Recordkeeping for Timely Deposit Insurance Determination
The "Recordkeeping for Timely Deposit Insurance Determination" rule (12 CFR Part 370 of the FDIC's Rules and Regulations), requires each insured depository institution that has two million or more deposit accounts (a “Covered Institution” as defined in § 370.2(c) of the rule) to (1) configure its information technology system to be capable of calculating the insured and uninsured amount in each deposit account by ownership right and capacity, which would be used by the FDIC to make deposit insurance determinations in the event of the institution’s failure, and (2) maintain complete and accurate information needed by the FDIC to determine deposit insurance coverage with respect to each deposit account, except as otherwise provided.
For more information pertaining to the rule see Federal Register notice Part 370 - Recordkeeping for Timely Deposit Insurance Determination or contact the FDIC at Part370@FDIC.gov.
Information Technology Functional Guide
The FDIC has prepared the following Information Technology Functional Guide ("Guide") - PDF to assist the information technology teams of the Covered Institutions in implementing systems compliant with 12 C.F.R. Part 370 (“Part 370”). The FDIC requested feedback from Covered Institutions prior to the Part 370 effective date to ensure that this Guide provides adequate and clear information.
The FDIC recognizes that as Covered Institutions begin to build out their information technology systems to comply with Part 370, new information regarding system architecture, interfaces, capabilities, and limitations may come to light resulting in additional feedback on the Guide. In an effort to provide current guidance to Covered Institutions, the FDIC anticipates that this Guide will be updated over time, as necessary, based on feedback from Covered Institutions or additional FDIC input. To the extent questions arise regarding Part 370, including the information contained in this Guide, please contact the FDIC at Part370@fdic.gov.
12 CFR Part 370 Frequently Asked Questions and Answers
The "Recordkeeping for Timely Deposit Insurance Determination" rule (12 CFR Part 370 of the FDIC's Rules and Regulations) (“Part 370”) requires each insured depository institution that has two million or more deposit accounts (a “Covered Institution” or “CI” as defined in section 370.2(c) of the rule) to (1) configure its information technology system to be capable of calculating the insured and uninsured amount in each deposit account by ownership right and capacity, which would be used by the FDIC to make deposit insurance determinations in the event of the institution’s failure, and (2) maintain complete and accurate information needed by the FDIC to determine deposit insurance coverage with respect to each deposit account, except as otherwise provided.
The following frequently asked questions (“FAQs”) consist of representative examples of inquiries directed to the FDIC by Covered Institutions or other parties-in-interest regarding Part 370. The opinions expressed herein are the views of FDIC staff and, like all staff opinions, are not binding upon the FDIC or its Board of Directors. Moreover, the opinions expressed herein are based upon the facts as stated and any change in those facts might result in different responses. The purpose of these FAQs is to provide informal guidance, where possible, on issues FDIC staff believes are common to all Covered Institutions. These FAQs will be updated from time to time. To the extent you have questions regarding the FAQs or Part 370, please email the Part 370 mailbox at Part370@fdic.gov.
Section 370.5 – Transactional Features
What is the purpose for addressing accounts with “transactional features” in Section 370.5?
Banks offer depositors certain accounts that allow the depositor to write checks, send or receive ACH payments, or conduct other transactions. Because it may take several days for these transactions to be completed, they could still be pending when a bank fails. If, for example, a check is presented to the successor to the failed bank on the business day following the failure, the successor bank will not be able to honor the check unless the FDIC has completed a deposit insurance determination. If there is a delay in completing the deposit insurance determination, the check could be returned, causing complications for the depositor. Moreover, a delayed deposit insurance determination could result in a large number of checks or other transactions not being processed, making operations very difficult for the successor bank. Accordingly, section 370.5 requires account holders who maintain information necessary for deposit insurance determinations outside of the bank and whose accounts have transactional features, to provide to the FDIC the information needed in time for the FDIC to calculate deposit insurance coverage within 24 hours after the FDIC’s appointment as receiver.
