Financial Institution Letter
FIL-2-2006
January 10, 2006
PROPOSAL TO MODERNIZE LARGE-BANK DEPOSIT
INSURANCE DETERMINATIONS
Comments Sought on Advance Notice of Proposed Rulemaking
Federal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 20429-9990
Summary: The FDIC is seeking comment on whether the largest insured depository
institutions should be required to modify their deposit systems so that the FDIC may calculate
deposit insurance coverage quickly in the event of a failure of one of these institutions. The
advance notice of proposed rulemaking (ANPR) is attached. Comments are due by March 13,
2006.
Distribution:
All Insured Depository Institutions
Suggested Routing:
Chief Executive Officer
Chief Operations Officer
Related Topics:
Deposit Insurance Coverage
12 C.F.R. Part 330
Attachment:
Advance Notice of Proposed Rulemaking
Contact:
James Marino, Project Manager, Division of
Resolutions and Receiverships, at
jmarino@fdic.gov or 202-898-7151; or Christopher
Hencke, Counsel, Legal Division, at
chencke@fdic.gov or 202-898-8839
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2006/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center (1-877-275-3342 or 202-416-
6940).
Highlights:
• The FDIC is modernizing its current business
processes and procedures for determining
deposit insurance coverage in the event of a
failure of one of the largest insured depository
institutions (i.e., the 145 institutions with more
than 250,000 deposit accounts and more than $2
billion in domestic deposits).
• As part of this initiative, the FDIC has published
the attached advance notice of proposed
rulemaking seeking comment on three options,
each requiring the largest institutions to modify
their deposit systems so that the FDIC may
calculate deposit insurance coverage quickly in
the event of failure.
• Comments on the ANPR must be submitted by
March 13, 2006.
FIL-2-2006
January 10, 2006
PROPOSAL TO MODERNIZE LARGE-BANK DEPOSIT
INSURANCE DETERMINATIONS
Comments Sought on Advance Notice of Proposed Rulemaking
Federal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 20429-9990
Summary: The FDIC is seeking comment on whether the largest insured depository
institutions should be required to modify their deposit systems so that the FDIC may calculate
deposit insurance coverage quickly in the event of a failure of one of these institutions. The
advance notice of proposed rulemaking (ANPR) is attached. Comments are due by March 13,
2006.
Distribution:
All Insured Depository Institutions
Suggested Routing:
Chief Executive Officer
Chief Operations Officer
Related Topics:
Deposit Insurance Coverage
12 C.F.R. Part 330
Attachment:
Advance Notice of Proposed Rulemaking
Contact:
James Marino, Project Manager, Division of
Resolutions and Receiverships, at
jmarino@fdic.gov or 202-898-7151; or Christopher
Hencke, Counsel, Legal Division, at
chencke@fdic.gov or 202-898-8839
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2006/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center (1-877-275-3342 or 202-416-
6940).
Highlights:
• The FDIC is modernizing its current business
processes and procedures for determining
deposit insurance coverage in the event of a
failure of one of the largest insured depository
institutions (i.e., the 145 institutions with more
than 250,000 deposit accounts and more than $2
billion in domestic deposits).
• As part of this initiative, the FDIC has published
the attached advance notice of proposed
rulemaking seeking comment on three options,
each requiring the largest institutions to modify
their deposit systems so that the FDIC may
calculate deposit insurance coverage quickly in
the event of failure.
• Comments on the ANPR must be submitted by
March 13, 2006.
2
Financial Institution Letter
FIL-2-2006
January 10, 2006
PROPOSAL TO MODERNIZE LARGE-BANK DEPOSIT INSURANCE DETERMINATIONS
Comments Sought on Advance Notice of Proposed Rulemaking
The Federal Deposit Insurance Corporation (FDIC) has issued the attached advance notice of
proposed rulemaking (ANPR) seeking comment on whether the largest insured depository institutions
should be required to modify their deposit systems so that the FDIC may calculate deposit insurance
coverage quickly in the event of failure. As currently structured, this proposal would apply only to
insured depository institutions with more than 250,000 deposit accounts and more than $2 billion in
domestic deposits. Presently, there are 145 such insured institutions.
