When Covered Institutions (and their Technology Service Providers) are
testing for compliance with provisions of the Large-Bank Rule how should
FDIC generated debits
and credits to retirement accounts, such as IRAs, be handled? Should debits
give rise to income tax reporting or penalty assessments? Likewise should
credits be treated as deposits, reportable on form 5498 or subject to other
During the resolution of a failed financial institution, deposit accounts
that are determined to be in excess of the deposit insurance limit may have
both a debit and credit transaction. The debit represents funds in the account
considered to be uninsured while the credit represents an advanced dividend
that is paid to uninsured depositors.
For IRS Reporting purposes, the debit and credit transactions should be viewed
as a FDIC seizure of funds that will not trigger retirement account reporting,
IRS or otherwise, generally associated with typical retirement account activity.
Sweep Investment Vehicle Update
As the FDIC is concluding Technology Service Provider (TSP) testing we have
discovered that in certain instances sweep investment vehicle balances may
not have been properly identified and as a result are not being accounted
for accurately both in the provisional hold process or in the data extracts.
It is the Covered Institution’s responsibility to assess the extent
to which sweep investment vehicles are used and that they are treated according
to the Large-Bank Rule provisions. If an institution uses its core deposit
TSP processing system to house sweep investment vehicles, including repurchase
agreements, Euro, Cayman, Fed Funds and other sweep products, the TSP needs
to be aware of this use and either provide a solution within the core application
or the CI should make other arrangements. Sweep investment vehicles are subject
to different provisional hold thresholds and percentages than insurance-eligible
deposit accounts. Sweep investment vehicle data is reportable separately in
the Sweep/Automated Credit File Structure found in Appendix D to Section 360.9.
Section 7 of the Detailed Self Assessment Test Plan, published on September
11, 2009, contains certain required financial data reconciliations including
general ledger, deposit systems, and Call Report data. As part
of this FAQ update, is a spreadsheet
template (xls) that has been distributed
on a limited basis previously to assist in performing the reconciliation.
Use of the template is not required but may be useful when collecting
and presenting details of the reconciliation.
It is recommended that the reconciliation used is as of a quarter-end date
corresponding to a recent quarterly Call or TFR Report filing. The template
provides instructions for use.