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4000 - Advisory Opinions

Recordkeeping Requirements for Deposits Supporting Municipal Bond Issues


September 26, 1988

Roger A. Hood, Assistant General Counsel

Enclosed for your guidance is a copy of General Counsel's Opinion No. 2 - Interpretation of 12 C.F.R. § 330.1(b) as it Applies to Deposits Supporting Municipal Bond Issues [See page 5522], as submitted for publication in the Federal Register. General Counsel's Opinion No. 2 sets forth the Legal Division's position on how the FDIC's recordkeeping requirements can be satisfied so as to provide pass-through insurance coverage, in the amount of up to $100,000 per bond owner, for the owners of municipal bonds which are supported by deposits in FDIC-insured banks ("deposit-backed bonds"). The enclosed document will be published in the Federal Register and will be distributed to the chief executive officers of all FDIC-insured banks in the near future.

This General Counsel's Opinion supercedes the letter I wrote to Burton L. Raimi, dated September 17, 1982, which discusses deposit insurance in the context of deposit-backed bonds (the "1982 Letter"), a copy of which is enclosed for your reference. The FDIC will, however, continue to operate under the 1982 Letter for a period of 90 calendar days from the date the General Counsel's Opinion is published in the Federal Register. This is to say that, during the 90 day period, if a bank should fail and we are asked to determine the insurance coverage for certificates of deposit supporting municipal bonds which are registered on the depositor's (bond trustee's) records as being owned by financial institutions, we will permit the financial institutions to present evidence indicating that they are holding the bonds in a fiduciary capacity, on behalf of others, notwithstanding the fact that such fiduciary relationships may not be evident from either the records of the bank or those of the depositor.

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