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4000 - Advisory Opinions

Whether an insured depository institution can operate branch under a name that is different than that of the insured institution


March 8, 1996

Marc J. Goldstrom, Counsel

This is in response to your January 18, 1996, letter to the FDIC's Office of the Executive Secretary. You have requested the FDIC's approval for Bank A (the "Bank") to use the name, Bank B, Branch of Bank A in signage and advertising, for its newly established de novo branch in the town of X.

We know of no federal law or regulation which specifically limits the ability of an insured depository institution to operate a branch under a name that is different than that of the insured institution. However, the FDIC is concerned about potential customer confusion regarding deposit insurance. Specifically, without adequate disclosure, customers might believe that the branch and other offices of the institution are separate entities and that the deposits in the branch are separately insured from deposits in the other facilities of the insured institution. The FDIC believes it is very important that customers understand the scope and extent of FDIC insurance. Accordingly, insured institutions that wish to use a different name for a branch or branches should take steps to eliminate the possibility of depositor confusion.

The FDIC will not object to an insured institution using a different name for one or more of its branches, so long as the insured institution can demonstrate that it has taken measures reasonably calculated to ensure that customers will not be misled into believing that the two facilities are separate entities or that deposits in the two branches are separately insured. Such measures may include, but are not limited to:

1)  Ascertaining that the use of such name is permitted by the institution's chartering law and/or obtaining the approval of the use of such name by the primary federal regulator and, in the case of state chartered institutions, the state regulator.

2)  Disclosing in all signage, advertising, and similar materials that the facility is a branch of the insured institution. Such disclosure should be clear and conspicuous. The insured institution should also exercise care that the relative size of typefaces used in such materials as well as the juxtaposition of such disclosure could not, in any way, be reasonably expected to create a deceptive and/or misleading impression.

3)  Using the formal name of the insured institution for legal documents, certificates of deposit, signature cards, loan agreements, and the like.

4)  Educating the staff of the insured institution as to the potential for customer confusion with respect to deposit insurance. We would recommend that staff at the branch and other facilities be instructed to, prior to opening new accounts, inquire of customers whether they have deposits at the other facility or branch.

5)  Obtaining a signed statement from customers opening accounts acknowledging that the customer understands that the branch and other facilities are in fact parts of the same insured institution and that deposits held at each facility are not separately insured.

It is my understanding that the federal banking agencies may be issuing uniform guidelines on this issue in the near future. It is possible that the guidance herein may differ somewhat from that ultimately issued under the uniform guidelines.

I hope that this letter is responsive to your inquiry. If there are any further questions, you may contact me at (202) 898--8807.

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