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17 July 2008

Two notices.

Large-Bank Deposit Insurance Determination Modernization

[Federal Register: July 17, 2008 (Volume 73, Number 138)]
[Rules and Regulations]               
[Page 41169-41180]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy08-17]                         


[[Page 41169]]

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Part II

Federal Deposit Insurance Corporation

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12 CFR Part 360

Processing of Deposit Accounts in the Event of an Insured Depository 
Institution Failure; Large Bank Deposit Insurance Determination 
Modernization; Interim and Final Rules


[[Page 41170]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AD26

 
Processing of Deposit Accounts in the Event of an Insured 
Depository Institution Failure

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Interim rule with request for comments.

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SUMMARY: The FDIC is adopting an interim rule establishing the FDIC's 
practices for determining deposit and other liability account balances 
at a failed insured depository institution. Except as noted, the FDIC 
practices defined in the interim rule represent a continuation of long-
standing FDIC procedures in processing such balances at a failed 
depository institution. The FDIC is adopting the interim rule 
concurrently with its adoption of a related final rule requiring the 
largest insured depository institutions to adopt mechanisms that would, 
in the event of the institution's failure: Provide the FDIC with 
standard deposit account and other customer information; and allow the 
placement and release of holds on liability accounts, including 
deposits. This interim rule applies to all insured depository 
institutions.

DATES: This interim rule is effective August 18, 2008, except for Sec.  
360.8(e), which will be effective July 1, 2009. Written comments must 
be received by the FDIC on or before September 15, 2008.

ADDRESSES: You may submit comments by any of the following methods:
     Agency Web Site: http://www.fdic.gov/regulations/laws/
federal. Follow instructions for submitting comments on the Agency Web 
Site.
     E-mail: Comments@FDIC.gov. Include ``Processing of Deposit 
Accounts'' in the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery/Courier: 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. (EST).
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Public Inspection: All comments received will be posted without 
change to http://www.fdic.gov/regulations/laws/federal including any 
personal information provided. Comments may be inspected and 
photocopied in the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m. 
(EST) on business days. Paper copies of public comments may be ordered 
from the Public Information Center by telephone at (877) 275-3342 or 
(703) 562-2200.

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 Christopher L. Hencke, Counsel, Legal 
Division, (202) 898-8839 or chencke@fdic.gov.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    In January of this year the FDIC published a proposed rule composed 
of two parts (``proposed rule'').\1\ The first part proposed FDIC 
practices for determining deposit and other liability account balances 
at a failed insured depository institution. The second part proposed 
requirements for the largest insured depository institutions to adopt 
mechanisms that would, in the event of the institution's failure: (1) 
Provide the FDIC with standard deposit account and other customer 
information; and (2) allow the placement and release of holds on 
liability accounts, including deposits.
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    \1\ 73 FR 2364 (Jan. 14, 2008).
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    The comment period for the proposed rule ended on April 14, 2008. 
The FDIC received twenty-one comment letters, all of which may be 
viewed on the FDIC's Web site at http://www.fdic.gov/regulations/laws/
federal/2008/08comAD26.html.
    Based in part on the comments received on the proposed rule, the 
FDIC has decided to finalize the proposed rule by issuing two separate 
rulemakings--(1) the interim rule, covering part one of the proposed 
rule and (2) a separate final rule, covering part two of the proposed 
rule (``Large Bank Modernization Final Rule'').
    Throughout this preamble the terms ``deposit'' (or ``domestic 
deposit''), ``foreign deposit'' and ``international banking facility 
deposit'' identify liabilities having different meanings for deposit 
insurance purposes. A ``deposit'' is used as defined in section 3(l) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(l)) (``Section 
3(l)''). A deposit includes only deposit liabilities payable in the 
United States, typically those deposits maintained in a domestic office 
of an insured depository institution. Only deposits meeting these 
criteria are eligible for insurance coverage. Insured depository 
institutions may maintain deposit liabilities in a foreign branch 
(``foreign deposits''), but these liabilities are not deposits in the 
statutory sense (for insurance or depositor preference purposes) for 
the time that they are payable solely at a foreign branch or branches. 
Insured depository institutions also may maintain liabilities in an 
international banking facility (``IBF''). An ``international banking 
facility deposit,'' as defined by the Board of Governors of the Federal 
Reserve System in Regulation D (12 CFR 204.8(a)(2)), also is excluded 
from the definition of ``deposit'' in Section 3(l) and the depositor 
preference statute (12 U.S.C. 1821(d)(11)).

II. Background

    Upon the failure of an FDIC-insured depository institution, the 
FDIC must determine the total insured amount for each depositor. 12 
U.S.C. 1821(f). To make this determination, the FDIC must ascertain the 
balances of all deposit accounts owned by the same depositor in the 
same ownership capacity at a failed institution as of the day of 
failure.
    The Large Bank Modernization Final Rule, among other things, 
requires certain large depository institutions to adopt mechanisms that 
will allow the FDIC, as receiver, to place holds on liability accounts, 
including deposits, in the event of failure. The amount held would vary 
depending on the account balance, the nature of the liability (whether 
or not it is a deposit for insurance purposes) and the expected losses 
resulting from the failure. In order to calculate these hold amounts, 
the rules used by the FDIC to determine account balances as of the day 
of failure must be clearly established.
    A deposit account balance can be affected by transactions \2\ 
presented during the day. A customer, a third party or the depository 
institution can initiate a deposit account transaction. All depository 
institutions process and post these deposit account transactions 
according to a predetermined set of rules to determine whether to 
include a deposit account transaction either in that day's end-of-day 
ledger balances or in a subsequent day's balances. These rules 
establish cutoff times that vary by institution and by type of deposit 
account transaction--for example, check

[[Page 41171]]

clearing, Fedwire, ATM, and teller transactions. Institutions post 
transactions initiated before the respective cutoff time as part of 
that day's business and generally post transactions initiated after the 
cutoff time the following business day. Further, institutions 
automatically execute prearranged ``sweep'' instructions affecting 
deposit and other liability balances at various points throughout the 
day. The cutoff rules for posting deposit account transactions and the 
prearranged automated instructions define the end-of-day balance for 
each deposit account on any given business day.\3\
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    \2\ A deposit account transaction, such as deposits, 
withdrawals, transfers and payments, causes funds to be debited from 
or credited to the account.
    \3\ Some depository institutions operate ``real-time'' deposit 
systems in which some deposit account transactions are posted 
throughout the business day. Most depository institutions, however, 
process at least some deposit account transactions in a ``batch 
mode,'' where deposit account transactions presented before the 
cutoff time are posted that evening or in the early morning hours of 
the following day. With either system--batch or real-time--the 
institution calculates a close-of-business deposit balance for each 
deposit account on each business day.
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    In the past, the FDIC usually took over an institution as receiver 
after it had closed on a Friday. For institutions with a few branches 
in one state, deposit account transactions for the day were completed 
and determining account balances on that day was relatively 
straightforward. The growth of interstate banking and branching over 
the past two decades and the increasing complexity of bank products and 
practices (such as sweep accounts) has made the determination of end-
of-day account balances on the day of closing much more complicated.

III. The Proposed Rule

Overview

    The proposed rule defined the deposit account balance used for 
deposit insurance determination purposes as the end-of-day ledger 
balance of the deposit account on the day of failure. Except as noted, 
the FDIC would use the cutoff times previously applied by the failed 
insured depository institution in establishing the end-of-day ledger 
balance for deposit insurance determination purposes. The use of end-
of-day ledger balances and the institution's normal cutoff times for 
insurance determination purposes continues long-standing FDIC 
procedures in processing such balances at a failed depository 
institution. Whether a deposit account transaction would be included in 
the end-of-day ledger balance on the day of failure would depend 
generally upon how it normally would be treated using the institution's 
ordinary cutoff time on that day. Many institutions have different 
cutoff times for different kinds of transactions, such as check 
clearing, Fedwire, ATM and teller transactions.
    The FDIC proposed establishing an FDIC Cutoff Point, defined as a 
point in time after it takes control of the failed institution as 
receiver, to allow the FDIC to make a final determination of the ledger 
balances of the deposit accounts if the institution's normal cutoff 
times for the accounts would impair the efficient winding up of the 
institution. If the institution's ordinary cutoff time on the day of 
failure for any particular kind of transaction preceded the FDIC Cutoff 
Point, the institution's ordinary cutoff time would be used. Otherwise, 
the institution's ordinary cutoff time for an individual kind of 
transaction would be replaced by the FDIC Cutoff Point. The 
``Applicable Cutoff Time'' used for any kind of transaction thus would 
be the earlier of the institution's ordinary cutoff time or the FDIC 
Cutoff Point. In practice, there might be several Applicable Cutoff 
Times for a given failed institution, since different kinds of 
transactions could have different cutoff times. No Applicable Cutoff 
Time would be later than the FDIC Cutoff Point established by the FDIC, 
though some could be earlier.
    Under the proposed rule, transactions occurring after the 
Applicable Cutoff Time would have been posted to the next day's 
business, if the operations of the failed institution were carried on 
by a successor institution. In a depository institution failure where 
deposit operations were not continued by a successor institution, 
account transactions on the day of failure would have been posted to 
the applicable deposit accounts until the FDIC Cutoff Point. This 
practice would have been consistent with the FDIC's current practice in 
handling deposit account transactions in deposit insurance payout 
situations.\4\
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    \4\ This is when the FDIC handles the resolution of a failed 
depository institution by making payments to insured depositors. 
More commonly, the FDIC handles a failed institution by arranging a 
purchase-and-assumption transaction with a healthy depository 
institution. In those cases, insured depositors' funds are 
transferred to the assuming institution and available at that 
institution to depositors.
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    Upon taking control of a failed institution as receiver, as 
proposed, the FDIC would take steps necessary to limit additional 
transactions to ensure, to the extent practicable, that funds would not 
be received by or removed from the failed institution. These steps 
might include the suspension of wire activities and new deposit account 
transactions. For example, wire transactions not yet executed by the 
FDIC Cutoff Point would not be allowed to occur on the day of closing.
    For a failed institution operating in several time zones, the FDIC 
Cutoff Point, which would have set the latest possible time for any 
particular transaction's Applicable Cutoff Time, would have been 
translated into local time. For example, a 6 p.m. Eastern Time FDIC 
Cutoff Point on the day an institution was closed would have meant a 5 
p.m. FDIC Cutoff Point in the Central Time zone. As receiver, the FDIC 
would have attempted, as it has customarily done in the past, to close 
all offices of the failed institution as soon as practicable after 
taking over as receiver.

Treatment of Uncollected Deposited Checks

    Under the proposed rule, in determining end-of-day deposit account 
balances at a failed insured depository institution, the FDIC would 
have deemed all checks deposited into and posted to a deposit account 
by the Applicable Cutoff Time as part of the end-of-day deposit account 
balance for insurance purposes. This approach means that the FDIC would 
have used the end-of-day ledger balance of the account for purposes of 
its deposit insurance determination, in contrast to using either end-
of-day available or collected funds balances. The proposed rule 
differed from the FDIC's practices in an important way. In the past, 
for a check that was posted to an account but not yet collected at the 
time of failure--including a check already forwarded by the failed 
institution for collection but not yet collected--the FDIC acted as 
agent for the depositor and remitted or credited payments received on 
these checks to the depositor in full. These checks were not included 
in deposits on the day of failure for insurance purposes and were not 
subject to deposit insurance limits.\5\ In contrast, under the proposed 
rule, when a check is posted to an account at the failed institution by 
the Applicable Cutoff Time, the check would have been included in the 
end-of-day balance and would have been subject to deposit insurance 
limits, even if uncollected.
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    \5\ FDIC Adv. Op. 95-2 (Jan. 23, 1995).
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Prearranged Instructions To ``Sweep'' Funds

    The proposed rule attempted to distinguish between internal and 
external sweep accounts. Internal sweep arrangements--such as those 
applying

[[Page 41172]]

to zero balance accounts \6\ or where the investment vehicle is a 
deposit in a foreign branch of the institution or its international 
banking facility--were characterized as arrangements that sweep funds 
only within the institution itself by accounting or bookkeeping 
entries. External sweep arrangements--such as those connected to 
investments in money market mutual funds--were characterized as 
arrangements that move funds (usually by wire transfer) outside the 
institution and, hence, off its books altogether.
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    \6\ In the case of a zero balance account ordinarily a customer 
has a master account tied to one or more subsidiary accounts. The 
institution's agreement with the customer calls for the subsidiary 
account to have a zero balance at the end of each day. For example, 
if funds need to be transferred from the master account to cover 
checks presented against the subsidiary account, this will be done 
during the nightly processing cycle. Alternatively, if there are 
excess funds in the subsidiary account they will be transferred to 
the master account prior to the end of the day.
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    Under the proposed rule, any automated internal sweep transaction 
from one account at the failed institution to another account at the 
failed institution would have been completed on the day of failure. The 
FDIC as receiver, in effect, would have recognized the transfer, 
pursuant to the account agreement, in determining the end-of-day 
balance for deposit insurance and depositor preference purposes. Under 
the proposed rule the FDIC as receiver would not, however, complete an 
external sweep--a sweep in which funds leave the institution and 
another entity assumes liability to the customer--if funds have not 
already left the failed institution by the FDIC Cutoff Point. An 
external sweep included, for example, an account where funds are swept 
from a deposit account at the institution and wired to a third party 
money market mutual fund every day. External sweeps also would have 
included an arrangement where funds are swept from a deposit account at 
a depository institution to an account or product at an affiliate of 
the institution, even if the transfer is accomplished through a book-
entry at the depository institution. In some cases it would not be 
practicable to stop an external sweep from occurring after the FDIC 
general cutoff time. In these cases the FDIC proposed using the pre-
sweep deposit balance for insurance purposes.
    The proposed rule would have applied differently to sweep accounts 
involving the transfer of funds outside the depository institution. In 
those situations, the status of the funds as of the institution's day 
of failure would depend on whether the funds left the institution (via 
wire transfer or otherwise) before the FDIC Cutoff Point. Where funds 
subject to a prearranged, automated external sweep have been 
temporarily transferred to an intermediate deposit account (or omnibus 
account) at the failed institution awaiting transfer to an external 
source, but have not actually been transferred to the external source 
(for example, the mutual fund) by the FDIC Cutoff Point, those funds 
would still have been considered part of the customer's deposit account 
balance for deposit insurance and receivership purposes.
    The completion of prearranged internal sweep transactions results 
in the calculation of end-of-day deposit balances for insurance 
proposes consistent with how such funds currently are reported on Call 
and Thrift Financial Reports and are treated for assessment purposes. 
As detailed in the proposed rule, the need for the FDIC to clarify the 
treatment of internal sweep arrangements was motivated, in part, by the 
decision in Adagio Investment Holding Ltd. v. FDIC, 338 F. Supp. 2d 71 
(D.D.C. 2004) (``Adagio'').
    In that case the FDIC had been appointed receiver of the failed 
Connecticut Bank of Commerce. On the night of the bank's failure, in 
accordance with its customary practice, the FDIC ``completed the day's 
business'' which involved processing pending transactions, including 
approximately $20.2 million which had been authorized to be swept from 
a demand deposit account in the bank to an account in the bank's IBF. 
Because an IBF account is not a deposit for purposes of section 3(l) of 
the FDI Act, the FDIC issued the holders of the IBF accounts 
receivership certificates as general creditors rather than according 
them priority status as depositors (pursuant to the national deposit 
preference statute, described below). The creditors, claiming that the 
receiver did not have authority to permit the sweeps, sued the FDIC. In 
the Adagio case, the court concluded that the sweep should not have 
been performed in light of the lack of ``any provision in either the 
statute or regulations that would permit the sweep that occurred. * * 
*'' 338 F. Supp. 2d at 81.

Post-Closing Adjustments

    Under the proposed rule, the FDIC, as receiver, would have been 
able to correct errors and omissions after the day of failure and 
reflect them in the day-of-closing deposit account balances.

No New Requirements Would Have Been Imposed on Open and Operating 
Institutions

    The proposed rule would not have required insured institutions to 
have in place computer systems capable of applying the FDIC Cutoff 
Point to determine deposit account balances upon an institution's day 
of failure. The FDIC, however, requested comments on whether such a 
requirement should be imposed for either all institutions or, 
alternatively, for ``Covered Institutions''--defined in the second part 
of the proposed rule as institutions having at least $2 billion in 
domestic deposits and either: More than 250,000 deposit accounts; or 
total assets over $20 billion, regardless of the number of deposit 
accounts.

Repo Sweep Arrangements

    The preamble to the proposed rule noted that some repurchase sweep 
agreements provide for an actual sale of securities by the depository 
institution to a customer (followed by the institution's repurchase of 
the securities from the customer). Accordingly, when the customer uses 
funds in a deposit account to make the purchase, the bank's deposit 
liability to the customer is extinguished. There may be other so-called 
repurchase agreements that do not provide for the actual sale and 
repurchase of securities, but simply provide for the transfer of the 
customer's claim from a deposit account at the depository institution 
to another liability account, collateralized by either specific 
securities or a pool of securities, at the same institution. In the 
proposed rule, the FDIC posed the following questions:
     Do some or all repurchase arrangements as actually 
executed: (1) Pass title to the customer in a transaction that is 
enforceable against the FDIC? or (2) create perfected security 
interests that are enforceable against the FDIC?
     Does the nature of some or all repurchase sweep 
arrangements satisfy the definition of ``deposit'' in section 3(l) of 
the FDI Act?
     What arguments may be made that repurchase arrangements in 
which the institution collateralizes its liability are permissible, 
given restrictions on collateralizing private deposits? See Texas & 
Pacific Railway Company v. Pottorff, 291 U.S. 245 (1934).

Sweeps Alternative

    Under the proposed rule, funds subject to an internal sweep that is 
to take place before end-of-day balances are calculated would not be 
accorded

[[Page 41173]]

treatment as deposits if they were to be swept, within the depository 
institution, by prearrangement, before the institution's end-of-day 
balances are determined, from a deposit to a liability not recognized 
as a deposit for insurance purposes. The discussion noted that under 
such an arrangement, no deposit insurance premiums would have been 
assessed against these funds since they would not have been reported as 
deposits by the institution. The FDIC asked whether, if the swept funds 
in such arrangements were to be assessed insurance premiums, they also 
should be eligible to be treated as deposits for purposes of FDIC 
deposit insurance and depositor preference. The FDIC also asked whether 
or to what extent such an option would involve any operational or 
regulatory burden or other adverse regulatory consequences.

IV. Comments on the Proposed Rule

    As noted, the FDIC received twenty-one comments on the proposed 
rule, the bulk of which addressed both parts of the proposed rule. Four 
of the comments were from banking industry trade associations 
(including one joint letter), two from bank regulatory authorities, ten 
from large insured depository institutions, one from a law firm 
representing broker-dealers who place brokered funds in insured 
depository institutions, one from a member-owned electronic funds 
transfer network and three from individuals. The following is a summary 
of the comments we received on part one of the proposed rule--
determining deposit and other liability account balances at a failed 
insured depository institution.

Use of End-of-Day Ledger Balances

    All of the bank trade association commenters and many of the large-
bank commenters agreed with the FDIC's proposal to define the deposit 
account balance on the day of failure as the end-of-day ledger balance. 
Further, these commenters stated that, upon an institution's failure, 
the FDIC should use the end-of-day ledger balances normally calculated 
by the institution; thus, such balances should not be affected by the 
FDIC Cutoff Point.

FDIC Cutoff Point

    The bank trade associations and large-bank commenters opposed the 
use of an FDIC Cutoff Point, proposing alternatively that the FDIC 
should always use the cutoff times normally established by the insured 
depository institution. They argued that introducing a new cutoff 
scheme would be unfair to customers. Many commenters expressed a belief 
that FDIC practices should not impinge upon the contractual 
arrangements or other understandings established between the insured 
depository institution and its customers. Further, it was argued that 
altering the customer's understanding of how deposit transactions will 
be posted would create uncertainty and may result in depositor flight.
    Additionally, the implementation of an FDIC Cutoff Point was 
largely viewed as technically infeasible. It was noted that deposit 
systems are preprogrammed to implement cutoff times as established by 
the policies of the particular insured depository institution. Adapting 
these systems to accommodate an FDIC Cutoff Point would be costly, 
especially since the FDIC Cutoff Point would not be known until the day 
of failure.

Treatment of Sweep Account Arrangements

    In general. Commenters supported at a very general level the 
establishment of a regulation intended to resolve the legal confusion 
brought about by the decision in Adagio. Commenters recommended that 
the FDIC limit any regulation to addressing only the legal confusion 
raised in Adagio. One banking trade group suggested this could be done 
by language to ``explicitly provide that all automated sweep 
arrangements that are codified in contract will be recognized as part 
of the day's business and reflected in end-of-day ledger balances, 
regardless of when the transactions are processed.'' Another banking 
trade association noted its ``greatest concerns relate to the FDIC's 
extensive new proposals relating to the treatment of sweep products. 
Sweep transactions have been an extensively used business practice for 
decades, enabling banks to secure substantial funding at reasonable 
costs and their customers to achieve their financial objectives. Any 
proposal that disrupts the existing treatment and expectations of 
institutions and their customers vis-[agrave]-vis sweeps would 
potentially impair the viability of sweeps with very serious and 
unpredictable consequences.''
    Generally, commenters felt the FDIC should delay a final rule that 
would go beyond narrowly addressing the Adagio concerns. One large bank 
stated ``the issues raised and the potential impact to financial 
markets that could result from these proposals are very substantial. 
All of the proposals relating to sweeps warrant further study and 
consideration by the FDIC and should be removed from this rulemaking 
and should not be part of any final rule. The FDIC should consult 
further with other banking and financial regulatory agencies and with 
financial institutions that are key players in this market before 
finalizing a rule on sweeps.'' This commenter further stated ``the 
proposed regulation could have major ripple effects on other laws and 
regulations that ultimately rely upon the same legal definitions of a 
deposit as the Federal Deposit Insurance Act, including Regulation D, 
Regulation Q, deposit insurance assessments and the nationwide 10% 
deposit cap.''
    Repo sweep arrangements. The FDIC's questions regarding the nature 
of funds swept through arrangements identified as repurchase agreement 
sweeps generally were not addressed, other than through the overall 
comment that the FDIC should only narrowly address Adagio in any final 
rule. One large bank stated that it ``believes the current sweep 
structures commonly used in the industry (including the structures of 
securities repos) are appropriately characterized as not being deposits 
under the FDIA. [The bank] further believes that any proposal to charge 
FDIC insurance premiums on the amounts swept would dramatically 
increase costs to banks relating to that product and could result in 
the product no longer being economically viable or able to be offered 
on terms that are competitive with other products offered by non-bank 
market participants.''
    Sweeps alternative. In the proposed rule, the FDIC asked whether, 
if the funds involved in certain sweep arrangements were to be assessed 
insurance premiums, they also should be eligible to be treated as 
deposits for purposes of FDIC deposit insurance and depositor 
preference. No commenters addressed this question directly, although 
the tenor of the comments from the large banks and bank trade 
associations was that issues such as this should not be considered as 
part of this rulemaking.
    Consistent treatment across sweep transactions. Several commenters 
argued that, if the FDIC proceeds with the rulemaking, it should treat 
each sweep transaction the same for claims purposes. One banking trade 
association argued that ``all these products have one common element--
once swept from a deposit account, and until returned to the deposit 
account, none of the bank's obligations meets the definition of a 
`deposit' under the Federal Deposit Insurance Act and are therefore not 
covered by deposit insurance in the event of the bank's insolvency. 
This characterization of sweeps is consistent with the long-standing 
practices of virtually every financial institution and has been the 
widely accepted practice by banking regulators for decades.'' In this 
regard, the commenter noted that, should the FDIC afford different

[[Page 41174]]

treatment across sweep products, it ``would therefore result in 
different (and, to a certain degree, arbitrary) treatment under the 
Proposal. Our members have great concern as to these potential 
disparities that could result, in some cases from nothing more than 
differences in the mechanisms used to execute and arrange sweep 
transactions.''
    To provide consistent treatment among the various sweep products, 
several commenters suggested the FDIC should do away with the internal 
versus external distinction between sweep transactions as well as the 
Class A versus Class B distinction. ``We urge the FDIC to eliminate 
these unnecessary distinctions, to the extent that the FDIC proceeds 
with rulemaking around sweeps at all, and treat similar sweep products 
the same, despite different methods used by banks for processing the 
necessary transfers and posting the relevant accounts.''

V. Rationale for Interim Rulemaking

    As noted above, the practices being adopted in the interim rule 
were proposed in part one of the proposed rule. Hence, the FDIC is 
adopting those practices through the usual public notice-and-comment 
procedures pursuant to requirements in the Administrative Procedure 
Act, 5 U.S.C. 553. Before adopting the interim rule as a permanent 
rule, however, the FDIC invites comment on all aspects of the interim 
rule, including an aspect of the proposed rule on which the FDIC had 
not requested specific comment.
    The interim rule addresses how the FDIC will treat sweep accounts 
upon an insured institution failure. The result is that, in many cases, 
the swept funds will not be treated by the FDIC as deposit obligations 
of the failed institutions. As explained above, that means the swept 
funds will not be eligible for deposit insurance coverage and will not 
be afforded status as a deposit under the depositor preference statute. 
Commenters on the proposed rule indicated that sweep account customers 
are aware of this potential consequence if the institution were to 
fail. In order to ensure that sweep account customers are aware that 
their funds will not be treated as deposits if the insured institution 
fails, however, the FDIC will require institutions to prominently 
disclose to customers whether the swept funds are deposits and the 
status of the swept funds if the institution failed. The effective date 
of this requirement will be deferred until July 1, 2009 to allow the 
FDIC to consider specific comments on the disclosure requirement. 
(Further explanation of the disclosure requirement is provided below 
under ``Request for Comments.'')

