12 CFR Part 370 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. For questions regarding part 370, please contact the FDIC at Part370@FDIC.gov.
Information Technology Functional Guide Version 2.1
The FDIC has prepared the following Information Technology Functional Guide (ITFG) version 2.1 - PDF to assist the information technology teams of the Covered Institutions in implementing systems for 12 C.F.R. part 370 (“Part 370”). This update incorporates feedback from Covered Institutions on the draft ITFG version 2.0 issued on June 29, 2018.
Guidelines for Relief
The following Guidelines for Relief from Part 370 (the “Guidelines”) describe the procedures for CIs to follow when submitting requests for relief from aspects of Part 370 to the FDIC. Further, the Guidelines describe the process by which the FDIC will consider these requests for relief.
Frequently Asked Questions
The FAQs are organized by Part 370 section and can be viewed by selecting one of the following sections below. Additionally, the following link contains a pdf document with all FAQs.
Q: 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.
Q: 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.
Q: 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.
NEW Q: Irrevocable Trust Account
What is the correct treatment for irrevocable trust account that became an Irrevocable Trust due to the death of an owner of a revocable trust account? Should it follow REV rules or IRR rules?
Revocable trusts (REV) that become irrevocable (IRR) upon the death of an owner (grantor) may be treated as REV for deposit insurance purposes. To the extent the CI maintains sufficient information to complete deposit insurance calculation as REV, this is the preferred approach. There are instances where the REV trust has become IRR and the CI no longer maintains the information necessary to complete the insurance determination as if it were REV. In this instance, the FDIC would expect the account to be treated as IRR.
NEW Q: Pass-through Coverage for 15c3-3 accounts
How would pass-through coverage be applied for funds held in 15c3-3 reserve accounts that are not considered brokered deposits? What would the ownership category be?
Where deposits are held by an agent on behalf of its principals, deposit insurance may “pass through” the holder of the account (the agent) to the owners of the funds (the principals). 12 C.F.R. § 330.7(a). Generally, pass-through coverage is only available if three requirements are satisfied:
- The custodial nature of the account must be disclosed in the deposit account records of the insured depository institution. 12 C.F.R. § 330.5(b)(1).
- The identities and interests of the actual owners must be ascertainable either from the account records of the insured depository institution or records maintained in good faith by the agent or other party. 12 C.F.R. § 330.5(b)(2).
- The agency or custodial relationship must be genuine. Through this relationship, the deposits actually must be owned by the named owners and not by the agent or custodian. Actual ownership of the deposits will depend upon the agreements among the parties and also may depend upon applicable state law. See 12 C.F.R. § 330.3(h); § 330.5(a)(1).
Where funds are not owned by particular clients of the broker-dealer, pass-through insurance would not apply. Our understanding is that the funds in the special reserve bank accounts maintained under SEC Rule 15c3-3 generally are not attributable to particular clients. Thus, the funds in these accounts would be considered corporate funds for purposes of the FDIC’s deposit insurance regulations, and insured to the broker-dealer up to $250,000. See 12 C.F.R. § 330.11(a).
In addition, a 15c3-3 account would be subject to aggregation with any other corporate deposits a broker-dealer has at your institution. For example, if a broker-dealer has a corporate account and a 15c3-3 account at your institution, then both accounts are categorized under the BUS ORC. The combined balance would be insured up to $250,000.
NEW Q: Annuity Contract Accounts (ANC)
How does insurance determination differ between annuities which are owned by the insurance company versus annuities owned by the annuitant?
If the insurance company is the owner of the funds then the applicable regulation provides that the insurance company’s funds are insured in an amount of up to $250,000 per annuitant. This is similar to the per-beneficiary coverage that generally applies to trust accounts. Even if funds of two different insurance companies are associated with the same annuitant, there are two separate owners and therefore the funds are separately insured.
If the annuity is owned by the annuitant, then the funds would be aggregated across insurance companies and would aggregate all balances owned by the annuitant thereby causing deposit insurance to be limited to $250,000. The need to aggregate funds across insurance companies for a particular annuitant should be rare as most state laws emphasize that the insurance company is the owner of the funds.
NEW Q: In situations where a covered institution does not have a signature card with each co- owner’s ink or digital signature, but rather has a unique customer code, can the unique customer code serve as a deposit account record of the covered institution and the account be categorized as a joint account?
As long as the account opening process for joint deposit accounts satisfies each of the FDIC’s requirements for joint accounts, the accounts would be insured under the joint account category.
Section 330.9 of the FDIC’s regulations provides that a joint deposit account is deemed to be a “qualifying joint account” insured separately from any individually owned deposit accounts only if: (1) all co-owners of the funds are natural persons; (2) each co-owner has personally signed a deposit account signature card; and (3) each co-owner possesses withdrawal rights on the same basis.
Section 330.9 does not require any particular format for the signature card, and a signed deposit account contract would satisfy the requirement. Institutions can satisfy the signature card requirement through methods such as electronic signatures. In the context of the covered institution’s account opening process, if joint account ownership coding establishes that the customer has executed the deposit account contract for joint accounts, this would satisfy the signature card requirement even in the absence of an ink signature or a digital representation of an ink signature.
Q: 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.
NEW Q: Signature Cards
Do Covered Institutions need to request relief before placing joint accounts with missing, incomplete, or inaccurate signature cards into the pending file?
As noted in section 370.8(b), covered institutions should request an exception in conjunction with placing joint accounts in the Pending File for reasons other than those allowed by Part 370 or the ITFG (for example, missing data fields without a “null” allowance). Section 330.9 establishes the requirements for joint accounts, which are needed for the FDIC to determine account ownership interests and insurance coverage, and the FDIC has provided additional information regarding means by which Covered Institutions can satisfy the signature card requirements of section 330.9.
Q: 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.
Q: 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 accounts 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.
Q: 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.
Q: 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.
Q: 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.
Q: 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.