74857Federal Register / Vol. 71, No. 239 / Wednesday, December 13, 2006 / Proposed Rules
1 ‘‘Large-Bank Deposit Insurance Determination
Modernization Proposal, Advance Notice of
Proposed Rulemaking,’’ 70 FR 73652, December 13,
2005.
2 Section 13(c)(4)(A)(ii) of the Federal Deposit
Insurance Act (‘‘FDI Act’’) 12 U.S.C.
1823(c)(4)(A)(ii) and section 13(c)(4)(G)(i) of the FDI
Act, 12 U.S.C. 1823(c)(4)(G)(i).
3 Section 11(f)(1) of the FDI, 12 U.S.C. 1821(f)(1).
4 Doing so enables the FDIC to: (1) Maintain
public confidence in the banking industry and the
FDIC; (2) provide the best possible service to
insured depositors by minimizing uncertainty about
their status and avoiding costly disruptions, such as
returned checks, that may limit their ability to meet
financial obligations; (3) mitigate the spillover
effects of a failure, such as risks to the payments
system, problems stemming from depositor
illiquidity and a substantial reduction in credit
availability; and (4) retain, where feasible, the
franchise value of the failed institution (and thus
minimize the FDIC’s resolution costs).
reevaluation of the Waste Confidence
findings if either of two criteria were
met: (1) When the impending repository
development and regulatory activities
run their course; or (2) If significant and
pertinent unexpected events occur,
raising substantial doubt about the
continuing validity of the Waste
Confidence findings (December 6, 1991;
64 FR 68007). Because activities
involving the high-level waste
repository have not run their course, a
petitioner would have to demonstrate
that ‘‘significant and pertinent
unexpected events’’ have occurred that
have raised ‘‘substantial doubt about the
continuing validity of the Waste
Confidence findings’’ for the
Commission to reevaluate its
conclusions. Neither PRM–54–02 or
PRM–54–03 has provided any
demonstration warranting reopening of
this decision. Finally, delays of the
waste depository at Yucca Mountain are
not relevant to these petitions because
waste is governed by separate NRC
regulations and outside the scope of part
54, and the Waste Confidence Decision
determined that spent fuel can be safely
stored onsite for 100 years. The
petitioners have not shown that waste
would be better regulated under part 54.
For spent fuel issues, see previous
discussion.
With respect to the comment
regarding the National Academy of
Sciences Report, the NRC notes that this
is a classified report on spent fuel
transportation security that was
delivered to the House and Senate
Committees on Appropriations in July
2004, and that an unclassified summary
was published in March 2005. The NRC
sent a report to Congress on March 14,
2005, describing the specific actions the
NRC took to respond to the Academy’s
recommendations. The Academy’s
study is one of many instruments that
supplements NRC’s understanding of
the safety of the interim storage of spent
fuel.
Reasons for Denial
The NRC is denying the petitions for
rulemaking (PRM–54–02 and PRM–54–
03) because they raise issues that the
Commission already considered at
length in developing the license renewal
rule (December 13, 1991; 56 FR 64943),
that are managed by the ongoing
regulatory process or under other
regulations, or that are beyond the
Commission’s regulatory authority.
The petitioners did not present any
new information that would contradict
positions taken by the Commission
when the regulation was established or
demonstrate that sufficient reason exists
to modify the current regulations.
Dated at Rockville, Maryland, this 2nd day
of December 2006.
For the Nuclear Regulatory Commission.
Luis A. Reyes,
Executive Director of Operations.
[FR Doc. E6–21151 Filed 12–12–06; 8:45 am]
BILLING CODE 7590 –01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Chapter III
RIN 3064–AC98
Large-Bank Deposit Insurance
Determination Modernization Proposal
AGENCY: Federal Deposit Insurance
Corporation (‘‘FDIC’’).
ACTION: Advance notice of proposed
rulemaking (‘‘ANPR’’).