VI. The Interim Rule

    After fully considering the comments on the proposed rule, FDIC has 
adopted the interim rule substantially as proposed, with some 
modifications in connection with the treatment of ``internal and 
external'' sweep transactions, and in other limited areas. As noted, 
the interim rule requires institutions to disclose to customers whether 
the swept funds are deposits and the status of the swept funds if the 
institution failed, but the effective date of this requirement is 
deferred to allow for public comment. In addition, the FDIC will 
entertain comments on all other aspects of the interim rule.

Underlying Principles

    The interim rule describes the method for determining the value and 
nature of claims against a failed insured depository institution to be 
used in the event of failure. Upon taking control of a failed insured 
depository institution it is the receiver's responsibility to construct 
an ending balance sheet for the depository institution (which becomes 
the beginning balance sheet for the receivership) and determine the 
value and nature of the claims against the failed institution, 
including claims to be made by depositors, general creditors, 
subordinated creditors, and shareholders. Such claims determinations 
will be made consistent with the principles described below, which for 
the most part reflect existing practices and procedures used to 
determine account balances in the event of failure.
     In making deposit insurance determinations and in 
determining the value and nature of claims against the receivership on 
the institution's date of failure the FDIC, as insurer and receiver, 
will treat deposits and other liabilities of the failed institution 
according to the ownership and nature of the underlying obligations 
based on end-of-day ledger balances for each account using, except as 
expressly provided otherwise in the interim rule, the depository 
institution's normal posting procedures.
     In its role as receiver of a failed insured depository 
institution, in order to ensure the proper distribution of the failed 
institution's assets under the FDI Act (12 U.S.C. 1821(d)(11)) as of 
the FDIC Cutoff Point, the FDIC will use its best efforts to take all 
steps necessary to stop the generation, via transactions or transfers 
coming from or going outside the institution, of new liabilities or 
extinguishing existing liabilities for the depository institution.\7\
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    \7\ This principle draws a sharp distinction between 
transactions involving the transfer of funds into or out of the 
failed institution and transactions intended to move funds between 
accounts or otherwise on the books and records of the failed 
institution. The receiver will act to stop the inflow and outflow of 
cash/assets at the point at which it takes control of the failed 
institution; thus transactions involving the transfer of assets into 
or out of the failed institution may be blocked or suspended. 
Transactions internal to the failed institution's operations 
initiated prior to the FDIC Cutoff Point--including those initiated 
through prearranged automated instructions--will still be conducted 
after the point of failure as part of a necessary process to arrive 
at the end-of-day ledger balances and to establish the nature of the 
claim recognized by the receiver.
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     End-of-day ledger balances are subject to corrections for 
posted transactions that are inconsistent with the above principles.

End-of-Day Ledger Balances and Cutoff Points

    As proposed, in the interim rule the deposit or liability account 
balance used for deposit insurance determination purposes is defined as 
the end-of-day ledger balance of the deposit or other liability on the 
day of failure. Except as noted, the FDIC will use the cutoff rules 
previously applied by the failed insured depository institution in 
establishing the end-of-day ledger balance for deposit insurance 
determination purposes. However, the interim rule allows the FDIC to 
establish an FDIC Cutoff Point, coinciding with the point in time at 
which the receiver acts to stop deposit transactions which might result 
in creating new liabilities or extinguishing existing liabilities. The 
FDIC Cutoff Point will facilitate the orderly winding up of the 
institution and the FDIC's final determination of the ledger balances 
of the deposit accounts in those cases where the institution's normal 
cutoff rules prevent or impair the FDIC's ability to promptly determine 
the end-of-day ledger balance of the deposit or other liability. The 
intention is to complete internal postings of transactions presented or 
authorized prior to the institution's normal cutoff rules or the FDIC 
Cutoff Point, as applicable, according to the depository institution's 
normal procedures--thus, as explained below, the nature of the 
liability may change after the FDIC Cutoff Point. Any transaction--
including sweep arrangements--would be completed for that day according 
to normal procedures if it involves only the movement of funds between 
accounts within the confines of the depository institution. Some sweep 
arrangements shift funds within the depository institution from a

[[Page 41175]]

deposit account to ownership in a sweep investment vehicle. The value 
and nature of these claims will be determined as they rest on the books 
and records of the depository institution as reflected in its end-of-
day ledger balances.
    If the institution's ordinary cutoff time for the day's business on 
the day of failure for any particular kind of transaction precedes the 
FDIC Cutoff Point, the institution's ordinary cutoff time will be used. 
Where the institution's ordinary cutoff time for an individual kind of 
transaction is later than the FDIC Cutoff Point, the institution's 
cutoff time will be replaced by the FDIC Cutoff Point. The ``Applicable 
Cutoff Time'' used for any kind of transaction thus will be the earlier 
of the institution's ordinary cutoff time or the FDIC Cutoff Point. 
Different kinds of transactions may have different Applicable Cutoff 
Times. Transactions occurring after the Applicable Cutoff Time will be 
posted a subsequent day's business, if the operations of the failed 
institution are carried on by a successor institution or by the FDIC as 
receiver or insurer.
    The interim rule differs from the proposed rule in cases where 
deposit operations are not continued after failure in order to provide 
consistency in the determination of deposit balances regardless of 
whether the deposit operations were continued. In a depository 
institution failure where deposit operations are not continued by a 
successor institution, account transactions on the day of failure also 
will be posted to the applicable accounts as described above. Since 
there is no next business day in this case, rather than posting 
transactions occurring after the Applicable Cutoff Time as the next 
day's business, such transactions will be handled depending on the 
nature of the transaction. In the case of a cash or other deposit 
occurring after the Applicable Cutoff Time, such funds--which would not 
be included in the end-of-day ledger balance used for claims purposes--
would be disbursed to the account owner. If a cash or other withdrawal 
is made after the Applicable Cutoff Time, such funds--again which would 
not be included in the end-of-day ledger balance used for claims 
purposes--could be used by the receiver to satisfy a claim against the 
receivership.\8\
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    \8\ A deposit account withdrawal in the form of an official 
check drawn on the failed depository institution would not be used 
by the receiver to satisfy the insured deposit claim. Official items 
are considered to be deposits for deposit insurance purposes; 
therefore, such official withdrawals would be treated differently 
from cash withdrawals.
---------------------------------------------------------------------------

    The interim rule does not establish any new operational 
requirements for insured institutions relative to the FDIC Cutoff 
Point. Also, the interim rule explicitly authorizes the FDIC, as 
receiver, to correct errors and omissions after the day of failure and 
reflect them in the end-of-day ledger balances.
    Several commenters argued against the establishment of an FDIC 
Cutoff Point and recommended that the FDIC use end-of-day balances as 
normally calculated by the insured depository institution. As noted 
above, the FDIC will apply the institution's normal cutoff times in 
most cases, but establishing an FDIC Cutoff Point is essential to the 
efficient finalization of end-of-day ledger balances in some 
situations. Strictly applying a depository institution's pre-
established cutoff times in all circumstances is inconsistent with the 
duties and responsibilities of the receiver--as articulated in the 
principle indicated above. In the event of failure the receiver will 
take control of the failed institutions and simultaneously will act to 
stop deposit or other transactions involving creating new liabilities 
or extinguishing existing liabilities. In many cases, this can be done 
consistent with the institution's normal cutoff times, but in others it 
cannot and the FDIC will establish an FDIC Cutoff Point. If the 
receiver is successful in stopping these external transactions after it 
takes control there will be no new transactions to be posted affected 
by an FDIC Cutoff Point. In this case, the end-of-day ledger balances 
on the day of failure will be calculated using the failed institution's 
pre-established cutoff points. If the receiver is unsuccessful in 
stopping the external transactions, the FDIC Cutoff Point establishes a 
basis for posting these inadvertent transactions the following day, if 
that is the course of action selected by the receiver.

Treatment of Uncollected Deposited Checks

    As proposed, in determining deposit account balances at a failed 
insured depository institution, the FDIC will deem all checks deposited 
into and posted to a deposit account by the Applicable Cutoff Time as 
part of the end-of-day ledger balance for insurance purposes. As 
detailed in the proposed rule, this treatment of uncollected deposited 
checks is warranted because: Depository institutions use and calculate 
the ledger balance in a more consistent way than other balances; it is 
consistent with the way that depository institutions report deposits on 
Call Reports and Thrift Financial Reports; it is the balance the FDIC 
uses to determine an institution's assessment base for calculating the 
institution's deposit insurance assessments; \9\ it is the easiest 
balance for depositors to understand; and it is the most frequently 
used balance on financial statements provided to customers. Using 
ledger balances also is consistent with the definition of a deposit in 
the Federal Deposit Insurance Act (``FDI Act''), which includes 
balances both ``conditionally'' or ``unconditionally'' credited to a 
deposit account. 12 U.S.C. 1813(l).
---------------------------------------------------------------------------

    \9\ The FDIC's recent revisions to the FDIC's risk-based 
assessment system have made an institution's assessment base, which 
is used to determine its deposit insurance assessment, virtually 
identical with an institution's deposits as defined in the Federal 
Deposit Insurance Act. The revisions eliminated the ``float'' 
deductions previously used to compute an institution's assessment 
base; hence, deposits posted to a deposit account but not yet 
collected are now part of the assessment base. The stated rationale 
for eliminating the float deduction from the calculation of an 
institution's assessment base was that such deductions were small 
and decreasing as a result of legal, technological and system 
payment changes. 71 Fed. Reg. 69720 (Nov. 30, 2006).
---------------------------------------------------------------------------

    Further, especially in a large depository institution failure, 
using end-of-day ledger balances may be the only operationally feasible 
means for the FDIC to make deposit insurance determinations timely and 
expeditiously. As discussed in more detail in the Large Bank 
Modernization Final Rule, the FDIC is statutorily obligated to pay 
insured deposits ``as soon as possible'' after an insured depository 
institution fails. 12 U.S.C. 1821(f)(1). The FDIC places a high 
priority on providing access to insured deposits promptly and, in the 
past, has usually been able to allow most depositors access to their 
deposits on the business day following closing. The largest insured 
institutions today are much bigger than any institution has been in the 
past and are growing increasingly complex. Providing prompt access to 
depositors if one of these institutions were to fail would prove 
difficult if adjustments for uncollected funds were necessary.
    This treatment of uncollected deposited checks, however, will 
differ from the FDIC's past practice in an important way. In the past, 
for a check that was posted to an account but not yet collected at the 
time of failure--including a check already forwarded by the failed 
institution for collection but not yet collected--the FDIC acted as 
agent for the depositor and remitted or credited payments received on 
these checks to the depositor in full. These checks were not included 
in deposits on the day of failure for insurance purposes and were not 
subject to deposit

[[Page 41176]]

insurance limits.\10\ In contrast, under the interim rule, when a check 
is posted to an account at the failed institution as provided by the 
Applicable Cutoff Time, the check will be included in the end-of-day 
ledger balance and will be subject to deposit insurance limits, even if 
uncollected.\11\
---------------------------------------------------------------------------

    \10\ FDIC Adv. Op. 95-2 (Jan. 23, 1995).
    \11\ The FDIC's treatment of uncollected checks is subject to 
the FDIC's rights and obligations under the FDI Act. See, e.g., 12 
U.S.C. 1822(d); FDIC v. McKnight, 769 F.2d 658 (10th Cir. 1985); 
cert. denied sub nom., All Souls Episcopal Church v. FDIC, 475 U.S. 
1010 (1986). Although the FDIC will immediately honor uncollected 
checks through the payment of deposit insurance and the issuance of 
receivership certificates, if a check is ultimately uncollectible, 
the ledger balance of the depositor will be adjusted accordingly, 
and the FDIC will seek reimbursement from the depositor and adjust 
the depositor's receivership claim (if any) as necessary.
---------------------------------------------------------------------------

    Some depositors may receive less favorable treatment under the 
interim rule than if the FDIC were to continue to use its past approach 
to handling uncollected deposited checks. The increasing speed with 
which checks are processed as a result of electronic check processing, 
the use of checking account debit cards and other developments, 
however, should limit the effect of the final rule in this regard. 
Moreover, the past approach would not be feasible in a larger bank 
failure, and the FDIC must plan for all contingencies.

Prearranged Instructions To ``Sweep'' Funds

    The proposed rule distinguished between internal and external sweep 
accounts. This distinction was created to recognize the receiver's 
responsibility, upon taking control of the failed institution, to stop 
the generation of new deposit or other transactions which might result 
in creating new liabilities or extinguishing existing liabilities for 
the depository institution or its customers to protect the appropriate 
distribution to claimants.
    Under the interim rule, any automated sweep transaction 
transferring funds internally from one deposit account at the failed 
institution to a sweep investment vehicle at the failed institution 
will be completed on the day of failure. In the case of sweeps out of 
the failed institution into external investment vehicles, the swept 
funds will be treated consistent with their status in the end-of-day 
ledger balances. If an expected transfer to the external sweep 
investment vehicle is not completed prior to the FDIC Cutoff Point, the 
external investment will not be purchased and the funds will remain in 
the account identified on the end-of-day ledger balance.
    Where funds are swept internally to an investment vehicle at the 
failed institution, the FDIC will recognize the transfer, pursuant to 
the account agreement, in determining the end-of-day ledger balance for 
deposit insurance and depositor preference purposes. This approach is 
consistent with the principle articulated in the interim rule that the 
FDIC will treat deposits and other liabilities of the failed 
institution on the date of failure based on the ownership and the 
nature of the underlying obligations as reflected in the end-of-day 
ledger balance. The completion of prearranged internal sweep 
transactions in the calculation of end-of-day deposit and other 
balances for insurance proposes also is consistent with how such funds 
currently are reported on Call and Thrift Financial Reports and are 
treated for assessment purposes.
    Eurodollar and IBF accounts are two examples of internal sweep 
investment vehicles. Accounts that include a Eurodollar or IBF sweep 
arrangement typically begin each business day with balances only in a 
domestic deposit account. At the end of the business day, the 
customer's end-of-day ledger balance is reported as a Eurodollar 
account (typically associated with the bank's branch in the Cayman 
Islands or Bahamas) or an IBF account. At the start of the next 
business day, the depository institution will report the balance as 
being back in the domestic deposit account. The cycle typically repeats 
itself daily.
    Usually the underlying contract for a Eurodollar sweep specifies 
that the obligation at the foreign branch is not payable in the United 
States and, hence, is not a deposit,\12\ for deposit insurance and 
depositor preference purposes. Upon an institution's failure, amounts 
in a Eurodollar account in a foreign branch of the failed institution 
are treated as unsecured, non-deposit liabilities and are not eligible 
for insurance or depositor preference status. The same treatment will 
apply to sweeps to IBFs, which by statutory definition are not 
deposits. Eurodollar and IBF accountholders will thus be accorded 
general creditor status in the receivership estate.
---------------------------------------------------------------------------

    \12\ The definition of ``deposit'' in the FDI Act expressly 
excludes: ``Any obligation of a depository institution which is 
carried on the books and records of an office of such bank or 
savings association located outside of any State, unless (i) such 
obligation would be a deposit if it were carried on the books and 
records of the depository institution, and would be payable at an 
office located in any State; and (ii) the contract evidencing the 
obligation provides by express terms, and not by implication, for 
payment at an office of the depository institution located in any 
State.'' 12 U.S.C. 1813(l)(5)(A). Also, the FDI Act defines IBF 
obligations as non-deposits, which are not eligible for deposit 
insurance or deposit preference status. 12 U.S.C. 1813(l)(5)(B).
---------------------------------------------------------------------------

    It is important for customers to be aware that whether an account 
has deposit status--versus general creditor status--can be far more 
important for large depositors than the question of whether the account 
is fully insured. To illustrate, assume that $5.1 million is swept from 
a customer's checking account into a Eurodollar account. Further, 
assume that the failed institution's assets would be worth 
approximately eighty percent of its total deposit liabilities. In this 
illustration, if the funds had remained deposits the customer would 
have received approximately $4.1 million ($100,000 in deposit insurance 
plus an eighty percent dividend on the uninsured portion of the 
deposit), thus losing $1 million. However, since Eurodollar accounts 
are not deposits for purposes of either FDIC insurance or depositor 
preference, in this situation the customer would lose the entire $5.1 
million upon the institution's failure.
    Institutions do not pay deposit insurance assessments on 
liabilities denominated, as of an institution's end-of-day ledger 
balance, as foreign deposits or IBF deposits. Some of the commenters 
who addressed sweep account issues raised in the proposed rule 
acknowledged that sweep products (particularly those involving the 
transfer of funds from deposit accounts to non-U.S. deposits, 
securities repos, fed funds and money market mutual funds) result in 
obligations of the insured institution that would not be eligible for 
insurance and do not have deposit preference status. One commenter 
stated that, ``[m]ost of these products are designed for and used by 
corporate and institutional customers who are sophisticated enough to 
understand the business terms,'' thus suggesting that such customers 
are aware of the potential consequences in the event of failure of the 
institution.
    Under the interim rule, the sweep to an IBF (for example, as 
described in the Adagio decision) will be completed for that day by the 
receiver on the day of failure and the account holders, who hold end-
of-day ledger IBF accounts after the sweep, will be deemed to be 
general creditors of the receivership, rather than depositors, under 
the deposit preference statute.\13\
---------------------------------------------------------------------------

    \13\ Rights are fixed as reflected in the depository 
institution's end-of-day ledger balances. Those rights would not be 
changed if, for example, it was impractical to reprogram the bank's 
computers before a liability swept to a foreign branch of an insured 
institution as of the day of the institution's failure and was 
treated by the computer as having been swept back to a deposit 
account at a bridge bank or assuming bank serving as the successor 
to the failed institution.

---------------------------------------------------------------------------

[[Page 41177]]

    Repo sweep arrangements are another example of sweep arrangements 
that are generally conducted via internal transfers on the 
institution's books. Repo sweeps can differ considerably in 
documentation, actual execution, and timing. The FDIC, to the extent 
consistent with the principles articulated in the interim rule, will 
carry out repo sweeps in reaching end-of-day ledger balances. If as of 
the end-of-day ledger balance the repo sweep customer is the legal 
owner of identified securities subject to a repurchase agreement, the 
FDIC will acknowledge that ownership interest.
    Based on industry information, as reflected in some comment 
letters, money market mutual fund sweeps may be structured in a variety 
of ways. In some cases the money market mutual funds shares are held 
directly in the name of the sweep account holder, but in other cases 
the money market mutual fund account is either in the name of the 
depository institution or in the name of the transfer agent for the 
mutual fund. Shares are sold or allocated to the individual sweep 
customer depending on the particulars of the sweep arrangement. 
Further, some money market mutual fund sweep arrangements result in a 
``same-day'' purchase of fund shares while ``next-day'' sweeps delay 
the purchase of fund shares by the customer until the day following the 
investment decision.
    Regardless of the internal mechanics of the money market mutual 
fund sweep arrangement, under the interim rule the FDIC will treat 
funds swept in connection with a money market mutual fund sweep 
arrangement consistent with the account where the funds are reported as 
reflected in the end-of-day ledger balances. The results of this 
determination may be affected by whether the sweep arrangement 
contemplated the movement of funds outside the institution. If an 
expected transfer is not completed on the day of failure due to the 
application of the second principle discussed above (that the receiver 
will stop the generation of new deposit or other transactions which 
might result in creating new liabilities or extinguishing existing 
liabilities for the depository institution or its customers), the 
account holder's rights will be fixed based on where the funds actually 
reside as of the end-of-day ledger balance. As with the treatment of 
other sweep products, this treatment is consistent with the principle 
that the FDIC will treat deposits and other liabilities of the failed 
institution on the date of failure based on the ownership and the 
nature of the underlying obligations as reflected in the end-of-day 
ledger balance.
    Money market mutual fund sweeps are the most prevalent case 
involving a sweep investment vehicle designed to move outside of the 
depository institution, and have them come to rest in a separate legal 
entity. Another example is where funds are swept from a deposit account 
at a depository institution to an account or product at an affiliate of 
the institution, even if the transfer is accomplished through a book-
entry at the depository institution. When the sweep investment vehicle 
rests outside the depository institution, under the interim rule the 
status of the funds as of the institution's day of failure will depend 
on whether the funds have been used to purchase the sweep investment 
vehicle prior to the FDIC Cutoff Point. For some sweep arrangements the 
purchase may not be completed for that day prior to the FDIC Cutoff 
Point. For example, an institution could have an arrangement to 
transfer funds from a customer's demand deposit account into an account 
at an affiliated depository institution, to be conducted each day late 
in the evening. In this case, under the interim rule if the funds had 
not been transferred to the sweep investment vehicle as of the FDIC 
Cutoff Point, they still will be considered to be a deposit for 
insurance purposes. This treatment is in furtherance of the FDIC's 
obligation as receiver to stop the generation of new deposit or other 
transactions that might result in creating new liabilities or 
extinguishing existing liabilities for the depository institution after 
the institution has failed.
    In some cases it will not be practicable to stop automatically 
generated sweeps from occurring after the FDIC Cutoff Point, requiring 
the necessary adjustments post closing.

Sweeps Alternative

    Under the interim rule, the receiver will establish the value and 
nature of claims based on the end-of-day ledger balance for each 
account. In the proposed rule the FDIC asked whether certain swept 
funds, if assessed insurance premiums, also should be eligible to be 
treated as deposits for purposes of FDIC deposit insurance and 
depositor preference. Based in part on the comments received on this 
issue, the FDIC has decided not to change current practices.

VII. Request for Comments

    The FDIC invites interested parties to submit comments during a 60-
day comment period on all aspects of the interim rule, including 
whether insured depository institutions should be required to disclose 
to sweep account customers that swept funds will not be treated as 
deposits if the institution were to fail. More specifically, comments 
are requested on Sec.  360.8(e) of the interim rule which, as indicated 
above, is subject to an extended delayed effective date:


    In all sweep account contracts and account statements reflecting 
sweep account balances, institutions must prominently disclose 
whether swept funds are deposits within the meaning of 12 U.S.C. 
1813(l). If the funds are not deposits, the institution must further 
disclose the status such funds would have if the institution 
failed--for example, general creditor status or secured creditor 
status. Such disclosures must be consistent with how the institution 
reports such funds on its Call Reports or Thrift Financial Reports.

    As noted above, several commenters stated that sweep customers 
generally are aware of how the swept funds would be treated in the 
event of failure. Over the past year, FDIC staff held meetings with 
groups of corporate treasurers to discuss the potential implications of 
the proposed rule. During these meetings, corporate treasurers stated 
that many institutions provided some disclosure to sweep customers 
about the potential consequences of these transactions. However, it was 
evident those disclosures did not result in a consistent understanding 
of how these funds would be treated in the event of failure.
    This interim rule clearly states the FDIC's intent to use for 
claims purposes end-of-day ledger balances as normally reflected on the 
books and records of the insured depository institution. Prior to this 
end-of-day ledger balance calculation, funds could have been swept from 
a deposit account into a sweep investment vehicle. The movement of 
funds from a deposit account into a sweep investment vehicle not 
considered to be a deposit for insurance purposes can have significant 
implications for the sweep customers. In the case of a Eurodollar 
sweep, for example, the swept funds would have general creditor 
standing with a considerably higher loss exposure relative to an 
uninsured deposit claim.
    The FDIC is concerned that the treatment of swept funds in the 
event of failure is not clearly understood by sweep customers. A better 
understanding of this treatment by sweep customers is important to 
avoid

[[Page 41178]]

misconceptions which may arise in the event of failure. While many 
institutions currently provide some disclosures to sweep customers, the 
FDIC believes the significance of the consequences to depositors of 
some sweep transactions necessitates consistent disclosures by 
institutions providing sweep services. In this context, it is 
particularly important for institutions to disclose to sweep customers 
that the completion of some sweep transactions may result in their 
funds being subject to treatment as general creditor claims.
    In the Large Bank Modernization Final Rule--the companion to this 
interim rule--the FDIC discusses several important objectives 
including: (1) Providing liquidity to depositors, (2) enhancement of 
market discipline, (3) equity in the treatment of depositors of insured 
institutions and (4) preservation of franchise value in the event of 
failure. These objectives can be undermined if sweep customers do not 
have a clear understanding of the treatment of swept funds in the event 
of failure.
    Specifically the FDIC is interested in responses to the following 
questions:
     What disclosures are currently being made in connection 
with sweep account arrangements which allow the sweep customer to 
ascertain the treatment of such funds in the event of failure?
     What form do these disclosures take, when are they 
provided, and what is their frequency?
     Are the disclosures consistent with how such funds are 
reported on Call or Thrift Financial Reports?

VIII. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. No commenters suggested that the proposed rule was 
unclear, and the interim rule is substantively similar to the proposed 
rule.

