[Federal Register Volume 59, Number 110 (Thursday, June 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14008]


[[Page Unknown]]

[Federal Register: June 9, 1994]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AB46

 

Assessments

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Board of Directors (Board) of the Federal Deposit 
Insurance Corporation (FDIC) is amending its regulations governing 
computation of an institution's assessment base to provide for the 
subtraction of certain liabilities arising under depository institution 
investment contracts. The subject liabilities are those not treated as 
insured deposits under section 11(a)(8) of the Federal Deposit 
Insurance Act (FDI Act). Under the final rule, these liabilities would 
be excluded from the deposit base on which deposit insurance premiums 
are assessed, thereby reducing assessment payments for affected 
institutions. The purpose of the amendment is to give effect, by 
regulation, to apparent congressional intent.

EFFECTIVE DATE: July 11, 1994.

FOR FURTHER INFORMATION CONTACT: William Farrell, Chief, Assessments 
Management Section, Division of Finance, (703) 516-5546; or Gerald J. 
Gervino, Senior Attorney, (202) 898-3723; Federal Deposit Insurance 
Corporation, Washington D.C. 20429.

SUPPLEMENTARY INFORMATION: Prior to December 1993, liabilities arising 
under bank or thrift investment contracts (BICs) that qualified as 
deposits under section 3(l) of the FDI Act, 12 U.S.C. 1813(l), were 
insured in accordance with the statutory and regulatory provisions 
governing federal deposit insurance coverage. Similarly, BIC 
liabilities that qualified as deposits were included in an 
institution's deposit base for the purpose of calculating the 
institution's deposit insurance premiums.

    Effective December 19, 1993, a new section 11(a)(8) was added to 
the FDI Act by section 311(a)(1) of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (FDICIA). Under this new provision, 
codified at 12 U.S.C. 1821(a)(8), liabilities arising under certain 
depository institution investment contracts are no longer treated as 
insured deposits.
    A companion provision to the new section 11(a)(8) was a new 
subparagraph (D) added to section 7(b)(6) of the FDI Act (12 U.S.C. 
1817(b)(6)) by section 311(a)(2) of FDICIA, which also became effective 
December 19, 1993. Section 7(b)(6)(D) excluded from an institution's 
insurance assessment base any liability of the institution not treated 
as an insured deposit pursuant to section 11(a)(8).
    Although section 11(a)(8) continues in force, its companion 
provision does not. Section 7(b)(6), as amended effective December 19, 
1993, was superseded as of January 1, 1994, by a totally revised 
version of section 7(b) that provides for a risk-based assessment 
system. The existing section 7(b), 12 U.S.C. 1817(b), as amended by 
section 302(a) of FDICIA, omits all provisions of the superseded 
section 7(b) that dealt with the computation of an institution's 
deposit insurance assessment base. Under the existing provisions, 
definition of the assessment base is to be determined by the FDIC.
    The Board believes that it is appropriate and desirable to give 
continued effect, by regulation, to the intent of Congress, as 
reflected in superseded section 7(b)(6), that investment contract 
liabilities not treated as insured deposits under section 11(a)(8) of 
the FDI Act should be excluded from the universe of deposits on which 
insurance assessments are paid. The amendment maintains the balance the 
Board believes Congress intended in enacting the former section 7(b)(6) 
as a companion to section 11(a)(8).
    The FDIC invited comments on the proposal. 59 FR 9687 (March 1, 
1994). Four comments were received. Two were furnished by trade 
associations and two by financial institutions. One comment letter from 
each group supported the proposal. One association commenter and one 
institutional commenter opposed the proposal. An association commenter 
strongly opposed the proposal, indicating that the amendment would 
favor larger banks since, according to the commenter, small banks 
generally do not have deposit liabilities arising under these 
investment contracts. It also asked that the change not be addressed 
until a larger review of the assessment base is made by the FDIC. 
Citing congressional intent, the other trade association supported the 
proposal. However, they suggested that the FDIC make it clear that the 
exclusion of BICs is a special case and should not be construed as 
indicative of other actions that the FDIC may take to change the 
assessment base.
    The two institutions offered diametrically opposed comments. One 
felt that the exemption should be adopted quickly enough to be used in 
the first quarter of this year. The other institution was totally 
against excluding BICs from the insurance assessment. It felt that BICs 
were useful for large money center banks with the resources to enter 
complicated arrangements. It felt that any argument that BICs should 
not be assessed, if they are not insured, was inappropriate. The 
commenter noted that it pays assessments on behalf of customer deposits 
that are not insured because the deposits exceed $100,000. In the 
commenter's view, principles of fairness require that BICs be assessed 
for FDIC insurance purposes.
    The Board has carefully considered the comments of each of the four 
commenters. The Board believes that the amendment is designed to give 
continued effect to congressional intent to exclude investment contract 
liabilities, that are not treated as insured deposits, from the deposit 
base on which premiums are assessed. Since the amendment is designed to 
carry out congressional intent, the Board does not believe it is 
appropriate to delay the amendment pending further study of the 
assessment base. This amendment does not reflect any policy judgment of 
the FDIC relating to the assessment base.
    The Board does not believe that the proposal is designed to favor 
large banks. Any insured institution, regardless of size, may deduct 
deposit liabilities arising under these investment contracts from its 
assessment base. Any bank may potentially use the investment contracts 
described in the regulation.
    Accordingly, the Board is amending its assessments regulation to 
exclude from an institution's assessment base, as computed under 
Sec. 327.4, those investment contract liabilities not treated as 
insured deposits under section 11(a)(8) of the FDI Act.

Paperwork Reduction Act

    No collections of information pursuant to section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are contained in this 
final rule. Consequently, no information has been submitted to the 
Office of Management and Budget for review.

Regulatory Flexibility Act

    The Board hereby certifies that the amendments to part 327 will not 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act (5 U.S.C. 
601 et seq.). In light of this certification, the Regulatory 
Flexibility Act requirements (at 5 U.S.C. 603, 604) to prepare initial 
and final regulatory flexibility analyses do not apply.

List of Subjects in 12 CFR Part 327

    Assessments, Bank deposit insurance, Financing corporation, Savings 
associations.

    For the reasons stated in the preamble, 12 CFR part 327 is amended 
as follows:

PART 327--[AMENDED]

    1. The authority citation for part 327 continues to read as 
follows:

    Authority: 12 U.S.C. 1441, 1441b, 1817-1819.

    2. Section 327.4 is amended by removing the period at the end of 
paragraph (b)(2)(iv)(B) and adding a semicolon in lieu thereof, and by 
adding paragraph (b)(2)(v) to read as follows:


Sec. 327.4  Average assessment base.

* * * * *
    (b) * * *
    (2) * * *
    (v) Liabilities arising from a depository institution investment 
contract that are not treated as insured deposits under section 
11(a)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(8)).
* * * * *
    By order of the Board of Directors.

    Dated at Washington, D.C., this 24th day of May 1994.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 94-14008 Filed 6-8-94; 8:45 am]
BILLING CODE 6714-01-P