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4000 - Advisory Opinions

FDIC's Assessment Rules and Rules Governing Conversion Transactions and Fees: "Oakar Banks"

FDIC-90-22 June 15, 1990 Alan J. Kaplan, Senior Counsel

You have asked our position on the proper treatment, under the FDIC's assessment rules and the rules governing conversion fees, of a transaction whereby an "Oakar bank"--i.e., a bank that has acquired a savings association under the so-called "Oakar Amendment," 12 U.S.C. § 1815(d)(3)--subsequently transfers some of its deposits to another bank insured by the Bank Insurance Fund ("BIF"). Specifically, you want to know whether such a transfer would be regarded as a conversion transaction, whether the transfer would be subject to the "insubstantial portion" test that limits the amount of deposits that may be transferred from one insurance fund to the other, whether entrance and exit fees would be required, and whether the transfer would have any effect on the Oaker bank's payments to the Savings Association Insurance Fund ("SAIF").

It is our understanding that the aggregate of all deposits being transferred to BIF-member banks will not reduce the Oakar bank's total deposit base below the amount of its "adjusted attributable deposit amount" ("AADA"), which is the amount upon which the Oakar bank's SAIF assessment obligation is based. In several previous cases of this type, the Legal Division staff has orally indicated that the transfer of deposits under these conditions would not be regarded as a "conversion transaction" as defined in 12 U.S.C. § 1815(d)(2)(B), that the "insubstantial portion'' test would not apply, that conversion fees would not be required, and that the transfer would not result in any reduction or adjustment of the AADA.

However, if the aggregate of all deposits transferred to BIF-member banks reduces the Oakar bank's total deposit base below the amount of its "adjusted attributable deposit amount," any subsequent deposit transfer by the Oakar bank to another BIF-member bank would be regarded as a conversion transaction and so subject to FDIC approval, the "insubstantial portion" test, and entrance and exit fees.

These views have only been staff opinions. A number of complex issues have arisen regarding Oakar banks and we are continuing to explore the range of possible interpretations. It is also possible that some of these issues may ultimately be addressed by the FDIC's Board of Directors, through rulemaking or otherwise. Thus, you should be aware that any final regulation or other resolution of these issues by the Board or the staff might differ from the earlier staff position as stated herein.

Please call us if you require additional assistance.

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