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4000 - Advisory Opinions

Whether Master Repurchase Agreement and Side Letter Entered Into by Insured Bank and Its Trust Department Constitute a Deposit for Assessment Purposes


March 10, 1992

Gerald J. Gervino, Senior Attorney

You have sought our written opinion as to whether a specific potential transaction constitutes a deposit for assessment purposes. We had previously discussed this matter by telephone.

The transaction would involve a standard master repurchase agreement and a side letter, designed to achieve a shift in the timing of benefit payments when accounting for the proposed transaction, all in accordance with the accounting pronouncement, FASB No. 88.

The bank would enter into a repurchase arrangement with its own trust department, as trustee for an employee benefit plan.

Since the question has not been raised, we express no opinion with respect to the Employee Retirement Income Security Act of 1974, Pub.L.93-406, 88 Stat. 829, 29 U.S.C. § 1001 et seq. (1988) ("ERISA"), or any other laws that may be applicable to a fiduciary engaged in the proposed transaction. The discussion that follows assumes that the parties to the transaction comply with those laws.

The issuance of a repurchase obligation does not generally create a deposit liability for purposes of the Reports of Condition and Income, (FFIEC 031,032,033, and 034), 12 CFR § 304.4(a) (1991), prescribed for insured banks, and is not the subject of an adjustment under our assessment rules, 12 CFR § 327.4 (1992). Because of this, the repurchase agreement would not ordinarily be considered a deposit for the purposes of the assessment rules.

The side letter specifies the method of payment to be used by the bank requiring transfers to a holding account or a checking account of the bank. It further states that the bank has "assumed" the obligation to fund the holding account and has "assumed" the "primary obligation" to fund the checking account. Since the bank is already liable for payment of the repurchase price, the side letter does not appear to alter the bank's obligation to pay.

In view of the above, we would not consider a bank's repurchase obligation to be a "deposit" for our assessment purposes. Amounts credited to the deposit accounts under the authority of the side letter or otherwise would constitute deposits as we indicated in our previous telephone conversation.

If you have any further questions or would like further explanation of our letter, please write or call me at (202) 898-3723.

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