This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
25596
Vol. 61, No. 100
Wednesday, May 22, 1996
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 330
RIN 3064–AB73
Simplification of Deposit Insurance
Rules
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Advance notice of proposed
rulemaking.
SUMMARY: The Board of Directors of the
Federal Deposit Insurance Corporation
(FDIC) is seeking comment on whether
the deposit insurance rules (insurance
regulations) should be simplified and, if
so, how. If the Board finds
simplification to be warranted, it will
propose specific amendments on which
public comment will then be invited.
The purpose of this notice is to solicit
comments to help guide the possible
preparation of a proposed rule. This
notice presents only a general
description of the insurance
simplification options being considered
and includes no regulatory text.
DATES: Written comments must be
received by the FDIC on or before
August 20, 1996.
ADDRESSES: Written comments are to be
addressed to the Office of the Executive
Secretary, Federal Deposit Insurance
Corporation, 550 17th Street, N.W.,
Washington, D.C. 20429. Comments
may be hand-delivered to Room F–402,
1776 F Street, N.W., Washington, D.C.
20429, on business days between 8:30
a.m. and 5 p.m. (FAX number: (202)
898–3838; Internet address:
comments@FDIC.gov). Comments will
be available for inspection in the FDIC
Public Information Center, room 100,
801 17th Street, N.W., Washington, D.C.,
between 9:00 a.m. and 5:00 p.m. on
business days.
FOR FURTHER INFORMATION CONTACT:
Joseph A. DiNuzzo, Acting Senior
Counsel, Legal Division, (202) 898–
7349; Adrienne George, Attorney, Legal
Division, (202) 898–3859; Federal
Deposit Insurance Corporation, 550 17th
Street, N.W., Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Background
One of the FDIC’s corporate operating
projects under its Strategic Plan is to
simplify the deposit insurance rules.
The purpose is to promote public
understanding of deposit insurance and
to increase financial institution and
consumer understanding of deposit
insurance. This Advance Notice of
Proposed Rulemaking (Notice) is one of
the steps in realizing the project’s goals.
This effort to simplify the FDIC’s
insurance regulations, found in 12 CFR
part 330 (part 330), also is intended to
satisfy the provisions in section 303(a)
of the Riegle Community Development
and Regulatory Improvement Act of
1994, 12 U.S.C. 4803(a), to reduce
regulatory burden and improve
efficiency.
The FDIC revised its insurance
regulations twice in the recent past. The
first time, in 1990, was necessitated by
the termination of the Federal Savings
and Loan Insurance Corporation
(FSLIC). The Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (FIRREA) (Pub. L. 101–73, 103
Stat. 183 (1989)) required the FDIC to
issue uniform insurance regulations for
deposits in all insured depository
institutions, including those previously
insured by the FSLIC. The second set of
recent changes in the FDIC insurance
rules were made pursuant to provisions
in the Federal Deposit Insurance
Corporation Improvement Act of 1991
(FDICIA) (Pub. L. 102–242 (1991)). A
provision in FDICIA, in essence, limited
the insurance coverage of employee
benefit and retirement plans. Also, in
February 1995, the FDIC issued
disclosure requirements in connection
with the limited availability of
insurance for employee benefit plan
accounts, 60 FR 7701 (Feb. 9, 1995).
The amendments made to the
insurance rules in 1990 not only
reconciled differences between the
FSLIC insurance regulations and the
then-existing FDIC regulations, they also
revised the insurance regulations to,
among other things, better organize and
define terms used in the regulations,
convert long-standing interpretive
opinions into regulations, resolve
outstanding issues and clarify
ambiguous provisions.
Although the insurance rules were
revised relatively recently, the
Corporation believes, preliminarily, that
at least some additional modification to
and simplification of the insurance rules
would be helpful. The need for these
changes has been brought to the FDIC’s
attention in several ways, especially
through the steady receipt of letters and
phone calls on insurance questions.