SUMMARY: The FDIC is seeking comment
on whether and how the largest insured
depository institutions should be
required to modify their deposit account
systems to speed depositor access to
funds in the event of a failure. Today,
insured institutions do not track the
insured status of their depositors yet the
FDIC must make deposit insurance
coverage determinations in the event of
failure. The current process might result
in unacceptable delays if used for an
FDIC-insured institution with a large
volume of deposit accounts. Such
delays would have an impact on
depositors’ ability to access their funds
and are likely to result in a resolution
(of the failed institution) significantly
more costly to the Deposit Insurance
Fund. As currently contemplated, the
options discussed in the ANPR would
apply only to the 152 insured
depository institutions with more than
250,000 deposit accounts and more than
$2 billion in domestic deposits, as well
as seven additional institutions with
total assets over $20 billion, less than
250,000 deposit accounts and at least $2
billion in domestic deposits. In
December 2005 the FDIC issued a prior
advance notice of proposed rulemaking
on this subject (‘‘2005 ANPR’’).1 This
ANPR is a follow-up to that issuance.
The FDIC is seeking comment on all
aspects of the ANPR.
DATES: Comments must be submitted on
or before March 13, 2007.
ADDRESSES: You may submit comments
by any of the following methods:
• Agency Web site: http://
www.FDIC.gov/regulations/laws/
federal/propose.html. Follow the
instructions for submitting comments.
• E-mail: comments@FDIC.gov.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments/Legal
ESS, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
• Hand Delivered/Courier: The guard
station at the rear of the 550 17th Street
Building (located on F Street), on
business days between 7 a.m. and 5 p.m.
• Public Inspection: Comments may
be inspected and photocopied in the
FDIC Public Information Center, Room
E–1002, 3501 North Fairfax Drive,
Arlington, Virginia, between 9 a.m. and
5 p.m. on business days.
• Internet Posting: Comments
received will be posted without change
to http://www.FDIC.gov/regulations/
laws/federal/propose.html, including
any personal information provided.
FOR FURTHER INFORMATION CONTACT:
James Marino, Project Manager, Division
of Resolutions and Receiverships, (202)
898–7151 or jmarino@fdic.gov, Joseph
A. DiNuzzo, Counsel, Legal Division,
(202) 898–7349 or jdinuzzo@fdic.gov or
Catherine Ribnick, Counsel, Legal
Division, (202) 898–3728 or
cribnick@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
When handling a depository
institution failure the FDIC is required
to structure the least costly of all
possible resolution transactions, except
in the event of systemic risk.2 In
addition, the FDIC is required to pay
insured deposits ‘‘as soon as possible’’
after an institution fails 3 and places a
high priority on providing access to
insured deposits promptly.4 In view of
the significant industry consolidation in
recent years, the FDIC is exploring new
methods to modernize the process to
determine the insurance status of each
depositor in the event of a depository
institution failure. The FDIC’s current
procedures to determine deposit
VerDate Aug<31>2005 16:44 Dec 12, 2006 Jkt 211001 PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 E:\FR\FM\13DEP1.SGM 13DEP1
jlentini on PROD1PC65 with PROPOSAL
1 ‘‘Large-Bank Deposit Insurance Determination
Modernization Proposal, Advance Notice of
Proposed Rulemaking,’’ 70 FR 73652, December 13,
2005.
2 Section 13(c)(4)(A)(ii) of the Federal Deposit
Insurance Act (‘‘FDI Act’’) 12 U.S.C.
1823(c)(4)(A)(ii) and section 13(c)(4)(G)(i) of the FDI
Act, 12 U.S.C. 1823(c)(4)(G)(i).