IX. Paperwork Reduction Act

    OMB Number: New Collection.
    Frequency of Response: On occasion.
    Affected Public: Insured depository institutions offering sweep 
account products.
    Estimated Number of Respondents: 1,170 to 1,970.
    Estimated Time per Response: 25-49 hours per respondent.
    Estimated Total Annual Burden: 28,870-84,400 hours.
    Background/General Description of Collection: The interim rule 
contains collections of information pursuant to the Paperwork Reduction 
Act (44 U.S.C. 3501 et seq.) (``PRA''). In particular, the interim rule 
requires, subject to an extended delayed effective date, depository 
institutions offering sweep products to disclose whether the swept 
funds are deposits for insurance purposes and, if not, how these funds 
would be treated in the event of failure. The collections of 
information contained in this section of the interim rule have been 
submitted to OMB for review.
    Estimated costs: Compliance with the disclosure requirement will 
require insured depository institutions offering sweep products, which 
do not currently provide adequate disclosures, to modify their sweep 
account documentation, including customer account statements, to 
include new language indicating whether swept funds are a deposit for 
insurance purposes and, if not, how such funds would be treated in the 
event of failure. Further, additional documentation may be provided to 
sweep customers as part of a statement mailing on a one-time basis. 
Implementation cost will be mitigated by the delayed effective date of 
this requirement. Sweep account documents must be reprinted 
periodically in any case, and the cost of including the disclosure 
requirement should be minimal. Further, most insured depository 
institutions already make certain disclosures to customers, and the new 
requirements would simply replace these disclosures. After 
implementation, on-going cost should be negligible. Future printings of 
sweep account documentation will have to be conducted in any case to 
replenish stock, and the disclosure requirement should not add to the 
cost of such printings given its brief nature. Customer account 
statements would continue to be provided according to normal business 
practices. Further, staff training must be conducted periodically, and 
the disclosure requirement should not materially add to the length or 
complexity of this training.
    The exact number of insured depository institutions offering sweep 
products is unknown. It is the FDIC's experience that the vast majority 
of large institutions offer some sweep arrangement as part of their 
cash management services. The prevalence of sweep offerings among 
smaller community banks is far less prevalent. This analysis assumes 
that all insured depository institutions with total assets of at least 
$2 billion offer at least one sweep product (370 institutions). It is 
further assumed that between 10 and 20 percent of the remaining 8,000 
insured institutions also offer a sweep product (800 to 1,600 
institutions). The total number of respondents is estimated to be 
between 1,170 and 1,970.
    Implementation costs will vary based on the size, nature and scope 
of the depository institutions sweep programs. It is estimated that 
compliance costs for the very largest and super-regional banking 
organizations are between $25,000 and $50,000 while smaller regional 
organizations were placed at $10,000 to $20,000. Other large 
organizations (those with at least $2 billion in total assets) were 
assigned a cost estimate of $1,500 to $3,000. Costs for community banks 
were estimated to be between $1,000 and $2,000. Under these 
assumptions, the overall disclosure costs are estimated to be between 
$1.73 million and $3.46 million at the lower end of the number of 
institutions believed to be engaging in sweep operations (1,170). If as 
many as 1,970 depository institutions maintain sweep operations the 
total costs are estimated to range between $2.53 million and $5.06 
million.
    Based on the above cost estimates the number of hours needed to 
meet the disclosure requirements per institution is calculated as 
follows. $1.73 million / 1,170 institutions = $1,480 per institution. 
Assuming an hourly cost of $60 for employee time generates the minimum 
time estimate of 25 hours per institution. The upper range of the cost 
estimate is $2,960 which is equivalent to 49 hours ($3.46 million / 
1,170 institutions / $60 hourly employee cost = 49 hours). Total hours 
are estimated at a minimum as: ($1.73 million / $60 hourly employee 
cost = 28,870 hours) and at the upper range as: ($5.06 million / $60 
hourly employee cost = 84,400 hours).
    Comments: In addition to the questions raised elsewhere in this 
Preamble, comment is solicited on: (1) Whether the collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (2) the accuracy of the agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) the quality, utility, and clarity 
of the information to be collected; (4) ways to minimize the burden of 
the collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology; e.g., permitting electronic submission of responses; and 
(5) estimates of capital or start-up costs

[[Page 41179]]

and costs of operation, maintenance, and purchases of services to 
provide information.
    Addresses: Interested parties are invited to submit written 
comments to the FDIC concerning the Paperwork Reduction Act 
implications of this proposal. Such comments should refer to 
``Processing of Deposit Accounts, 3064-AD26.'' Comments may be 
submitted by any of the following methods:
     Agency Web Site: http://www.FDIC.gov/regulations/laws/
federal. Follow instructions for submitting comments on the Agency Web 
Site.
     E-mail: comments@FDIC.gov. Include ``Processing of Deposit 
Accounts, 3064-AD26'' in the subject line of the message.
     Mail: Executive Secretary, Attention: Comments, FDIC, 550 
17th St., NW., Room F-1066, Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand-delivered to 
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. (EST).
     A copy of the comments may also be submitted to the OMB 
desk officer for the FDIC, Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 3208, Washington, DC 20503.
    Public Inspection: All comments received will be posted without 
change to http://www.fdic.gov/regulations/laws/federal including any 
personal information provided. In accordance with the Paperwork 
Reduction Act (44 U.S.C. 3501 et seq.) the FDIC may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid Office of Management 
and Budget (OMB) control number.

X. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires a federal agency 
publishing a notice of proposed rulemaking to prepare and make 
available for public comment an initial regulatory flexibility analysis 
that describes the impact of the proposed rule on small entities. 5 
U.S.C. 603(a). As defined in regulations issued by the Small Business 
Administration (13 CFR 121.201), a ``small entity'' includes a bank 
holding company, commercial bank or savings association with assets of 
$165 million or less (collectively, small banking organizations). The 
RFA provides that an agency is not required to prepare and publish a 
regulatory flexibility analysis if the agency certifies that the 
proposed rule would not have a significant impact on a substantial 
number of small entities. 5 U.S.C. 605(b).
    In publishing the proposed rule the FDIC certified that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. The rationale for this 
certification was that the proposed rule would establish the FDIC's 
practice for determining deposit account balances at a failed insured 
depository institution and would impose no requirements on insured 
depository institutions.
    The interim rule imposes a disclosure requirement on all insured 
depository institutions offering one or more sweep account products. 
This requirement is subject to an extended delayed effective date to 
allow the FDIC to consider specific comments on the disclosure 
requirement before insured depository institutions must comply with it. 
Preliminarily, the FDIC believes the disclosure requirement in the 
interim rule will not have a substantial impact on a substantial number 
of small banking organizations, mainly because such entities are much 
less likely than larger insured depository institutions to offer sweep-
account products. Such products are typically offered by insured 
depository institutions serving large commercial and institutional 
customers. The FDIC welcomes comments on whether and, if so, to what 
extent small banking organizations will be affected by the disclosure 
requirement in the interim rule.

XI. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the interim rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 12 CFR Part 360

    Banks, Banking, Savings associations.

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation hereby amends part 360 of title 12 of the 
Code of Federal Regulations as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
1. The authority citation for part 360 continues to read as follows:

    Authority: 12 U.S.C. 1819(a) Tenth, 1821(d)(1), 1821(d)(10)(c), 
1821(d)(11), 1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); 
Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.


0
2. Add new Sec.  360.8 to read as follows:


Sec.  360.8.  Method for determining deposit and other liability 
account balances at a failed insured depository institution.

    (a) Purpose. The purpose of this section is to describe the process 
the FDIC will use to determine deposit and other liability account 
balances for insurance coverage and receivership purposes at a failed 
insured depository institution.
    (b) Definitions.--(1) The FDIC cutoff point means the point in time 
established by the FDIC after it has been appointed receiver of a 
failed insured depository institution and takes control of the failed 
institution.
    (2) The applicable cutoff time for a specific type of deposit 
account transaction means the earlier of either the failed 
institution's normal cutoff time for that specific type of transaction 
or the FDIC cutoff point.
    (3) Close-of-business account balance means the closing end-of-day 
ledger balance of a deposit or other liability account on the day of 
failure of an insured depository institution determined by using the 
applicable cutoff times. This balance may be adjusted to reflect steps 
taken by the receiver to ensure that funds are not received by or 
removed from the institution after the FDIC cutoff point.
    (c) Principles.--(1) In making deposit insurance determinations and 
in determining the value and nature of claims against the receivership 
on the institution's date of failure the FDIC, as insurer and receiver, 
will treat deposits and other liabilities of the failed institution 
according to the ownership and nature of the underlying obligations 
based on end-of-day ledger balances for each account using, except as 
expressly provided otherwise in this section, the depository 
institution's normal posting procedures.
    (2) In its role as receiver of a failed insured depository 
institution, in order to ensure the proper distribution of the failed 
institution's assets under the FDI Act (12 U.S.C. 1821(d)(11)) as of 
the FDIC Cutoff Point, the FDIC will use its best efforts to take all 
steps necessary to stop the generation, via transactions or transfers 
coming from or going outside the institution, of new liabilities or 
extinguishing existing liabilities for the depository institution.
    (3) End-of-day ledger balances are subject to corrections for 
posted

[[Page 41180]]

transactions that are inconsistent with the above principles.
    (d) Determining closing day balances.--(1) In determining account 
balances for insurance coverage and receivership purposes at a failed 
insured depository institution, the FDIC will use close-of-business 
account balances as may be adjusted for funds that are received by or 
removed from the institution after the FDIC cutoff point.
    (2) A check posted to the close-of-business account balance but not 
collected by the depository institution will be included as part of the 
balance, subject to the correction of errors and omissions and 
adjustments for uncollectible items that the FDIC may make in its role 
as receiver of the failed depository institution.
    (3) In determining close-of-business account balances, the FDIC 
will recognize contractual, automated transfers (or sweeps) of funds 
from a deposit account to a non-deposit account or investment vehicle 
at the institution scheduled to take place before the final calculation 
of the institution's end-of-day ledger balances for that day.
    (4) For deposit insurance and receivership purposes in connection 
with the failure of an insured depository institution, a depositor's 
and other liability-holder's rights will be determined as of the point 
the close-of-business account balance is calculated. These rights may 
be adjusted as necessary to account for funds that are received by or 
removed from the institution after the FDIC cutoff point.
    (e) Effective July 1, 2009, in all sweep account contracts and 
account statements reflecting sweep account balances, institutions must 
prominently disclose whether swept funds are deposits within the 
meaning of 12 U.S.C. 1813(l). If the funds are not deposits, the 
institution must further disclose the status such funds would have if 
the institution failed--for example, general creditor status or secured 
creditor status. Such disclosures must be consistent with how the 
institution reports such funds on its Call Reports or Thrift Financial 
Reports.

    By order of the Board of Directors.

    Dated at Washington, DC, this 17th day of June, 2008.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8-15493 Filed 7-16-08; 8:45 am]

BILLING CODE 6714-01-P



[Federal Register: July 17, 2008 (Volume 73, Number 138)]
[Rules and Regulations]               
[Page 41180-41211]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy08-18]                         

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AD26

 
Large-Bank Deposit Insurance Determination Modernization

AGENCY: Federal Deposit Insurance Corporation (``FDIC'').

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule requiring the largest 
insured depository institutions to adopt mechanisms that would, in the 
event of the institution's failure: provide the FDIC with standard 
deposit account and other customer information; and allow the placement 
and release of holds on liability accounts, including deposits. The 
final rule applies only to insured depository institutions having at 
least $2 billion in domestic deposits and either: more than 250,000 
deposit accounts (currently estimated to be 152 institutions); or total 
assets over $20 billion, regardless of the number of deposit accounts 
(currently estimated to be 7 institutions).
    The FDIC is adopting the final rule concurrently with its adoption 
of an interim rule establishing practices for determining deposit and 
other liability account balances at a failed insured depository 
institution. With exceptions indicated in the final rule, institutions 
subject to this final rule will have eighteen months from the effective 
date of the final rule to implement its requirements.

EFFECTIVE DATE: August 18, 2008.

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 Christopher L. Hencke, Counsel, Legal 
Division, (202) 898-8839 or chencke@fdic.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    The final rule requires the largest insured depository institutions 
to adopt mechanisms that would, in the event of the institution's 
failure: (1) Provide the FDIC with standard deposit account and other 
customer information; and (2) allow the placement and release of holds 
on liability accounts, including deposits. These requirements were 
addressed in two advance notices of proposed rulemaking issued in 2005 
and 2006, respectively the ``2005 ANPR'' and the ``2006 ANPR''.\1\ 
Also, in January of this year the FDIC published a proposed rule 
composed of two parts, addressing in part two the issues involved in 
the final rule and addressing in part one issues involving the FDIC's 
practices for determining deposit and other liability account balances 
at a failed insured depository institution (``proposed rule'').\2\
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    \1\ 70 FR 73652 (Dec. 13, 2005) and 71 FR 74857 (Dec. 13, 2006).
    \2\ 73 FR 2364 (January 14, 2008).
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    The FDIC received twenty-one comments on the proposed rule. (The 
comment letters may be viewed on the FDIC's Web site at http://
www.fdic.gov/regulations/laws/federal/2008/08comAD26.html.)
    Based in part on those comments, the FDIC has decided to finalize 
the proposed rule by issuing two separate rulemakings--(1) the final 
rule, covering part two of the proposed rule and (2) a separate interim 
rule, covering part one of the proposed rule (``Interim Rule on 
Processing Deposit Accounts'').
    Throughout the preamble the terms ``deposit'' (or ``domestic 
deposit''), ``foreign deposit'' and ``international banking facility 
deposit'' identify liabilities having different meanings for deposit 
insurance purposes. A ``deposit'' is used as defined in section 3(l) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(l)) (``Section 
3(l)''). A deposit includes only deposit liabilities payable in the 
United States, typically those deposits maintained in a domestic office 
of an insured depository institution. Only deposits meeting these 
criteria are eligible for insurance coverage. Insured depository 
institutions may maintain deposit liabilities in a foreign branch 
(``foreign deposits''), but these liabilities are not deposits in the 
statutory sense (for insurance or depositor preference purposes) for 
the time that they are payable solely at a foreign branch or branches. 
Insured depository institutions also may maintain liabilities in an 
international banking facility (IBF). An ``international banking 
facility deposit,'' as defined by the Board of Governors of the Federal 
Reserve System in Regulation D (12 CFR 204.8(a)(2)), also is excluded 
from the definition of ``deposit'' in Section 3(l) and the depositor 
preference statute (12 U.S.C. 1821(d)(11)).
    The FDIC anticipates questions regarding implementation of the 
functionality required by this rule. Questions and requests for 
telephonic meetings may be submitted via e-mail to 
depositclaims@fdic.gov.

[[Page 41181]]

II. Overview

    The final rule applies to large FDIC-insured institutions, defined 
as ``Covered Institutions.'' The definition includes insured depository 
institutions having at least $2 billion in domestic deposits and at 
least either: (1) 250,000 deposit accounts; or (2) $20 billion in total 
assets, regardless of the number of deposit accounts. In summary, 
Covered Institutions are required to adopt mechanisms that would, in 
the event of the institution's failure:
     Allow automatic posting of provisional holds on large 
liability accounts in any percentage specified by the FDIC on the day 
of failure.
     Provide the FDIC with deposit and customer account data in 
a standard format.
     Allow automatic removal of the provisional holds and 
posting of the results of insurance determinations as specified by the 
FDIC.

III. The Proposed Rule

Definition of Institutions Covered

    Under the proposed rule a Covered Institution was defined as any 
insured depository institution having at least $2 billion in domestic 
deposits and at least either: (1) 250,000 deposit accounts; or (2) $20 
billion in total assets, regardless of the number of deposit 
accounts.\3\ All other insured depository institutions were designated 
as Non-Covered Institutions and, thus, were not subject to this part of 
the proposed rule.\4\
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    \3\ For the purposes of the criteria in the text, an ``insured 
depository institution'' includes all institutions defined as such 
in the FDI Act. 12 U.S.C. 1813(c)(2). Other applicable terms would 
be as defined in the Reports of Condition and Income (Call Report) 
instructions (for insured banks) and Thrift Financial Reports (TFR) 
instructions (for insured savings associations): ``deposit 
accounts'' mean the total number of deposit accounts (including 
retirement accounts), ``domestic deposits'' mean total deposits held 
in domestic offices (for insured banks) or deposits (for insured 
savings associations), and ``total assets'' means the reported 
amount of total assets.
    \4\ The criteria for a Covered Institution apply to separately 
chartered insured depository institutions. Commonly owned depository 
institutions are not aggregated for the purposes of these criteria. 
Furthermore, a holding company may own insured depository 
institutions that are both Covered and Non-Covered.
---------------------------------------------------------------------------

Continuation of Business Operations

    As discussed in the proposed rule, in the event of failure a 
Covered Institution's legal entity status will terminate. In most 
cases, however, it is expected that a new entity will carry on the 
Covered Institution's business operations.\5\ The new legal entity 
under which business operations will be continued is the Successor 
Institution, which could include an established or new insured 
depository institution or a bridge bank operated by the FDIC. Through 
the proposed rule the FDIC intended to provide a means to facilitate 
access to deposit funds and maintain the franchise value of the failed 
Covered Institution or a Successor Institution. Thus, in most cases, 
core business operations would continue post failure, although some 
operations might be suspended temporarily.
---------------------------------------------------------------------------

    \5\ The provisional hold functionality and other requirements of 
the proposed rule were to be developed in this context. It is 
possible a Covered Institution may be liquidated in the event of 
failure. The decision to liquidate or continue the deposit 
operations of a Covered Institution would be made on a case-by-case 
basis depending on the individual circumstances at the time.
---------------------------------------------------------------------------

Process Overview

    As discussed in part one of the proposed rule, in the event of 
failure, the FDIC would complete daily account processing to generate 
the end-of-day deposit ledger balances used by the FDIC for insurance 
purposes. Under part two of the proposed rule, after completion of the 
failed Covered Institution's final daily processing, the Successor 
Institution would place provisional holds on selected \6\ deposit 
accounts, foreign deposit accounts and certain other liability accounts 
subject to a sweep arrangement. Provisional holds, once posted, would 
allow depositors access to the remaining balance in their accounts the 
day following failure, yet guard against the possibility of an 
uninsured depositor or unsecured general creditor receiving more than 
allowed under deposit insurance rules or the depositor preference 
statute.\7\ The FDIC would use a standard set of depositor and customer 
data to make deposit insurance determinations. These determinations 
would be provided to the Successor Institution, probably several days 
after failure. The Successor Institution would then remove the 
provisional holds as specified by the FDIC and, if necessary, replace 
them with additional holds or debits based upon the deposit insurance 
determinations. The FDIC would continue to notify the Successor 
Institution to remove additional holds as information is received from 
depositors to complete the insurance determination.
---------------------------------------------------------------------------

    \6\ The FDIC will supply the business rules upon which a 
provisional hold will be placed. These business rules will be based 
upon current balance and account product types.
    \7\ Uninsured depositors are entitled to a pro rata distribution 
of the receivership proceeds with respect to their claim. The FDIC--
at its discretion-may immediately distribute receivership proceeds 
in the form of advance dividends at failure. Advance dividends are 
based on the expected recovery to uninsured depositors.
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Provisional Holds

    General description. The proposed rule would have required Covered 
Institutions to have in place an automated process for implementing 
provisional holds concurrent with or immediately following the daily 
deposit account processing on the day of failure. After the placement 
of provisional holds, all other holds previously placed by the 
institution would still remain in effect.\8\ The proposal did not 
require development of mechanisms to stop or alter interest accrual for 
the affected accounts.
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    \8\ Provisional holds could overlap preexisting holds if the 
entire account is held or the unheld account balance before posting 
the provisional hold is less than the amount of the provisional 
hold. In such cases posting the provisional hold would have to be 
constructed so that it did not cause the account to become 
``overdrawn'' and trigger service fees against the account.
---------------------------------------------------------------------------

    Account-by-account application. Provisional holds would be applied 
to individual accounts in an automated fashion. Commonly owned accounts 
would not have been aggregated by ownership for the purposes of 
calculating or placing provisional holds. Provisional holds would 
extend to all non-closed deposit accounts held in domestic and foreign 
offices, as well as certain sweep account arrangements.\9\
---------------------------------------------------------------------------

    \9\ Non-closed deposit accounts include those that are open, 
dormant, inactive, abandoned, restricted, frozen or blocked, in the 
process of closing or subject to escheatment.
---------------------------------------------------------------------------

    The nature of a provisional hold. As explained in the proposed 
rule, the provisional hold is intended to bar access to some or all of 
a customer's account pending the results of the insurance 
determination. The proposed rule offered for comment the following 
three options for implementing provisional holds.
     Persistent hold. A ``persistent'' provisional hold would 
be applied once (on or immediately after the day of failure) and stay 
on the deposit account until it is removed at the order of the FDIC. 
Once applied, the persistent hold would reduce the customer's available 
balance.
     Memo hold. A memo-type provisional hold remains effective 
only intra-day and does not affect the batch deposit posting process. 
The memo type provisional hold amount is calculated immediately after 
end-of-day balances are available on the day of failure and the same 
amount is applied on a daily basis until changed or removed at the 
instruction of the FDIC. Once applied, a memo-type provisional hold 
would

[[Page 41182]]

reduce the customer's available intra-day balance.
     Holding balances in an alternate account. Rather than 
placing an account hold, balances could be removed from the account to 
which a provisional hold is to be applied and otherwise ``held'' in a 
work in progress (WIP) or suspense account. Since balances are removed 
from the affected account, they would not be available to the customer 
until the provisional hold was removed and the balance restored to the 
original account.
    Provisional holds for deposit accounts. Under the proposed rule, on 
the day of failure the FDIC would specify a deposit account balance 
(the ``account balance threshold'') that would determine whether a 
provisional hold would be placed on a particular deposit account.\10\ 
No provisional hold would be placed on a deposit account with a balance 
less than or equal to the account balance threshold. For a deposit 
account above the account balance threshold, the FDIC would specify, 
again on the day of failure, a percentage (the ``provisional hold 
percentage'') that would be multiplied by the account balance in excess 
of the account balance threshold.\11\ The product of this 
multiplication would equal the dollar amount of the provisional hold. 
The proposed rule would have required a Covered Institution to adopt 
systems allowing the hold to be calculated and placed. The account 
balance threshold as well as the provisional hold percentage could vary 
for the following four categories, as the Covered Institution 
customarily defines them:
---------------------------------------------------------------------------

    \10\ The account balance threshold could be any dollar amount 
specified by the FDIC, including zero.
    \11\ The provisional hold percentage could be any percentage 
specified by the FDIC, from 0 to 100 percent.
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    1. Consumer demand deposit, negotiable order of withdrawal 
(``NOW'') and money market deposit accounts (``MMDA'').
    2. Other consumer deposit accounts (time deposit and savings 
accounts, excluding NOW accounts and MMDAs).
    3. Non-consumer demand deposit, NOW accounts and MMDAs.
    4. Other non-consumer deposit accounts (time deposit and savings 
accounts, excluding NOW accounts and MMDAs).
    Provisional holds for foreign deposits. For foreign deposits the 
provisional hold methodology was proposed to be the same as for deposit 
accounts, except that the account balance thresholds and the 
provisional hold percentages could have varied based on the country in 
which the account is located.
    Provisional holds for IBF deposits. For IBF deposits the 
provisional hold methodology was proposed to be the same as for deposit 
accounts, except that the account balance thresholds and the 
provisional hold percentages could have been different.
    Provisional holds for deposit accounts with prearranged, automated 
sweep features. As discussed in part one of the proposed rule, certain 
deposit accounts have a feature to ``sweep'' funds periodically 
according to predefined rules into another deposit account, a foreign 
deposit or an alternative investment vehicle.\12\ The deposit account 
through which the customer has primary access to deposited funds--
usually a demand deposit account--is the ``base sweep account.'' The 
investable or excess account balance is swept periodically into a 
``sweep investment vehicle.'' Sweep investment vehicles may include, 
but are not limited to: (1) A deposit account at the same institution 
or an affiliated insured depository institution, (2) a foreign or IBF 
deposit, (3) repurchase agreements, (4) federal funds, (5) commercial 
paper and (6) a proprietary or third-party money market mutual fund.
---------------------------------------------------------------------------

    \12\ Sweep accounts as described here do not include zero 
balance account (ZBA) arrangements that move funds to and from a 
master (or concentration) deposit account and one or more subsidiary 
deposit accounts at the same bank. Such deposit account arrangements 
are not intended to provide a yield on excess deposit balances nor 
do they change the customer's insurance status. ZBAs would be 
subject to the provisional hold methodology for deposit accounts 
described above.
---------------------------------------------------------------------------

    The proposed rule would have subjected some sweep accounts to the 
same provisional hold requirements as a deposit account. These were 
defined as ``Class A'' sweep accounts and included:
     Base sweep accounts where the sweep investment vehicle is 
another deposit account in an office of the same institution. Both the 
base sweep account and the sweep investment vehicle are deposits that 
would have been subject to the provisional hold requirements of a 
deposit account.
     Base sweep accounts where funds are wired from the Covered 
Institution to a separate legal entity other than the Covered 
Institution (e.g., a proprietary or third-party money market mutual 
fund). In this case, funds residing in the base sweep account (if any) 
would have been subject to a provisional hold as any other deposit 
account held in a domestic office. No provisional hold would have been 
required for funds residing outside the Covered Institution in the 
sweep investment vehicle.
    The proposed rule defined all other sweep accounts as ``Class B'' 
sweep accounts requiring a dual provisional hold methodology. For the 
fund balance remaining in the base sweep account as of the 
institution's customary end-of-day on the day of failure, the 
provisional hold methodology would have been the same as applied to 
other deposit accounts. For the funds residing in the sweep investment 
vehicle as of the institution's customary end-of-day, the provisional 
hold methodology would have had a separate account balance threshold 
and provisional hold percentage.\13\ The proposed rule would have 
required the balance threshold as well as the provisional hold 
percentage to vary for different types of sweep investment 
vehicles.\14\
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    \13\ Some Covered Institutions may allow a single base sweep 
account to be associated with multiple investment vehicles. In this 
case a separate provisional hold methodology would have been 
developed for each investment vehicle.
    \14\ Some alternative investment vehicles are deposits held in 
foreign offices. These foreign deposits would be subject only to the 
provisional hold methodology for the sweep alternative investment. 
Such foreign deposits would be excluded from the provisional hold 
methodology designed for non-sweep deposits held in the same foreign 
office.
---------------------------------------------------------------------------