Experience with bank and thrift failures
also has enabled the staff to identify
procedural aspects of the regulations
which, when applied in accordance
with the regulations, may prove unfair
to certain depositors in some situations.
The FDIC must be mindful of the
applicable statutory parameters in
considering whether and to what extent
to modify the insurance regulations. The
general statutory basis for and guidance
on deposit insurance is found in section
11(a) of the Federal Deposit Insurance
Act (FDI Act), 12 U.S.C. 1821(a), which
provides, in relevant part, that deposits
are insured up to $100,000 based on the
‘‘right’’ and ‘‘capacity’’ in which the
deposits are maintained. The FDIC
interprets the ‘‘right-and-capacity’’
criterion as essentially meaning
ownership. Thus, the rules provide
‘‘separate’’ insurance coverage for
different types of accounts which are
owned in different ways. For example,
accounts owned by an individual are
not added to joint accounts in which
that same individual has an ownership
interest. ‘‘Separate’’ insurance means
that each category of account in which
a person has an ownership interest is
covered for up to $100,000 separately
insured from the funds in other
categories of accounts.
Possible Areas of Simplification
Preliminarily, the Board believes that
certain technical and moderate
substantive revisions to the deposit
insurance rules may be warranted.
Technical revisions would entail
rewriting ambiguous provisions of the
rules and generally making the rules
easier to understand. Moderate
substantive revisions would entail
making some substantive changes to the
rules (and statute) but the FDIC intends
to retain the principles that insurance is
based on deposit ownership and that
separate insurance coverage within the
same institution depends upon the
different ‘‘rights and capacities’’ in
which deposits can be held.
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
Proposed Rules Federal Register
25596
Vol. 61, No. 100
Wednesday, May 22, 1996
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 330
RIN 3064–AB73
Simplification of Deposit Insurance
Rules
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Advance notice of proposed
rulemaking.
SUMMARY: The Board of Directors of the
Federal Deposit Insurance Corporation
(FDIC) is seeking comment on whether
the deposit insurance rules (insurance
regulations) should be simplified and, if
so, how. If the Board finds
simplification to be warranted, it will
propose specific amendments on which
public comment will then be invited.
The purpose of this notice is to solicit
comments to help guide the possible
preparation of a proposed rule. This
notice presents only a general
description of the insurance
simplification options being considered
and includes no regulatory text.
DATES: Written comments must be
received by the FDIC on or before
August 20, 1996.
ADDRESSES: Written comments are to be
addressed to the Office of the Executive
Secretary, Federal Deposit Insurance
Corporation, 550 17th Street, N.W.,
Washington, D.C. 20429. Comments
may be hand-delivered to Room F–402,
1776 F Street, N.W., Washington, D.C.
20429, on business days between 8:30
a.m. and 5 p.m. (FAX number: (202)
898–3838; Internet address:
comments@FDIC.gov). Comments will
be available for inspection in the FDIC
Public Information Center, room 100,
801 17th Street, N.W., Washington, D.C.,
between 9:00 a.m. and 5:00 p.m. on
business days.
FOR FURTHER INFORMATION CONTACT:
Joseph A. DiNuzzo, Acting Senior
Counsel, Legal Division, (202) 898–
7349; Adrienne George, Attorney, Legal
Division, (202) 898–3859; Federal
Deposit Insurance Corporation, 550 17th
Street, N.W., Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
Background
One of the FDIC’s corporate operating
projects under its Strategic Plan is to
simplify the deposit insurance rules.
The purpose is to promote public
understanding of deposit insurance and
to increase financial institution and
consumer understanding of deposit
insurance. This Advance Notice of
Proposed Rulemaking (Notice) is one of
the steps in realizing the project’s goals.
This effort to simplify the FDIC’s
insurance regulations, found in 12 CFR
part 330 (part 330), also is intended to
satisfy the provisions in section 303(a)
of the Riegle Community Development
and Regulatory Improvement Act of
1994, 12 U.S.C. 4803(a), to reduce
regulatory burden and improve
efficiency.
