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4000 - Advisory Opinions

Payment to Insured Depositors of a Failed Bank


December 16, 1987

Alan J. Kaplan, Counsel

Thank you for your letter of December 11, which asks whether the FDIC is required by law to pay insured depositors within a certain period of time after a bank fails and whether the FDIC is backed by the full faith and credit of the United States Government.

Section 11(f) of the Federal Deposit Insurance Act requires the FDIC to pay insured depositors "as soon as possible" after a bank has been closed due to insolvency. In practice, the FDIC usually begins paying depositors within five days after the closing, and often within a couple of days. When the deposits of the closed bank are assumed by another bank in a "purchase and assumption" transaction, or merger, the funds are usually available to depositors on the next business day.

For information on how long it takes the FSLIC to pay insured deposits in failed FSLIC-insured institutions, you should contact that agency directly. Their address is 1800 G Street, N.W., Washington, D.C. 20552.

Title IX of the Competitive Equality Banking Act of 1987, signed into law by President Reagan on August 10, 1987, serves as a reaffirmation by Congress that the United States pledges its full faith and credit behind the federal deposit insurance funds. Thus, although the FDIC's deposit insurance fund remains strong (currently exceeding $18 billion, with 1986 assessment income of $1.5 billion and other income of $1.8 billion), Congress has expressed its intention to support the fund should the need ever arise. A copy of Title IX is enclosed.

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