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Statement of Martin J. Gruenberg
Member, FDIC Board of Directors
Notice of Proposed Rulemaking: Amendments to 12 CFR Part 370
Recordkeeping for Timely Deposit Insurance Determination
March 29, 2019
In December 2016, the FDIC Board adopted a final rule
establishing additional recordkeeping requirements to facilitate prompt
payment of FDIC-insured deposits when large insured depository
institutions (IDI) with two million or more accounts fail.1 As of year-end
2018, there were 36 insured depository institutions subject to the rule
(“covered institutions”).
I believe this is one of the most important rules that the FDIC has
adopted to manage the orderly failure of large, complex banks. As the
preamble to the current rule states, “The FDIC believes that prompt
payment of deposit insurance is essential to the FDIC’s mission ....
First, prompt payment of deposit insurance maintains public confidence
in the FDIC, the banking system, and overall financial stability. Second,
facilitating prompt access to insured funds for depositors enables them
to meet their financial needs and obligations. A delay in the payment of
deposit insurance – especially in the case of the failure of one of the
1 81 Fed. Reg. 87734 (Dec. 5, 2016) (12 CFR Part 370, Recordkeeping for Timely Deposit Insurance
Determination).
Statement of Martin J. Gruenberg
Member, FDIC Board of Directors
Notice of Proposed Rulemaking: Amendments to 12 CFR Part 370
Recordkeeping for Timely Deposit Insurance Determination
March 29, 2019
In December 2016, the FDIC Board adopted a final rule
establishing additional recordkeeping requirements to facilitate prompt
payment of FDIC-insured deposits when large insured depository
institutions (IDI) with two million or more accounts fail.1 As of year-end
2018, there were 36 insured depository institutions subject to the rule
(“covered institutions”).
I believe this is one of the most important rules that the FDIC has
adopted to manage the orderly failure of large, complex banks. As the
preamble to the current rule states, “The FDIC believes that prompt
payment of deposit insurance is essential to the FDIC’s mission ....
First, prompt payment of deposit insurance maintains public confidence
in the FDIC, the banking system, and overall financial stability. Second,
facilitating prompt access to insured funds for depositors enables them
to meet their financial needs and obligations. A delay in the payment of
deposit insurance – especially in the case of the failure of one of the
1 81 Fed. Reg. 87734 (Dec. 5, 2016) (12 CFR Part 370, Recordkeeping for Timely Deposit Insurance
Determination).
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largest IDI’s – could harm the entire financial system and national
economy.”
The Notice of Proposed Rulemaking (NPR) before the FDIC
Board today would, in the words of the preamble to the NPR, “make
extensive changes” to the current rule. Since I intend to vote against the
NPR, I would like to take this opportunity to explain the reasons for my
vote.
First, the NPR would allow banks subject to the current rule to
delay compliance for a year. The current rule provided a three-year
compliance period from the April 1, 2017 effective date of the rule to the
current implementation date of April 1, 2020. The proposed rule would
provide a fourth year to comply at the discretion of covered institutions.
While I recognize the significant operational challenges associated
with compliance with this rule, I believe a three-year compliance period
for covered institutions is more than sufficient. The covered institutions
are large and have considerable resources. In addition, we are in the
tenth year of an economic expansion that will soon be the longest
expansion on record in July. If a large bank should get into difficulty
during the next economic downturn, the ability to make timely deposit
insurance determinations will be essential to an orderly resolution.
I would note that the NPR for the current rule originally proposed a
two-year period for covered banks to come into compliance. In response
largest IDI’s – could harm the entire financial system and national
economy.”
The Notice of Proposed Rulemaking (NPR) before the FDIC
Board today would, in the words of the preamble to the NPR, “make
extensive changes” to the current rule. Since I intend to vote against the
NPR, I would like to take this opportunity to explain the reasons for my
vote.
First, the NPR would allow banks subject to the current rule to
delay compliance for a year. The current rule provided a three-year
compliance period from the April 1, 2017 effective date of the rule to the
current implementation date of April 1, 2020. The proposed rule would
provide a fourth year to comply at the discretion of covered institutions.
While I recognize the significant operational challenges associated
with compliance with this rule, I believe a three-year compliance period
for covered institutions is more than sufficient. The covered institutions
are large and have considerable resources. In addition, we are in the
tenth year of an economic expansion that will soon be the longest
expansion on record in July. If a large bank should get into difficulty
during the next economic downturn, the ability to make timely deposit
insurance determinations will be essential to an orderly resolution.
I would note that the NPR for the current rule originally proposed a
two-year period for covered banks to come into compliance. In response