The FDIC revised its insurance
regulations twice in the recent past. The
first time, in 1990, was necessitated by
the termination of the Federal Savings
and Loan Insurance Corporation
(FSLIC). The Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (FIRREA) (Pub. L. 101–73, 103
Stat. 183 (1989)) required the FDIC to
issue uniform insurance regulations for
deposits in all insured depository
institutions, including those previously
insured by the FSLIC. The second set of
recent changes in the FDIC insurance
rules were made pursuant to provisions
in the Federal Deposit Insurance
Corporation Improvement Act of 1991
(FDICIA) (Pub. L. 102–242 (1991)). A
provision in FDICIA, in essence, limited
the insurance coverage of employee
benefit and retirement plans. Also, in
February 1995, the FDIC issued
disclosure requirements in connection
with the limited availability of
insurance for employee benefit plan
accounts, 60 FR 7701 (Feb. 9, 1995).
The amendments made to the
insurance rules in 1990 not only
reconciled differences between the
FSLIC insurance regulations and the
then-existing FDIC regulations, they also
revised the insurance regulations to,
among other things, better organize and
define terms used in the regulations,
convert long-standing interpretive
opinions into regulations, resolve
outstanding issues and clarify
ambiguous provisions.
Although the insurance rules were
revised relatively recently, the
Corporation believes, preliminarily, that
at least some additional modification to
and simplification of the insurance rules
would be helpful. The need for these
changes has been brought to the FDIC’s
attention in several ways, especially
through the steady receipt of letters and
phone calls on insurance questions.
Experience with bank and thrift failures
also has enabled the staff to identify
procedural aspects of the regulations
which, when applied in accordance
with the regulations, may prove unfair
to certain depositors in some situations.
The FDIC must be mindful of the
applicable statutory parameters in
considering whether and to what extent
to modify the insurance regulations. The
general statutory basis for and guidance
on deposit insurance is found in section
11(a) of the Federal Deposit Insurance
Act (FDI Act), 12 U.S.C. 1821(a), which
provides, in relevant part, that deposits
are insured up to $100,000 based on the
‘‘right’’ and ‘‘capacity’’ in which the
deposits are maintained. The FDIC
interprets the ‘‘right-and-capacity’’
criterion as essentially meaning
ownership. Thus, the rules provide
‘‘separate’’ insurance coverage for
different types of accounts which are
owned in different ways. For example,
accounts owned by an individual are
not added to joint accounts in which
that same individual has an ownership
interest. ‘‘Separate’’ insurance means
that each category of account in which
a person has an ownership interest is
covered for up to $100,000 separately
insured from the funds in other
categories of accounts.
Possible Areas of Simplification
Preliminarily, the Board believes that
certain technical and moderate
substantive revisions to the deposit
insurance rules may be warranted.
Technical revisions would entail
rewriting ambiguous provisions of the
rules and generally making the rules
easier to understand. Moderate
substantive revisions would entail
making some substantive changes to the
rules (and statute) but the FDIC intends
to retain the principles that insurance is
based on deposit ownership and that
separate insurance coverage within the
same institution depends upon the
different ‘‘rights and capacities’’ in
which deposits can be held.
25597Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Proposed Rules
The FDIC has identified the following
possible revisions to the insurance
regulations and laws:
1. Rewrite certain parts of the rules to
make them clearer and easier to
understand. Ambiguous and potentially
ambiguous provisions of the rules
would be rewritten and part 330 might
be reordered and reorganized.
2. Eliminate step one of the two steps
involved in determining insurance
coverage for joint accounts. Joint
ownership is one of the account
categories that qualifies for separate
insurance coverage. 12 CFR 330.7. Thus,
an individual who has an individual
deposit and interests in joint accounts at
the same insured bank or thrift would
be insured for up to $100,000 per
category of account. Currently deposit
insurance for joint accounts is
determined by a two-step process: first,
all joint accounts that are identically
owned (i.e., held by the same
combination of individuals) are added
together and the combined total is
insurable up to the $100,000 maximum;
second, each person’s interests in joint
accounts involving different
combinations of individuals are
combined and the total is insured up to
the $100,000 maximum.