Deposit accounts with “transactional features” include deposit accounts from which deposits can be used to make payments or transfers to third persons or others (including another account of the depositor or account holder at the same institution or at a different institution). By including the phrase “another account of the depositor or account holder at the same institution or at a different institution,” the rule encompasses deposit accounts held in connection with prepaid card programs, brokered deposit programs, sweep programs, or other programs that permit their customers (who are the beneficial owners of the deposits that would be entitled to deposit insurance) to use those deposits to make payments. These programs may involve transaction processing by an IDI other than the IDI at which the deposit is maintained. In such cases, the deposited funds may be “swept” from one IDI to another IDI which will process the transaction that was initiated by the program’s customer. In order for these transactions to be completed without undue disruption resulting from a delay in the deposit insurance determination, the definition “transactional features” is used to include deposit accounts used in connection with programs like these within the scope of section 370.5.
A CI may submit a request for relief pursuant to section 370.8 if the CI is unable to certify that the account holder will submit to the FDIC the information needed for the FDIC, using the CI’s IT system, to calculate the deposit insurance coverage for deposit accounts with transactional features within the first 24 hours after the failure.
Section 370.10 - Compliance
Are there interim deadlines prior to the Part 370 compliance date?
No, Part 370 does not impose any interim deadlines prior to the compliance date. The compliance date is April 1, 2020, for all initial Covered Institutions as of April 1, 2017. For a Covered Institution meeting the two million or more deposit accounts criteria for two consecutive quarters after April 1, 2017, the compliance date is three years after the date on which it becomes a Covered Institution (as of the end of the second consecutive quarter). A covered Institution may submit its Part 370 compliance certification prior to the compliance date in the event that it has implemented and successfully tested its information technology system for compliance before such time.
The FDIC has initiated an outreach program with CIs to discuss each Covered Institution’s implementation strategy and to answer questions by providing guidance on their implementation process and categorization of specific products or account types. Separately, the FDIC is considering utilizing a pilot program for CIs that are prepared to implement the Part 370 requirements on an accelerated basis but has not implemented such program at this time. This will be optional, and there are no associated deadlines.
For the summary report due by April 1, 2020, should year-end or quarter-end data be used?
The output files should be tested and produced as close as practical to the certification date but not earlier than four months before the summary report is submitted. That four month window would include the most recent quarter- or year-end if the CI determines such period-end test date would be conducive to the CI’s internal scheduling purposes.
Section 370.8 – Relief from Part 370 Requirements
Should relief pursuant to section 370.8 for certain accounts be requested before the April 1, 2020, certification submission?
Yes, requests for relief should be submitted in advance of the Compliance Date. The summary report to be submitted pursuant to section 370.10(2)(v) requires the identification of deposit accounts for which the calculation could not be completed in the event of a Covered Institution’s failure. It is presumed that the CI’s certifying official would expect clarity with respect to the subset of deposit accounts for which relief is granted or pending when completing a certification submission.
What are the criteria by which the FDIC may grant exceptions for certain deposit accounts?
The FDIC is required to pay depositors’ insured funds as soon as possible, which has typically been on the next business day. To assess the impact of an exception on the ability to quickly and accurately calculate the deposit insurance for the related deposit accounts, the following information must be provided to the FDIC in accordance with section 370.8(b):
- Is the need for exception clearly conveyed and adequately demonstrated? The FDIC must understand the need.
- Does the request explain how compliance with the requirement from which relief is sought would be impracticable or overly burdensome? The FDIC will consider whether a legal impediment or logical impossibility to compliance exists.
- How does the exception, if granted, impact the ability of the CI’s IT system to quickly and accurately calculate deposit insurance for the related deposit accounts? - The FDIC needs to know the effect the exception will have on its efforts to conduct deposit insurance determination in the event of the CI’s failure.
- Identification of whether the accounts have transactional features, as defined under section 370.2(j), and if so:
- Description of the ability to continue to conduct depositors' transactions until the deposit insurance determination is complete.
- Identification of the sources and sufficiency of available liquidity to support continued transaction clearing during the pendency of the insurance determination, including the number of days funding will be available based on average daily transaction flows.
- Does the request state the number of, and dollar value of deposits in, the related deposit accounts? The FDIC needs to know the effect the exception will have on its efforts to conduct deposit insurance determination in the event of the CI’s failure.
Depending on the nature of the relief request, providing the following information, as necessary, with a relief request would facilitate the review of the necessary elements listed above:
- Identification of the beneficial owners of the funds by type (individual, commercial, government, etc.) if the beneficial owner is not the account holder.
- Breakdown of the number of affected deposit accounts above and below $250,000 and the average account balance. The proportion of all deposit accounts that these deposit accounts represent, and the proportion of the CI’s deposit dollar volume that they represent.