3 Section 11(f)(1) of the FDI, 12 U.S.C. 1821(f)(1).
4 Doing so enables the FDIC to: (1) Maintain
public confidence in the banking industry and the
FDIC; (2) provide the best possible service to
insured depositors by minimizing uncertainty about
their status and avoiding costly disruptions, such as
returned checks, that may limit their ability to meet
financial obligations; (3) mitigate the spillover
effects of a failure, such as risks to the payments
system, problems stemming from depositor
illiquidity and a substantial reduction in credit
availability; and (4) retain, where feasible, the
franchise value of the failed institution (and thus
minimize the FDIC’s resolution costs).
reevaluation of the Waste Confidence
findings if either of two criteria were
met: (1) When the impending repository
development and regulatory activities
run their course; or (2) If significant and
pertinent unexpected events occur,
raising substantial doubt about the
continuing validity of the Waste
Confidence findings (December 6, 1991;
64 FR 68007). Because activities
involving the high-level waste
repository have not run their course, a
petitioner would have to demonstrate
that ‘‘significant and pertinent
unexpected events’’ have occurred that
have raised ‘‘substantial doubt about the
continuing validity of the Waste
Confidence findings’’ for the
Commission to reevaluate its
conclusions. Neither PRM–54–02 or
PRM–54–03 has provided any
demonstration warranting reopening of
this decision. Finally, delays of the
waste depository at Yucca Mountain are
not relevant to these petitions because
waste is governed by separate NRC
regulations and outside the scope of part
54, and the Waste Confidence Decision
determined that spent fuel can be safely
stored onsite for 100 years. The
petitioners have not shown that waste
would be better regulated under part 54.
For spent fuel issues, see previous
discussion.
With respect to the comment
regarding the National Academy of
Sciences Report, the NRC notes that this
is a classified report on spent fuel
transportation security that was
delivered to the House and Senate
Committees on Appropriations in July
2004, and that an unclassified summary
was published in March 2005. The NRC
sent a report to Congress on March 14,
2005, describing the specific actions the
NRC took to respond to the Academy’s
recommendations. The Academy’s
study is one of many instruments that
supplements NRC’s understanding of
the safety of the interim storage of spent
fuel.
Reasons for Denial
The NRC is denying the petitions for
rulemaking (PRM–54–02 and PRM–54–
03) because they raise issues that the
Commission already considered at
length in developing the license renewal
rule (December 13, 1991; 56 FR 64943),
that are managed by the ongoing
regulatory process or under other
regulations, or that are beyond the
Commission’s regulatory authority.
The petitioners did not present any
new information that would contradict
positions taken by the Commission
when the regulation was established or
demonstrate that sufficient reason exists
to modify the current regulations.
Dated at Rockville, Maryland, this 2nd day
of December 2006.
For the Nuclear Regulatory Commission.
Luis A. Reyes,
Executive Director of Operations.
[FR Doc. E6–21151 Filed 12–12–06; 8:45 am]
BILLING CODE 7590 –01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Chapter III
RIN 3064–AC98
Large-Bank Deposit Insurance
Determination Modernization Proposal
AGENCY: Federal Deposit Insurance
Corporation (‘‘FDIC’’).
ACTION: Advance notice of proposed
rulemaking (‘‘ANPR’’).
SUMMARY: The FDIC is seeking comment
on whether and how the largest insured
depository institutions should be
required to modify their deposit account
systems to speed depositor access to
funds in the event of a failure. Today,
insured institutions do not track the
insured status of their depositors yet the
FDIC must make deposit insurance
coverage determinations in the event of
failure. The current process might result
in unacceptable delays if used for an
FDIC-insured institution with a large
volume of deposit accounts. Such
delays would have an impact on
depositors’ ability to access their funds
and are likely to result in a resolution
(of the failed institution) significantly
more costly to the Deposit Insurance
Fund. As currently contemplated, the
options discussed in the ANPR would
apply only to the 152 insured
depository institutions with more than
250,000 deposit accounts and more than
$2 billion in domestic deposits, as well
as seven additional institutions with
total assets over $20 billion, less than
250,000 deposit accounts and at least $2
billion in domestic deposits. In
December 2005 the FDIC issued a prior
advance notice of proposed rulemaking
on this subject (‘‘2005 ANPR’’).1 This
ANPR is a follow-up to that issuance.
