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4000 - Advisory Opinions

Maximum Insurance Coverage for Public Deposits


July 17, 1985

Walter P. Doyle, Counsel

Thank you for your June 25 letter inquiring about the apparent conflict between section 11(a)(2)(A) of our Act, which states that deposits of public funds "shall be insured in an amount not to exceed $100,000 per account," and § 330.8 of FDIC regulations, which limits the coverage of public deposits held in the same right and capacity to $100,000 in the aggregate per insured bank. (Emphasis added.)

Section 11(a)(2) was added to our Act in 1974 by Public Law 93-495. The House-passed version of this legislation provided for 100 per cent insurance of public unit deposits, whereas the Senate bill had no provision on this point. The language eventually enacted came out of the Conference Committee with little legislative history to clarify Congressional intent.

If the "per account" language were taken to mean that the simple proliferation of multiple accounts in the same insured bank by the same official custodian of the same public unit could achieve unlimited insurance coverage, then, of course, the House's preference for 100 per cent insurance of public deposits would, in effect, be the result and the Conference Committee compromise and much of the resulting verbiage in section 11(a)(2)(A) and in other parts of our Act would be essentially meaningless.

On the other hand, with a closer look at the above-quoted language in section 11(a)(2)(A), one will note that the statement is that public deposits "shall be insured in an amount not to exceed $100,000 per account." (Emphasis added.) Taking this in conjunction with the very broad regulatory authority in section 3(m)(1) of our Act for FDIC "to define, with such classifications and exceptions as it may prescribe, [the term "insured deposit" as well as the terms used in section 11(a)] and the extent of the insurance coverage resulting therefrom," it seems clear that the interpretation of section 11(a)(2)(A) as embodied in § 330.8 of our regulations is the one which most accurately reflects the underlying Congressional intent of the 1974 legislation in the context of the overall statutory framework in which FDIC operates.

For your further information, I am enclosing a copy of a recent FDIC legal opinion pertaining to the use of multiple accounts in an effort to achieve increased insurance coverage. Please let us know if we can be of any further assistance.

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