[Federal Register Volume 60, Number 27 (Thursday, February 9, 1995)]
[Rules and Regulations]
[Pages 7701-7710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3178]



=======================================================================
-----------------------------------------------------------------------

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB28


Deposit Insurance Coverage

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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

SUMMARY: The FDIC is amending its deposit insurance regulations to 
require that: Upon request, an insured depository institution disclose 
in writing to depositors of employee benefit plan funds, its current 
Prompt Corrective Action (PCA) capital category, its capital ratios, 
and whether employee benefit plan deposits would be eligible for 
``pass-through'' insurance coverage; upon opening an account comprised 
of employee benefit plan funds, an insured depository institution 
disclose in writing its PCA capital category, a description of the 
requirements for ``pass-through'' insurance coverage and whether, in 
the institution's judgment, the deposits are eligible for ``pass-
through'' deposit insurance; and when employee benefit plan deposits 
placed with an insured depository institution would no longer qualify 
for ``pass-through'' insurance coverage, the institution disclose in 
writing to all existing employee benefit plan depositors within 10 
business days the institution's PCA capital category and that new, 
rolled-over or renewed employee benefit plan deposits will not be 
eligible for ``pass-through'' deposit insurance coverage.
    The FDIC is also making a number of technical amendments to its 
insurance regulations concerning commingled accounts of bankruptcy 
trustees, joint accounts, accounts for which an insured depository 
institution is acting in a fiduciary capacity, and accounts for which 
an insured depository institution is acting as the trustee of an 
irrevocable trust.
    The intended effect of the final rule is to provide employee 
benefit plan depositors important information, not otherwise available, 
on ``pass-through'' deposit insurance which may be needed to prudently 
manage their funds. The technical amendments clarify the insurance 
rules involving commingled accounts of bankruptcy trustees, joint 
accounts, accounts for which an insured depository institution is 
acting in a fiduciary capacity, and accounts for which an insured 
depository institution is acting as the trustee of an irrevocable 
trust.

EFFECTIVE DATES: The amendments to 12 CFR 330.12 are effective on July 
1, 1995. The amendments to 12 CFR 330.6, 330.7, 330.10 and 330.11 are 
effective on March 13, 1995.

FOR FURTHER INFORMATION CONTACT: Daniel M. Gautsch, Examination 
Specialist, Division of Supervision (202/898-6912) or Joseph A. 
DiNuzzo, Counsel, Legal Division (202/898-7349), Federal Deposit 
Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

Background

    In May 1993, the FDIC Board of Directors (Board) revised 
Sec. 330.12 of the FDIC's regulations (12 CFR 330.12) (58 FR 29952 (May 
25, 1993)) to reflect the new limitations imposed by section 311 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991 
[[Page 7702]] (Pub. L. 102-242, 105 Stat. 2236) (FDICIA) on the ``pass-
through'' deposit insurance provided for employee benefit accounts. 
(``Pass-through'' insurance means that the insurance coverage passes 
through to each owner/beneficiary of the applicable deposit.) As 
required by section 311 of FDICIA, under the revised rules, whether an 
employee benefit plan deposit is entitled to ``pass-through'' deposit 
insurance coverage is based, in part, upon the capital status of an 
insured depository institution at the time the deposit is accepted.
    Under Secs. 330.12 (a) and (b), ``pass-through'' insurance shall 
not be provided if, at the time an employee benefit plan deposit is 
accepted, the institution may not accept brokered deposits pursuant to 
section 29 of the FDI Act (12 U.S.C. 1831f(a)) unless, at the time the 
deposit is accepted: (1) The institution meets each applicable capital 
standard; and (2) the depositor receives a written statement from the 
institution indicating that such deposits are eligible for insurance 
coverage on a ``pass-through'' basis.\1\ The written statement required 
under this exception must be provided each time a deposit is made or 
additional employee benefit plan funds are placed with the insured 
institution. 58 FR 29957 (May 25, 1993).