    The proposed rule would not have required mechanisms to stop the 
processing of any prearranged deposit account sweep transactions in the 
event of failure. The provisional holds process described above would 
have allowed for the transfer of balances from a deposit account to a 
sweep investment vehicle. The provisional holds would have applied to 
liability accounts as they were designated on the books and records of 
the institution at its customary end-of-day.
    Provisional holds for deposit accounts which accept automated 
credits from funds invested within the Covered Institution. Certain 
customers may provide the depository institution with instructions each 
day or periodically to invest funds in a non-deposit investment vehicle 
within the institution (e.g., an overnight time account at the Cayman 
Island branch), whereby such funds are automatically credited to the 
customer's deposit account the following day (``automated credit 
account''). The proposed rule would have required a dual provisional 
hold methodology for automated credit accounts. For the fund balance 
remaining in the automated credit account as of the institution's 
customary end-of-day the provisional hold methodology would have been 
the same as applied to other deposit accounts. For the funds residing 
in the investment vehicle as of the institution's customary end-of-day, 
the provisional hold methodology would have had the

[[Page 41183]]

capability of a separate account balance threshold and provisional hold 
percentage.\15\ The account balance threshold, as well as the 
provisional hold percentage, would have been required to vary for 
different types of investment vehicles. These account balance 
thresholds and provisional hold percentages could be different from 
those applied to: (1) Funds automatically swept into a similar or 
identical investment vehicle or (2) funds held in a similar or 
identical investment vehicle that does not provide for an automated 
crediting of funds.\16\
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    \15\ Some automated credit accounts may also be a base sweep 
account. In this case a separate provisional hold methodology must 
be developed for each investment vehicle. It is possible, for 
example, for a customer to each day provide the institution with 
instructions to invest a certain amount of funds in a Cayman Island 
branch time account where the funds would be returned to the 
customer's demand deposit account the following morning. Further, 
the customer may also have provided prearranged instructions to have 
excess balances residing in the same demand deposit account swept to 
a Cayman Island branch account where such funds also are returned to 
the demand account the following morning. In this case the Covered 
Institution must have a provisional hold methodology that: (1) 
Treats funds residing in the demand deposit account as of the 
institution's end-of-day consistent with other deposit accounts, (2) 
treats funds residing in the Cayman Island branch account as a 
result of the prearranged sweep consistent with other Cayman Island 
sweep investment vehicles and (3) treats funds residing in the 
Cayman Island branch account as a result of the daily investment 
instructions using a separate account balance threshold and 
provisional hold percentage.
    \16\ Some investment vehicles are foreign deposits. These funds 
would be subject only to the provisional hold methodology for the 
automated credit account. Such accounts would be excluded from the 
provisional hold methodology designed for non-sweep foreign deposits 
held in the same office.
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    Account balance used for provisional hold calculation. The proposed 
rule would have required the account balance threshold and provisional 
hold percentage to be applied against the end-of-day ledger balance as 
calculated by the institution, in the event of failure.
    Provisional hold duration. Under the proposed rule, the methodology 
for implementing a provisional hold process was required to hold funds 
until removed by the Successor Institution as instructed by the FDIC. 
Provisional holds would have been removed when the results of the 
deposit insurance determination are available, generally anticipated 
being several days after failure, depending on the size and complexity 
of the failed institution's deposit base.
    Provisional hold designation. The proposed rule would have required 
provisional holds to be labeled ``FDIC PHold''.
    Provisional hold customer disclosure. The proposed rule requested 
comment on whether the FDIC should require the provisional hold, once 
placed, to be apparent if the customer views account information on-
line or through other means.
    Security level and mechanism for manual removal of provisional 
holds. The proposed rule would have required the Covered Institution to 
create policies, procedures and systems reasonably capable of 
preventing the alteration of FDIC provisional holds or other FDIC hold 
amounts except under the specific written direction of the FDIC.
    Timeliness of the provisional holds process. The proposed rule 
would have required a Covered Institution to have the capability of 
placing provisional holds on the applicable accounts prior to the 
Successor Institution opening for business the following day, but in no 
case later than 9 a.m. local time the day following the day of the 
depository institution failure.
    Exception for systems with a small number of accounts. The proposed 
rule requested comment on whether a Covered Institution having multiple 
account systems through which provisional holds will be placed may 
apply them manually in certain cases. Some account systems may service 
a relatively small number of accounts making the manual application of 
provisional holds feasible. If used, the proposed rule would have 
required approval by the FDIC in response to a written request, 
including a justification for the manual process and its relative 
effectiveness for posting provisional holds in the event of failure.
    Institutional contacts. The proposed rule would have required a 
Covered Institution to notify the FDIC of the person(s) responsible for 
producing the standard deposit data download and administering 
provisional holds, both while this functionality is being constructed 
and on an on-going basis. The Covered Institution would have been 
responsible for ensuring such contact information is current.

Removal of Provisional Holds

    General process. As specified in the proposed rule, the FDIC would 
begin forwarding insurance determination results to the Successor 
Institution once a substantial number of the insurance determinations 
have been made, which should be within a few days after failure. These 
results would have been required to be incorporated into the 
institution's deposit systems as soon as practicable, perhaps as 
quickly as the day following the receipt of the standard depositor and 
customer data sets. The results would contain instructions for the 
removal of provisional holds as well as replacement transactions, which 
could include the placement of new holds or account debits and credits.
    Removal of provisional holds. As proposed, the Successor 
Institution would be required to remove provisional holds in batch as 
specified by the FDIC. On the day(s) provisional holds are to be 
removed, the FDIC would provide the Successor Institution with a file 
listing the accounts subject to removal of the provisional hold. A file 
format was specified and would be provided to the Successor Institution 
through FDICconnect or Direct Connect, depending on the size of the 
file. The file would be encrypted using an FDIC-supplied algorithm.

Provisional Hold Replacement Transactions

    Debiting and crediting accounts after provisional holds are 
removed. As specified in the proposed rule, on the day a provisional 
hold removal file is provided to the Successor Institution, the FDIC 
also would provide a file or set of files either in ACH format or in a 
tab- or pipe-delimited format listing the accounts subject to debit or 
credit transactions, which reflect the results of the insurance 
determination process. A file format was specified and would be 
provided to the Successor Institution through FDICconnect or Direct 
Connect, depending on the size of the file. The file would be encrypted 
using an FDIC-supplied algorithm to secure data during the transport 
process.
    Posting of additional FDIC holds. As specified in the proposed 
rule, on the day provisional holds are to be removed the FDIC also 
would provide the Successor Institution with a file listing the 
accounts subject to a new hold to be placed after the removal of the 
provisional hold. A file format was specified and would be provided to 
the Successor Institution through FDICconnect or Direct Connect, 
depending on the size of the file. The file would be encrypted using an 
FDIC-supplied algorithm.

Removal of Additional FDIC Holds

    Under the proposed approach, in some cases provisional holds would 
be replaced by a second FDIC hold. These holds would be removed over 
time as further information is gathered from depositors needed to 
complete the insurance determination. A file format was specified.

The Generation of Deposit Account and Customer Data in a Standard 
Structure

    The proposed rule would have required a Covered Institution to have 
in

[[Page 41184]]

place practices and procedures to provide the FDIC with required 
depositor and customer data in a standard format following the close of 
any day's business. Covered Institutions would not have been required 
to collect or generate new depositor or customer information. The 
standard data files would have been created through a mapping of pre-
existing data elements and internal institution codes into standard 
data formats. Data was to be provided on all non-closed deposit or 
foreign deposit accounts as well as Class B and automated credit 
accounts.
    Files. The proposed rule would have required these data to be 
provided in the following five separate files:
    1. Deposit file. Data fields for each non-closed deposit or foreign 
deposit account, except those deposit or foreign deposit accounts 
serving as an investment vehicle reported in the Class B Sweep/
Automated Credit file.
    2. Class B Sweep/Automated Credit file. Data fields capturing 
information on funds residing in investment vehicles linked to each 
non-closed deposit account: (1) Involved in Class B sweep activity or 
(2) which accept automated credits.
    3. Hold file.\17\ Deposit hold data fields for each non-closed 
deposit account.
---------------------------------------------------------------------------

    \17\ The Hold file contains information on holds against each 
deposit account, including FDIC provisional holds. Since provisional 
holds may be generated after the completion of an institution's 
nightly deposit processing cycle, they may not be reflected fully in 
the Hold file generated as of the day of closing. The FDIC may 
require a second Hold file to be generated the day following closing 
to fully capture provisional holds that may not have been posted 
until the next deposit processing cycle.
---------------------------------------------------------------------------

    4. Customer file. Data fields for each customer.
    5. Deposit-customer join file. Data necessary to link each deposit 
and foreign deposit with the customers who have an interest in the 
account.
    Possible file combinations. The proposed rule provided that data 
could be submitted using one of each deposit, Class B sweep/automated 
credit, hold, customer, customer address and deposit-customer join 
files. Alternatively, data could be supplied using multiple files for 
each type. The number of files could correspond to the number of 
institutional systems of record, for example.
    File format. Under the proposed rule depositor and customer data 
files would have been provided in tab- or pipe-delimited format. 
Further, each file name would contain the institution's FDIC 
Certificate Number, the file type (deposit, sweep hold, customer, 
customer address, join or other) and the date of the extract. The FDIC 
would support both ASCII and EBCDIC delimited files. All EBCDIC fields 
must be provided in Pic(X) format. Binary, packed or signed numeric 
formats would not be allowed.
    File transmission mechanism. Under the proposed rule the data files 
would be provided to the FDIC in the most expeditious manner. Data 
which can be compressed and encrypted could be transmitted to FDIC 
using existing telecommunication services. Should the volume be too 
great to transmit in the most expeditious manner then a portable hard 
drive should be used and physically transported by FDIC personnel to 
the FDIC's data processing facilities.

Reporting Requirements

    The proposed rule noted that the criteria defining a Covered 
Institution include the number of its deposit accounts, total domestic 
deposits and total assets. Total domestic deposits and total assets are 
reported quarterly on the Consolidated Reports of Condition and Income 
(insured bank) and the Thrift Financial Report (insured savings 
association). Savings associations report the number of deposit 
accounts quarterly, but banks report on the total number of deposit 
accounts only annually, as part of the June reporting cycle. The FDIC 
recommended quarterly reporting of the number of deposit accounts for 
all insured institutions with total assets over $1 billion.

Testing Requirements

    The proposed rule indicated the FDIC would conduct an initial test 
at each Covered Institution sometime after the initial implementation 
period ends.\18\ All testing would be coordinated with the financial 
institution and conducted at the site of their choosing if multiple 
sites are available. Once the initial test is completed successfully, 
the FDIC anticipated that it would conduct additional tests 
infrequently at institutions that do not make major changes to their 
deposit systems \19\--perhaps only once every three-to-five years. It 
was noted that more frequent testing may be necessary for institutions 
that make major acquisitions, experience financial distress (even if 
the distress is unlikely to result in failure) or undertake major 
system conversions.
---------------------------------------------------------------------------

    \18\ In addition to testing, the FDIC expects to require that 
information contact points be validated (and updated as needed) 
every three-to-six months.
    \19\ A major change to a deposit system means a change made to a 
Covered Institution's data environment affecting one or more of the 
data elements described in attached Appendices. Changes could be the 
result of a merger or the streamlining of a financial institution's 
systems of record.
---------------------------------------------------------------------------

    The proposed rule would have required Covered Institutions to 
establish a series of test accounts on their deposit account systems 
that could be used for verification purposes. These accounts would be 
used to verify the processing of holds, debits and credits.
    The FDIC also contemplated development of a XML validation service 
which would be provided to each Covered Institution for the purpose of 
establishing compliance with the standard data requirements for 
depositor and customer records. The XML schema would read a file (which 
has been created in the standard format), validate the accuracy and 
integrity of the file content and provide a report that establishes the 
institution's compliance with the criteria. In addition to the XML 
service, the FDIC also proposed providing a more readable description 
of the validation process to help facilitate institutional testing.
    The proposed rule provided that a Covered Institution would be 
responsible for ensuring that a representative sample of data has been 
passed through the XML validation service. At a minimum the sampling 
strategy should cover a cross-section of different insurance categories 
and a cross section of account ledger balances maintained by the 
institution. The Covered Institution would have been required to 
provide the FDIC its sampling strategy along with the validation 
results as a part of the periodic verification process.
    To reduce the frequency of FDIC testing and ensure ongoing 
compliance, the FDIC proposed requiring Covered Institutions to conduct 
tests in-house on a regular basis (perhaps every year) and provide the 
FDIC with evidence that the test was conducted and a summary of the 
test results.
    In addition, the proposed rule would allow the FDIC to test certain 
other requirements inside the institution, including but not limited to 
the ability to place and remove provisional holds, place new holds and 
implement debits and credits using a data set that meets the FDIC 
standards.

Implementation Requirements

    Institutions meeting the criteria of a Covered Institution upon the 
effective date of the regulation. The proposed rule would have required 
a Covered Institution to fully implement the respective requirements 18 
months from the regulation's effective date.
    Institutions meeting the criteria of a Covered Institution after 
the effective date of the regulation. The proposed rule would have 
required that any insured institution meeting the criteria

[[Page 41185]]

of a Covered Institution for at least two consecutive quarters would 
have 18 months following the end of the two consecutive quarters in 
which to fully implement the respective requirements.
    Merger involving two Covered Institutions. Under the proposed rule, 
the requirements were to be fully implemented within 18 months 
following the completion of an acquisition, although an acquisition 
does not delay any implementation requirements which may already have 
been in place for the individual institutions involved in the merger.
    Merger involving a Covered and Non-Covered Institution. Under the 
proposed rule, the requirements were to be fully implemented within 18 
months following the completion of an acquisition, although a merger 
does not delay any implementation requirements which may already have 
been in place for the individual institutions involved in the merger.
    Exception for troubled institutions. Under the proposed rule, on a 
case-by-case basis, the FDIC could accelerate the implementation 
timeframe of all or part of the proposed rule for a Covered Institution 
that either: (1) Has a composite rating of 3, 4 or 5 under the Uniform 
Financial Institutions Rating System (commonly referred to as CAMELS) 
\20\ or (2) is undercapitalized as defined for purposes of the prompt 
corrective action (``PCA'') rules.\21\ In determining the accelerated 
implementation timeframe for such institutions, the FDIC would have 
been required to consider such factors as the: (1) Complexity of the 
institution's deposit systems and operations; (2) extent of asset 
quality difficulties; (3) volatility of funding sources; (4) expected 
near-term changes in capital levels; and (5) other relevant factors 
appropriate for the FDIC to consider in its roles as insurer and 
possible receiver of the institution. The proposed rule would have 
required the FDIC to consult with the Covered Institution's primary 
federal regulator in determining whether to implement this provision of 
the proposed rule.
---------------------------------------------------------------------------

    \20\ CAMELS is an acronym drawn from the first letters of the 
individual components of the rating system: Capital adequacy, Asset 
quality, Management, Earnings, Liquidity, and Sensitivity to market 
risk.
    \21\ 12 CFR Part 325.
---------------------------------------------------------------------------

    Applications for extension of implementation requirements. The 
proposed rule provided that a Covered Institution could request an 
extension of the 18-month deadline for implementing the requirements. 
An application for such an extension would be subject to the FDIC's 
rules of general applicability, 12 CFR 303.251. For good cause shown, 
the FDIC could grant the application for an extension.

New Deposit Accounts

    The proposed rule would not have required a unique depositor ID for 
customer accounts, rather the FDIC would rely upon customer information 
already maintained by the Covered Institution to link commonly owned 
accounts. Nevertheless, the FDIC asked whether a unique depositor ID 
should be assigned by Covered Institutions when a new account is opened 
and the relative costs of such a requirement.

IV. Comments on the Proposed Rule

    The FDIC received twenty-one comments on the proposed rule, the 
bulk of which addressed both parts of the proposed rule. Four of the 
comments were from banking industry trade associations (including one 
joint letter), two from bank regulatory authorities, ten from large 
insured depository institutions, one from a law firm representing 
broker-dealers who place brokered funds in insured depository 
institutions, one from a member-owned electronic funds transfer network 
and three from individuals. The following is a summary of the comments 
we received on part two of the proposed rule--Large-Bank Deposit 
Insurance Determination Modernization.

General Comments

    The FDIC received a joint comment letter from three banking 
industry trade associations. This letter summarized their sense of the 
second part of the proposed rule as follows: ``The Associations support 
the intent of the NPR to provide in a bank failure for timely deposit 
insurance determination, prompt release of depositor funds, and least 
cost resolution. Nonetheless many of the NPR's proposals would be very 
costly for banks to implement. We recommend adoption of elements from 
the NPR only where demonstrated benefits justify the cost, and request 
that the FDIC make every effort to limit the burdens on banks and 
provide flexibility to accommodate the variety of bank systems.''

Cost and Benefits

    Many of the large-bank and all of the bank trade association 
commenters expressed concern over the potential costs of implementing 
the provisions of the second part of the proposed rule. Several 
commenters also noted that the expected benefits to the FDIC are not 
likely to outweigh the costs, especially given the perceived extremely 
low likelihood of failure of any particular large bank.
    Commenters emphasized that the potential implementation costs are 
not small. ``Indeed, even small changes to information systems require 
hundreds of person hours both in programming and testing to ensure 
proper functionality and avoid disruption with ongoing operations. 
Several of our member banks estimate that the cost per institution of 
the initial implementation and testing of the Proposal's requirements 
is likely to exceed $10 million and involve thousands of hours of 
labor. As institutions begin the implementation process, based on prior 
experience, these costs could increase beyond these initial estimates, 
perhaps substantially. Moreover, significant additional costs will be 
incurred to maintain and test these processes in the future.''
    Several large banks provided estimates of implementation costs in 
their comments. These cost estimates are shown in Table 1 along with 
their deposit assessment base and a comparison of the estimated cost 
with a 1 basis point deposit insurance assessment.
    Several commenters also cited the extremely low likelihood of the 
failure of a Covered Institution and that the FDIC typically is aware 
of financial difficulties well in advance of failure. It was noted this 
early warning should allow the FDIC ample time for preparation.

[[Page 41186]]



                                    Table 1.--Estimated Implementation Costs
----------------------------------------------------------------------------------------------------------------
                                                                              1-Basis point
                                        Estimated            Assessable        annual FDIC     Estimated cost as
           Responder               implementation cost      deposits ($       assessment ($       a % of 1 BP
                                                             millions)          millions)          assessment
----------------------------------------------------------------------------------------------------------------
Bank A.........................  $8-10 million.........            630,000               63.0              13-16
Bank B.........................  ``total costs in the              230,000               23.0                 NA
                                  millions of dollars''.
Bank C.........................  ``in excess of $2                  29,000                2.9                 70
                                  million''.
Bank D.........................  $2-4 million..........             17,000                1.7            120-235
----------------------------------------------------------------------------------------------------------------

    One banking trade association noted that the proposed requirements 
are likely to provide no financial benefit to the FDIC. ``The proposed 
rule offers no financial benefit to the FDIC because the FDIC does not 
pay out the full amount of an uninsured deposit's recovery from a 
failed institution until several years after the failed institution is 
closed. Hence, the FDIC has ample time after an institution is closed 
to properly aggregate deposit accounts to ensure that no uninsured 
depositor obtains an excess recovery from the FDIC. Since the deposit-
account aggregation process under the proposed rule will not be 
foolproof, the FDIC must still conduct a post-failure review of all 
deposit accounts in a failed institution to ensure that they have been 
properly aggregated for deposit-insurance purposes. The only way the 
FDIC will pay out too much to an uninsured depositor is if its initial 
dividend payment to uninsured depositors cannot be recovered through 
(1) an offset against future dividend payments or (2) if offsets 
against subsequent dividend payments do not fully recover the 
overpayment, court actions or other collection procedures.''

Meeting the FDIC's Objectives

    A letter from a bank regulatory agency cited the importance of 
advance preparation in the event of a large-bank failure. The commenter 
noted that the proposal ``reduces the chance that policymakers will 
invoke the systemic risk exception of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (FDICIA) \22\ for technical reasons 
rather than true concern over spillovers. This outcome has the benefit 
of reducing potential resource misallocations arising from implied 
guarantees of large-bank creditors. I further argued [in a previous 
comment letter] that policymakers will not achieve this desired outcome 
by implementing a new determination regime only at the time when banks 
are in trouble.'' This commenter also provided the following five 
observations regarding recent financial events:
---------------------------------------------------------------------------

    \22\ Pub. L.102-242 (1991).
---------------------------------------------------------------------------

    1. ``Several very large financial institutions (FIs) moved from 
reasonably strong financial positions to what observers characterized 
as near failure in short periods of time.''
    2. ``The market turmoil reinforced the benefits of an ex ante 
system that provide creditors of failed banks with ex post rapid access 
to their available funds.''
    3. ``Responses during the recent tumult reinforce the need for bank 
policymakers to actively manage the implied safety net.''
    4. ``Recent events reaffirm the need for policymakers to act before 
bad outcomes occur.''
    5. ``Large financial institutions have been at the epicenter of 
recent events, and some of their creditors benefited most directly from 
the policy response.''
    One large-bank commenter ``supports the FDIC's continued work on 
this important project. The current environment reminds us that bank 
failures are not necessarily a phenomenon of only the past.''

Covered Institution Exemptions

    Several commenters recommended exemptions from the definition of a 
Covered Institution. Three potential exemptions were discussed.
    Strong financial condition. Several commenters--including a state 
banking agency--suggested that a Covered Institution with strong 
financial characteristics should be exempt from the proposed 
requirements. The state banking agency noted that the proposed 
requirements would apply to only one depository institution in its 
state, but that this institution has consistently demonstrated strong 
financial characteristics. As such, commenters recommended that the 
FDIC consider an exemption based on such things as CAMELS ratings, debt 
ratings, capital levels or other financial characteristics.
    Specialty institutions. Several commenters proposed an exemption 
for specialty institutions, specifically those primarily involved in 
credit card operations and bankers' banks. With regard to credit card 
banks, it was noted that the deposits of these banks consist largely of 
credit card overpayments and balances used to secure cards. In that 
these are typically low balances, the commenters argued the deposits 
attributed to credit card operations should be exempt from the criteria 
of a Covered Institution.
    Fewer than 250,000 deposit accounts. Several commenters requested 
that the definition for a Covered Institution should include only those 
depository institutions with at least 250,000 deposit accounts. One 
large-bank commenter with fewer than 250,000 deposit accounts (that 
would be a Covered Institution under the criteria proposed) argued that 
the bank's ``insurance determination profile is no more complex than 
that of a small to mid-sized bank.'' It was further argued ``due to the 
large balances of our typical deposit accounts, the ratio of our 
deposit insurance coverage to our domestic assessed deposit base is 
substantially lower than nearly all other U.S. banks. [Our] potential 
exposure to the insurance fund is therefore at best modest and creates 
few of the complex challenges which the NPR seeks to address.''

Implementation Time

    Most large-banks and all bank trade association commenters argued 
for an extension in implementation time from the proposed 18 months to 
24-to-36 months. Commenters contend the proposed requirements of the 
proposed rule are significantly more complex than those of the past 
advance notices of proposed rulemaking; particularly with regard to the 
provisional hold requirements on sweep accounts and foreign deposits. 
Several commenters also recommended an extension in implementation time 
for institutions recently involved in merger and assumption activities.

Provisional Hold Exemptions

    Sunsetting deposit systems. One large bank suggested providing an 
exemption from requirements for deposit systems expected to be retired 
in the near future, as long as the replacement system is compliant.
    Small systems. Several commenters requested that--for a Covered 
Institution

[[Page 41187]]

with multiple deposit systems--the FDIC should provide an exemption for 
systems handling a small percent of overall deposit accounts at the 
Covered Institution. As an example, the commenters proposed that a 
deposit system handling five percent or fewer of the Covered 
Institution's deposit accounts should be exempt from the provisional 
holds requirements.

Foreign Deposit Provisional Holds

    Several large-bank and all banking trade association commenters 
recommended changing the provisional hold requirement on foreign 
deposits to be uniform across all countries in which the Covered 
Institution has deposit accounts. Commenters noted that for individual 
institutions all foreign deposits frequently reside on a single deposit 
system and that mandating different provisional hold percentages by 
country would be burdensome.

Provisional Hold Flexibility

    All banking trade association and many large bank commenters 
approved of the flexibility to implement provisional holds using the 
options of a persistent hold, a memo hold or a WIP account. The 
commenters noted that this flexibility could reduce significantly 
implementation costs. Generally the commenters believed they understood 
what the FDIC intended to accomplish through provisional holds and 
requested they be provided the flexibility to implement the holds in a 
manner least costly for their institution.
    Several commenters also requested additional flexibility regarding 
the placement of provisional holds on funds swept out of a deposit 
account into a sweep investment vehicle. It was noted that--in some 
cases--funds are swept into a system within the institution that does 
not have the capability of posting holds. In these cases commenters 
requested the option of placing the hold on these funds as they return 
to the deposit account rather than when they reside in the alternative 
investment vehicle. Again, the commenters argued that they understood 
the FDIC's intent and asked that they be allowed to implement the hold 
in a manner least costly for their institution.

Provisional Hold Disclosure

    Most banking trade associations and several large-bank commenters 
argued it was unnecessary and unduly burdensome to require on-line or 
other disclosure of provisional holds. Commenters noted the FDIC has 
other mechanisms for distributing information to customers in the event 
of a bank failure that would be equally effective.

