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FDIC Federal Register Citations

VIA FACSIMILE 202-898-3838

June 18, 2001

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
55017°' Street NW
Washington, DC 20429
Attn: Comments - OES

Re: Notice of Proposed Rulemaking, Being Engaged in the Business of
Receiving Deposits other than Trust Funds (12 CFR Part 303)

Dear Mr. Feldman:

Household Bank, f.s.b., Household Bank (Nevada), N.A., Household Bank (SB), N.A., and Beneficial National Bank USA (together, "Household") appreciate this opportunity to provide comments on the above-referenced rulemaking (the "Proposal"). Household commends the efforts of the Federal Deposit Insurance Corporation ("FDIC") to promote consistency with respect to the activities of federally-insured institutions. The FDIC's current proposal to establish General Counsel Opinion No. 12 as a regulation would help provide certainty with respect to the operations of insured institutions. Thus, we support issuance of the proposed regulation. Specifically, we agree that the FDIC should adopt a regulatory standard for determining that a depository institution is "engaged in the business of receiving deposits other than trust funds" for purposes of 12 USC § 1818(a)(1).

In the Proposal, the FDIC asks for comments on certain elements that would be included in any regulatory standard for determining whether a depository institution is engaged in the business of receiving deposits. In general, we believe that the FDIC's current approach to making this determination is appropriate. That is, we do not believe that the standard should be based on any particular number non-trust deposits. Provided that an institution has the capacity to accept even one non-trust deposit, it evidences the ability to engage in deposit-taking functions. It would appear unreasonable to suggest that an institution acquire deposits before it is able to acquire deposit insurance, or to maintain a particular number of accounts unrelated to the size or operations of the bank. Thus, the FDIC should be able to grant deposit insurance, and allow an institution to retain its insured status, based on the demonstration by an institution that it is able to hold deposits in a safe and sound manner (as well as meeting all of the other regulatory standards set by the FDIC).

Similarly, any minimum dollar amount of deposits set by the FDIC need not be significant in size. We agree that $500,000 would be a reasonable amount for the FDIC to require. However, any new regulation should allow the FDIC to take into account individual circumstances on an exception basis, for example, to accommodate small de novo institutions.

We do not believe that the FDIC should require an institution to accept deposits from the public at large as a condition to the grant of deposit insurance. Rather, it should be sufficient for an institution to accept deposits from any group, including the institution's customers, employees, or affiliates. In certain circumstances, financial institutions are able to create operational efficiencies by focusing on particular groups rather than the general public. These types of operations should not be discriminated against. Likewise, if an institution can effectively offer a single type of deposit, it would be unreasonable to require it to offer a selection of different types of deposits as a condition of obtaining deposit insurance. In other words, it would appear unreasonable to require an institution to engage in a business for which it may not have the operational capacity as a condition of obtaining deposit insurance.

With respect to any of the requirements set forth in a new regulation, we suggest that the FDIC should retain the ability to make exceptions where appropriate. Moreover, we suggest that such exceptions apply equally to operating insured institutions as well as applicants for deposit insurance. Thus, it would be reasonable for the FDIC to take into account. in the case of an operating insured institution, extenuating circumstances that may effect its ability to meet the minimum requirements for continuing insured status.

As a final note, we suggest that any standard set generally for the definition of "engaged in the business of receiving deposits other than trust funds" should apply consistently throughout the Federal Deposit Insurance Act.

We appreciate this opportunity to comment on the Proposal. If you should have any questions or comments regarding this letter, please feel free to contact me at the number below.

Martha Pampel
Household International, Inc.
Associate General Counsel
Federal Regulatory Coordination
Last Updated 06/20/2001

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