The FDIC is seeking comment on all
aspects of the ANPR.
DATES: Comments must be submitted on
or before March 13, 2007.
ADDRESSES: You may submit comments
by any of the following methods:
• Agency Web site: http://
www.FDIC.gov/regulations/laws/
federal/propose.html. Follow the
instructions for submitting comments.
• E-mail: comments@FDIC.gov.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments/Legal
ESS, Federal Deposit Insurance
Corporation, 550 17th Street, NW.,
Washington, DC 20429.
• Hand Delivered/Courier: The guard
station at the rear of the 550 17th Street
Building (located on F Street), on
business days between 7 a.m. and 5 p.m.
• Public Inspection: Comments may
be inspected and photocopied in the
FDIC Public Information Center, Room
E–1002, 3501 North Fairfax Drive,
Arlington, Virginia, between 9 a.m. and
5 p.m. on business days.
• Internet Posting: Comments
received will be posted without change
to http://www.FDIC.gov/regulations/
laws/federal/propose.html, including
any personal information provided.
FOR FURTHER INFORMATION CONTACT:
James Marino, Project Manager, Division
of Resolutions and Receiverships, (202)
898–7151 or jmarino@fdic.gov, Joseph
A. DiNuzzo, Counsel, Legal Division,
(202) 898–7349 or jdinuzzo@fdic.gov or
Catherine Ribnick, Counsel, Legal
Division, (202) 898–3728 or
cribnick@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
When handling a depository
institution failure the FDIC is required
to structure the least costly of all
possible resolution transactions, except
in the event of systemic risk.2 In
addition, the FDIC is required to pay
insured deposits ‘‘as soon as possible’’
after an institution fails 3 and places a
high priority on providing access to
insured deposits promptly.4 In view of
the significant industry consolidation in
recent years, the FDIC is exploring new
methods to modernize the process to
determine the insurance status of each
depositor in the event of a depository
institution failure. The FDIC’s current
procedures to determine deposit
VerDate Aug<31>2005 16:44 Dec 12, 2006 Jkt 211001 PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 E:\FR\FM\13DEP1.SGM 13DEP1
jlentini on PROD1PC65 with PROPOSAL
74858 Federal Register / Vol. 71, No. 239 / Wednesday, December 13, 2006 / Proposed Rules
5 The coverage for Individual Retirement
Accounts and other specific types of retirement
accounts was recently increased to $250,000. 71 FR
14629, March 23, 2006. The FDIC’s rules and
regulations for deposit insurance coverage
described the categories of ownership rights and
capacities eligible for separate insurance coverage.
FDIC refers to these as ‘‘ownership categories.’’
There is a description of the primary ownership
categories in Appendix A.
6 The receivership certificate entitles the
depositor to a pro rata distribution of the
receivership proceeds with respect to their claim.
7 A bridge bank is a national bank chartered for
the purpose of temporarily carrying on the banking
operations of a failed institution until a permanent
solution can be crafted. See 12 U.S.C. 1821(n). The
FDIC’s bridge bank authority applies only to the
failure of a bank. In the event of the failure of an
insured savings association the FDIC could seek a
federal thrift charter that would be operated as a
conservatorship. As with a bridge bank, the new
thrift institution would be a temporary mechanism
to facilitate a permanent resolution structure.
insurance coverage may result in
unacceptable delays if used for an FDIC-
insured institution with a large volume
of deposit accounts. In developing a
new system to determine insurance
coverage in a large-bank failure, the
FDIC’s goals are to minimize disruption
to depositors and communities and to
minimize costs to the Deposit Insurance
Fund.
