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4000 - Advisory Opinions

Insurance Coverage of Book-Entry Deposits in a Multi-Bank Depository Program


October 20, 1986

Roger A. Hood, Assistant General Counsel

In your letter of October 9, 1986, you described a multi-bank depository program developed by a bank holding company. The program relies on book-entry deposits that the participating banks maintain with the holding company's lead bank. You write:

The purpose of this correspondence is to submit a written description of the [program] and to request formal confirmation that the book entry deposits of [one] bank under the [program], together with any other deposits a customer may have placed with such bank, are insured in the aggregate up to a maximum of $100,000 pursuant to FDIC regulations set forth at 12 C.F.R. [Part] 330.

I must caution you that the views I express here are those of the FDIC legal staff, not of the FDIC itself. The FDIC issues formal interpretations of its rules, but only pursuant to rule-making proceedings. The FDIC does not issue formal interpretations in the form of letters or rulings on specific cases.

The mere fact that the depository bank keeps its records in book-entry form does not adversely affect the insurance of deposits held in that bank. The only record-keeping requirement the depository bank itself must satisfy is that its "deposit account records" must disclose the existence of any relationship on which a claim for insurance is based.

The aggregation rules governing the insurance of deposits placed pursuant to a multi-bank depositor program depend on the arrangements between the customer and the agent that places the funds for him (here, "Subsidiary Bank #1"). I understand from your description that each depository bank records the deposit on its books in the customer's own name. In that event, the customer is the insured party. The FDIC aggregates the deposit with other deposits the customer has placed directly at the same depository bank, and insured the aggregate funds up to $100,000.

If the depository bank records the deposit in Subsidiary Bank #1's name "as agent" for the customer, and if the FDIC's other record-keeping requirements have been satisfied, the customer is still the insured party. Subsidiary Bank #1 is a bank itself, however. Accordingly, a different aggregation rule comes into play: the deposit is only aggregated with other deposits that Subsidiary Bank #1 holds as the customer's agent, not with deposits that the customer holds in his own name. The aggregate funds are insured up to $100,000, and are insured separately from any deposits that the customer holds in his own name. The aggregate funds are insured up to $100,000, and are insured separately from any deposits that the customer has placed with the depository bank directly, or through any other agent.

The FDIC will not acknowledge the depositor as the insured party, however, unless the FDIC's record-keeping rules have been satisfied. These rules say that the depository bank's records must disclose the existence of the agency relationship between Subsidiary Bank #1 and the customer. They also specify that the details of the agency relationship, and the customer's interest in the account, must be ascertainable from the depository bank's records or from the records of Subsidiary Bank #1 maintained in good faith and in the regular course of business.

Accordingly, if Subsidiary Bank #1 holds the deposit in its own name without a qualifying phrase like "as agent," or if the details of the relationship and/or the customer's interest in the account cannot be determined adequately, the FDIC will recognize Subsidiary Bank #1--not the customer--as the insured party. The deposit will be aggregated with other deposits that Subsidiary Bank #1 holds in its own name, and the aggregate will be insured up to $100,000.

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