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.
Compliance Review Manual
The Compliance Review Manual includes general guidelines for FDIC testing, as well as compliance documentation modules to be used by FDIC staff in scoping and performing the review.
Information Technology Functional Guide Version 2.1
The Information Technology Functional Guide (ITFG) was developed 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 Guidelines for Relief describe the procedures for CIs to follow when submitting requests for relief from aspects of Part 370.
Frequently Asked Questions
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: Prepaid Cards
Are pre-paid cards subject to Part 370? If so, how should they be processed for compliance with the rule?
Yes, stored value or pre-paid cards are subject to Part 370 and are considered deposits. The calculation of deposit insurance depends upon the satisfaction of the requirements for obtaining pass-through insurance coverage. To satisfy these requirements, the records of the institution, the fiduciary, or a third party must disclose the agency or custodial relationship, indicate both the identities of the principal(s) as well as the ownership interest in the deposit, and show the deposits are actually owned by the named owners and not the custodian. Pass-through insurance generally applies to stored value or pre-paid cards that are registered and where the institution can identify the cardholder and ownership interest. If the underlying registered card information is not maintained on the Part 370 institution’s system, the data can be submitted using the alternative recordkeeping entity input file format and integrated through the institution’s Part 370 deposit insurance calculation process. Part 370 requires the ability to restrict access to these accounts until insurance determinations are complete.
Where cards are not registered, and where the covered institution cannot identify the cardholder and ownership interest, the pass-through insurance requirements would not be met and the aggregate of the funds attributable to unregistered cards would be insured to the custodian up to the Standard Maximum Deposit Insurance Amount (SMDIA). For example, Anycorp provides its employees with spot bonuses paid in the form of $50 pre-paid cards issued by Largebank, a Part 370 covered institution, and the account documentation properly establishes a fiduciary relationship. Employees have the option to visit the website of the pre-paid card administrator and input his or her name and address to register the cards, but 99% of the employees choose not to do so. For the 1% of the registered employee bonus cards, Largebank would aggregate the individual card value with all other deposits of the employee in the same ownership right and capacity at Largebank and insure up to the SMDIA. For the 99% of unregistered cards, Largebank would aggregate the value attributable to those cards with Anycorp’s other deposits at Largebank and insure up to the SMDIA notwithstanding the fact that the unregistered cards are in the hands of individual employees.
NEW Q: Local Chapters of National Organizations
How should local chapters of charitable organizations be in a covered institution’s Part 370 records when the local chapter uses the EIN of the main organization to administer its accounts?
Deposits for local chapters of international, national, or regional charities are insured separately from those of the main entity. Deposits for entities, such as the Boy Scouts, would be aggregated at the troop or local chapter level and insured up to the SMDIA for their respective right and capacity, separate from funds held by the parent entity. The unique ID of the local chapter would differentiate it from the parent entity in the Part 370 output files.
Q: Are Covered Institutions’ internal operational processing accounts outside of the scope of Part 370?
Internal operational accounts, including intercompany accounts, zero-balance accounts, accounts payable, disbursement accounts, error accounts, suspense accounts, mortgage application fees, and bank teller accounts are generally not covered by FDIC insurance and, therefore, are outside of the scope of Part 370, to the extent that these are bank-owned funds. In the event of failure, the FDIC will address these accounts through specific instructions.
Q: While noting that recordkeeping for official items (section 370.4(c)) allows for minimal information to be retained regarding accounts from which withdrawals are made to honor payment instruments to specific payees, what is the minimum information required for an insurance calculation?
The payee is the owner of the funds. If the Covered Institution has the payee name, government identification for the payee, and the amount of the official item, the Covered Institution’s IT system should be able to complete the insurance calculation. If an institution does not have this required information, the account would go in the pending file with the pending reason code “OI,” and there would be no need for an exception request.
Q: In the event a Covered Institution serves as co-trustee for an irrevocable trust, does the account belong in the DIT or IRR ORC? For example, the other co-trustee could be a non-bank person or entity, such as a lawyer, law firm, wealth manager, or family member.