    \1\The recordkeeping requirements of Sec. 330.4 of the FDIC's 
regulations also would have to be satisfied. 12 CFR 330.12(a) & 
330.4.
---------------------------------------------------------------------------

    Section 29 of the FDI Act prohibits insured depository institutions 
that are ``adequately capitalized'' but have not obtained a broker 
deposit waiver from the FDIC and ``undercapitalized'' institutions (or 
institutions in lower capital categories) from accepting brokered 
deposits.\2\ A brokered deposit is defined in Sec. 337.6 of the FDIC's 
regulations (12 CFR 337.6) as any deposit that is obtained, directly or 
indirectly, from or through the mediation or assistance of a deposit 
broker.

    \2\``Well capitalized'' insured institutions can, in certain 
circumstances, avoid a lapse in eligibility for ``pass-through'' 
insurance of employee benefit plan deposits, should the 
institution's PCA capital category be reduced to ``adequately 
capitalized'', by obtaining a broker deposit waiver from the FDIC.
---------------------------------------------------------------------------

    On December 8, 1993, the FDIC published in the Federal Register a 
proposed rule (58 FR 64521) to impose several specific disclosure 
requirements upon insured depository institutions regarding the 
availability of ``pass-through'' insurance coverage for employee 
benefit plan deposits. In summary, the proposed rule would have 
required that: (1) Upon request (within two business days after receipt 
of such request), an insured depository institution provide written 
notice to any existing or prospective depositor of employee benefit 
plan funds of the institution's leverage ratio, Tier 1 risked-based 
capital ratio, total risk-based capital ratio, PCA capital category and 
whether or not, in the opinion of the institution, employee benefit 
plan deposits made with the institution would be entitled to ``pass-
through'' insurance coverage; (2) upon the opening of any account 
comprised of employee benefit plan funds, an insured depository 
institution provide written notice to the depositor of the 
institution's PCA capital category and whether or not such deposits are 
eligible for ``pass-through'' insurance coverage; (3) within two 
business days after an insured depository institution's PCA capital 
category changes from ``well capitalized'' to ``adequately 
capitalized'', the institution provide written notice to all depositors 
of employee benefit plan funds of the institution's new PCA capital 
category and whether or not new, rolled-over or renewed employee 
benefit plan deposits would be eligible for ``pass-through'' insurance 
coverage; and (4) within two business days after an insured depository 
institution's PCA capital category changes to a category below 
``adequately capitalized'', the institution provide written notice to 
all depositors of employee benefit plan funds indicating that new, 
rolled-over or renewed deposits of employee benefit plan funds made on 
or after the date the institution's PCA capital category changed to a 
category below adequately capitalized will not be eligible for ``pass-
through'' insurance coverage.
    The FDIC issued the proposed rule, in part, because of numerous 
comments it received from various sources on the difficulty of 
obtaining public information concerning an insured institution's 
capital levels and on its current PCA capital category--information 
necessary to determine whether employee benefit plan deposits would be 
eligible for ``pass-through'' insurance coverage.

Discussion of the Final Rule and Comments on the Proposed Rule

    The FDIC received 67 comment letters on the proposed rule. Thirty-
seven were from banks and savings associations, seventeen from bank or 
thrift holding companies, seven from trade associations, and six from 
other interested parties. Numerous suggestions and recommendations were 
made to revise the proposal.
    Only three commenters expressed support for all aspects of the 
proposed rule. The majority of comments recommended various revisions 
to make the proposal less burdensome. Many commenters noted that most 
institutions presently do not have a system for identifying employee 
benefit plan accounts and that more time was needed to provide the 
required disclosures to affected depositors. They also expressed 
concern about the administrative cost of complying with all aspects of 
the proposal. Others commented that the proposed rule might create a 
potential liability for insured institutions and promote bank ``runs.'' 
Most commenters suggested that the FDIC include optional sample 
disclosures in the regulation.
    In issuing the proposed rule for comment the FDIC was cognizant of 
the attendant regulatory burden that would be imposed upon insured 
depository institutions. Thus, the FDIC attempted to balance the 
undesirability of imposing additional regulatory requirements on 
insured depository institutions with the importance of providing timely 
notice to existing and prospective employee benefit plan depositors of 
the extent of ``pass-through'' insurance coverage available for their 
deposits--information which is important to them and not otherwise 
generally available. In response to the public comments, the FDIC has 
modified the requirements of the proposed rule so that the final rule 
has fewer and less burdensome disclosure requirements than those 
proposed. The remaining requirements are believed to be essential, 
however, to ensure that the necessary deposit insurance information is 
provided to employee benefit plan depositors.
    In FDICIA Congress for the first time linked deposit insurance 
coverage to the capital level of the insured depository institution. 
This relationship between the scope of deposit insurance and an 
institution's capital applies only to employee benefit plan deposits. 
This special category of deposit insurance coverage, therefore, 
requires special disclosure rules; otherwise, employee benefit plan 
depositors may be inappropriately disadvantaged. Given the nature of 
the statutory requirements for ``pass-through'' insurance coverage for 
employee benefit plan accounts, the Board believes the disclosure 
requirements are essential to safeguard the interests of employee 
benefit plan depositors and ultimately plan participants. As indicated 
below, however, the Board acknowledges that the disclosure requirements 
do not fully safeguard the interests of the owners of employee benefit 
plan deposits and believes that amendments to the insurance provisions 
of the FDI Act are [[Page 7703]] needed to remedy the continuing 
potential exposure of those owners.
    The following is a discussion of the comments received on the 
various aspects of the proposed rule including comments received on the 
specific issues raised in the proposed rulemaking:

