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4000 - Advisory Opinions

Would the Distribution of a Brochure Which Describes a Particular Savings Program for a Bank's Current Customers Violate the Prohibition on Soliciting Deposits or Would Exceed the De Minimus Exception in Section 347.206(a)(7) of FDIC's Regulations

May 10, 2000


Karen L. Main, Counsel

I am writing in response to your letter dated March 15, 2000, to Jamey Basham of this office. I have read your letter and reviewed the brochure that you enclosed describing the savings program that your parent bank, Bank 1, is proposing to implement in Place. The following is my understanding of the proposed program and is based upon, in addition to your letter and brochure, our telephone conversation of April 18, 2000.

Under the program, customers of B2, an uninsured branch in New York City, would remit funds through B2 branches of the parent bank, Bank 1 in Place. These B2 customers would receive a document(s) in the form of cheques to acknowledge the remittance of their funds abroad; any remaining funds would be deposited to the individual customers' accounts, according to the customers' instructions. A drawing would be held periodically at Bank 1 in Place to award the holders or the beneficiaries of the cheques cash prizes.

I have reviewed several parts of the Federal Deposit Insurance Corporation's (FDIC) Rules and Regulations (regulations) which might have some applicability to this proposed program as well as section 20 of the Federal Deposit Insurance Act (FDI Act). For various reasons, including the fact that B2 is an uninsured branch, these provisions of the FDIC's regulations are not relevant. Moreover, because B2 is not a "state nonmember insured bank", section 20 of the FDI Act (which prohibits such banks from participating in lotteries) is not applicable to the program, as described.

The only remaining section which requires consideration is section 347.206(a)(7) of the FDIC's regulations which prohibits the branch from soliciting deposits from the general public "by advertising, display of signs, or similar activity designed to attract the attention of the general public". Mr. Basham and I discussed whether B2's pamphlet represented "advertising" which would contravene section 347.206. Based upon the representations in your March 15, 2000 letter, it appears that the brochure will only be offered or provided to current customers of B2, and not offered or distributed to the general public. Therefore, we believe that the brochure could be distributed to current B2 customers without violating the prohibition on soliciting deposits found in section 347.206(a)(7) of the FDIC's regulations.

There is, however, one other aspect of section 347.206 which requires some discussion and clarification. It is my impression from our conversation as well as the brochure that these remittances will only remain in B2 for a short period of time. During our telephone conversation of April 18, 2000, you indicated to me that the remittances made by your B2 customers in New York would not be deposits. However, according to the provisions of the FDI Act which define and interpret what represents a "deposit", these remittances will be considered to be "deposits" by the FDIC. Therefore, it will be important for B2 to monitor the deposits that are received as part of this remittance program to ensure that B2 does not exceed the one percent de minimus exception found in section 347.206(a)(7) of the FDIC's regulations. This does not seem likely, however, as you have represented to me that these brochures will only be offered to current customers of B2 who presumably have a relationship with the uninsured branch which would allow their deposits to be categorized under paragraphs (a)(1)--(a)(6) of section 347.206.

I have also shared your letter and the brochure with a review examiner in the Division of Supervision, International Branch, and she has expressed no objections to B2's proposed program.

This advisory letter is based upon the facts as known to us at the present time. Should new information become available or the facts change, the substance of this opinion may change. I trust that this discussion is responsive to your inquiry. However, if you should have any further questions, please do not hesitate to contact me at (202) 898--8838.

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