Upon the failure of an insured depository institution, the FDIC applies the $100,000 insurance limit
by aggregating accounts owned by the same depositor in the same ownership category. Examples of
ownership categories are single accounts, joint accounts and revocable trust accounts. In determining
the identities of depositors and the ownership categories of accounts, the FDIC relies upon the
account records, including computer records, of the failed institution. Historically, in paying deposit
insurance, the FDIC has made insured funds available to most depositors by the next business day
following the institution’s failure (usually the Monday following a Friday closing).
The ability of the FDIC to rapidly determine the insured status of deposit accounts is essential in
resolving failed institutions in the most cost-effective and least disruptive fashion. The FDIC
periodically updates the deposit claims process. In response to the growth of large institutions and
consolidation in the banking industry, the FDIC is exploring new methods to modernize how it
identifies insured deposits in the event of a large-bank failure.
Through the ANPR, the FDIC is seeking comment on three options:
• Option 1 would require the institution to install on its deposit system a capability that, in the
event of failure, would place a temporary hold on a portion of the balances of large deposit
accounts. The percentage hold amount would be determined by the FDIC at the time of failure,
depending mainly on estimated losses to uninsured depositors. These holds would be placed
immediately prior to the institution’s reopening for business as a “bridge bank,” generally
expected to be the next business day. The institution also would need to be able to automatically
remove these holds and debit the account, if necessary, depending on the results of the FDIC’s
insurance determination. The insurance determination would be facilitated by certain depositor
data (such as name, address, and tax identification number) maintained by the institution in a
standard format. The data would include a unique identifier for each depositor and the insurance
ownership category of each account.
• Option 2 would be similar to Option 1 except that the standard data set would include only
information that institutions currently possess. This option would not require institutions to
create a unique identifier for each depositor or to classify each account by ownership category.
Financial Institution Letter
FIL-2-2006
January 10, 2006
PROPOSAL TO MODERNIZE LARGE-BANK DEPOSIT INSURANCE DETERMINATIONS
Comments Sought on Advance Notice of Proposed Rulemaking
The Federal Deposit Insurance Corporation (FDIC) has issued the attached advance notice of
proposed rulemaking (ANPR) seeking comment on whether the largest insured depository institutions
should be required to modify their deposit systems so that the FDIC may calculate deposit insurance
coverage quickly in the event of failure. As currently structured, this proposal would apply only to
insured depository institutions with more than 250,000 deposit accounts and more than $2 billion in
domestic deposits. Presently, there are 145 such insured institutions.
Upon the failure of an insured depository institution, the FDIC applies the $100,000 insurance limit
by aggregating accounts owned by the same depositor in the same ownership category. Examples of
ownership categories are single accounts, joint accounts and revocable trust accounts. In determining
the identities of depositors and the ownership categories of accounts, the FDIC relies upon the
account records, including computer records, of the failed institution. Historically, in paying deposit
insurance, the FDIC has made insured funds available to most depositors by the next business day
following the institution’s failure (usually the Monday following a Friday closing).
The ability of the FDIC to rapidly determine the insured status of deposit accounts is essential in
resolving failed institutions in the most cost-effective and least disruptive fashion. The FDIC
periodically updates the deposit claims process. In response to the growth of large institutions and
consolidation in the banking industry, the FDIC is exploring new methods to modernize how it
identifies insured deposits in the event of a large-bank failure.
Through the ANPR, the FDIC is seeking comment on three options:
• Option 1 would require the institution to install on its deposit system a capability that, in the
event of failure, would place a temporary hold on a portion of the balances of large deposit
accounts. The percentage hold amount would be determined by the FDIC at the time of failure,
depending mainly on estimated losses to uninsured depositors. These holds would be placed
immediately prior to the institution’s reopening for business as a “bridge bank,” generally
expected to be the next business day. The institution also would need to be able to automatically
remove these holds and debit the account, if necessary, depending on the results of the FDIC’s
insurance determination. The insurance determination would be facilitated by certain depositor
data (such as name, address, and tax identification number) maintained by the institution in a
standard format. The data would include a unique identifier for each depositor and the insurance
ownership category of each account.
• Option 2 would be similar to Option 1 except that the standard data set would include only
information that institutions currently possess. This option would not require institutions to
create a unique identifier for each depositor or to classify each account by ownership category.