- Estimated time required for banks or account holders to submit the information required to complete a deposit insurance determination.
- Description of trends or volatility, in the number of accounts and dollar value, of the affected over time in relation to the number of accounts reported in the request for relief today?
- Description of disclosures made to the depositors about timely access to insured funds?
- Description of remediation plans that have been developed including a timeline for execution, resources dedicated and expected progress at key milestones.
If a CI was exempted, or certain accounts were exempted from section 360.9, would the relief also apply under Part 370?
No. The requirements of Part 370 are independent of section 360.9.
Will Covered Institutions subject to section 360.9 and Part 370 still be required to comply with section 360.9 and the requirement to file the FDIC Annual Questionnaire until the actual compliance date of April 1, 2020 for Part 370?
Covered Institutions subject to section 360.9 will be required to comply with section 360.9 until submission of the Part 370 compliance certification as required under section 370.10(a). While the deadline for the Part 370 compliance certification is April 1, 2020, the Covered Institution is permitted to certify Part 370 compliance prior to the deadline. A Covered Institution is released from the requirements of section 360.9 upon submitting to the FDIC the compliance certification required under section 370.10(a). Please note: Part 370 does not require CIs to terminate their section 360.9 capabilities. Further, section 370.3(a)(3) requires CIs to be able to restrict access to some or all deposits in each deposit account.
Section 370.2 – Definitions
If a Covered Institution reports each omnibus account as one account according to Call Report instructions for RC-O and accordingly does not meet the two million deposit account threshold, is the Covered Institution covered by Part 370?
No. Covered Institutions that conclude that they may accurately report under the two million deposit account threshold may take the following actions:
- Amend previously filed Call Reports for Q4 2016 and all subsequent Call Reports. Accurate, filed Call Reports must show that an institution does not meet the two million deposit account threshold during the two consecutive quarters preceding the Part 370 effective date of April 1, 2017, or thereafter. No further action would be necessary and an institution would not be considered a Covered Institution;
- Amend the three most recent Call Reports showing that an institution is under the two million deposit account threshold and apply for release from Part 370 pursuant to section 370.8(c); or
- Begin filing Call Reports, according to correct Call Report instructions, showing an institution is under the two million deposit account threshold. Upon filing three consecutive quarterly Call Reports under the deposit account threshold, an institution can apply for release from Part 370 pursuant to section 370.8(c). The FDIC requests that an institution availing itself of this type of relief inform the FDIC as soon as possible of its intent to do so and commence filing Call Reports under the threshold immediately so as to be eligible for relief prior to the Part 370 Compliance Date of April 1, 2020.
Section 370.3 – Information Technology System Requirements
In the Customer File description on line 10, “CS Street Add Ln1” calls for the mailing address of record, but lines 13 to 16, “CS City, CS State, CS ZIP, and CS Country,” calls for the permanent legal address. The same discrepancy exists for lines 18 to 24 in the Pending File. Which one should be used to populate the fields? Combination, legal or mailing?
The mailing address should be used for lines 10 through 16 on the Customer File and lines 18 through 24 on the Pending File, notwithstanding instructions in the file descriptions. The FDIC may need to contact or deliver items to account holders by mail in the event of a CI’s failure and this ensures that the FDIC has the contact information where the depositor prefers to be reached.
If any of the accounts that a customer participates in are pending, should all accounts for that customer go to the pending file instead of the account file since a CI will not have all the information on all accounts for that customer to calculate the insurance accurately?
No. A Covered Institution’s IT system must be capable of accurately calculating the deposit insurance coverage for each deposit account. The IT Functional Guide provides additional guidance that may assist the Covered Institution in implementing the requirements of Part 370. A Covered Institution must conduct deposit insurance calculations for all deposit accounts for which sufficient information is available on the CI's book and records. The CI’s IT systems must be able to adjust account balances for those accounts within 24 hours after the appointment of the FDIC as receiver. When additional information needed for deposit insurance calculation is received, the CI’s IT systems should have the capability to revisit pending accounts and complete the calculation. Certain types of missing information for a customer across all relevant deposit accounts may necessitate that all deposit accounts for that customer be shown in the pending file. However there may be instances where all information needed to calculate deposit insurance for deposits held in a particular right and capacity is available, so those accounts should be processed without delay.