A. Disclosures Upon Request

    The proposed rule would have required that, upon request ( within 
two business days after receipt of such request), an insured depository 
institution provide written notice to any existing or prospective 
depositor of employee benefit plan funds of the institution's leverage 
ratio, Tier 1 risked-based capital ratio, total risk-based capital 
ratio, PCA capital category and whether, in the opinion of the 
institution, employee benefit plan deposits placed with the institution 
would be eligible for ``pass-through'' insurance coverage. A majority 
of the commenters that specifically addressed this issue favored this 
provision. They cited the need for depositors to be able to obtain 
adequate information in order to make an informed decision about where 
to invest their funds. Those opposed to such a requirement cited the 
regulatory burden of developing policies and procedures, automation 
systems, training of customer service personnel and maintaining current 
capital-related information to ensure compliance with the requirement. 
Other commenters questioned the need to disclose this capital 
information because, in their view, the information would confuse most 
individuals.
    A number of commenters also questioned the requirement that 
institutions make disclosures to prospective employee benefit plan 
depositors upon request. They indicated that individuals are free to 
take their business elsewhere if they are not satisfied with the 
information received. They suggested that market forces can address 
this issue and recommended that this requirement be deleted from the 
regulation.
    The FDIC agrees that prospective customers are free to take their 
business elsewhere if they do not get the desired information. Existing 
customers, however, may have several reasons why they cannot easily 
move their accounts. Therefore, the final rule has been changed to 
require disclosures when requested by employee benefit plan customers 
that already have accounts at an insured institution.
    The FDIC believes that the regulatory burden placed on institutions 
can be mitigated if adequate time is given to establish policies and 
procedures. Accordingly, the final rule contains a delayed effective 
date of July 1, 1995. In addition, the capital information to be 
disclosed is based on the most recently available data and need not be 
as of the date of the deposit. The FDIC believes that insured 
institutions should not have to develop any new, specific procedures to 
develop the capital information required by this portion of the rule. 
For example, institutions that are clearly ``well capitalized'' and 
have experienced only minor variations in their capital ratios since 
the filing of their last quarterly Consolidated Report of Condition and 
Income (Call Report) may use the capital ratios calculated at that 
time.
    An institution's capital category and the availability of ``pass-
through'' insurance are, in almost all cases, believed to be derived 
from financial information currently available. Further, only a very 
few insured depository institutions are not eligible for employee 
benefit plan ``pass-through'' deposit insurance coverage. (Based on 
September 30, 1994 regulatory reporting data only 279 of 12,774 insured 
depository institutions were less than ``well capitalized''.) 
Therefore, it is estimated that the regulatory impact of this portion 
of the rule will be insignificant.
    Some commenters recommended that depositor requests be in writing 
and be mailed to a central location. The FDIC believes that once 
procedures are developed it should be no more burdensome to honor an 
oral request than a written one. In addition, imposing restrictions on 
existing depositors that request this information would hamper the 
purpose of providing timely information. Therefore, the FDIC has 
decided that depositor requests can be made orally or in writing to 
designated bank employees.