The ANPR’s focus is on FDIC-insured
institutions with complex deposit
systems. These include those
institutions with the largest volume of
deposit accounts, currently expected to
include 152 insured institutions with
over 250,000 deposit accounts and total
domestic deposits of at least $2 billion,
as well as seven additional institutions
with total assets over $20 billion, with
less than 250,000 deposit accounts and
total domestic deposits of at least $2
billion (‘‘Covered Institutions’’). One of
the assumptions underlying this ANPR
is that no institution would be required
to submit detailed customer deposit
data to the FDIC unless the institution
was in danger of failing.
Insurance Coverage and Insurance
Coverage Determination Procedures
The basic FDIC insurance limit is
$100,000 per depositor, per insured
institution.5 Deposits maintained by a
person or entity in different ownership
rights and capacities at one institution
are separately insured up to the
insurance limit. All types of deposits
(for example, checking accounts,
savings accounts, certificates of deposit,
interest checks and cashier’s checks)
held by a depositor in the same
ownership category at an institution are
added together before the FDIC applies
the insurance limit for that category.
The FDIC generally relies upon the
deposit account records of a failed
institution in making deposit insurance
determination.
To achieve accurate deposit insurance
determinations, the FDIC uses a
specialized system to analyze depositor
data and apply insurance rules. As part
of its normal practice, the FDIC obtains
depositor data only at the time an
insured institution is in danger of
failing. These data are received in the
weeks or months prior to failure, and
the FDIC uses them to determine the
insurance status of their depositors and
to estimate the total amount of insured
funds in the institution. The current
FDIC deposit insurance determination
process has several steps. Each step
varies in time and complexity,
depending on the institution’s
characteristics (primarily the number of
deposit accounts and type of deposit
account system). The following is a
summary of the usual steps involved in
the insurance coverage determination
process where deposits are passed to an
acquiring institution:
• Closing out the day’s business. In
the event of failure, it is the FDIC’s
practice to close out the insured
institution’s daily business prior to
obtaining the account balances upon
which the insurance determination is
based. Generally, this process is
completed according to the bank’s
existing procedures. All of the day’s
check processing and deposit
transactions are completed, and end-of-
day account balances are determined.
This process can require varying lengths
of time, across Covered Institutions. For
larger institutions this process can run
into the early morning hours.
• Obtain deposit data. A data file is
obtained from the institution or its
servicer. Obtaining usable data from the
institution or its servicer frequently is a
time-consuming process. The FDIC will
provide the institution or its servicer
with a standard data request. The
standard data request requires the
institution to provide approximately 45
data fields for each deposit account
along with electronic copies of trial
balances and deposit application
reconciliations. FDIC technical staff
works with the insured institution until
the standard data set requirements are
met and the files provided the FDIC can
be processed properly. Generally, the
FDIC has at least 30 days advance
warning to plan and prepare for a
failure. Data are requested in advance to
test delivery capabilities, prove the
balancing and reconciliation processes
and make certain that all required data
fields have been included.
• Process deposit data. Data are
received and validated (including
reconciliation to supporting subsidiary
systems). Using its Receivership
Liability System (‘‘RLS’’), the FDIC
determines which accounts are fully
insured, which are definitely uninsured
and which are possibly uninsured
(pending the collection of further
information). The RLS automatically
groups accounts based on the ownership
category and the name(s), address, and
tax identification number for each
account. This process is part of the
insurance determination performed on
the depositor data received from a failed
institution.
• FDIC holds/debits based on
insurance determination results. Funds
deemed insured are passed in full to the
acquiring institution. Accounts
definitely uninsured are debited for the
uninsured amount and a receivership
certificate (‘‘RC’’) is issued for the
debited amount.6 Holds are placed on
accounts deemed potentially uninsured
for amounts over the insurance limit,
and the account owner is contacted. If
additional information is required from
the depositor, a meeting is scheduled.
