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4000 - Advisory Opinions

Deposits of Two Separately Chartered and Insured Institutions Continue to be Separately Insured From Each Other Following Merger of Their Bank Holding Companies


November 6, 1991

Mark A. Mellon, Attorney

This is in response to your letter of October 22, 1991. Based on your letter and our telephone conversations, it is my understanding that you wish to ascertain the starting date for the six months of separate insurance coverage provided for by the Federal Deposit Insurance Act (the "FDIA") and the FDIC's regulations when two insured depository institutions merge.

You state in your letter that it is anticipated that the holding company of * * * ("[Bank 1]") will merge with the holding company of [Bank 2] in early 1992. The two banks will then operate for a time as separately chartered and insured subsidiaries of the same holding company until they too are merged. You wish to ascertain whether the separate insurance of both institutions will continue after the holding company merger and whether the six months of separate insurance will only commence upon the merger of [Bank 1] and [Bank 2].

12 C.F.R. § 330.3(b) provides that any deposit accounts maintained by a depositor at one insured depository institution shall be insured separately from, and without regard to, any deposit accounts that the same depositor maintains at any other separately chartered and insured depository institution, even if two or more separately chartered and insured depository institutions are affiliated through common ownership.

12 C.F.R. § 330.3(g) provides that whenever the liabilities of an insured depository institution for deposits have been assumed by another insured depository institution by merger that: (a) the insured status of the institution whose liabilities have been assumed shall terminate on the date of receipt by the FDIC of satisfactory evidence of such assumption; and (b) the separate insurance for the assumed deposits will continue for six months from the date of assumption or, in the case of time deposits, the earliest maturity date after the six-month period. This regulatory provision follows the language of section 8(q) of the FDIA (12 U.S.C. § 1818(q)).

Based on 12 C.F.R. § 330.3(b), it is my conclusion that the deposits of [Bank 1] and [Bank 2] will continue to be separately insured from one another subsequent to the merger of the bank holding companies that own those institutions. This is because, although commonly owned, [Bank 1] and [Bank 2] will still be separately chartered and insured depository institutions after the merger of their holding companies.

Separate insurance will be provided for the respective deposits of [Bank 1] and [Bank 2] for a period of six months after the date when the two institutions merge and deposit liabilities are assumed (or in the case of time deposits, until the first maturity date thereafter) as provided for by the FDIA and section 330.3(g) of the FDIC's insurance regulations. Depositors who may have more than $100,000 in deposits as a result of the merger will thereby be provided with an opportunity to rearrange their accounts and retain full deposit insurance coverage.

I hope that this letter is responsive to your inquiry. Please do not hesitate to contact me if you should have any questions about this or any other matter.

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