B. Disclosure Upon Opening an Account

    The proposed rule also would have required that, upon the opening 
of any employee benefit plan account, the insured depository 
institution provide a written notice to the depositor of the 
institution's PCA capital category and whether or not such deposits are 
eligible for ``pass-through'' insurance coverage. Commenters generally 
expressed support for this provision. Some, however, questioned whether 
disclosing capital information was meaningful to an employee benefit 
plan depositor.
    The FDIC continues to believe that it is essential that an employee 
plan depositor be notified about whether ``pass-through'' coverage is 
available for deposits placed with a depository institution. Moreover, 
based on the comments received on this and related issues, the FDIC 
also believes that when opening an employee benefit plan account 
depositors should be informed (or reminded of) the basic requirements 
of the law and regulations regarding the availability of ``pass-
through'' insurance coverage for employee benefit plan deposits. Thus, 
the FDIC has revised this provision of the final rule to require that 
the written notice provided to an employee benefit plan depositor 
include an accurate explanation of the requirements for ``pass-
through'' deposit insurance coverage. (A sample disclosure of this 
information is provided below.) Therefore, the final rule retains the 
requirement that the written disclosure statement indicate the 
institution's PCA capital category and whether, in the institution's 
judgment, the funds being deposited are eligible for deposit insurance 
coverage. The sample disclosure also contains language informing 
employee benefit plan depositors that additional information on the 
institution's capital condition may be requested.

C. Timing of Disclosures

    The proposed rule would have required that certain information be 
provided within two business days to current or prospective employee 
plan depositors in three different situations: (1) When an institution 
received a request for information from an employee benefit plan 
depositor; (2) when an institution's capital category changed from 
``well capitalized'' to ``adequately capitalized''; and (3) when an 
institution's capital category fell below ``adequately capitalized''. 
Regardless of whether or when notice is provided to the depositor, 
``pass-through'' insurance coverage on new, rolled over or renewed 
deposits may cease immediately upon notice to the insured depository 
institution that its PCA capital category has been lowered. Thus, the 
proposed rule requested comments on the feasibility of compliance with 
the two-day notification requirement and, specifically, on whether a 
longer time frame might increase the period for which a depositor's 
employee benefit plan funds would be uninsured.
    Of the 42 commenters that specifically addressed the time frame 
requirement, 40 stated that the two-business-day period was too short. 
The commenters recommended extending the time requirement from the 
proposed period of two business days to periods of time ranging from 
five days to 30 days. The most common recommendation was to extend the 
period to 10 business days, the same [[Page 7704]] period of time as 
required under the Federal Reserve's Regulation DD (12 CFR part 230), 
which implements the Truth in Savings Act. Seven commenters recommended 
five business days indicating that the required disclosures could be 
made within five business days once policies and procedures had been 
established to ensure compliance with the regulation.
    Based on the comments received on this issue, the Board has decided 
to require that the disclosures to be made upon request be made within 
five business days--the shortest period of time that it believes an 
institution could be expected to meet the time requirements. In 
arriving at this time period the FDIC attempted to balance the 
feasibility of complying with the requirement with the need for 
employee benefit plan depositors to know, on a timely basis, whether 
deposits are and will continue to be eligible for ``pass-through'' 
insurance coverage. Institutions are encouraged to provide the required 
disclosures sooner, if possible.
    The five business day time frame begins upon the bank's receipt of 
the request and ends when the institution mails or delivers the 
required information to the depositor. ``Receipt'' means when an 
institution receives a request, not when it is received by a designated 
department of the institution.
    Secondly, the FDIC has decided to extend to 10 business days the 
notification time frame when an insured institution must provide notice 
that new, renewed or roll-over employee benefit plan deposits placed 
with an institution will not be eligible for ``pass-through'' insurance 
coverage. The FDIC recognizes that this disclosure is more extensive 
than an individual request from an employee benefit plan depositor and 
generally will occur when an institution is experiencing financial 
problems. Institutions in this situation frequently have management 
deficiencies and weak internal controls. For these reasons, adoption of 
a slightly longer time frame is believed appropriate. Institutions are 
encouraged to provide disclosures sooner, if possible.
    Despite its decision to extend the periods in which insured 
institutions must comply with the disclosure requirements of the final 
rule, the Board continues to be concerned about employee benefit plan 
funds that are deposited with an institution before the institution is 
required to notify depositors of the discontinuation of the 
availability of ``pass-through'' coverage on such deposits. An example 
would be where an institution becomes ``undercapitalized'' on Day 1 and 
a customer deposits employee benefit plan funds before the expiration 
of the 10 days within which the institution is required to notify 
employee benefit plan depositors that ``pass-through'' insurance will 
not be available for deposits placed after Day 1. Under the FDI Act and 
Sec. 330.12, such deposits would not be eligible for ``pass-through'' 
coverage because at the time they were ``accepted'' the institution was 
undercapitalized--and, thus, not permitted to accept brokered deposits. 
The Board believes that Congress should consider amendments to the 
insurance provisions of the FDI Act to address this potential pitfall 
for employee benefit plan depositors and, particularly, the ultimate 
plan participants.
    One commenter recommended that when an institution notifies 
existing employee benefit plan depositors that ``pass-through'' 
insurance coverage is no longer available, the affected depositors not 
be assessed a withdrawal penalty. This would pertain particularly to 
the situation where a depositor places employee benefit plan funds with 
an institution between the time that such deposits become ineligible 
for ``pass-through'' coverage and the time the institution notifies the 
depositor of the ineligibility of new deposits for such coverage. 
Because the ``pass-through'' coverage of only newly deposited funds is 
potentially affected by this time gap and then only if the institution 
fails, the FDIC has decided not to address the withdrawal penalty issue 
in the final rule. The institution and its employee benefit plan 
customers are free to negotiate this matter. The FDIC anticipates that 
insured institutions will waive any penalty fees in appropriate 
circumstances.

