Large-Bank Deposit Insurance Determination Modernization FAQs
General Resolution Information
Describe the timing of events that would occur in the event of failure, including the posting and removal of provisional holds and the generation of standard data files.
The series of events in an insured depository institution failure are as follows:
- Prior to failure, the FDIC will establish points of contact with the institution to gather necessary information. The points of contact supplied to the FDIC for parties responsible for provisional holds and standard data extracts may be instrumental to the information gathering process, but the FDIC’s standard practice is to initiate contact at a very senior level within the organization. Pre-failure contact may include a request for a standard data extract, a test of the provisional hold process and information regarding the institution’s operations, including a detailed understanding of its sweep products. The pre-failure standard data extract and the sweep product information will be used to determine the account thresholds and percentages used for the provisional hold process.
- On the day of failure, the FDIC will take control of the institution, typically late in the afternoon when branch office locations have ceased operations. Upon taking control of the institution, the FDIC acting as receiver will use its best efforts to stop some or all deposit and other transactions involving the flow of funds into or out of the institution, such as closing wire operations. Some processes and systems for the external transfer of funds may be left operating at the discretion of the FDIC as receiver, such as ATM operations which typically limit the dollar amount of funds which can be removed from the institution. Based on discussions with the Covered Institution prior to failure, the FDIC will determine which activities should and should not be limited at the point the FDIC takes control of the institution.
- Also on the day of failure, the Covered Institution will be asked to process the day’s deposit and other transactions to arrive at end-of-day ledger balances according to 12 CFR 360.8 of the FDIC’s Resolution and Receivership Rules (Method for Determining Deposit and other Liability Account Balances for a failed Insured Depository Institution). The FDIC uses the “close-of-business account balances” as defined in 12 CFR 360.8(b)(3) for deposit insurance determination purposes. At and after the bank’s failure, the term “Covered Institution” refers to the back office operations of the bank which must be able to perform these functions at the direction of the receiver (FDIC). Usually, former Covered Institution’s employees will perform or assist with these functions.
- After end-of-day ledger balances are determined, the Covered Institution may be asked to initiate the process of posting provisional holds. Upon taking control of the Covered Institution, the FDIC will provide detail on the account thresholds and percentages to be used for the provisional holds. If used, provisional holds must be in place by 9:00 a.m. local time on the day following failure.
- Concurrent with the placement of provisional holds, or shortly thereafter, the Covered Institution will begin the process of generating standard data file extracts using the close-of-business account balances for the day of failure. These data files must be provided to the FDIC by close of business on the calendar day following failure. This set of files will be used by the FDIC to conduct its insurance determination.
- The insurance determination process will take several weeks to complete, but the FDIC will have results on most of the deposit accounts after several days. As soon as results are available, the FDIC will provide the Covered Institution with a Non-Monetary Transaction file indicating the accounts where provisional holds should be removed. The FDIC will always request the complete removal of a provisional hold on an individual account, not a partial removal of the hold. The Non-Monetary Transaction file will be accompanied by companion Debit/Credit files requesting debits and credits against some of the accounts where provisional holds have been removed. A second Non-Monetary Transaction file may also be provided indicating new holds to be placed. A series of Non-Monetary Transaction and companion Debit/Credit files will be sent to the Covered Institution, possibly on a daily basis, until all provisional holds have been removed.
Will the FDIC always request the use of provisional holds in the event of failure?
No. The FDIC will make the decision whether to use provisional holds on a case-by-case basis.