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4000 - Advisory Opinions

Insurance of Deposits in Merged Banks


January 26, 1988

Walter P. Doyle, Counsel

Thank you for your January 12 letter regarding insurance of deposits in merged banks.

Section 8(q) of the Federal Deposit Insurance Act (12 U.S.C. 1818(q)) provides that the deposits of one or more insured banks that merge are separately insured up to the $100,000 limit applicable to each bank prior to the merger for a minimum of six months from the date of the merger. Moreover, in the case of interest-bearing time deposits, such separate insurance would continue in effect until the earliest maturity date of the deposit occurring after expiration of the six-month period. Such separate insurance remains in effect even if one or more of such time deposits are renewed one or more times during the six-month period, so long as there is no significant change in the original terms and conditions of such deposit (other than the adding of accrued interest to principal and the adjusting of the interest rate to reflect current economic conditions). Increasing the principal of the deposit by more than the accrued interest or renewing the deposit for longer than its original term would result in termination of the separate coverage at the end of the six-month period. Separate insurance coverage for time deposits that, in practice, are payable on demand (such as savings and NOW accounts) would end at the expiration of the six-month period.

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