLG Program. The POC must be
filed with the FDIC within 90 days of the published bar date of the
bankruptcy proceeding. The claimant shall identify and describe the
debt it believes is subject to the FDIC guarantee.
(ii) Payment of claims. The FDIC will make payment to the debt
holder for the principal amount of the debt and contract interest to
the date of the filing of a bankruptcy petition with respect to the
company, provided that the FDIC will pay interest at the 90-day T-Bill
bill rate if there is a delay in payment beyond the next business day
after the date of filing of the bankruptcy petition. The FDIC is not
required to make payment on the guaranteed amount for a debt asserted
against a bankruptcy estate, unless and until the claim for the
unsecured senior debt has been determined to be an allowed claim
against the bankruptcy estate and such claim is not subject to
reconsideration under 11 U.S.C. 502 (j).
(iii) Assignment of rights to FDIC. To receive payment under the
debt guarantee program, the holder of the unsecured senior debt shall
assign its rights, title and interest in the unsecured senior debt to
the FDIC and to transfer its allowed claim in bankruptcy to the FDIC.
This assignment shall include the right of the FDIC to receive
principal and interest payments on the unsecured senior debt from the
proceeds of the bankruptcy estate of the holding company. If the holder
of the unsecured senior debt receives any distribution from the
bankruptcy estate prior to the FDIC's payment under the guarantee, the
guaranteed amount paid by the FDIC shall be reduced by the amount the
holder has received in the distribution from the bankruptcy estate.
(iv) Final determination. The FDIC's determination of the
guaranteed amount shall be a final administrative determination subject
to judicial review.
(v) Review of final determination. The holder of an unsecured
senior debt shall have the right to seek judicial review of the FDIC's
final determination in the United States District Court for the
District of Columbia or the United State District Court for the federal
district where the holding company's principal place of business was
located. Failure of the holder of the unsecured senior debt to seek
such judicial review within sixty (60) days of the date of the
rendering of the final determination will deprive the holder of the
unsecured senior debt of all further rights and remedies with respect
to the guarantee claim.
By order of the Board of Directors.
Dated at Washington, DC, this 23rd day of October, 2008.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8-25739 Filed 10-24-08; 4:15 pm]
BILLING CODE 6714-01-P