Deposit Broker Requirements

    One commenter requested confirmation that the proposed rule would 
not require changes to brokered deposit recordkeeping or require 
brokers to develop systems to comply with the rule. The commenter noted 
that in addition to the more traditional brokered CD programs many 
brokers offer brokered money market deposit and NOW accounts.

Unique Depositor ID

    All commenters addressing the proposal to require a unique 
depositor ID for newly opened accounts recommend against it. One 
commenter noted ``the compliance and training costs would be excessive 
while offsetting benefits are not apparent.''

V. The Final Rule

    After considering the comments on the second part of the proposed 
rule, the FDIC has adopted a final rule in a form similar to that 
proposed. While there are a number of limited changes from the proposed 
rule, the main changes are that the final rule will:
     Permit application to the FDIC for an exemption from the 
requirements of the final rule if an institution has a high 
concentration of deposits incidental to credit card operations.
     Expand the circumstances under which a Covered Institution 
may be required to accelerate implementation of the final rule 
requirements to include materially deteriorating financial conditions, 
as discussed below.
     Provide for a uniform provisional hold strategy for 
foreign deposits.
     Allow application to use alternatives to persistent 
provisional holds.

Costs and Benefits

    Many commenters cited the potentially high implementation costs of 
the final rule and noted that the expected benefits might be low, 
especially given the low likelihood of a Covered Institution failure. 
One banking trade association commenter suggested there would be no 
benefits to the FDIC.
    In the proposed rule the FDIC noted that even if the likelihood of 
a failure among Covered Institutions is perceived to be low, it is not 
zero. Recent events have placed stress on the banking industry as a 
whole. The FDIC must have in place a credible plan for resolving the 
failure of an institution of any size at the least possible cost. The 
ability to provide depositors prompt access to funds and determine the 
insurance status of depositors in a failed institution in a timely 
manner is a critical element for ensuring a least-costly resolution and 
maintaining public confidence.
    Meeting the FDIC's legal mandates. FDICIA was one of the most 
important pieces of legislation affecting the FDIC's failure resolution 
process. Its least-cost requirement effectively requires uninsured 
depositors to be exposed to losses.\23\ Also, FDICIA's legislative 
history and the nature of the systemic risk exception provide a clear 
message that uninsured depositors of large institutions are to be 
treated on par with uninsured depositors of other institutions. The 
requirements being imposed in this rulemaking provide essential support 
for the FDIC to meet these statutory mandates--particularly given the 
current size and complexity of some insured depository institutions.
---------------------------------------------------------------------------

    \23\ 12 U.S.C. 1823(c)(4).
---------------------------------------------------------------------------

    Providing liquidity to depositors. The provisional hold 
functionality creates a mechanism for the FDIC to provide customer 
access to deposit accounts immediately after failure, albeit with some 
FDIC hold for large accounts. The ability to continue uninterrupted the 
deposit operations of a Covered Institution in the event of failure has 
significant benefits for depositors and also helps preserve the 
institution's franchise value.
    Enhancement of market discipline. The FDIC's legal mandates have 
direct implications for Too-Big-to-Fail and market discipline. If 
financial markets perceive that uninsured depositors in large 
institutions will be made whole in the event of failure, uninsured 
deposits will be directed toward these larger depository institutions, 
which could result in a significant misallocation of economic 
resources. Many market observers believe there are substantial benefits 
of improved market discipline that accrue even without serious industry 
distress or bank failures.
    Effective market discipline also limits the size of troubled 
institutions and results in a more rapid course toward failure. Both 
serve to mitigate overall resolution losses. Lower resolution losses 
benefit insured institutions through lower insurance assessments.
    Equity in the treatment of depositors of insured institutions. 
Without the provisions of the final rule, the FDIC is concerned that 
the resolution of a Covered Institution could be accomplished only 
through a significant departure from the FDIC's normal claims 
procedures. This departure could leave the bank closed until an 
insurance determination is made or require the use of shortcuts to 
speed the opening of the bridge institution. The use of shortcuts or 
other mechanisms to facilitate

[[Page 41188]]

depositor access to funds could result in disparate treatment among 
depositors within the failed institution and certainly different 
treatment relative to the closure of a Non-Covered Institution.
    Preservation of franchise value in the event of failure. The sale 
of the franchise of a failed institution can provide significant value 
to mitigate failure costs and is likely to be part of a least-cost 
resolution. Superior Bank, FSB, one of the largest failures over the 
past 10 years, generated a franchise premium of $52 million, or 17 
percent of current estimated FDIC losses in the failure. An ineffective 
claims process--especially one deviating significantly from the FDIC's 
normal policies and procedures--risks reducing or destroying an 
important asset of the receivership. Preservation of franchise value in 
the event of failure of a Covered Institution will be an important 
benefit of the final rule.
    A banking trade association commenter suggested the FDIC delay 
implementation of the final rule ``until the FDIC evaluates how to 
relieve such cost and burden on the industry.'' The FDIC first proposed 
the elements of the final rule in its 2005 ANPR. A second ANPR was 
issued in 2006, roughly a year in advance of the January 2008 proposed 
rule leading to this final rule. As indicated in the proposed rule, 
based on the respective comments on the 2005 and 2006 ANPRs, the FDIC 
reduced the potential for industry burden relative to the requirements 
in the proposed rule. Several of the commenters on the proposed rule 
acknowledged this reduction in industry burden. Likewise, as a result 
of the comments on the proposed rule, the FDIC has further reduced the 
potential for industry burden as to the requirements of the final rule.
    In both ANPRs and in the proposed rule the FDIC requested comment 
on alternative approaches that could meet the FDIC's objectives with a 
lower industry burden. None of these three requests for comment yielded 
suggestions for a different overall approach meeting the FDIC's 
objectives. In consideration of the extensive public comment process 
covering the second part of the proposed rule, the FDIC believes no 
further examination of costs and benefits is necessary prior to the 
adoption of the final rule.

Definition of Institutions Covered

    The final rule applies to a Covered Institution, defined as any 
insured depository institution having at least $2 billion in domestic 
deposits and at least either: (1) 250,000 deposit accounts; or (2) $20 
billion in total assets, regardless of the number of deposit 
accounts.\24\ All other insured depository institutions are designated 
Non-Covered Institutions and, thus, are not subject to the final 
rule.\25\
---------------------------------------------------------------------------

    \24\ For the purposes of the criteria in the text, an ``insured 
depository institution'' includes all institutions defined as such 
in the FDI Act. 12 U.S.C. 1813(c)(2). Other applicable terms would 
be as defined in the Reports of Condition and Income (Call Report) 
instructions (for insured banks) and Thrift Financial Reports (TFR) 
instructions (for insured savings associations): ``deposit 
accounts'' mean the total number of deposit accounts (including 
retirement accounts), ``domestic deposits'' mean total deposits held 
in domestic offices (for insured banks) or deposits (for insured 
savings associations), and ``total assets'' means the reported 
amount of total assets.
    \25\ As discussed previously, the criteria for a Covered 
Institution apply to separately chartered insured depository 
institutions.
---------------------------------------------------------------------------

    Commenters suggested exemptions for institutions: (1) With strong 
financial characteristics, (2) specializing in credit card operations 
or services to depository institutions (bankers' banks) and (3) with 
fewer than 250,000 deposit accounts. As discussed below, based on the 
comments, the final rule provides (through an application process) for 
an exemption from the final rule for institutions with a high 
concentration of deposits incidental to credit card operations.
    Strong financial characteristics. The financial characteristics of 
Covered Institutions vary considerably, as reflected in differing 
CAMELS ratings, capital levels and debt ratings. The recent 
difficulties experienced by the financial markets demonstrate the 
degree to which rapid financial deterioration is possible, even for 
some institutions only recently considered to be in strong health. The 
FDIC is concerned that the possible pace of financial deterioration-
even among those historically showing strong financial characteristics-
could expose the FDIC to undue risk, especially given the potential 
implementation times cited by commenters. Thus, the final rule provides 
no exception to the criteria of a Covered Institution based on 
financial characteristics.
    Credit card specialists and bankers' banks. Some depository 
institutions specialize in credit card operations. As such, the 
preponderance of their deposits relate to overpayments on credit cards 
or balances held to secure a credit card. Some credit card specialists 
have in excess of 250,000 deposit accounts and could also have more 
than $2 billion in domestic deposits. Such institutions rarely hold 
large deposit balances in a significant number of accounts. As 
discussed below, under the final rule, the FDIC will permit application 
for an exemption from the final rule requirements if an institution has 
a high concentration of deposits incidental to credit card operations.
    A bankers' bank specializes primarily in services to other 
depository institutions. Deposit balances can be large and such 
organizations typically have high levels of uninsured deposits. A large 
bankers' bank raises concerns similar to other depository institutions, 
perhaps to a greater extent given its stronger link to those 
institutions. For a bankers' bank the FDIC would be concerned about 
rapidly restoring deposit operations in the event of failure so that 
depositors can have access to their funds. Consequently, the final rule 
provides no exception to the criteria of a Covered Institution for a 
bankers' bank.
    Fewer than 250,000 deposit accounts. Under the proposed rule a 
Covered Institution could include a depository institution with fewer 
than 250,000 deposit accounts, as long as it has total assets in excess 
of $20 billion and domestic deposits over $2 billion. These criteria 
expand the list of Covered Institutions by roughly seven compared to a 
more narrow definition including depository institutions with at least 
250,000 deposit accounts and over $2 billion in domestic deposits. Some 
large depository institutions with fewer than 250,000 deposit accounts 
play a significant role in the financial system, some having total 
assets in excess of $100 billion. In the event of failure, the FDIC 
would be concerned about rapidly restoring deposit operations so that 
depositors can have access to their funds. Hence, the final rule 
provides no exception to the criteria of a Covered Institution based on 
the number of deposit accounts.

Provisional Holds

    General description. The final rule requires Covered Institutions 
to have in place an automated process for implementing provisional 
holds concurrent with or immediately following the daily deposit 
account processing on the day of failure. After the placement of 
provisional holds, all other holds previously placed by the institution 
would still remain in effect.\26\ The final rule does not require 
development of mechanisms to stop or

[[Page 41189]]

alter interest accrual for the affected accounts.
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    \26\ Provisional holds could overlap preexisting holds if the 
entire account is held or the unheld account balance before posting 
the provisional hold is less than the amount of the provisional 
hold. In such cases posting the provisional hold would have to be 
constructed so that it did not cause the account to become 
``overdrawn'' and trigger service fees against the account.
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    Account-by-account application. Provisional holds must be applied 
to individual accounts in an automated fashion. Commonly owned accounts 
need not be aggregated by ownership for the purposes of calculating or 
placing provisional holds. Provisional holds will extend to all non-
closed deposit accounts held in domestic and foreign offices, as well 
as certain sweep account arrangements.\27\ For these purposes a deposit 
account also includes omnibus accounts reflected on the books and 
records of the Covered Institution used to temporarily house customer 
funds, such as those used in connection with sweep transactions.
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    \27\ As noted above, non-closed deposit accounts include those 
that are open, dormant, inactive, abandoned, restricted, frozen or 
blocked, in the process of closing or subject to escheatment.
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    The nature of a provisional hold. The final rule requires a 
persistent provisional hold to be applied once (on or immediately after 
the day of failure) and stay on the deposit account until it is removed 
at the order of the FDIC. Once applied, the persistent hold would 
reduce the customer's available balance.
    The proposed rule discussed the use of memo holds and holding 
balances in an alternate account, such as a work in progress or 
suspense account. The use of these alternatives could reduce 
implementation costs. Under the final rule, a Covered Institution may 
apply to the FDIC to develop a provisional holds process involving memo 
holds or alternative account mechanisms. If used, the Covered 
Institution is required to obtain prior approval from the FDIC in 
response to a written request, including a justification for the 
process and its relative effectiveness for posting provisional holds in 
the event of failure.
    Provisional holds for deposit accounts. Under the final rule, a 
Covered Institution is required to develop and implement a process 
whereby a provisional hold could be placed on each deposit account in 
excess of the ``account balance threshold'' specified by the FDIC on 
the day of failure.\28\ No provisional hold would be placed on a 
deposit account with a balance less than or equal to the account 
balance threshold. For a deposit account above the account balance 
threshold, the FDIC would specify, again on the day of failure, a 
percentage (the ``provisional hold percentage'') that would be 
multiplied by the account balance in excess of the account balance 
threshold.\29\ The product of this multiplication would equal the 
dollar amount of the provisional hold. The final rule requires a 
Covered Institution to adopt systems allowing the hold to be calculated 
and placed. The account balance threshold as well as the provisional 
hold percentage could vary for the following four categories, as the 
Covered Institution customarily defines them:
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    \28\ The account balance threshold could be any dollar amount 
specified by the FDIC, including zero.
    \29\ The provisional hold percentage could be any percentage 
specified by the FDIC, from 0 to 100 percent.
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    1. Consumer demand deposit, negotiable order of withdrawal 
(``NOW'') and money market deposit accounts (``MMDA'').
    2. Other consumer deposit accounts (time deposit and savings 
accounts, excluding NOW accounts and MMDAs).
    3. Non-consumer demand deposit, NOW accounts and MMDAs.
    4. Other non-consumer deposit accounts (time deposit and savings 
accounts, excluding NOW accounts and MMDAs).
    One commenter requested confirmation that the proposed rule would 
not require changes to brokered deposit recordkeeping or require 
brokers to develop systems to comply with the rule. The final rule does 
not impose any such requirements, although deposit brokers may be 
affected in the event of the failure of a Covered Institution. Under 
the final rule a brokered deposit would be treated as any other deposit 
account for provisional hold purposes. The implications for deposit 
brokers may vary depending on the ability of the underlying owners to 
access funds in the account or otherwise change their ownership 
interests. Some brokered deposit accounts may be structured as money 
market deposit accounts, for example, thus allowing the underlying 
owners check-writing access to funds in the account. If an underlying 
owner with an uninsured interest removes funds from the account 
subsequent to failure, the result might be a shortfall to other 
underlying owners. Responsibility for this shortfall will rest with the 
broker or agent in whose name the account is titled, and not the FDIC 
as insurer.
    Provisional holds for foreign deposits. Under the final rule, a 
Covered Institution is required to develop and implement a process 
whereby a provisional hold could be placed on each foreign deposit 
account on the day of failure applying a provisional hold percentage to 
the entire account balance. For foreign deposits the provisional hold 
percentage may differ from that applied to deposit accounts. Also, the 
provisional hold percentage would not vary by account category (i.e., 
consumer versus non-consumer and transaction versus non-transaction) as 
is the case with deposit accounts.
    The proposed rule would have required the provisional hold 
percentage on foreign deposits to vary by country. Several commenters 
noted that foreign deposits frequently are housed on a single deposit 
system within the institution. It was argued that the application of 
different provisional hold mechanisms based on a country would be 
burdensome. After considering these comments, the FDIC believes an 
effective provisional hold strategy could be implemented without the 
need for country-by-country distinctions.
    Provisional holds for IBF deposits. Under the final rule, a Covered 
Institution is required to develop and implement a process whereby a 
provisional hold could be placed on each IBF deposit account on the day 
of failure applying a provisional hold percentage to the entire account 
balance. For IBF deposits the provisional hold percentage may differ 
from that applied to deposit or foreign deposit accounts. Also, the 
provisional hold percentage would not vary by account category (i.e., 
consumer versus non-consumer, and transaction versus non-transaction) 
as is the case with deposit accounts.
    Provisional holds for deposit accounts with prearranged, automated 
sweep features. For sweep accounts \30\ under the final rule the FDIC 
will consider a deposit account through which the customer has primary 
access to deposited funds--usually a demand deposit account--as the 
``base sweep account.'' The investable or excess account balance is 
swept periodically into a ``sweep investment vehicle.''
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    \30\ Sweep accounts as described here do not include zero 
balance account (ZBA) arrangements that move funds to and from a 
master (or concentration) deposit account and one or more subsidiary 
deposit accounts at the same bank. Such deposit account arrangements 
are not intended to provide a yield on excess deposit balances nor 
do they change the customer's insurance status. ZBAs would be 
subject to the provisional hold methodology for deposit accounts 
described above.
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    In the case where the sweep investment vehicle is another deposit 
account in the same institution, both the base sweep account and the 
sweep investment vehicle are deposits subject to the provisional hold 
requirements of a deposit account. Some sweep arrangements channel 
funds through an omnibus account as an intermediate step prior to their 
transfer to the sweep investment vehicle. In some cases, such as with 
``next-day'' money market mutual fund sweeps, customer funds

[[Page 41190]]

will reside in the omnibus deposit account as reflected in the Covered 
Institution's end-of-day ledger balances. Under the final rule the 
omnibus account is subject to the provisional hold requirements of a 
deposit account.
    In the case where the sweep investment vehicle is housed in a 
separate legal entity other than the Covered Institution (e.g., a 
proprietary or third-party money market mutual fund), funds residing in 
the base sweep account (if any) are subject to a provisional hold as 
any other deposit account. No provisional hold is required for funds 
residing outside the Covered Institution in the sweep investment 
vehicle.
    All other sweep accounts, those where the sweep investment vehicle 
is not a deposit and is reflected on the books and records of the 
Covered Institution, are required by the final rule to have a dual 
provisional hold methodology. This means that, for the fund balance 
remaining in the base sweep account as of the institution's customary 
end-of-day on the day of failure, the provisional hold methodology will 
be the same as applied to other deposit accounts. But, for the funds 
residing in the sweep investment vehicle as of the institution's 
customary end-of-day, the provisional hold methodology will have a 
separate account balance threshold and provisional hold percentage.\31\ 
Under the final rule the balance threshold as well as the provisional 
hold percentage may vary for different types of sweep investment 
vehicles.\32\
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    \31\ Some Covered Institutions may allow a single base sweep 
account to be associated with multiple investment vehicles. In this 
case a separate provisional hold methodology must be developed for 
each investment vehicle.
    \32\ Some alternative investment vehicles are deposits held in 
foreign offices. These foreign deposits would be subject only to the 
provisional hold methodology for the sweep alternative investment. 
Such foreign deposits would be excluded from the provisional hold 
methodology designed for non-sweep deposits held in the same foreign 
office.
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    The proposed rule distinguished between Class A and Class B sweep 
account arrangements, where Class A sweep arrangements were those where 
the sweep investment vehicle is either a deposit or a money market 
mutual fund account while Class B covered all other sweep arrangements. 
In response to comments and for better clarity this distinction is not 
used in the final rule.
    The final rule does not require mechanisms to stop the processing 
of any prearranged deposit account sweep transactions in the event of 
failure. The provisional holds described above would allow for the 
transfer of balances from a deposit account to a sweep investment 
vehicle. The provisional holds would apply to liability accounts as 
they are designated on the books and records of the institution at its 
customary end-of-day.
    One commenter noted that frequently ``systems or processes for 
booking swept products (like securities repos, money market mutual 
funds or fed funds) are not like a deposit system that would have 
functionality for holds. In many cases, there are not `accounts' in a 
sense equivalent to a deposit account. * * * Due to the structure, 
timing and automated processes of sweeps, there is no practical ability 
of a customer to access and remove such funds until the incoming side 
of that sweep transaction is processed and the funds are placed back 
into the U.S. deposit account. Bank deposit systems could utilize 
existing capabilities to either place holds on the domestic deposit 
account upon return of the funds or a bank could trap such funds prior 
to their being returned by routing such funds into an alternative 
suspense account. This method would allow the FDIC to control such 
funds until it releases them to the customer and would reduce the 
burden and cost of process and technology development.'' The final rule 
would allow a Covered Institution to apply to the FDIC to use such 
approaches. If used, the Covered Institution is required to obtain 
prior approval from the FDIC in response to a written request, 
including a justification for the process and its relative 
effectiveness for posting provisional holds in the event of failure.
    Provisional holds for deposit accounts which accept automated 
credits from funds invested within the Covered Institution. The final 
rule requires a dual provisional hold methodology for automated credit 
accounts. For the fund balance remaining in the automated credit 
account as of the institution's customary end-of-day the provisional 
hold methodology would be the same as applied to other deposit 
accounts. For the funds residing in the investment vehicle as of the 
institution's customary end-of-day, the provisional hold methodology 
must have the capability of a separate account balance threshold and 
provisional hold percentage.\33\ The account balance threshold as well 
as the provisional hold percentage are required to vary for different 
types of investment vehicles. These account balance thresholds and 
provisional hold percentages could be different from those applied to: 
(1) Funds automatically swept into a similar or identical investment 
vehicle or (2) funds held in a similar or identical investment vehicle 
that does not provide for an automated crediting of funds.\34\
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    \33\ Some automated credit accounts may also be a base sweep 
account. In this case a separate provisional hold methodology must 
be developed for each investment vehicle. It is possible, for 
example, for a customer to each day provide the institution with 
instructions to invest a certain amount of funds in a Cayman Island 
branch time account where the funds would be returned to the 
customer's demand deposit account the following morning. Further, 
the customer may also have provided prearranged instructions to have 
excess balances residing in the same demand deposit account swept to 
a Cayman Island branch account where such funds also are returned to 
the demand account the following morning. In this case the Covered 
Institution must have a provisional hold methodology that: (1) 
Treats funds residing in the demand deposit account as of the 
institution's end-of-day consistent with other deposit accounts, (2) 
treats funds residing in the Cayman Island branch account as a 
result of the prearranged sweep consistent with other Cayman Island 
sweep investment vehicles and (3) treats funds residing in the 
Cayman Island branch account as a result of the daily investment 
instructions using a separate account balance threshold and 
provisional hold percentage.
    \34\ Some investment vehicles are foreign deposits. These funds 
would be subject only to the provisional hold methodology for the 
automated credit account. Such accounts would be excluded from the 
provisional hold methodology designed for non-sweep foreign deposits 
held in the same office.
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    Account balance used for provisional hold calculation. The final 
rule requires the account balance threshold and provisional hold 
percentage to be applied against the end-of-day ledger balance 
calculated by the institution as of the date of failure.
    Provisional hold duration. Under the final rule, the methodology 
for implementing a provisional hold process will be required to hold 
funds until removed by the Successor Institution as instructed by the 
FDIC. Provisional holds will be removed when the results of the deposit 
insurance determination are available, generally anticipated being 
several days after failure, depending on the size and complexity of the 
failed institution's deposit base.
    Provisional hold designation. The final rule requires provisional 
holds to be labeled ``FDIC Hold.''
    Provisional hold customer disclosure. The majority of the 
commenters addressing the issue of provisional hold disclosure 
indicated it would be burdensome and unnecessary. They indicated the 
FDIC has other means at its disposal to notify customers the 
provisional holds are in place. Once placed, the provisional hold will 
be reflected in the account's available balance, which can be viewed 
and accessed through normal channels.
    The final rule does not require the development of new mechanisms 
so that provisional holds, once placed, would be apparent if the 
customer

[[Page 41191]]

views account information on-line or through other means.
    Security level and mechanism for manual removal of provisional 
holds. The final rule requires the Covered Institution to create 
policies, procedures and systems reasonably capable of preventing the 
alteration of FDIC provisional holds or other FDIC hold amounts except 
under the specific written direction of the FDIC.
    Timeliness of the provisional holds process. The final rule 
requires a Covered Institution to have the capability of placing 
provisional holds on the applicable accounts prior to the Successor 
Institution opening for business the following day, but in no case 
later than 9 a.m. local time the day following the day of the 
depository institution failure.
    Exception for systems with a small number of accounts. The final 
rule allows an exception for account systems servicing a relatively 
small number of accounts making the manual application of provisional 
holds feasible. If used, the Covered Institution is required to obtain 
prior approval from the FDIC in response to a written request, 
including a justification for the manual process and its relative 
effectiveness for posting provisional holds in the event of failure.
    Institutional contacts. The final rule requires a Covered 
Institution to notify the FDIC of the person(s) responsible for 
producing the standard deposit data download and administering 
provisional holds, both while this functionality is being constructed 
and on an on-going basis. The Covered Institution is responsible for 
ensuring such contact information is current.

Removal of Provisional Holds

    Removal of provisional holds. Under the final rule, the Successor 
Institution is required to remove provisional holds in batch as 
specified by the FDIC. On the day(s) provisional holds are to be 
removed, the FDIC would provide the Successor Institution with a file 
listing the accounts subject to removal of the provisional hold. The 
file format is shown in Appendix A. The file will be in a tab-or pipe-
delimited ASCII format and provided to the Successor Institution 
through FDICconnect or Direct Connect, depending on the size of the 
file. The file will be encrypted using an FDIC-supplied algorithm. The 
FDIC will provide the Successor Institution with the necessary software 
algorithms needed to decrypt the data files.
    In addition to the batch process used to remove provisional holds, 
the Covered Institution is required to have in place a mechanism for 
manual removal of provisional holds on a case-by-case basis. The FDIC 
expects that virtually all provisional holds will be removed via the 
batch process described above; however, the removal of provisional 
holds on a case-by-case basis during the business day, which could 
include the day following failure, may also be necessary to provide an 
individual depositor access to funds.

Provisional Hold Replacement Transactions

    Debiting and crediting accounts after provisional holds are 
removed. Under the final rule, on the day a provisional hold removal 
file is provided to the Successor Institution, the FDIC also will 
provide a file or set of files in a tab-or pipe-delimited ASCII format 
listing the accounts subject to debit or credit transactions, which 
reflect the results of the insurance determination process. Appendix B 
provides details on the debit/credit data file structure. The debit and 
credit transaction file will be transmitted to the Successor 
Institution through FDICconnect or Direct Connect, depending on the 
size of the file. The file will be encrypted using an FDIC-supplied 
algorithm.
    Posting of additional FDIC holds. Under the final rule, on the day 
provisional holds are to be removed, the FDIC also will provide the 
Successor Institution with a file listing the accounts subject to a new 
hold to be placed after the removal of the provisional hold. The file 
format is shown in Appendix A. The file will be in a tab-or pipe-
delimited ASCII format and provided to the Successor Institution 
through FDICconnect or Direct Connect, depending on the size of the 
file. The file will be encrypted using an FDIC-supplied algorithm.

