FDIC Law, Regulations, Related Acts
4000 - Advisory Opinions
12 C.F.R. § 333.3 Does Not Apply to State-Chartered Banks That Have Participated in an "Oakar'' Transaction
FDIC-91-76 August 30, 1991 Valerie J. Best, Counsel
Your letter dated July 12, 1991, has been referred to me for a response. You ask us to confirm your understanding that section 333.3 of the FDIC's rules and regulations, 12 CFR 333.3, does not apply to state-chartered banks that have participated in a transaction pursuant to section 5(d)(3) of the Federal Deposit Insurance ("FDI") Act, 12 USC 1815(d)(3) (the "Oakar" Amendment). Your understanding is correct.
Section 333.3 of the FDIC's rules and regulations applies to "all SAIF [Savings Association Insurance Fund] member state banks." 12 CFR 333.3(a). Section 7(l)(5) of the FDI Act defines a "Savings Association Insurance Fund member" as "any depository institution the deposits of which are insured by the SAIF." 12 USC 1817(l)(5). A savings association that is a SAIF member and which converts to a state bank charter in accordance with section 5(d)(2)(G) of the FDI Act, 12 USC 1815(d)(2)(G) (the "Sasser" Amendment), is subject to 12 CFR 333.3 by virtue of its SAIF-member status. In contrast, section 333.3 does not apply to a state-chartered bank which is a Bank Insurance Fund ("BIF") member and which combines with a SAIF-member savings association pursuant to section 5(d)(3) of the FDI Act. This is because such a bank retains its BIF-member status. This is true whether the Oakar transaction is consummated via a pre-existing subsidiary state bank or a newly organized state-chartered bank.
In previous cases where the Legal Division was asked whether a bank that has engaged in a transaction pursuant to section 5(d)(3) of the FDI Act is considered to be a BIF or SAIF member, the Legal Division staff has orally indicated that the bank retains its BIF-member status. The Oakar Amendment provides that a bank subsidiary must be a BIF member before it may engage in an Oakar transaction. Nothing in section 5(d)(3) suggests that a bank must relinquish its BIF-member status after having engaged in an Oakar transaction. Further, following the consummation of an Oakar transaction, the deposits acquired are not, strictly speaking, deposits which are insured by the SAIF. Rather, the Oakar Amendment provides that a portion of the average assessment base of the subsidiary bank which is equal to the adjusted attributable deposit amount (the "AADA") is "treated as" deposits which are insured by the SAIF. 12 USC 1815(d)(3)(B). The Oakar Amendment thus distinguishes between the AADA and the deposits themselves.
I trust this is responsive to your inquiry.