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4000 - Advisory Opinions


Clarification of Notice to Depositor Requirements

FDIC--93--36

June 29, 1993

Claude A. Rollin, Counsel

This is in response to your letter, dated June 14, 1993, inquiring about the notice to depositors which is required by section 330.15 of the FDIC's revised regulations, 12 C.F.R. 330.15.

In your letter, you ask the following question:

If an IRA is the only type of retirement/employee benefit plan [account] offered by an institution, must the institution send out the Notice to Depositors required by section 330.15 of the regulation?

Section 330.15(a) of the FDIC's regulations requires that each insured institution send the prescribed notice to "each of its depositors or, at the option of the institution, to all depositors having deposit accounts which could potentially be affected by the rules in [Part 330] which are effective December 19, 1993."

The idea behind this provision was to assure that depositors who might be affected by the rule changes are provided notice of those changes, and have the opportunity to take appropriate measures to protect themselves, while at the same time providing institutions with flexibility to satisfy the notice requirement in an efficient and cost effective manner.

We expect all insured institutions to make a good faith effort to satisfy the notice requirement. As stated in the preamble to the final rule, if an institution opts not to notify all of its depositors of the rule changes, then the FDIC would expect the institution to make a good faith effort to identify and notify all depositors who may potentially be affected by the rule changes.

If, after a thorough review of an institution's records, it is conclusively determined that there are IRA accounts but no other existing accounts that could potentially be affected by the rule changes, an institution could opt not to send the prescribed notice to any of its depositors since none of its depositors could potentially be affected by the rule changes.

It should be noted, however, that the rule changes affect not only IRA accounts and other employee benefit plan accounts but also accounts in which an institution is acting as agent, custodian, nominee, conservator, trustee or in some other fiduciary capacity. In fact, the new rules provide separate coverage for such accounts only when the institution is acting as trustee of an irrevocable trust.

It should also be noted that even though an institution does not have special accounts or specific forms for other types of employee benefit plans, an employee benefit plan could, in some cases, acquire a regular certificate of deposit from an insured institution, either directly or through an intermediary. Those accounts should be titled in a manner indicating that they are employee benefit plan accounts.

If an institution is unable to conclusively determine whether or not it has other accounts that could potentially be affected by the rule changes, then it should send the notice to all of its depositors. As stated in the preamble to the final rule, the FDIC wishes to maximize the probability that depositors become aware of the rule changes so that they do not unknowingly have uninsured funds in an insured institution. All too frequently, depositors only find out that they have uninsured funds after an institution fails.

The FDIC has attempted to minimize the burden on insured institutions of satisfying the notice requirement. We expect institutions to make a concerted effort to, at a minimum, notify depositors who could potentially be affected by the rule changes.

I trust that this has been responsive to your inquiry. If you have any further questions, please call me at (202) 898-3985.


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