Removal of Additional FDIC Holds

    Under the final rule, in some cases provisional holds will be 
replaced by a second FDIC hold. These holds will be removed over time 
as further information is gathered from depositors needed to complete 
the insurance determination. These additional FDIC holds will be 
removed using the same file format described in Appendix A.

The Generation of Deposit Account and Customer Data in a Standard 
Structure

    The final rule requires a Covered Institution to have in place 
practices and procedures to provide the FDIC with required depositor 
and customer data in a standard format following the close of any day's 
business. The depositor and customer data would be provided as soon as 
practicable, but in no case later than by the following calendar day, 
and must reflect the end-of-day ledger balances as customarily shown on 
the books and records of the Covered Institution as of the day data are 
requested. Furthermore, all other deposit account and customer data 
provided must be current as of the close of business on that day.
    Covered Institutions are not required to collect or generate new 
depositor or customer information. The standard data files would be 
created through a mapping of pre-existing data elements and internal 
institution codes into standard data formats. Data will be provided on 
all non-closed deposit or foreign deposit accounts as well as sweep and 
automated credit accounts.
    Files. The final rule requires these data to be provided in the 
following five separate files:
    1. Deposit file. Data fields for each non-closed deposit or foreign 
deposit account,\35\ except those accounts serving as an investment 
vehicle reported in the Sweep/Automated Credit file. See Appendix C for 
more detail.
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    \35\ For these purposes a deposit account also includes omnibus 
accounts reflected on the books and records of the Covered 
Institution used to temporarily house customer funds, such as those 
used in connection with sweep transactions.
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    2. Sweep/Automated Credit file. Data fields capturing information 
on funds residing in investment vehicles linked to each non-closed 
deposit account: (1) Involved in sweep activity where the sweep 
investment vehicle is not a deposit and is reflected on the books and 
records of the Covered Institution or (2) which accept automated 
credits. See Appendix D for more detail.
    3. Hold file.\36\ Deposit hold data fields for each non-closed 
deposit account. See Appendix E for more detail.
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    \36\ The Hold file contains information on holds against each 
deposit account, including FDIC provisional holds. Since provisional 
holds may be generated after the completion of an institution's 
nightly deposit processing cycle, they may not be reflected fully in 
the Hold file generated as of the day of closing. In this case the 
FDIC would require a second Hold file to be generated the day 
following closing to fully capture provisional holds that may not 
have been posted until the next deposit processing cycle.
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    4. Customer file. Data fields for each customer. See Appendix F for 
more detail.
    5. Deposit-customer join file. Data necessary to link each deposit 
and foreign deposit with the customers who have an interest in the 
account. See Appendix G for more detail.
    Possible file combinations. The final rule provides that data could 
be submitted using one of each deposit, sweep/automated credit, hold, 
customer, and deposit-customer join files. Alternatively, data could be 
supplied using multiple files for each

[[Page 41192]]

type. The number of files could correspond to the number of 
institutional systems of record, for example. When an institution 
provides multiple data files for a single deposit application, all of 
the files must sum to the institution's subsidiary system control 
totals. In addition, either a set of customer files or a single 
customer file must accompany the deposit file(s). See Appendix H for 
rules governing the possible file combinations for depositor and 
customer data.
    File format. Under the final rule depositor and customer data files 
must be provided in tab- or pipe-delimited ASCII format. Each file name 
would contain the institution's FDIC Certificate Number, the file type 
(deposit, sweep, hold, customer, join or other) and the date of the 
extract. Additional data could be provided, not required by the 
regulation, that may be helpful to the FDIC's deposit insurance 
determination process. For these additional files, the names should 
describe the file content such as ``lookup table'' or ``product 
codes''. All files will be compressed and encrypted using an FDIC-
supplied or specified algorithm. The FDIC would transmit the encryption 
algorithm over FDICconnect. The FDIC will support an ASCII file format.
    File transmission mechanism. Under the final rule, the data files 
must be provided to the FDIC in the most expeditious manner. Data which 
are compressed and encrypted could be transmitted to the FDIC using 
FDICconnect or a secure FTP site which the FDIC has established for 
this purpose. Should the volume be too great to be transmitted 
electronically, then a portable hard drive should be used and 
physically transported by FDIC personnel to the FDIC's data processing 
facilities.

Testing Requirements

    The FDIC will conduct an initial test at each Covered Institution 
sometime after the initial implementation period ends.\37\ All testing 
will be coordinated with the financial institution and conducted at the 
site of their choosing if multiple sites are available. Once the 
initial test is completed successfully, the FDIC anticipates conducting 
additional tests infrequently at institutions that do not make major 
changes to their deposit systems \38\--perhaps only once every three-
to-five years. More frequent testing may be necessary for institutions 
that make major acquisitions, experience financial distress (even if 
the distress is unlikely to result in failure) or undertake major 
system conversions.
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    \37\ In addition to testing, the FDIC expects to require that 
information contact points be validated (and updated as needed).
    \38\ A major change to a deposit system means a change made to a 
Covered Institution's data environment affecting one or more of the 
data elements described in attached Appendices. Changes could be the 
result of a merger or the streamlining of a financial institution's 
systems of record.
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    Covered Institutions will be asked to establish a series of test 
accounts on their deposit account systems that could be used for 
verification purposes. These accounts will be used to verify the 
processing of holds, debits and credits.
    The FDIC also contemplates development of a XML validation service 
to be provided to each Covered Institution for the purpose of 
establishing compliance with the standard data requirements for 
depositor and customer records. The XML schema will read a file (which 
has been created in the standard format), validate the accuracy and 
integrity of the file content and provide a report that establishes the 
institution's compliance with the criteria. In addition to the XML 
service, the FDIC also will provide a description of the validation 
process to help facilitate institutional testing.
    Covered Institutions will be responsible for ensuring that a 
representative sample of data has been passed through the XML 
validation service. At a minimum the sampling strategy should cover a 
cross-section of different insurance categories and of account ledger 
balances maintained by the institution. The Covered Institution will be 
required to provide the FDIC its sampling strategy along with the 
validation results as a part of the periodic verification process.
    To reduce the frequency of FDIC testing and ensure ongoing 
compliance, the FDIC will require Covered Institutions to conduct tests 
in-house every year and provide the FDIC with verification that the 
test was conducted, a summary of the test results and certification 
that the functionality can be successfully implemented.
    In addition, the FDIC will test certain other requirements inside 
the institution, including but not limited to the ability to place and 
remove provisional holds, place new holds and implement debits and 
credits using a data set that meets the FDIC standards.

Implementation Requirements

    Institutions meeting the criteria of a Covered Institution upon the 
effective date of the regulation. The final rule requires a Covered 
Institution to fully implement the respective requirements no later 
than 18 months from the regulation's effective date.
    Institutions meeting the criteria of a Covered Institution after 
the effective date of the regulation. The final rule requires that any 
insured institution meeting the criteria of a Covered Institution for 
at least two consecutive quarters will have 18 months following the end 
of the two consecutive quarters in which to fully implement the 
respective requirements.
    Merger involving two Covered Institutions. Under the final rule, 
the requirements are to be fully implemented within 18 months following 
the completion of an acquisition, although an acquisition does not 
delay any implementation requirements which may already have been in 
place for the individual institutions involved in the merger.
    Merger involving a Covered and Non-Covered Institution. Under the 
final rule, the requirements are to be fully implemented within 18 
months following the completion of an acquisition, although a merger 
does not delay any implementation requirements which may already have 
been in place for the individual institutions involved in the merger.
    Exception for certain institutions. Under the final rule, on a 
case-by-case basis, the FDIC could accelerate the implementation 
timeframe of all or part of the final rule for a Covered Institution 
that: (1) Has a composite rating of 3, 4 or 5 under the Uniform 
Financial Institutions Rating System (commonly referred to as 
CAMELS),\39\ or in the case of an insured branch of a foreign bank, an 
equivalent rating, (2) is undercapitalized as defined for purposes of 
the prompt corrective action (``PCA'') rules \40\ or (3) is determined 
by the appropriate Federal banking agency or the FDIC in consultation 
with the appropriate Federal banking agency to be experiencing a 
significant deterioration of capital or significant funding 
difficulties or liquidity stress, notwithstanding the composite rating 
of the institution by its appropriate Federal banking agency in its 
most recent report of examination. In determining the accelerated 
implementation timeframe for such institutions, the FDIC will consider 
such factors as the: (1) Complexity of the institution's deposit 
systems and operations; (2) extent of asset quality difficulties; (3) 
volatility of funding sources; (4) expected near-term

[[Page 41193]]

changes in capital levels; and (5) other relevant factors appropriate 
for the FDIC to consider in its roles as insurer and possible receiver 
of the institution. The final rule requires the FDIC to consult with 
the Covered Institution's primary federal regulator in determining 
whether to implement this provision.
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    \39\ CAMELS is an acronym drawn from the first letters of the 
individual components of the rating system: Capital adequacy, Asset 
quality, Management, Earnings, Liquidity, and Sensitivity to market 
risk.
    \40\ 12 CFR Part 325.
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    Applications for extension of implementation requirements. The 
final rule provides that a Covered Institution could request an 
extension of the 18-month deadline for implementing the requirements. 
An application for such an extension would be subject to the FDIC's 
rules of general applicability, 12 CFR 303.251. For good cause shown, 
the FDIC could grant the application for an extension.
    One commenter requested that the FDIC provide an exemption from the 
proposed requirements for deposit systems which may be retired in the 
near future, as long as the replacement system is intended to be 
compliant. Such a request could be addressed as an application for 
extension of implementation requirements.

New Deposit Accounts

    The proposed rule asked whether a unique depositor ID should be 
assigned by Covered Institutions when a new account is opened and to 
indicate the relative costs of such a requirement. Commenters generally 
indicated the assignment of a unique depositor ID was burdensome and 
unnecessary to meet the FDIC's objectives. The final rule does not 
include a requirement to assign a unique depositor ID when a new 
account is opened.

FDIC Contact

    Applications for an exemption from the criteria of a Covered 
Institution, a request for flexibility in the use of provisional holds, 
an extension of implementation requirements or the submission of point-
of-contact information should be submitted in writing to: Office of the 
Director, Division of Resolutions and Receiverships, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429-0002.

VI. Plain language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. No commenters suggested that the proposed rule was 
unclear, and the final rule is substantively similar to the proposed 
rule.

VII. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995, the FDIC may not conduct or sponsor, and respondents are not 
required to respond to, an information collection unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
The FDIC submitted the information collections (as more fully described 
below) contained in this rule to OMB for review. No collections of 
information will be made until OMB approval has been obtained.
    Background/General Description of Collection: Section 360.9 
contains collections of information pursuant to the Paperwork Reduction 
Act (44 U.S.C. 3501 et seq.) (``PRA''). In particular, the following 
requirements of this proposed rule constitute collections of 
information as defined by the PRA: (A) All notices that Covered 
Institutions must provide the FDIC of persons responsible for producing 
the standard data download and administering provisional holds, both 
while the functionality is being constructed and on an on-going basis 
(360.9(c)(3)); (B) written practices and procedures for providing the 
FDIC with required deposit account and customer data, as to all 
accounts held in domestic and foreign offices, in a standard format 
upon the close of any day's business, to be created through a mapping 
of pre-existing data elements into standard data formats in six 
separate files, as indicated in the appendices to this Part 360 
(360.9(d) (1) and (2); (C) all data provided to the FDIC pursuant to 
360.9(d)(3); and (D) the dollar costs and time burdens associated with 
information systems acquisition, modification and maintenance that 
respondents will need in order to respond to the information 
requirements. Items A, B, C, and D are reflected, to some extent, as 
on-going burdens and costs; Item D represents primarily implementation 
or ``start-up'' burdens and costs. As discussed below, the FDIC has 
clarified its burden estimates in order to distinguish on-going costs 
and burdens from implementation or start-up costs and to provide 
additional detail concerning the FDIC's calculations.
    Costs estimated in the proposed rule: Compliance with the 
requirements of the proposed rule would have required Covered 
Institutions to implement functionality to post provisional holds, 
remove provisional holds, post debit and credit transactions, post 
additional holds and provide customer data in a standard format 
reconciled to supporting subsidiary systems. These requirements also 
were required to be supported by policies and procedures as well as 
notification of individuals responsible for the systems. Further, the 
requirements involved on-going costs for testing and general 
maintenance and upkeep of the functionality. Estimates of both initial 
implementation and on-going costs were provided.
    In the proposed rule implementation costs were estimated to vary 
widely among the Covered Institutions due to considerable differences 
in the complexity and scope of the deposit operations across Covered 
Institutions. Some Covered Institutions only slightly exceeded the 
250,000 deposit account threshold while several institutions had over 
20 million deposit accounts. In addition, some Covered Institutions--
most notably the largest-have proprietary deposits systems likely 
requiring an in-house, custom solution for the proposed requirements 
while most--generally the small-to-mid-sized ones--purchase deposit 
software from a vendor or use a servicer for deposit processing. 
Deposit software vendors and servicers were expected to incorporate the 
proposed requirements into their products or services to be available 
for their clients. In these cases estimated implementation costs were 
greatly reduced. The analysis assumed 100 of the 159 Covered 
Institutions, or 63 percent, would have reduced implementation costs 
due to the use of software or services from a vendor.
    The cost estimates used in the proposed rule were based on comments 
from the 2005 and 2006 ANPRs that provided some indication of 
implementation and on-going costs. Further, during November 2007 the 
FDIC had conversations with several Covered Institutions and deposit 
software vendors, which also assisted in formulating these cost 
estimates.
    For Covered Institutions with proprietary deposit systems 
implementation costs were estimated to vary considerably. The costs for 
the least complex of these institutions were estimated to range between 
$250,000 and $350,000.\41\ For super-regional organizations 
implementation costs were estimated to be between $2 million and $4 
million.\42\ The costs for the largest, most complex Covered 
Institutions were estimated to be several

[[Page 41194]]

times that of the super-regional organizations. For Covered 
Institutions using software or servicing provided by a vendor 
implementation costs were estimated to be $13,000 to $20,000 per 
institution. These costs primarily were due to installation of software 
received from the vendor.
---------------------------------------------------------------------------

    \41\ Compliance with the proposed requirements would require 
staff time. The analysis assumed an hourly cost of $160 for Covered 
Institutions.
    \42\ The comment letter provided by the American Bankers 
Association dated March 13, 2007 in response to the 2006 ANPR 
indicated cost estimates provided by members ranged from $2 million 
to $6 million per institution for implementation (page 3).
---------------------------------------------------------------------------

    Using this methodology overall industry implementation costs were 
estimated to range between $50 million and $100 million. The best 
estimate of implementation costs is the mid-point of this range, or $75 
million. In reviewing implementation costs as part of the comments 
received from previous ANPRs the FDIC viewed them relative to a one 
basis point assessment against deposits. In this context the estimated 
implementation costs ranged between 11 and 21 percent of a one basis 
point assessment against deposits of Covered Institutions. The mid-
point cost estimate would have been 16 percent.
    On-going costs for testing, maintenance and other periodic items 
were estimated to range between $6,000 and $13,000 for those Covered 
Institutions using software or servicing provided by a vendor. For 
super-regional organizations on-going costs were estimated to be 
between $150,000 and $250,000. The largest, most complex Covered 
Institution was estimated to have on-going costs as high as $500,000 
per year. Overall, on-going industry cost estimates ranged from $4 
million to $6.5 million, or 0.8 to 1.4 percent of a one basis point 
assessment against the deposits of Covered Institutions.
    Comments: Several commenters provided estimates for implementation. 
These cost estimates are discussed in the preamble to the final rule. 
In general, the implementation cost estimates provided by commenters 
were consistent with the assumptions used in the proposed rule. The 
largest, most complex depository institution estimated implementation 
costs to be $8 million to $10 million, within the range of the estimate 
for this institution used in the calculations for the proposed rule.
    Updated cost estimates: The requirements of the final rule 
effectively are identical to the proposed rule. Further, there was 
considerable consistency between the cost comments provided from the 
proposed rule and the assumptions used by the FDIC to estimate the 
costs of the proposed rule. Therefore, the FDIC has not changed its 
estimates regarding implementation or on-going costs.
    When the proposed rule was issued 159 depository institutions were 
estimated to meet the criteria of a Covered Institution. This estimate 
was based on Call and Thrift Financial Report data as of June 2007. 
Since this reporting date eight institutions included in these 159 no 
longer exist due to a merger or acquisition. For commercial banks the 
number of deposit accounts is reported only once a year in June. Based 
on analysis from prior years, the number of institutions potentially 
covered by the criteria has been about 160. While the number of 
potentially covered institutions is reduced each year due to merger and 
acquisition activity, it also has increased as new institutions grow in 
size to meet the criteria. In this regard, for the purposes of this 
cost analysis, the FDIC is assuming that since June 2007 an additional 
eight depository institutions (which it is unable to identify at this 
point) have met the requirements of a Covered Institution. Therefore, 
the FDIC is still basing its cost estimate on 159 Covered Institutions.
    OMB Number: New collection.
    Frequency of Response: On Occasion.
    Affected Public: Insured depository institutions having at least $2 
billion in domestic deposits and either at least: (i) 250,000 deposit 
accounts; or (ii) $20 billion in total assets.
    Estimated Number of Respondents: 159.
    On-Going Burden Hours and Costs:
    Estimated Time per Response: 157 hours to 255.5 hours. These hours 
are calculated as follows: $4 million low-end, annualized, over-all 
industry estimated costs for on-going burden / $160 per hour salary / 
159 respondents = 157 hours; and $6.5 million high-end, annualized, 
over-all industry estimated costs for on-going burden / $160 per hour 
salary / 159 respondents = 255.5 hours.
    Estimated Total Annual Burden: 25,000 hours to 40,625 hours. These 
hours are calculated as follows: 157 hours x 159 respondents = 25,000 
hours at a minimum; and 255.5 hours x 159 respondents = 40,624.5 hours 
at a maximum.
    On-going costs for testing, maintenance and other periodic items 
are estimated to range between $6,000 and $13,000 for those Covered 
Institutions using software or servicing provided by a vendor. For 
super-regional organizations on-going costs are estimated to be between 
$150,000 and $250,000. The largest, most complex Covered Institution 
was estimated to have on-going costs as high as $500,000 per year. 
Overall, on-going industry cost estimates ranged from $4 million to 
$6.5 million. Placed in context, this is 0.8 to 1.4 percent of a one 
basis point assessment against the deposits of Covered Institutions. 
This analysis assumes a cost of $160 per hour for Covered Institutions, 
as suggested by Covered Institutions and vendors.

Implementation Burden Hours and Costs--Capital Start-Up Costs

    Estimated Time per Individual Response: 80 hours to 75,000 hours 
per respondent. With regard to the one-time burden of adopting 
mechanisms required to facilitate provisional holds and standard data 
sets, the FDIC estimates a range from 80 hours for the smallest Covered 
Institutions with the least expensive systems, to 75,000 hours for the 
largest Covered Institutions with the most expensive systems. As 
discussed elsewhere, there is a broad range in the complexity and size 
among Covered Institutions, with the smallest having $2.5 billion in 
total assets and the largest having over $1.3 trillion in total assets. 
The FDIC estimated the range of hours per institution as follows: 
$13,000 overall implementation cost for the smallest, least expensive 
programs using vendor-provided software / $160 per hour salary = 80 
hours; and $12,000,000 overall implementation for the most complex, 
expensive programs using proprietary software / $160 per hour salary = 
75,000 hours. The FDIC considered this range of hours in estimating the 
average response time shown below.
    Estimated Time per Average Response: 1,965 hours to 3,931 hours. 
The FDIC calculated the average, start-up cost of acquiring software/
hardware for the industry as a whole (i.e., all Covered Institutions) 
based upon the cost estimates provided by Covered Institutions, vendors 
and servicers with a low end of $50,000,000 and a high-end of 
$100,000,000. The calculations are as follows: $50,000,000 / $160 per 
hour salary / 159 Covered Institutions = 1,965 hours; and $100,000,000 
/ $160 per hour salary / 159 Covered Institutions = 3,931 hours.
    Estimated Total Annual Burden: 312,500 hours to 625,000 hours. 
Minimum hours calculated as: 1,965 hours x 159 respondents = 312,435 
hours; maximum hours calculated as: 3,931 hours x 159 respondents = 
625,029 hours.
    Estimated Total Annual Burden--Annualized: 104,200 hours to 208,350 
hours. The FDIC averaged over the three-year collection period the 
burden of start-up costs associated with the cost of acquiring 
software/hardware for the industry as a whole (i.e., all Covered 
Institutions). The calculations are as follows: 312,500 hours / 3 = 
104,167 hours; and 625,000 hours / 3 = 208,333 hours.

[[Page 41195]]

    Comment Request: The FDIC has an ongoing interest in public 
comments on its collections of information, including comments on: (a) 
Whether the collection of information is necessary for the proper 
performance of the Agencies' functions, including whether the 
information has practical utility; (b) the accuracy of the estimates of 
the burden of the information collection, including the validity of the 
methodology and assumptions used; (c) ways to enhance the quality, 
utility, and clarity of the information to be collected; (d) ways to 
minimize the burden of the information collection on respondents, 
including through the use of automated collection techniques or other 
forms of information technology; and (e) estimates of capital or start 
up costs and costs of operation, maintenance, and purchase of services 
to provide information. Comments may be submitted to the FDIC by any of 
the following methods: By mail to the Executive Secretary, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429; by FAX at (202) 898-8788; or by e-mail to comments@fdic.gov. All 
comments should refer to ``Large Bank Deposit Insurance 
Modernization.'' Copies of comments may also be submitted to the OMB 
desk officer for the FDIC, Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 10235, Washington, DC 20503.

VIII. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA), 
5 U.S.C. 605(b), the FDIC certifies that the final rule will not have a 
significant economic impact on a substantial number of small entities, 
within the meaning of those terms as used in the RFA. The final rule 
requires the largest insured depository institutions to adopt 
mechanisms that would, in the event of the institution's failure: (1) 
Provide the FDIC with standard deposit account and customer 
information; and (2) allow the placement and release of holds on 
liability accounts, including deposits. The final rule applies only to 
Covered Institutions--defined in the final rule as insured depository 
institutions having at least $2 billion in domestic deposits and 
either: (1) More than 250,000 deposit accounts; or (2) total assets 
over $20 billion, regardless of the number of deposit accounts. There 
are no small banking organizations that come within the definition of a 
Covered Institution.

IX. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 12 CFR Part 360

    Banks, banking, savings associations.

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation hereby amends part 360 of title 12 of the 
Code of Federal Regulations as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

0
1. The authority citation for part 360 continues to read as follows:

    Authority: 12 U.S.C. 1819(a) Tenth, 1821(d)(1), 1821(d)(10)(c), 
1821(d)(11), 1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); 
Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.


0
2. Add new Sec.  360.9 to read as follows:


Sec.  360.9.  Large-bank deposit insurance determination modernization.