One option to simplify the current
joint account rules is to eliminate the
first step of the two-step process. Under
this alternative, all funds held in joint
accounts would be allocated among the
owners and each owner’s interests in all
joint accounts (held at the same
depository institution) would be added
and insured up to $100,000 in the
aggregate.
3. Revise the recordkeeping rules
allowing the FDIC more flexibility (for
the benefit of depositors) in determining
the ownership of deposits held in a
custodial or fiduciary capacity. The
insurance regulations impose specific
recordkeeping requirements as a
precondition for insuring parties other
than those whose names appear on the
depository institution’s deposit account
records. 12 CFR 330.4. For example, if
A is acting as an agent for B, C, and D
and places funds belonging to them in
an insured bank or thrift, the
institution’s deposit account records
must show that A is holding the account
as an agent in order for the FDIC to
recognize the ownership interests of B,
C and D. The FDIC will then insure the
account as if it were held directly by B,
C, and D (the owners of the account) as
long as the institution’s deposit account
records or the agent’s records
(maintained in ‘‘good faith and in the
regular course of business’’) evidence B,
C and D’s ownership interests in the
account. In this context, we say that the
insurance ‘‘passes-through’’ the agent to
the owner(s) of the account.
The recordkeeping requirements
intentionally limit the FDIC’s ability to
consider evidence outside the deposit
account records of an insured
institution in determining the
ownership of deposits. They establish a
presumption that deposited funds are
actually owned in the manner indicated
on the account records. Those records
are binding on the depositor if they are
‘‘clear and unambiguous’’. The FDIC has
the discretion, however, to decide
whether records are clear and
unambiguous. If the FDIC determines
that the records are unclear or
ambiguous, then it may consider
evidence other than the deposit account
records. The question is whether this
discretion provides the FDIC with
sufficient flexibility to recognize
beneficial and/or multiple ownership of
accounts when such ownership is not
reflected on the bank or thrift’s deposit
account records.
The objective in amending the
recordkeeping requirements would be to
allow the FDIC staff more flexibility to
consider the actual ownership interests
in deposit accounts and thereby prevent
possible hardships. The proper balance
must be struck, however, to avoid fraud
in post-failure situations and to enable
the FDIC to reasonably and
expeditiously calculate the insured
deposits at failing institutions. One
option would be to amend the rules to
allow the FDIC to look beyond the
deposit accounts records of the
depository institution where account
titles are indicative of a fiduciary
relationship. Two examples would be
accounts held by attorneys and those
held by entities such as title companies,
who commonly hold funds for others.
4. Consider changing the rules on
‘‘payable upon death’’ accounts. The
insurance rules provide for separate
coverage for funds owned by an
individual and deposited into any
account commonly referred to as a
‘‘payable-on-death’’ account, tentative
or ‘‘Totten’’ trust account, revocable
trust account, or similar account (POD
accounts). 12 CFR 330.8. The account
must evidence an intention that upon
the death of the owner the funds shall
belong to certain qualifying
beneficiaries. The qualifying
beneficiaries are limited to the owner’s
spouse, children and grandchildren.
The owner is insured up to $100,000 as
to each such named qualifying
beneficiary, separately from any other
accounts of the owner or the
beneficiaries. Thus, if the individual
names his spouse, three children and
two grandchildren as beneficiaries, the
account would be insured up to
$600,000.
The FDI Act does not expressly
require that POD accounts receive
separate insurance coverage. The
purpose of the POD separate insurance
rule is to track state laws that allow for
the so-called ‘‘poor-man’s will’’ in
which deposit account balances can be
transmitted upon the death of the
account owner to beneficiaries named in
the account without an underlying trust
document or will. It is support for this
will-substitute that underlies the
separate insurance for POD accounts.
