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4000 - Advisory Opinions

Insurance Coverage of Packaged Affiliate Certificate of Deposit Program


May 22, 1986

Roger A. Hood, Assistant General Counsel

Thank you for your letter of May 8, 1986, addressed to Deputy General Counsel Douglas Jones. You describe *** Packaged Affiliate Certificate of Deposit Program ("PAC Program") as follows:

Under the PAC Program, a customer places funds at one of the Subsidiary Banks (the "Placing Bank") and instructs it to wire transfer for deposit for his account up to $100,000 in any one or more of the other Subsidiary Banks (the "Depository Bank"). Pursuant to such instructions, the Placing Bank transfers up to $100,000 of such funds to each Depository Bank in the name of such customer. Therefore, the Subsidiary Bank has received a deposit, established an account in the name of a customer and has caused the issuance of a certificate of deposit evidencing such deposit.

You ask Mr. Jones to "confirm . . . that, since each Subsidiary Bank actually receives the funds, establishes an account in the name of such customer and causes the issuance of a certificate of deposit in the name of the customer, each account established by a Subsidiary Bank pursuant to the PAC program is eligible for FDIC insurance." Mr. Jones has forwarded your letter to me for reply.

Based on my understanding of the PAC Program, it appears to me that the program does what it sets out to do--that is, create a depository relationship directly between the customer and each "Depository Bank." Accordingly, the customer's deposits at each "Depository Bank"--both those placed through the PAC Program and any other deposits he may have placed himself--would be insured in the aggregate up to a maximum of $100,000.

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