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4000 - Advisory Opinions

Subsequent Transfer of Deposits by "Oakar" Bank


November 16, 1992

Valerie J. Best, Counsel

I am writing in response to your letter dated October 14, 1992. You describe a situation wherein a bank that is a member of the Bank Insurance Fund ("BIF") has acquired a savings association pursuant to 12 U.S.C. 1815(d)(3). The bank (referred to as an "Oakar" bank) subsequently transfers some of its deposits to another bank insured by the BIF. You ask whether such a transfer would be regarded as a conversion transaction, whether it 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 Oakar bank's payments to the Savings Association Insurance Fund ("SAIF").

Enclosed for your review is a letter dated August 23, 1990, from Deputy General Counsel Douglas H. Jones that addresses this situation. Although this letter was written before the enactment of the FDIC Improvement Act of 1991 ("FDICIA"), the views set forth in that letter continue to be the views of the Legal Division staff. That is, if the aggregate of all deposits being transferred to BIF-member banks by the BIF-member Oakar bank will not reduce the Oakar bank's total deposit base below the amount of its "adjusted attributable deposit amount" ("AADA"), it is the opinion of the Legal Division staff that the transfer of deposits would be a transfer of BIF-insured deposits and, therefore, would not be regarded as a "conversion transaction" as defined in 12 U.S.C. 1815(d)(2)(B). As a consequence, the "insubstantial portion" test would not apply, conversion fees would not be required, and the transfer would not result in any reduction or adjustment of the AADA. However, it also continues to be the opinion of staff that if any deposit transfer by a BIF-member Oakar bank to another BIF-member reduces the Oakar bank's total deposit base below the amount of its AADA, such a transfer may be regarded as a conversion transaction and, as such, subject to FDIC approval, the "insubstantial portion" test, and entrance and exit fees.1

1In this regard, it should be noted that the five-year moratorium on "conversion transactions" established by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, has not been modified in any way by FDICIA. 12 U.S.C. 1815(d)(2). Go back to Text

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