The FDIC limits the qualifying
beneficiaries to the spouse, children and
grandchildren of the account owner
because it believes that such limitation
strikes a reasonable balance between
providing separate coverage to those
most likely to be named as beneficiaries
of a POD account while not overly
expanding this category of deposit
insurance coverage.
In the context of simplifying the
insurance regulations, the question
arises whether the FDIC should consider
revising the POD rules on qualifying
degrees of kinship. The FDIC, therefore,
requests comments on whether and, if
so, how the POD insurance rules should
be revised.
5. Consider modifying the way the
FDIC insures certain types of accounts
upon the death of the owner(s) of the
accounts. The ownership interest of a
deposit account often changes upon the
death of the owner of the account. If the
beneficiaries/executor of the decedent
do not act immediately after the
decedent’s death to change the nature of
the account, insurance coverage may be
decreased, sometimes significantly. For
example, if a husband and wife hold a
joint account, a payable-upon-death
account and two individual accounts in
their respective names, the death of one
spouse would result in the surviving
spouse becoming the sole owner of the
joint account and the payable-upon-
death account. Thus, the accounts
would be aggregated with the surviving
spouse’s individual account, possibly
resulting in a substantial reduction in
insurance coverage.
The former FSLIC, as a matter of
policy, allowed a grace period of six
months following the death of a
depositor for the decedent’s deposits to
be restructured. If an insured thrift
failed during the grace period and
additional insurance would be available
if the decedent had not died, the FSLIC
insured the account(s) based on the
account ownership shown on the
institution’s records as if the decedent
were still living. The reason for the
FSLIC policy was to ‘‘lessen the
The FDIC has identified the following
possible revisions to the insurance
regulations and laws:
1. Rewrite certain parts of the rules to
make them clearer and easier to
understand. Ambiguous and potentially
ambiguous provisions of the rules
would be rewritten and part 330 might
be reordered and reorganized.
2. Eliminate step one of the two steps
involved in determining insurance
coverage for joint accounts. Joint
ownership is one of the account
categories that qualifies for separate
insurance coverage. 12 CFR 330.7. Thus,
an individual who has an individual
deposit and interests in joint accounts at
the same insured bank or thrift would
be insured for up to $100,000 per
category of account. Currently deposit
insurance for joint accounts is
determined by a two-step process: first,
all joint accounts that are identically
owned (i.e., held by the same
combination of individuals) are added
together and the combined total is
insurable up to the $100,000 maximum;
second, each person’s interests in joint
accounts involving different
combinations of individuals are
combined and the total is insured up to
the $100,000 maximum.
One option to simplify the current
joint account rules is to eliminate the
first step of the two-step process. Under
this alternative, all funds held in joint
accounts would be allocated among the
owners and each owner’s interests in all
joint accounts (held at the same
depository institution) would be added
and insured up to $100,000 in the
aggregate.
3. Revise the recordkeeping rules
allowing the FDIC more flexibility (for
the benefit of depositors) in determining
the ownership of deposits held in a
custodial or fiduciary capacity. The
insurance regulations impose specific
recordkeeping requirements as a
precondition for insuring parties other
than those whose names appear on the
depository institution’s deposit account
records. 12 CFR 330.4. For example, if
A is acting as an agent for B, C, and D
and places funds belonging to them in
an insured bank or thrift, the
institution’s deposit account records
must show that A is holding the account
as an agent in order for the FDIC to
recognize the ownership interests of B,
C and D. The FDIC will then insure the
account as if it were held directly by B,
C, and D (the owners of the account) as
long as the institution’s deposit account
records or the agent’s records
(maintained in ‘‘good faith and in the
regular course of business’’) evidence B,
C and D’s ownership interests in the
account. In this context, we say that the
insurance ‘‘passes-through’’ the agent to
the owner(s) of the account.