    (a) Purpose and scope. This section is intended to allow the 
deposit and other operations of a large insured depository institution 
(defined as a ``Covered Institution'') to continue functioning on the 
day following failure. It also is intended to permit the FDIC to 
fulfill its legal mandates regarding the resolution of failed insured 
institutions to provide liquidity to depositors promptly, enhance 
market discipline, ensure equitable treatment of depositors at 
different institutions and reduce the FDIC's costs by preserving the 
franchise value of a failed institution.
    (b) Definitions.--(1) A covered Institution means an insured 
depository institution which, based on items as defined in Reports of 
Income and Condition or Thrift Financial Reports filed with the 
applicable federal regulator, has at least $2 billion in deposits and 
at least either:
    (i) 250,000 deposit accounts; or
    (ii) $20 billion in total assets, regardless of the number of 
deposit accounts.
    (2) Deposits, number of deposit accounts and total assets are as 
defined in the instructions for the filing of Reports of Income and 
Condition and Thrift Financial Reports, as applicable to the insured 
depository institution for determining whether it qualifies as a 
covered institution. A foreign deposit means an uninsured deposit 
liability maintained in a foreign branch of an insured depository 
institution. An international banking facility deposit is as defined by 
the Board of Governors of the Federal Reserve System in Regulation D 
(12 CFR Sec.  204.8(a)(2)). A demand deposit account, NOW account, 
money market deposit account, savings deposit account and time deposit 
account are as defined in the instructions for the filing of Reports of 
Income and Condition and Thrift Financial Reports.
    (3) Sweep account arrangements consist of a deposit account linked 
to an interest-bearing investment vehicle whereby funds are swept to 
and from the deposit account according to prearranged rules, usually on 
a daily basis, where the sweep investment vehicle is not a deposit and 
is reflected on the books and records of the Covered Institution.
    (4) Automated credit account arrangements consist of a deposit 
account into which funds are automatically credited from an interest-
bearing investment vehicle where the funds in the interest-bearing 
investment vehicle were not invested by prearranged rules.
    (5) Non-covered institution means an insured depository institution 
that does not meet the definition of a covered institution.
    (6) Provisional hold means an effective restriction on access to 
some or all of a deposit or other liability account after the failure 
of an insured depository institution.
    (c) Posting and removing provisional holds.--(1) A covered 
institution shall have in place an automated process for implementing a 
provisional hold on deposit accounts, foreign deposit accounts and 
sweep and automated credit account arrangements immediately following 
the determination of the close-of-business account balances, as defined 
in Sec.  360.8(b)(3), at the failed covered institution.
    (2) The system requirements under paragraph (c)(1) must have the 
capability of placing the provisional holds prescribed under that 
provision no later than 9 a.m. local time the day following the FDIC 
cutoff point, as defined in Sec.  360.8(b)(1).
    (3) Pursuant to instructions to be provided by the FDIC, a covered 
institution must notify the FDIC of the person(s) responsible for 
producing the standard data download and administering provisional 
holds, both

[[Page 41196]]

while the functionality is being constructed and on an on-going basis.
    (4) For deposit accounts held in domestic offices of an insured 
depository institution, the provisional hold algorithm must be designed 
to exempt accounts below a specific account balance threshold, as 
determined by the FDIC. The account balance threshold could be any 
amount, including zero. For accounts above the account balance 
threshold determined by the FDIC, the algorithm must be designed to 
calculate and place a hold equal to the dollar amount of funds in 
excess of the account balance threshold multiplied by the provisional 
hold percentage determined by the FDIC. The provisional hold percentage 
could be any amount, from zero to one hundred percent. The account 
balance threshold as well as the provisional hold percentage could vary 
for the following four categories, as the covered institution 
customarily defines consumer accounts:
    (i) Consumer demand deposit, NOW and money market deposit accounts;
    (ii) Other consumer deposit accounts (time deposit and savings 
accounts, excluding NOW and money market deposit accounts);
    (iii) Non-consumer demand deposit, NOW and money market deposit 
accounts; and
    (iv) Other non-consumer deposit accounts (time deposit and savings 
accounts, excluding NOW and money market deposit accounts).
    (5) For deposit accounts held in foreign offices of an insured 
depository institution, other than those connected to a sweep or 
automated credit arrangement, the provisional hold algorithm will apply 
a provisional hold percentage to the entire account balance. For 
deposit accounts held in foreign offices the provisional hold 
percentage may differ from that applied to deposit accounts. Also, the 
provisional hold percentage would not vary by account category (i.e., 
consumer versus non-consumer and transaction versus non-transaction) as 
is the case with deposit accounts.
    (6) For international banking facility deposits, other than those 
connected to a sweep or automated credit arrangements, the provisional 
hold algorithm will apply a provisional hold percentage to the entire 
account balance. For IBF deposits the provisional hold percentage may 
differ from that applied to deposit or foreign deposit accounts. Also, 
the provisional hold percentage would not vary by account category 
(i.e., consumer versus non-consumer, and transaction versus non-
transaction) as is the case with deposit accounts.
    (7) For the interest-bearing investment vehicle of a sweep 
arrangement, the provisional hold algorithm must be designed with the 
capability to place a provisional hold on the interest-bearing 
investment vehicle with possibly a different account balance threshold 
and a different hold percentage according to the type of interest-
bearing investment vehicle.
    (8) For the interest-bearing investment vehicle of an automated 
credit account arrangement, the provisional hold algorithm must be 
designed with the capability to place a provisional hold on the 
interest-bearing investment vehicle with possibly a different account 
balance threshold and a different hold percentage according to the type 
of interest-bearing investment vehicle.
    (9) A covered institution may submit a request to the FDIC, using 
the address indicated in Sec.  360.9(g): to develop a provisional hold 
process involving memo holds or alternative account mechanisms; or to 
exempt from the provisional hold requirements of this section those 
account systems servicing a relatively small number of accounts where 
the manual application of provisional holds is feasible. Such requests 
may be in the form of a letter and must include a justification for the 
request and address the relative effectiveness of the alternative for 
posting provisional holds in the event of failure. The FDIC will 
consider such requests on a case-by-case basis in light of the 
objectives of this section.
    (10) The automated process for provisional holds required by 
paragraph (c)(1) of this section must include the capability of 
removing provisional holds in batch mode and, during the same 
processing cycle, applying debits, credits or additional holds on the 
deposit or other accounts from which the provisional holds were 
removed, as determined by the FDIC. The FDIC will provide files listing 
the accounts subject to: removal of provisional holds or additional 
holds (file format as specified in Appendix A); application of debits 
or credits (file format as specified in Appendix B); and application of 
additional holds (file format as specified in Appendix A). In addition 
to the batch process used to remove provisional holds, the Covered 
Institution is required to have in place a mechanism for manual removal 
of provisional holds on a case-by-case basis.
    (d) Providing a standard data format for generating deposit account 
and customer data.--(1) A covered institution must have in place 
practices and procedures for providing the FDIC in a standard format 
upon the close of any day's business with required depositor and 
customer data for all deposit accounts held in domestic and foreign 
offices and interest-bearing investment accounts connected with sweep 
and automated credit arrangements. Such standard data files are to be 
created through a mapping of pre-existing data elements and internal 
institution codes into standard data formats. Deposit account and 
customer data provided must be current as of the close of business for 
that day.
    (2) The requirements of paragraph (d)(1) of this section shall be 
provided in five separate files, as indicated in the Appendices C 
through G to this Part 360.
    (3) Upon request by the FDIC, a covered institution must submit the 
data required by paragraph (d)(1) of this section to the FDIC, in a 
manner prescribed by the FDIC.
    (4) In providing the data required under paragraph (d)(1) of this 
section to the FDIC, the Covered Institution must be able to reconcile 
the total deposit balances and the number of deposit accounts to the 
institution's subsidiary system control totals.
    (e) Implementation requirements.--(1) A covered institution must 
comply with the requirements of this section no later than February 18, 
2010.
    (2) An insured depository institution not within the definition of 
a covered institution on the effective date of this section must comply 
with the requirements of this section no later than eighteen months 
following the end of the second calendar quarter for which it meets the 
criteria for a covered institution.
    (3) Upon the merger of two or more non-covered institutions, if the 
resulting institution meets the criteria for a covered institution, 
that covered institution must comply with the requirements of this 
section no later than eighteen months after the effective date of the 
merger.
    (4) Upon the merger of two or more covered institutions, the merged 
institution must comply with the requirements of this section within 
eighteen months following the effective date of the merger. This 
provision, however, does not supplant any preexisting implementation 
date requirement, in place prior to the date of the merger, for the 
individual covered institution(s) involved in the merger.
    (5) Upon the merger of one or more covered institutions with one or 
more non-covered institutions, the merged institution(s) must comply 
with the requirements of this section within eighteen months following 
the effective

[[Page 41197]]

date of the merger. This provision, however, does not supplant any 
preexisting implementation date requirement for the individual covered 
institution(s) involved in the merger.
    (6) Notwithstanding the general requirements of this paragraph (e), 
on a case-by-case basis, the FDIC may accelerate, upon notice, the 
implementation timeframe of all or part of the requirements of this 
section for a covered institution that: Has a composite rating of 3, 4, 
or 5 under the Uniform Financial Institution's Rating System, or in the 
case of an insured branch of a foreign bank, an equivalent rating; is 
undercapitalized, as defined under the prompt corrective action 
provisions of 12 CFR part 325; or is determined by the appropriate 
Federal banking agency or the FDIC in consultation with the appropriate 
Federal banking agency to be experiencing a significant deterioration 
of capital or significant funding difficulties or liquidity stress, 
notwithstanding the composite rating of the institution by its 
appropriate Federal banking agency in its most recent report of 
examination. In implementing this paragraph (e)(6), the FDIC must 
consult with the covered institution's primary federal regulator and 
consider the: Complexity of the institution's deposit systems and 
operations, extent of the institution's asset quality difficulties, 
volatility of the institution's funding sources, expected near-term 
changes in the institution's capital levels, and other relevant factors 
appropriate for the FDIC to consider in its roles as insurer and 
possible receiver of the institution.
    (7) Notwithstanding the general requirements of this paragraph (e), 
a covered institution may request, by letter, that the FDIC extend the 
deadline for complying with the requirements of this section. A request 
for such an extension is subject to the FDIC's rules of general 
applicability under 12 CFR. 303.251.
    (f) A covered institution may apply to the FDIC for an exemption 
from the requirements of this Sec.  360.9 if it has a high 
concentration of deposits incidental to credit card operations. The 
FDIC will consider such applications on a case-by-case basis in light 
of the objectives of this section.
    (g) Requests for exemptions from the requirements of this section, 
for flexibility in the use of provisional holds or for extensions of 
the implementation requirements of this section and the submission of 
point-of-contact information should be submitted in writing to: Office 
of the Director, Division of Resolutions and Receiverships, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429-0002.
    (h) Testing requirements. Covered institutions must provide 
appropriate assistance to the FDIC in its testing of the systems 
required by this section. The FDIC will provide testing details to 
covered institutions through the issuance of subsequent procedures and/
or guidelines.


0
3. Add new Appendices A through H to Part 360 to read as follows:

Appendix A to Part 360--Non-Monetary Transaction File Structure

    This is the structure of the data file the FDIC will provide to 
remove or add a FDIC hold for an individual account or sub-account. 
The file will be in a tab- or pipe-delimited ASCII format and 
provided through FDICconnect or Direct Connect. The file will be 
encrypted using an FDIC-supplied algorithm.

----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account. This field      physical data
                                  may be the Account       element. If multiple
                                  Number..                 fields are required
                                                           to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account.
2. DP--Acct--Identifier--2.....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account.
3. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account.
4. DP--Acct--Identifier--4.....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account.
5. DP --Acct--Identifier--5....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account.
6. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the Sub-    Identifier may
                                  Account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
7. PH--Hold--Action............  Hold Action............  ......................  Character (1).
                                 The requested hold
                                  action to be taken for
                                  this account or sub-
                                  account..
                                 Possible values are:
                                  R = Remove....
                                  A = Add.......
8. PH--Hold--Amt...............  Hold Amount............  ......................  Decimal (14,2).
                                 Dollar amount of the
                                  FDIC hold to be
                                  removed or added.
9. PH--Hold--Desc..............  Hold Description.......  ......................  Character (225).
                                 FDIC hold to be removed
                                  or added.
----------------------------------------------------------------------------------------------------------------


[[Page 41198]]

Appendix B to Part 360--Debit/Credit File Structure

    This is the structure of the data file the FDIC will provide to 
apply debits and credits to an individual account or sub-account 
after the removal of FDIC holds. The file will be in a tab- or pipe-
delimited ASCII format and provided through FDICconnect or Direct 
Connect. The file will be encrypted using an FDIC-supplied 
algorithm.

----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account. This field      physical data
                                  may the Account          element. If multiple
                                  Number..                 fields are required
                                                           to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account.
2. DP --Acct--Identifier--2....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account.
3. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account.
4. DP --Acct--Identifier--4....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account.
5. DP --Acct--Identifier--5....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account.
6. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the sub-    Identifier may
                                  account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
7. DC --Debit--Amt.............  Debit Amount...........  ......................  Decimal (14,2).
                                 Dollar amount of the
                                  debit to be applied to
                                  the account or sub-
                                  account.
8. DC--Credit--Amt.............  Credit Amount..........  ......................  Decimal (14,2).
                                 Dollar amount of the
                                  credit to be applied
                                  to the account or sub-
                                  account.
9. DC--Transaction--Desc.......  Debit/Credit             ......................  Character (225).
                                  Description.
                                 FDIC message associated
                                  with the debit or
                                  credit transaction.
----------------------------------------------------------------------------------------------------------------

Appendix C to Part 360--Deposit File Structure

    This is the structure for the data file to provide deposit data 
to the FDIC. If data or information are not maintained or do not 
apply, a null value in the appropriate field should be indicated. 
The file will be in a tab-or pipe-delimited ASCII format. Each file 
name will contain the institution's FDIC Certificate Number, an 
indication that it is a deposit file type and the date of the 
extract. The files will be encrypted using an FDIC-supplied 
algorithm. The FDIC will transmit to the covered institution the 
encryption algorithm over FDICconnect.
    The total deposit balances and the number of deposit accounts in 
each deposit file must be reconciled to the subsidiary system 
control totals.
    The FDIC intends to fully utilize a covered institution's 
understanding of its customers and the data maintained around 
deposit accounts. Should additional information be available to the 
covered institution to help the FDIC more quickly complete its 
insurance determination process, it may add this information to the 
end of this data file. Should additional data elements be provided, 
a complete data dictionary for these elements must be supplied along 
with a description of how this information could be best used to 
establish account ownership or insurance category.
    The deposit data elements provide information specific to 
deposit account balances and account data. The sequencing of these 
elements, their physical data structures and the field data format 
and field length must be provided to the FDIC along with the data 
structures identified below.
    A header record will also be required at the beginning of this 
file. This record will contain the number of accounts to be included 
in this file, the maximum number of characters contained in largest 
account title field maintained within the deposit file and the 
maximum number of characters contained in largest address field 
maintained within the deposit file.

    Note: Each record must contain the account title/name and 
current account statement mailing address. Fields 17-33 relate to 
the account name and address information. Some systems provide for 
separate fields for account title/name, street address, city, state, 
ZIP, and country, all of which are parsed out. Others systems may 
simply provide multiple lines for name, street address, city, state, 
ZIP, with no distinction. Populate fields that best fit the system's 
data, either fields 17-27 or fields 28-33.


[[Page 41199]]



----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account. This field      physical data
                                  may be the Account       element. If multiple
                                  Number..                 fields are required
                                                           to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account.
2. DP--Acct--Identifier--2.....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account..
3. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account..
4. DP--Acct--Identifier--4.....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account..
5. DP--Acct--Identifier--5.....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account..
6. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the sub-    Identifier may
                                  account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
7. DP--Bank--No................  Bank Number............  ......................  Character (15).
                                 The bank number
                                  assigned to the
                                  deposit account..
8. DP--Tax--ID.................  Tax ID.................  For consumer accounts,  Character (15).
                                 The tax identification    typically, this would
                                  number maintained on     be the primary
                                  the account..            account holder's
                                                           social security
                                                           number (``SSN''). For
                                                           business accounts it
                                                           would be the federal
                                                           tax identification
                                                           number (``TIN'').
                                                           Hyphens are optional
                                                           in this field.
9. DP--Tax--Code...............  Tax ID Code............  Generally deposit       Character (1).
                                 The type of the tax       systems have flags or
                                  identification number.   indicators set to
                                  Possible values are:.    indicate whether the
                                  S = Social       number is an SSN or
                                  Security Number..        TIN.
                                  T = Federal
                                  Tax Identification
                                  Number..
                                  O = Other.....
10. DP--Branch.................  Branch Number..........  In lieu of a branch     Character (15).
                                 The branch or office      number this field may
                                  associated with the      represent a specialty
                                  account..                department or
                                                           division.
11. DP--Cost--Center...........  Cost Center or G/L Code  This field ties to the  Character (20).
                                 The identifier used for   general ledger
                                  organization reporting   accounts.
                                  or ownership of the
                                  account. Insert null
                                  value if the cost
                                  center is not carried
                                  in the deposit record..
12. DP--Dep--Type..............  Deposit Type Indicator.  A deposit--also called  Character (1).
                                 The type of deposit by    a ``domestic
                                  office location.         deposit''--includes
                                  Possible values are:.    only deposit
                                  D = Deposit      liabilities payable
                                  (Domestic)..             in the United States,
                                  F = Foreign      typically those
                                  Deposit..                deposits maintained
                                                           in a domestic office
                                                           of an insured
                                                           depository
                                                           institution, as
                                                           defined in section
                                                           3(l) of the Federal
                                                           Deposit Insurance Act
                                                           (12 U.S.C. 1813(l)).
                                                           A foreign deposit is
                                                           a deposit liability
                                                           in a foreign branch
                                                           payable solely at a
                                                           foreign branch or
                                                           branches.
13. DP--Currency--Type.........  Currency Type..........  ......................  Character (3).
                                 The ISO 4217 currency
                                  code..

[[Page 41200]]


14. DP--Ownership--Ind.........  Customer Ownership       Single: Accounts owned  Character (2).
                                  Indicator.               by an individual and
                                 The type of ownership     those accounts held
                                  at the account level.    as Minor Accounts,
                                  Possible values are:.    Estate Accounts, Non-
                                  S = Single....   Minor Custodian/
                                  J = Joint        Guardian Accounts,
                                  Account..                Attorney in Fact
                                  P =              Accounts and Sole
                                  Partnership account..    Proprietorships.
                                  C =             Joint Account:
                                  Corporation..            Accounts owned by two
                                  B = Brokered     or more individuals,
                                  Deposits..               but does not include
                                  I = IRA          the ownership of a
                                  Accounts..               Payable on Death
                                  U =              Account or Trust
                                  Unincorporated           Account..
                                  Association..           Partnership Account:
                                  R = Revocable    Accounts owned by a
                                  Trust..                  Partnership.
                                  IR =            Corporation: Accounts
                                  Irrevocable Trust..      owned by a
                                  G = Government   Corporation (e.g.
                                  Accounts..               Inc., L.L.C., or
                                  E = Employee     P.C.)..
                                  Benefit Plan Accounts.. Brokered Deposits:
                                  O = Other.....   Accounts placed by a
                                                           deposit broker who
                                                           acts as an
                                                           intermediary for the
                                                           actual owner or sub-
                                                           broker..
                                                          IRA Accounts: Accounts
                                                           for which the owner
                                                           has the right to
                                                           direct how the funds
                                                           are invested
                                                           including Keoghs and
                                                           other Self-Directed
                                                           Retirement Accounts..
                                                          Unincorporated
                                                           Association: An
                                                           account owned by an
                                                           association of two or
                                                           more persons formed
                                                           for some religious,
                                                           educational,
                                                           charitable, social or
                                                           other non-commercial
                                                           purpose.
                                                          Revocable Trusts:
                                                           Including PODs and
                                                           formal revocable
                                                           trusts (e.g. Living
                                                           Trusts, Intervivos
                                                           Trusts or Family
                                                           Trusts).
                                                          Irrevocable Trusts:
                                                           Accounts held by a
                                                           trust established by
                                                           statute or written
                                                           trust in which the
                                                           grantor relinquishes
                                                           all power to revoke
                                                           the trust.
                                                          Government Accounts:
                                                           Accounts owned by a
                                                           government entity
                                                           (e.g. City, State,
                                                           County or Federal
                                                           government entities
                                                           and their sub-
                                                           divisions).
                                                          Employee Benefit Plan:
                                                           Accounts established
                                                           by the administrator
                                                           of an Employee
                                                           Benefit Plan
                                                           including defined
                                                           contribution, defined
                                                           benefit and employee
                                                           welfare plans.
                                                          Other Accounts:
                                                           Accounts owned by an
                                                           entity not described
                                                           above.
15. DP--Prod--Cat..............  Product Category.......  Product Category is     Character (3).
                                 The product               sometimes referred to
                                  classification.          as ``application
                                  Possible values are:.    type'' or ``system
                                                           type''.
                                  DDA = Non-
                                  Interest Bearing
                                  Checking accounts.
                                  NOW = Interest
                                  Bearing Checking
                                  accounts.
                                  MMA = Money
                                  Market Deposit
                                  Accounts.
                                  SAV = Other
                                  savings accounts.
                                  CDS = Time
                                  Deposit accounts and
                                  Certificate of Deposit
                                  accounts, including
                                  any accounts with
                                  specified maturity
                                  dates that may or may
                                  not be renewable.
16. DP--Stat--Code.............  Status Code............                          Character (1).
                                 Status or condition of
                                  the account. Possible
                                  values are:.
                                  O = Open.
                                  D = Dormant.
                                  I = Inactive.
                                  E =
                                  Escheatment.
                                  A = Abandoned.
                                  C = Closing.
                                  R = Restricted/
                                  Frozen/Blocked.

[[Page 41201]]


17. DP--Acct--Title--1.........  Account Title Line 1...  These data will be      Character (100).
                                 Account styling or        used to identify the
                                  titling of the           owners and
                                  account..                beneficiaries of the
                                                           account.
18. DP--Acct--Title--2.........  Account Title Line 2...  ......................  Character (100).
                                 If available, the
                                  second account title
                                  line..
19. DP--Acct--Title--3.........  Account Title Line 3...  ......................  Character (100).
                                 If available, the third
                                  account title line..
20. DP--Acct--Title--4.........  Account Title Line 4...  ......................  Character (100).
                                 If available, the
                                  fourth account title
                                  line..
21. DP--Street--Add--Ln--1.....  Street Address Line 1..  ......................  Character (100).
                                 The current account
                                  statement mailing
                                  address of record..
22. DP--Street--Add--Ln--2.....  Street Address Line 2..  ......................  Character (100).
                                 If available, the
                                  second mailing address
                                  line..
23. DP--Street--Add--Ln--3.....  Street Address Line 3..  ......................  Character (100).
                                 If available, the third
                                  mailing address line..
24. DP--City...................  City...................  ......................  Character (50).
                                 The city associated
                                  with the mailing
                                  address..
25. DP--State..................  State..................  Use a two-character     Character (2).
                                 The state abbreviation    state code (official
                                  associated with the      U.S. Postal Service
                                  mailing address..        abbreviations).
26. DP--ZIP....................  ZIP....................  If the ``+4'' code is   Character (10).
                                 The ZIP + 4 code          not available provide
                                  associated with the      only the 5-digit ZIP
                                  mailing address..        code. Hyphens are
                                                           optional in this
                                                           field.
27. DP--Country................  Country................  Provide the country     Character (10).
                                 The country associated    name or the standard
                                  with the mailing         IRS country code.
                                  address..
28. DP--NA--Line--1............  Name/Address Line 1....  Fields 28-33 are to be  Character (100).
                                 Alternate name/address    used if address data
                                  format for the current   are not parsed to
                                  account statement        populate Fields 17-
                                  mailing address of       27.
                                  record, first line..
29. DP--NA--Line--2............  Name/Address Line 2....  ......................  Character (100).
                                 Alternate name/address
                                  format, second line..
30. DP--NA--Line--3............  Name/Address Line 3....  ......................  Character (100).
                                 Alternate name/address
                                  format, third line..
31. DP--NA--Line--4............  Name/Address Line 4....  ......................  Character (100).
                                 Alternate name/address
                                  format, fourth line..
32. DP--NA--Line--5............  Name/Address Line 5....  ......................  Character (100).
                                 Alternate name/address
                                  format, fifth line..
33. DP--NA--Line--6............  Name/Address Line 6....  ......................  Character (100).
                                 Alternate name/address
                                  format, sixth line..
34. DP--Cur--Bal...............  Current Balance........  This balance should     Decimal (14,2).
                                 The current balance in    not be reduced by
                                  the account at the end   float or holds. For
                                  of business on the       CDs and time
                                  effective date of this   deposits, the balance
                                  file..                   should reflect the
                                                           principal balance
                                                           plus any interest
                                                           paid and available
                                                           for withdrawal not
                                                           already included in
                                                           the principal (do not
                                                           include accrued
                                                           interest). The total
                                                           of all current
                                                           balances in this file
                                                           should reconcile to
                                                           the total deposit
                                                           trial balance totals
                                                           or other summary
                                                           reconciliation of
                                                           deposits performed by
                                                           the institution.
35. DP--Int--Rate..............  Interest Rate..........  Interest rate should    Decimal (10,9).
                                 The current interest      be expressed in
                                  rate in effect for       decimal format, i.e.,
                                  interest bearing         2.0% should be
                                  accounts..               represented as
                                                           0.020000000.
36. DP--Acc--Int...............  Accrued Interest.......  ......................  Decimal (14,2).
                                 The amount of interest
                                  that has been earned
                                  but not yet paid to
                                  the account as of the
                                  date of the file..
37. DP--Lst--Int--Pd...........  Date Last Interest Paid  ......................  Date (YYYYMMDD).
                                 The date through which
                                  interest was last paid
                                  to the account..
38. DP--Lst--Deposit...........  Date Last Deposit......  For example, a deposit  Date (YYYYMMDD).
                                 The date of the last      that included checks
                                  deposit transaction      and/or cash.
                                  posted to the account..