It would be accurate to assign either the DIT or the IRR ORC codes to a deposit held by the type of irrevocable trust described, assuming the requirements of both categories are satisfied. The deposit insurance rules for trusts in the DIT category may be more generous in some situations than the rules for the IRR category, particularly with respect to aggregation.
Q: Regarding formal revocable trusts and irrevocable trusts, is grantor information required, even if it is in the records that require manual review, for FDIC Part 370 certification?
Trust-specific information, including the identities of the grantor(s) and beneficiary(ies), is required to calculate deposit insurance for trust accounts insured in either the REV or IRR right and capacity. Under section 370.4(b)(2), covered institutions may apply alternative recordkeeping treatment to trust accounts for which they do not maintain all information needed to calculate deposit insurance. For trust accounts that qualify for alternative recordkeeping treatment and that have “transactional features,” covered institutions must assign a unique identifier for the grantor. This requirement applies regardless of whether grantor information is maintained in paper-based records such as trust documents or certificates of trust. The Covered Institution must collect from the trustee or account holder the grantor name and unique identifier, if it hasn’t already, and input or transform that information into an electronic file format that can be used by the covered institution’s part-370 compliant IT system to begin calculating deposit insurance so that some insured deposits can be made available right away. It is not sufficient to maintain grantor information in records that require manual review. Additionally, if the proposed revision of Part 370 is finalized, then the Covered Institutions would also be required to maintain the corresponding “right and capacity” code in their deposit account records.
The FDIC expects that the covered institution’s part 370-compliant IT system would be able to process the remaining information necessary to complete a deposit insurance determination for trust accounts using data files submitted the standard file format by the account holder. For example, for formal revocable trust accounts with transactional features and irrevocable trust accounts with transactional features, relevant information regarding beneficiaries would be needed to complete the deposit insurance determination. For formal revocable trust accounts that do not have transactional features and irrevocable trust accounts that do not have transactional features, information regarding the grantor(s) and beneficiary(ies) would be needed.
Q: Does the FDIC expect the OFAC status of an account to be considered in an insurance calculation?
OFAC holds would be reflected in the DP_Hold_Amount field in the Account File and Pending File. The hold amount would not impact the deposit insurance calculation, but would restrict the release of funds equal to the hold amount. For the avoidance of doubt, all holds or freezes placed by regulators would survive the insurance calculation and determination process.
Q: What will be reviewed during the compliance visit for accounts that qualify for alternative recordkeeping as allowed under section 370.4?
During the compliance review, a mock data file will be used to test the Covered Institution’s ability to receive the alternative recordkeeping file (as described in Appendix C to the IT Functional Guide v2.1) and incorporate the data contained therein in subsequent iterations of the deposit insurance calculation. Contractual language and disclosures may be reviewed, as well.
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.
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.
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.
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.
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: How will the FDIC schedule the compliance reviews and conduct follow-up actions if necessary?
The reviews will be prioritized by internal and external risk factors determined by the FDIC and the primary federal regulator. The FDIC expects that all Covered Institutions will be reviewed in the first three years after an institution’s compliance date.
All findings will be discussed with bank staff upon completion of the review and the FDIC generally expects that Covered Institutions would address the findings. While the FDIC can bring enforcement actions to compel remediation of issues, we would not do so as an early step and only anticipate doing so in the extraordinary circumstance of a Covered Institution’s ongoing refusal to work with the FDIC on identified issues.
Q: Can the output files for the annual coverage summary report and the compliance review be produced from the test environment instead of the production environment?
No. Output files should be produced from the production environment because it will produce the most accurate and up-to-date information for all deposit accounts, as well as demonstrate the capabilities and run-times of the institution’s information technology systems.
Q: If debt flags are optional, why does the compliance manual include a section on such review?
While the debt flags are optional, the FDIC will need to note various loan platforms and processes as well as assess the bank’s and FDIC’s staffing needs to determine mutuality and process offsets at failure.
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.