The recordkeeping requirements
intentionally limit the FDIC’s ability to
consider evidence outside the deposit
account records of an insured
institution in determining the
ownership of deposits. They establish a
presumption that deposited funds are
actually owned in the manner indicated
on the account records. Those records
are binding on the depositor if they are
‘‘clear and unambiguous’’. The FDIC has
the discretion, however, to decide
whether records are clear and
unambiguous. If the FDIC determines
that the records are unclear or
ambiguous, then it may consider
evidence other than the deposit account
records. The question is whether this
discretion provides the FDIC with
sufficient flexibility to recognize
beneficial and/or multiple ownership of
accounts when such ownership is not
reflected on the bank or thrift’s deposit
account records.
The objective in amending the
recordkeeping requirements would be to
allow the FDIC staff more flexibility to
consider the actual ownership interests
in deposit accounts and thereby prevent
possible hardships. The proper balance
must be struck, however, to avoid fraud
in post-failure situations and to enable
the FDIC to reasonably and
expeditiously calculate the insured
deposits at failing institutions. One
option would be to amend the rules to
allow the FDIC to look beyond the
deposit accounts records of the
depository institution where account
titles are indicative of a fiduciary
relationship. Two examples would be
accounts held by attorneys and those
held by entities such as title companies,
who commonly hold funds for others.
4. Consider changing the rules on
‘‘payable upon death’’ accounts. The
insurance rules provide for separate
coverage for funds owned by an
individual and deposited into any
account commonly referred to as a
‘‘payable-on-death’’ account, tentative
or ‘‘Totten’’ trust account, revocable
trust account, or similar account (POD
accounts). 12 CFR 330.8. The account
must evidence an intention that upon
the death of the owner the funds shall
belong to certain qualifying
beneficiaries. The qualifying
beneficiaries are limited to the owner’s
spouse, children and grandchildren.
The owner is insured up to $100,000 as
to each such named qualifying
beneficiary, separately from any other
accounts of the owner or the
beneficiaries. Thus, if the individual
names his spouse, three children and
two grandchildren as beneficiaries, the
account would be insured up to
$600,000.
The FDI Act does not expressly
require that POD accounts receive
separate insurance coverage. The
purpose of the POD separate insurance
rule is to track state laws that allow for
the so-called ‘‘poor-man’s will’’ in
which deposit account balances can be
transmitted upon the death of the
account owner to beneficiaries named in
the account without an underlying trust
document or will. It is support for this
will-substitute that underlies the
separate insurance for POD accounts.
The FDIC limits the qualifying
beneficiaries to the spouse, children and
grandchildren of the account owner
because it believes that such limitation
strikes a reasonable balance between
providing separate coverage to those
most likely to be named as beneficiaries
of a POD account while not overly
expanding this category of deposit
insurance coverage.
In the context of simplifying the
insurance regulations, the question
arises whether the FDIC should consider
revising the POD rules on qualifying
degrees of kinship. The FDIC, therefore,
requests comments on whether and, if
so, how the POD insurance rules should
be revised.
5. Consider modifying the way the
FDIC insures certain types of accounts
upon the death of the owner(s) of the
accounts. The ownership interest of a
deposit account often changes upon the
death of the owner of the account. If the
beneficiaries/executor of the decedent
do not act immediately after the
decedent’s death to change the nature of
the account, insurance coverage may be
decreased, sometimes significantly. For
example, if a husband and wife hold a
joint account, a payable-upon-death
account and two individual accounts in
their respective names, the death of one
spouse would result in the surviving
spouse becoming the sole owner of the
joint account and the payable-upon-
death account. Thus, the accounts
would be aggregated with the surviving
spouse’s individual account, possibly
resulting in a substantial reduction in
insurance coverage.
The former FSLIC, as a matter of
policy, allowed a grace period of six
months following the death of a
depositor for the decedent’s deposits to
be restructured. If an insured thrift
failed during the grace period and
additional insurance would be available
if the decedent had not died, the FSLIC
insured the account(s) based on the
account ownership shown on the
institution’s records as if the decedent
were still living. The reason for the
FSLIC policy was to ‘‘lessen the