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4000 - Advisory Opinions

Circumstances in Which Advance Notice Is Required Under 12 C.F.R. §304.6


March 12, 1991

Pamela E.F. LeCren, Counsel

The following is in response to your letter to Mr. Roger Hood, Assistant General Counsel, Federal Deposit Insurance Corporation, ("FDIC") requesting an opinion on the application of section 304.6 of the FDIC's regulations (12 C.F.R. §304.6). Section 304.6 of the FDIC's regulations in general provides that an insured bank must provide the FDIC with 30 days advance notice before undertaking any special funding plan or arrangement designed to increase its assets by more than 7.5% during any consecutive three-month period. For the purpose of section 304.6 a special funding plan or arrangement is defined as

any effort to increase the assets of a bank through the solicitation and acceptance of fully insured deposits obtained from or through the mediation of brokers or affiliates, the solicitation of fully insured deposits outside a bank's normal trade area, or secured borrowing, including repurchase agreements.

In your letter you posit a situation in which a bank with assets of $100,000,000 intends to solicit what you refer to as "triggering deposits" in the amount of $6,000,000 during the same three-month period in which it will be soliciting $3,000,000 in deposits from its normal trade area. Your question is whether under those circumstances the bank would be required to give the FDIC advance notice pursuant to section 304.6.

It is clear upon reading the preamble which accompanied section 304.6 when it was adopted as a final regulation (55 Fed. Reg. 21015, May 22, 1990) that it is intended that the FDIC only need receive advance notice when the 7.5% figure is expected to be exceeded as a result of soliciting fully insured brokered deposits (whether from or through a deposit broker or an affiliate), soliciting fully insured deposits outside of the bank's normal trade area, and/or soliciting secured borrowings including repurchase agreements. If the bank's assets are expected to grow in any given three-month period as a result of soliciting the covered types of deposits, then notice is required. If not, then no notice is required. Any growth in assets attributable to a growth in deposits resulting in some other manner is not counted toward the 7.5% figure even if such deposit growth occurs in the same three-month period in which the bank did solicit fully insured brokered deposits, deposits from outside its normal trade area, and/or secured borrowings.

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