[[Page 41202]]


39. DP--Int--Term--No..........  Interest Term Number...  ......................  Decimal (3,0).
                                 The number of months in
                                  the current interest
                                  term..
40. DP--Nxt--Mat...............  Date of Next Maturity..  For non-renewing CDs    Date (YYYYMMDD).
                                 For CD and time deposit   that have matured and
                                  accounts, the next       are waiting to be
                                  date the account is to   redeemed this date
                                  mature..                 may be in the past.
41. DP--Open--DT...............  Account Open Date......  If the account had      Date (YYYYMMDD).
                                 The date the account      previously been
                                  was opened..             closed and re-opened,
                                                           this should reflect
                                                           the most recent re-
                                                           opened date.
42. DP--Sweep--Code............  Sweep Code.............  ......................  Character (1).
                                 Indicates if the
                                  account is a sweep
                                  account. Possible
                                  values are:
                                  Y = Yes.
                                  N = No.
43. DP--Hold--To--Post.........  Full Hold on the         ......................  Character (1).
                                  account: Indicator if
                                  all postings to this
                                  account are
                                  restricted. Possible
                                  values are:
                                  Y = Yes.
                                  N = No.
44. DP--Issue--Val--Amt........  Issued Value Amount....  For CDs only.           Decimal (14,2).
                                 The value of the
                                  current CD when
                                  issued..
45. DP--Int--CD--Cde...........  Type of Interest for CD  For CDs only.           Character (1).
                                 Possible values are:
                                  C = Rate
                                  Change Allowed.
                                  N = Rate
                                  Change Not Allowed.
                                  R = Change
                                  Rate to Default at
                                  Renewal.
                                  T = Rate
                                  Change Allowed Only
                                  During the Term.
46. DP--IRA--Cde...............  IRA Code...............  Optional code field to  Character (1).
                                 The type of IRA.          be used if available
                                  Possible values are:.    to help further
                                  C = Corporate    identify the types of
                                  Retirement.              IRA accounts.
                                  E =
                                  Educational IRA..
                                  I = IRA
                                  Account..
                                  K = Keogh
                                  Account..
                                  R = Roth IRA
                                  Account..
                                  S = SEP
                                  Account..
                                  T =
                                  Transitional Roth IRA..
                                  V = Versa
                                  Account..
                                  H = Health
                                  Savings Account..
47. DP--Deposit--Class--Type...  Deposit Class Type.....  The institution may     Character (10).
                                 The deposit class.        also use more or
                                  Possible values are:.    fewer class types.
                                  RTL = Retail.
                                  FED = Federal
                                  government.
                                  STATE = State
                                  government.
                                  COMM =
                                  Commercial.
                                  CORP =
                                  Corporate.
                                  BANK = Bank
                                  Owned.
                                  DUE TO = Other
                                  Banks.
48. DP--Product--Class--Cde....  Deposit Class Codes....  These Product Class     Character (2).
                                 The deposit class         codes are used in
                                  codes. Possible values   conjunction with the
                                  are:.                    Deposit Class Types
                                 RTL....................   in field 51. This
                                  1 = Payable on   field is to be used
                                  Death..                  in concert with
                                  2 =              fields 12 and 13
                                  Individual..             identified above to
                                  3 = Living       enable the financial
                                  Trust--Intervivos or     institution to
                                  Family..                 capture more detailed
                                  4 =              information
                                  Irrevocable Trust        concerning account
                                  (includes Educational    types. It is the
                                  IRAs)..                  intent of the FDIC to
                                  5 = Estate....   have the financial
                                  6 = Attorney     institution map its
                                  in Fact..                detailed account
                                  7 = Minor--      types to the codes
                                  (includes all            identified in this
                                  variations of Uniform    field. The
                                  Gifts to Minor           institution may also
                                  Accounts)..              use additional codes,
                                  8 = Bankruptcy   but in this event the
                                  Personal..               institution must
                                  9 = Pre-Need     supply the detailed
                                  Burial..                 description and code
                                  10 = Escrow...   value for each
                                  11 =             additional code used.
                                  Representative Payee/    If no additional
                                  Beneficiary..            account product type
                                  12 = Sole        detail is available
                                  Proprietorship..         then this field
                                  13 = Joint....   should be left blank.
                                  14 = Non-Minor
                                  Custodian/Guardian..
                                  15 = Other
                                  Retail..

[[Page 41203]]


                                 FED
                                  16 = FHA......
                                  17 = Federal
                                  Government..
                                 STATE..................
                                  18 = City.....
                                  19 = State....
                                  20 = County,
                                  Clerk of Court..
                                  21 = Other
                                  State..
                                 COMMERCIAL.............
                                  22 = Business
                                  Escrow..
                                  23 =
                                  Bankruptcy..
                                  24 = Club.....
                                  25 = Church...
                                  26 =
                                  Unincorporated
                                  Association..
                                  27 =
                                  Unincorporated Non-
                                  Profit..
                                   28 =
                                  Other Commercial..
                                 CORPORATION............
                                  29 = Business
                                  Trust..
                                  30 = Business
                                  Agent..
                                  31 = Business
                                  Guardian..
                                  32 =
                                  Incorporated
                                  Association..
                                  33 =
                                  Incorporated Non-
                                  Profit..
                                  33 =
                                  Incorporated Non-
                                  Profit..
                                  34 =
                                  Corporation..
                                  35 = Corporate
                                  Partnership..
                                  36 = Corporate
                                  Partnership Trust..
                                  37 = Corporate
                                  Agent..
                                  38 = Corporate
                                  Guardian..
                                  39 = Pre-Need
                                  Funeral Trust..
                                  40 = Limited
                                  Liability
                                  Incorporation..
                                  41 = LLC
                                  partnership..
                                  42 = Lawyer
                                  Trust..
                                  43 = Realtor
                                  Trust..
                                  44 = Other
                                  Corporation..
                                 BANK...................
                                  45 = Certified
                                  & Official Checks,
                                  Money Orders, Loan
                                  Disbursements Checks,
                                  and Expense Checks..
                                  46 = ATM
                                  Settlement..
                                  47 = Other
                                  Bank Owned Accounts..
                                 DUE TO (Other Banks)...
                                  48 = Due to
                                  U.S. Banks..
                                  49 = Due to
                                  U.S. Branches of
                                  Foreign Banks..
                                  50 = Due to
                                  Other Depository
                                  Institutions..
                                  51 = Due to
                                  Foreign Banks..
                                  52 = Due to
                                  Foreign Branches of
                                  U.S. banks..
                                  53 = Due to
                                  Foreign Governments
                                  and Official
                                  Institutions..
----------------------------------------------------------------------------------------------------------------

Appendix D to Part 360--Sweep/Automated Credit Account File Structure

    This is the structure of the data file to provide information to 
the FDIC on funds residing in investment vehicles linked to each 
non-closed deposit account or sub-account: (1) Involved in sweep 
activity where the sweep investment vehicle is not a deposit and is 
reflected on the books and records of the covered institution or (2) 
which accepts automated credits. A single record should be used for 
each instance where funds affiliated with the deposit account are 
held in an alternative investment vehicle. For any alternative 
investment vehicle, a separate account may or may not exist. If an 
account exists for the investment vehicle, it should be noted in the 
record. If no account exists, then a null value for the Sweep/
Automated Credit Account Identifiers should be provided, but the 
remainder of the data fields defined below should be populated.
    For data provided in the Sweep/Automated Credit Account File, 
the total account balances and the number of accounts must be 
reconciled to subsidiary system control totals. The file will be in 
a tab- or pipe-delimited ASCII format. The files will be encrypted 
using an FDIC-supplied algorithm. The FDIC will transmit the 
encryption algorithm over FDICconnect.

[[Page 41204]]



----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account from which       physical data
                                  funds are swept or       element. If multiple
                                  debited. The field may   fields are required
                                  be the Account number..  to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account.
2. DP--Acct--Identifier--2.....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account
                                  from which funds are
                                  swept or debited..
3. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account
                                  from which funds are
                                  swept or debited..
4. DP--Acct--Identifier--4.....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account
                                  from which funds are
                                  swept or debited..
5. DP --Acct--Identifier--5....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account
                                  from which funds are
                                  swept or debited..
6. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the sub-    Identifier may
                                  account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
7. SW--Acct--Identifier........  Sweep/Automated Credit   Funds may be swept      Character (25).
                                  Account Identifier.      into an investment
                                 The primary field used    vehicle not
                                  to identify the          represented as an
                                  account into which       account. In this case
                                  funds are swept or       this field should be
                                  credited. This field     a null value.
                                  may be the Account      The Sweep/Automated
                                  Number..                 Credit Account
                                                           Identifier may be
                                                           composed of more than
                                                           one physical data
                                                           element. If multiple
                                                           fields are required
                                                           to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account..
8. SW--Acct--Identifier--2.....  Sweep/Automated Credit   ......................  Character (25).
                                  Account Identifier--2.
                                 If necessary, the
                                  second element of the
                                  account identifier
                                  used to identify the
                                  account into which
                                  funds are swept or
                                  credited..
9. SW--Acct--Identifier--3.....  Sweep/Automated Credit   ......................  Character (25).
                                  Account Identifier--3.
                                 If necessary, the third
                                  element of the account
                                  identifier used to
                                  identify the account
                                  into which funds are
                                  swept or credited..
10. SW--Acct--Identifier--4....  Sweep/Automated Credit   ......................  Character (25).
                                  Account Identifier--4.
                                 If necessary, the
                                  fourth element of the
                                  account identifier
                                  used to identify the
                                  account into which
                                  funds are swept or
                                  credited..
11. SW --Acct--Identifier--5...  Sweep/Automated Credit   ......................  Character (25).
                                  Account Identifier-5.
                                 If necessary, the fifth
                                  element of the account
                                  identifier used to
                                  identify the account
                                  into which funds are
                                  swept or credited..
12. SW--Sub--Acct--Identifier..  Sweep/Automated Credit   ......................  Character (25).
                                  Sub-Account Identifier.
                                 If available, the sub-
                                  account identifier for
                                  the account.

[[Page 41205]]


13. SW--Type...................  Sweep/Automated Credit   The investment          Character (3).
                                  Type.                    vehicle. Possible
                                                           values are:
                                                           RE =
                                                           Repurchase Agreement..
                                                           DD = Deposit
                                                           Held in a Domestic
                                                           Office..
                                                           DF = Deposit
                                                           Held in a Foreign
                                                           Office..
                                                           IBF = Deposit
                                                           Held in an
                                                           International Banking
                                                           Facility..
                                                           AI = Deposit
                                                           Held in an affiliated
                                                           depository
                                                           institution..
                                                           FF = Federal
                                                           Funds..
                                                           CP =
                                                           Commercial Paper..
                                                           OT = Other...
14. SW--Inv--Amount............  Fund Balance in Sweep/   ......................  Decimal (14,2).
                                  Automated Credit
                                  Investment Vehicle.
                                 Dollar amount residing
                                  in the investment
                                  vehicle..
15. SW--Currency--Type.........  Currency Type..........  ......................  Character (3).
                                 The ISO 4217 currency
                                  code..
16. SW--Hold--Amount...........  FDIC Hold Amount.......  ......................  Decimal (14,2).
                                 Amount of FDIC hold on
                                  funds residing in the
                                  investment vehicle..
17. SW--Sweep--Interval........  Sweep/Investment         ......................  Character (2).
                                  Frequency.
                                 The frequency with
                                  which the sweep or
                                  investment occurs.
                                  Possible values are:.
                                  D = Daily.....
                                  W = Weekly....
                                  BW = Bi-
                                  Weekly..
                                  M = Monthly...
                                  BM = Bi-
                                  Monthly..
                                  Q = Quarterly.
                                  O = Other.....
----------------------------------------------------------------------------------------------------------------

Appendix E to Part 360--Hold File Structure

    This is the structure of the data file to provide information to 
the FDIC for each legal or collateral hold placed on a deposit 
account or sub-account. If data or information are not maintained or 
do not apply, a null value in the appropriate field should be 
indicated. The file will be in a tab-or pipe-delimited ASCII format. 
Each file name will contain the institution's FDIC Certificate 
Number, an indication that it is a hold data file type and the date 
of the extract. The files will be encrypted using an FDIC-supplied 
algorithm. The FDIC will transmit the encryption algorithm over 
FDICconnect.

----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account. This field      physical data
                                  may be the Account       element. If multiple
                                  Number..                 fields are required
                                                           to identify the
                                                           account, data should
                                                           be placed in separate
                                                           fields and the FDIC
                                                           instructed how these
                                                           fields are combined
                                                           to uniquely identify
                                                           the account.
2. DP--Acct--Identifier--2.....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account.
3. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account.
4. DP--Acct--Identifier--4.....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account.
5. DP --Acct--Identifier--5....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account.
6. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the sub-    Identifier may
                                  account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
7. HD--Hold--Amt...............  Hold Amount............  ......................  Decimal (14,2).
                                 Dollar amount of the
                                  hold.
8. HD--Hold--Reason............  Hold Reason............  ......................  Character (2).
                                 Reason for the hold.
                                  Possible values are:.

[[Page 41206]]


                                  LN = Loan
                                  Collateral Hold.
                                  LG = Court
                                  Order Hold.
                                  FD = FDIC hold
                                  OT = Other (do
                                  not include daily
                                  operational type
                                  holds).
9. HD--Hold--Desc..............  Hold Description.......  ......................  Character (255).
                                 Description of the hold
                                  available on the
                                  system.
10. HD--Hold--Start--Dt........  Hold Start Date........  ......................  Date (YYYYMMDD).
                                 The date the hold was
                                  initiated..
11. HD--Hold--Exp--Dt..........  Hold Expiration Date...  ......................  Date (YYYYMMDD)
                                 The date the hold is to
                                  expire..
----------------------------------------------------------------------------------------------------------------

Appendix F to Part 360--Customer File Structure

    This is the structure of the data file to provide to the FDIC 
information related to each customer who has an account or sub-
account reported in the deposit data or sweep/automated credit 
account file. If data or information are not maintained or do not 
apply, a null value in the appropriate field should be indicated. 
The file will be in a tab-or pipe-delimited ASCII format. Each file 
name will contain the institution's FDIC Certificate Number, an 
indication that it is a customer file type and the date of the 
extract. The files will be encrypted using an FDIC-supplied 
algorithm. The FDIC will transmit the encryption algorithm over 
FDICconnect.

    Note: Each record must contain the customer's name and permanent 
legal address. Fields 4-12 relate to the customer name for 
individuals only. Fields 13-14 relate to the customer name for 
entities other than individuals. Some systems provide for separate 
fields for name, street address, city, state, ZIP, and country, all 
of which are parsed out. Others systems may simply provide multiple 
lines for name, street address, city, state, ZIP, with no 
distinction. In this case, certain name and address data elements 
must be parsed and provided in the appropriate fields.


----------------------------------------------------------------------------------------------------------------
           Field name               Field description            Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier........  Customer Identifier....  ......................  Character (25).
                                 The unique field used
                                  by the institution to
                                  identify the customer.
2. CS--Tax--ID.................  Customer Tax ID Number.  Hyphens are optional    Character (11).
                                                           in this field.
                                 The tax identification                           ..............................
                                  number on record for
                                  the customer.
3. CS--Tax--Code...............  Customer Tax ID Code...  ......................  Character (1).
                                 The type of the tax
                                  identification number
                                  of the customer.
                                  Possible values are:
                                  S = Social
                                  Security Number.
                                  T = Federal
                                  Tax Identification
                                  Number.
                                  O = Other.....
4. CS--Name--Line--1...........  Individual Customer      ......................  Character (100).
                                  Name Line 1.
                                 If available, the free-
                                  form name narrative of
                                  the customer, first
                                  line.
5. CS--Name--Line--2...........  Individual Customer      ......................  Character (100).
                                  Name Line 2.
                                 If available, the free-
                                  form name narrative of
                                  the customer, second
                                  line.
6. CS--Last--Name..............  Individual Customer      This field is required  Character (50).
                                  Last Name.               if the data element
                                 For individuals, the      is in the
                                  customer's last name..   institution's
                                                           records. If
                                                           necessary, data
                                                           should be parsed from
                                                           fields 4 or 5 to
                                                           obtain this element.
7. CS--First--Name.............  Individual Customer      This field is required  Character (50).
                                  First Name.              if the data element
                                 For individuals, the      is in the
                                  customer's first name..  institution's
                                                           records. If
                                                           necessary, data
                                                           should be parsed from
                                                           fields 4 or 5 to
                                                           obtain this element.
8. CS--Middle--Name............  Individual Customer      This field is required  Character (50).
                                  Middle Name.             if the data element
                                 For individuals, the      is in the
                                  customer's middle        institution's
                                  name..                   records. If
                                                           necessary, data
                                                           should be parsed from
                                                           fields 4 or 5 to
                                                           obtain this element.
9. CS--Suffix..................  Individual Professional  This field is required  Character (20).
                                  Suffix.                  if the data element
                                 For individuals, the      is in the
                                  suffix designating       institution's
                                  customer's academic,     records. If
                                  professional or          necessary, data
                                  honorary status, such    should be parsed from
                                  as Esq., Ph.D., M.D.,    fields 4 or 5 to
                                  and D.D.S..              obtain this element.
10. CS--Generation.............  Individual Generational  This field is required  Character (10).
                                  Suffix.                  if the data element
                                 For individuals, the      is in the
                                  suffix designating the   institution's
                                  customer's               records. If
                                  generational status,     necessary, data
                                  such as Jr., Sr. or      should be parsed from
                                  III..                    fields 4 or 5 to
                                                           obtain this element.
11. CS--Prefix.................  Individual Customer      This field is required  Character (10).
                                  Prefix.                  if the data element
                                 For individuals, the      is in the
                                  prefix of the            institution's
                                  customer, such as        records. If
                                  Rev., Dr., Mrs., Mr.     necessary, data
                                  or Ms..                  should be parsed from
                                                           fields 4 or 5 to
                                                           obtain this element.
12. CS--Birth--Dt..............  Individual Customer      ......................  Date (YYYYMMDD).
                                  Birth Date.
                                 For individuals, the
                                  customer's birth date.

[[Page 41207]]


13. CS--Ent--Name--Line--1.....  Entity Name Line 1.....  ......................  Character (100).
                                 For entities other than
                                  individuals, the free-
                                  form name narrative of
                                  the customer, first
                                  line.
14. CS--Ent--Name--Line--2.....  Entity Name Line 2.....  ......................  Character (100).
                                 If available for
                                  entities other than
                                  individuals, the free-
                                  form name narrative of
                                  the customer, second
                                  line.
15. CS--Nar--Addr--Line--1.....  Customer Address Line 1  ......................  Character (100).
                                 If available, the free-
                                  form permanent legal
                                  address narrative for
                                  the customer, line one.
16. CS--Nar--Addr--Line--2.....  Customer Address Line 2  ......................  Character (100).
                                 If available, the free-
                                  form permanent legal
                                  address narrative of
                                  the customer, line two.
17. CS--Nar--Addr--Line--3.....  Customer Address Line 3  ......................  Character (100).
                                 If available, the free-
                                  form permanent legal
                                  address narrative of
                                  the customer, line
                                  three.
18. CS--Street--Address--1.....  Street Address Line 1..  This field is           Character (100).
                                 The permanent legal       required. If
                                  address of the           necessary, data
                                  customer, line one..     should be parsed from
                                                           fields 16 or 17 to
                                                           obtain this element.
19. CS--Street--Address--2.....  Street Address Line 2..  This field is           Character (100).
                                 The permanent legal       required. If
                                  address of the           necessary, data
                                  customer, line two..     should be parsed from
                                                           fields 16 or 17 to
                                                           obtain this element.
20. CS--City...................  City...................  This field is           Character (25).
                                 The city associated       required. If
                                  with the permanent       necessary, data
                                  legal address..          should be parsed from
                                                           fields 16 or 17 to
                                                           obtain this element.
21. CS--State..................  State..................  This field is           Character (2).
                                 The state abbreviation    required. If
                                  associated with the      necessary, data
                                  permanent legal          should be parsed from
                                  address..                fields 16 or 17 to
                                                           obtain this element.
                                                           Use a two-character
                                                           state code (official
                                                           U.S. Postal Service
                                                           abbreviations).
22. CS--ZIP....................  ZIP....................  This field is           Character (10).
                                 The ZIP + 4 code          required. If
                                  associated with the      necessary, data
                                  permanent legal          should be parsed from
                                  address..                fields 16 or 17 to
                                                           obtain this element.
                                                           If the ``+4'' code is
                                                           not available,
                                                           provide only the 5-
                                                           digit ZIP code.
                                                           Hyphens are optional
                                                           in this field.
23. CS--Country................  Country................  This field is           Character (10).
                                 The country associated    required. If
                                  with the permanent       necessary, data
                                  legal address..          should be parsed from
                                                           fields 16 or 17 to
                                                           obtain this element.
                                                           Provide the name of
                                                           the country or the
                                                           standard IRS country
                                                           code.
24. CS--Telephone..............  Customer Telephone       ......................  Character (20).
                                  Number.
                                 The telephone number on
                                  record for the
                                  customer.
25. CS--Email..................  Customer Email Address.  ......................  Character (150).
                                 The e-mail address on
                                  record for the
                                  customer.
----------------------------------------------------------------------------------------------------------------

Appendix G to Part 360--Deposit-Customer Join File Structure

    This is the structure of the data file to provide to the FDIC 
information necessary to link the records in the deposit and 
customer files. If data or information are not maintained or do not 
apply, a null value in the appropriate field should be indicated. 
The file will be in a tab- or pipe-delimited ASCII format. Each file 
name will contain the institution's FDIC Certificate Number, an 
indication that it is a join file type and the date of the extract. 
The files will be encrypted using an FDIC-supplied algorithm. The 
FDIC will transmit the encryption algorithm over FDICconnect.
    The deposit-customer join file will have one or more records for 
each deposit account, depending on the number of relationships to 
each account. A simple individual account, for example, will be 
associated with only one record in the deposit-customer join file 
indicating the owner of the account. A joint account with two owners 
will be associated with two records in the deposit-customer join 
file, one for each owner. The deposit-customer join file will 
contain other records associated with a deposit account to 
designate, among other things, beneficiaries, custodians, trustees 
and agents. This methodology allows the FDIC to know all of the 
possible relationships for an individual account and also whether a 
single customer is involved in many accounts.

----------------------------------------------------------------------------------------------------------------
           Field name             FDIC field description         Comments                     Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier........  Customer Identifier....  ......................  Character (25).
                                 The unique field used
                                  by the institution to
                                  identify the customer.

[[Page 41208]]


2. DP--Acct--Identifier........  Account Identifier.....  The Account Identifier  Character (25).
                                 The primary field used    may be composed of
                                  to identify the          more than one
                                  account. This field      physical data
                                  may be the Account       element. If multiple
                                  Number..                 fields are required
                                                           to identify the
                                                           account, the data
                                                           should be placed in
                                                           separate fields and
                                                           the FDIC instructed
                                                           how these fields are
                                                           combined to uniquely
                                                           identify the account.
3. DP--Acct--Identifier--2.....  Account Identifier--2..  ......................  Character (25).
                                 If necessary, the
                                  second element used to
                                  identify the account.
4. DP--Acct--Identifier--3.....  Account Identifier--3..  ......................  Character (25).
                                 If necessary, the third
                                  element used to
                                  identify the account.
5. DP--Acct--Identifier--4.....  Account Identifier--4..  ......................  Character (25).
                                 If necessary, the
                                  fourth element used to
                                  identify the account.
6. DP--Acct--Identifier--5.....  Account Identifier--5..  ......................  Character (25).
                                 If necessary, the fifth
                                  element used to
                                  identify the account.
7. DP--Sub--Acct--Identifier...  Sub-Account Identifier.  The Sub-Account         Character (25).
                                 If available, the sub-    Identifier may
                                  account identifier for   identify separate
                                  the account..            deposits tied to this
                                                           account where there
                                                           are different
                                                           processing parameters
                                                           such as interest
                                                           rates or maturity
                                                           dates, but all owners
                                                           are the same.
8. CS--Rel--Code...............  Relationship Code......  Institutions must map   Character (5).
                                 The code indicating how   their relationship
                                  the customer is          codes to the codes in
                                  related to the           the list to the left.
                                  account. Possible        If the institution
                                  values are:.             maintains more
                                  ADM =            relationships they
                                  Administrator..          must supply the
                                  AGT = Agent/     additional
                                  Representative..         relationship codes
                                  ATF = Attorney   being utilized along
                                  For..                    with the code
                                  AUT =            definition.
                                  Authorized Signer..
                                  BNF =
                                  Beneficiary.
                                  CSV =
                                  Conservator.
                                  CUS =
                                  Custodian.
                                  DBA = Doing
                                  Business As.
                                  EXC = Executor
                                  GDN = Guardian
                                  MIN = Minor...
                                  PRI = Primary
                                  Owner.
                                  SEC =
                                  Secondary Owner(s).
                                  TTE = Trustee.
9. CS--Bene--Code..............  Beneficiary Type Code..  This includes           Character (1).
                                 If the customer is        beneficiaries on
                                  considered a             retirement accounts,
                                  beneficiary, the type    trust accounts, minor
                                  of account associated    accounts, and payable-
                                  with this customer.      on-death accounts.
                                  Possible values are:.
                                  I = IRA.......
                                  T = Trust--
                                  Irrevocable.
                                  R = Trust--
                                  Revocable.
                                  M = Uniform
                                  Gift to Minor.
                                  P = Payable on
                                  Death.
                                  O = Other.....
----------------------------------------------------------------------------------------------------------------

Appendix H to Part 360--Possible File Combinations for Deposit Data

    A covered institution must provide deposit data using separate 
deposit, sweep/automated credit, hold, customer, and deposit-
customer join files. The simplest file structure involves providing 
one of each file. This basic file format is shown in Figure 1.

[[Page 41209]]

[GRAPHIC] [TIFF OMITTED] TR17JY08.000

    Multiple combinations of deposit, sweep/automated credit, hold, 
customer, and deposit-customer join files are permissible, but only 
in the following circumstances:
    1. Each separate deposit file must have companion sweep/
automated credit and hold files covering the same deposit accounts.
    2. A single customer file may be submitted covering customers 
affiliated with deposit accounts in one or more deposit files as 
long as the customer file contains information on all of the 
customers affiliated with the deposit files.
    3. Several customer files may be submitted as long as each 
separate customer file contains information on all of the customers 
affiliated with the associated deposit files.
    Figure 2 shows a permissible file configuration using a single 
Customer File affiliated with Deposit File A and Deposit File B. As 
required, Deposit File A has a companion Sweep/Automated Credit File 
A and Hold File A. The same is true for Deposit File B.
    Another permissible combination of files is shown in Figure 3, 
which is a variation of the basic data file structure shown in 
Figure 1.
BILLING CODE 6714-01-P

[[Page 41210]]

[GRAPHIC] [TIFF OMITTED] TR17JY08.001


[[Page 41211]]


[GRAPHIC] [TIFF OMITTED] TR17JY08.002


    By order of the Board of Directors.

    Dated at Washington, DC, this 17th day of June, 2008.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
 [FR Doc. E8-15492 Filed 7-16-08; 8:45 am]

BILLING CODE 6714-01-C