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4000 - Advisory Opinions

Use of Trade Names and Depositor Confusion


April 15, 1999

Marc J. Goldstrom, Counsel

The FDIC has received several inquiries regarding the insured status of Bank A.

It appears that your bank is using this trade name to transmit information to and do business with customers over the Internet.

The FDIC and the other Federal banking regulators are very concerned about the use of differing trade names by insured depository institutions. Even though in certain cases there may be valid business reasons for doing so, this practice has the potential for confusing depositors regarding their deposit insurance coverage.

As a result of our concerns, the Federal banking regulators have issued the "Interagency Statement on Branch Names" (FIL 46--98) dated May 1, 1998, (the "Interagency Statement") a copy of which is enclosed. The Interagency Statement was developed to help prevent customer confusion when a bank or thrift operates its offices, branches or other outlets for delivering services under a trade name. It urges banks and thrifts that intend to use a different name for a branch or other outlet to take reasonable steps to ensure that customers will not incorrectly assume that the branch or outlet is a separate institution, or that deposits in the different facilities are separately insured.

We have reviewed the Bank A world wide web site and are concerned that the site is likely to mislead customers into believing that the Bank A is a separate entity from Bank B and that deposits in each are separately insured. For example, although the Bank A site discloses that it is a division of Bank B, the web site never clarifies that Bank A is part of the same bank as Bank B. Also, the listing of certain bank employees as President, CEO, CFO, and Chief Operating Officer is similarly misleading. There are numerous other statements that suggest that Bank A is a separate entity. Indeed, the potential for confusion is evidenced by the many inquiries the FDIC has received concerning Bank A.

In light of our concerns, we respectively request that you inform us as to the additional measures that Bank B has taken or will take to ensure that customers are not mislead into believing that Bank A is a separate entity from Bank B and that deposits in each are separately insured.

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