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4000 - Advisory Opinions

Deposit insurance for deposits made to an insured institution operating a military banking facility in a foreign country


March 5, 1996

Alan J. Kaplan, Assistant General Counsel

This is in response to your letter dated February 26, 1996. Your letter involved a contract awarded by the United States Department of Defense to Bank X. Through that contract, Bank X will operate military banking facilities in several countries. One of these countries is the Republic of Panama. According to your letter, the XYZ Banking Commission has requested Bank X to obtain a letter from the Federal Deposit Insurance Corporation "indicating that the military banking program deposits received by X; in Panama will be insured by the FDIC."

The applicable statutory rule is set forth at 12 U.S.C. § 1813(l)(5). Please note that this statutory section was amended by the Riegle Community Development and Regulatory Improvement Act of 1994, Pub. L. No. 103--325 (Sept. 23, 1994). As amended, the section provides that the term "deposit" shall not include the following:

any obligation of a depository institution which is carried on the books and records of an office of such bank or savings association located outside of any State, unless--

(i)  such obligation would be a deposit if it were carried on the books and records of the depository institution, and would be payable at, an office located in any State; and

(ii)  the contract evidencing the obligation provides by express terms, and not by implication, for payment at an office of the depository institution located in any State.

12 U.S.C.A. § 1813(l)(5)(A) (West Supp. 1995).

In your letter, you state that Bank X will provide that the U.S. dollar deposits will be payable at Bank X banking locations within the United States. Under the definition quoted above, this feature will enable the deposits to qualify as "deposits" for FDIC insurance (and assessment) purposes but only if the deposit contract sets forth the required provision "by express terms, and not by implication." Bank X should have no difficulty in designing deposit contracts (such as signature cards and certificates of deposits) with the appropriate "express terms."

Assuming that the deposits received by Bank X in Panama satisfy the requirements discussed above, those deposits (with other deposits at Bank X) will be insured up to $100,000 in accordance with the insurance regulations at 12 C.F.R. Part 330. The FDIC understands that this letter will be shown to the Panamanian National Banking Commission.

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