These meetings afford the opportunity
to collect information necessary to
finalize the insurance determination on
the possibly uninsured depositors. The
typical institution resolved by the FDIC
does not have the capability to post a
large volume of holds electronically by
batch. However, this is an essential
requirement for an effective depositor
claims process for larger institutions.
Least-Cost Resolution Requirements
As noted above, when handling a
depository institution failure the FDIC is
required by statute to structure the least
costly of all possible resolution
transactions, except in the event of
systemic risk. Even with systemic-risk
failures, the FDIC must conserve costs.
Since the introduction of the systemic
risk exception in 1991, no exceptions to
the least-cost requirement have been
made. The FDIC’s least-cost requirement
was intended to reduce resolution cost
and instill a greater degree of market
discipline by requiring losses to be
borne by uninsured depositors and non-
deposit creditors.
When an insured institution fails the
FDIC may pay insured depositors up to
the insurance limit (a ‘‘pay-off’’) or the
FDIC may sell the failed institution to
another FDIC-insured institution (a
‘‘purchase and assumption
transaction’’). Another option is to
establish a bridge bank or a
conservatorship and transfer deposits to
that institution.7 Preservation of the
deposit franchise of a failed institution
VerDate Aug<31>2005 16:44 Dec 12, 2006 Jkt 211001 PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 E:\FR\FM\13DEP1.SGM 13DEP1
jlentini on PROD1PC65 with PROPOSAL
5 The coverage for Individual Retirement
Accounts and other specific types of retirement
accounts was recently increased to $250,000. 71 FR
14629, March 23, 2006. The FDIC’s rules and
regulations for deposit insurance coverage
described the categories of ownership rights and
capacities eligible for separate insurance coverage.
FDIC refers to these as ‘‘ownership categories.’’
There is a description of the primary ownership
categories in Appendix A.
6 The receivership certificate entitles the
depositor to a pro rata distribution of the
receivership proceeds with respect to their claim.
7 A bridge bank is a national bank chartered for
the purpose of temporarily carrying on the banking
operations of a failed institution until a permanent
solution can be crafted. See 12 U.S.C. 1821(n). The
FDIC’s bridge bank authority applies only to the
failure of a bank. In the event of the failure of an
insured savings association the FDIC could seek a
federal thrift charter that would be operated as a
conservatorship. As with a bridge bank, the new
thrift institution would be a temporary mechanism
to facilitate a permanent resolution structure.
insurance coverage may result in
unacceptable delays if used for an FDIC-
insured institution with a large volume
of deposit accounts. In developing a
new system to determine insurance
coverage in a large-bank failure, the
FDIC’s goals are to minimize disruption
to depositors and communities and to
minimize costs to the Deposit Insurance
Fund.
The ANPR’s focus is on FDIC-insured
institutions with complex deposit
systems. These include those
institutions with the largest volume of
deposit accounts, currently expected to
include 152 insured institutions with
over 250,000 deposit accounts and total
domestic deposits of at least $2 billion,
as well as seven additional institutions
with total assets over $20 billion, with
less than 250,000 deposit accounts and
total domestic deposits of at least $2
billion (‘‘Covered Institutions’’). One of
the assumptions underlying this ANPR
is that no institution would be required
to submit detailed customer deposit
data to the FDIC unless the institution
was in danger of failing.
Insurance Coverage and Insurance
Coverage Determination Procedures
The basic FDIC insurance limit is
$100,000 per depositor, per insured
institution.5 Deposits maintained by a
person or entity in different ownership
rights and capacities at one institution
are separately insured up to the
insurance limit. All types of deposits
(for example, checking accounts,
savings accounts, certificates of deposit,
interest checks and cashier’s checks)
held by a depositor in the same
ownership category at an institution are
added together before the FDIC applies
the insurance limit for that category.
The FDIC generally relies upon the
deposit account records of a failed
institution in making deposit insurance
determination.
To achieve accurate deposit insurance
determinations, the FDIC uses a
specialized system to analyze depositor
data and apply insurance rules. As part
of its normal practice, the FDIC obtains
depositor data only at the time an
insured institution is in danger of
failing. These data are received in the
weeks or months prior to failure, and
the FDIC uses them to determine the
insurance status of their depositors and
to estimate the total amount of insured
funds in the institution. The current
FDIC deposit insurance determination
process has several steps. Each step
varies in time and complexity,
depending on the institution’s
characteristics (primarily the number of
deposit accounts and type of deposit
account system). The following is a
summary of the usual steps involved in
the insurance coverage determination
process where deposits are passed to an
acquiring institution:
• Closing out the day’s business. In
the event of failure, it is the FDIC’s
practice to close out the insured
institution’s daily business prior to
obtaining the account balances upon
which the insurance determination is
based. Generally, this process is
completed according to the bank’s
existing procedures. All of the day’s
check processing and deposit
transactions are completed, and end-of-
day account balances are determined.
This process can require varying lengths
of time, across Covered Institutions. For
larger institutions this process can run
into the early morning hours.
• Obtain deposit data. A data file is
obtained from the institution or its
servicer. Obtaining usable data from the
institution or its servicer frequently is a
time-consuming process. The FDIC will
provide the institution or its servicer
with a standard data request. The
standard data request requires the
institution to provide approximately 45
data fields for each deposit account
along with electronic copies of trial
balances and deposit application
reconciliations. FDIC technical staff
works with the insured institution until
the standard data set requirements are
met and the files provided the FDIC can
be processed properly. Generally, the
FDIC has at least 30 days advance
warning to plan and prepare for a
failure. Data are requested in advance to
test delivery capabilities, prove the
balancing and reconciliation processes
and make certain that all required data
fields have been included.
• Process deposit data. Data are
received and validated (including
reconciliation to supporting subsidiary
systems). Using its Receivership
Liability System (‘‘RLS’’), the FDIC
determines which accounts are fully
insured, which are definitely uninsured
and which are possibly uninsured
(pending the collection of further
information). The RLS automatically
groups accounts based on the ownership
category and the name(s), address, and
tax identification number for each
account. This process is part of the
insurance determination performed on
the depositor data received from a failed
institution.
• FDIC holds/debits based on
insurance determination results. Funds
deemed insured are passed in full to the
acquiring institution. Accounts
definitely uninsured are debited for the
uninsured amount and a receivership
certificate (‘‘RC’’) is issued for the
debited amount.6 Holds are placed on
accounts deemed potentially uninsured
for amounts over the insurance limit,
and the account owner is contacted. If
additional information is required from
the depositor, a meeting is scheduled.
These meetings afford the opportunity
to collect information necessary to
finalize the insurance determination on
the possibly uninsured depositors. The
typical institution resolved by the FDIC
does not have the capability to post a
large volume of holds electronically by
batch. However, this is an essential
requirement for an effective depositor
claims process for larger institutions.
Least-Cost Resolution Requirements
As noted above, when handling a
depository institution failure the FDIC is
required by statute to structure the least
costly of all possible resolution
transactions, except in the event of
systemic risk. Even with systemic-risk
failures, the FDIC must conserve costs.
Since the introduction of the systemic
risk exception in 1991, no exceptions to
the least-cost requirement have been
made. The FDIC’s least-cost requirement
was intended to reduce resolution cost
and instill a greater degree of market
discipline by requiring losses to be
borne by uninsured depositors and non-
deposit creditors.
When an insured institution fails the
FDIC may pay insured depositors up to
the insurance limit (a ‘‘pay-off’’) or the
FDIC may sell the failed institution to
another FDIC-insured institution (a
‘‘purchase and assumption
transaction’’). Another option is to
establish a bridge bank or a
conservatorship and transfer deposits to
that institution.7 Preservation of the
deposit franchise of a failed institution
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