D. Disclosure When an Institution's PCA Capital Category Changes but 
``Pass-Through'' Insurance Coverage Is Still Available

    The proposed rule would have required an insured depository 
institution to provide a written notice to all employee benefit plan 
depositors when the institution's PCA capital category changed from 
``well capitalized'' to ``adequately capitalized'', irrespective of 
whether employee benefit plan deposits still would be eligible for 
``pass-through'' insurance coverage. The FDIC requested comment on 
whether a disclosure should be required upon such a reduction in an 
institution's PCA capital category but the institution had obtained a 
waiver from the FDIC under Sec. 337.6 of the FDIC's regulations to 
accept brokered deposits, and thus, there would be no change in the 
availability of ``pass-through'' deposit insurance coverage for 
employee benefit plan deposits.
    Of the 46 commenters that specifically addressed this issue, 40 
were against requiring any disclosures if the availability of ``pass-
through'' coverage had not changed. Commenters noted that providing 
disclosures would cause confusion among depositors, create an increased 
regulatory burden on the institution in having to explain to affected 
depositors why the notice was being sent even though the availability 
of ``pass-through'' insurance coverage had not changed, encourage 
disintermediation, promote financial instability within institutions, 
and encourage bank ``runs''. They also indicated that such a disclosure 
requirement would be contrary to the FDIC goals of promoting a safe and 
sound banking system and of limiting losses to the deposit insurance 
funds.
    The FDIC concludes that this requirement would be an unnecessary 
burden and has decided to eliminate this provision from the final rule. 
Although a reduction in an institution's PCA capital category to 
``adequately capitalized'' reflects a decline in an institution's 
capital level and, thus, may be helpful information for an employee 
benefit plan depositor, this change is only one of many factors that an 
employee benefit plan depositor should consider when monitoring the 
financial condition of an insured depository institution. In addition, 
the final rule requires that employee benefit plan depositors be 
notified if and when new, renewed or rolled-over employee benefit plan 
deposits will no longer be eligible for ``pass-through'' insurance 
coverage. Also, under the final rule, information on an institution's 
PCA capital category and whether ``pass-through'' coverage is available 
can be obtained from an institution under the ``upon request'' 
provision of the final rule.

E. Form of Disclosures

    In the proposed rule the FDIC solicited specific comment on the 
form of disclosure. The five specific areas addressed were whether: (1) 
the required disclosures should have to be in a separate mailing; (2) a 
written acknowledgement from the intended recipient of the disclosure 
should be required; (3) the disclosure should be required to be 
prominent and conspicuous (for example, requiring bold type); (4) the 
disclosure should be part of the deposit agreement; and (5) other 
related information may be disclosed. [[Page 7705]] 
    The FDIC received only a few comments on each of these areas. In 
general, commenters favored the option of using a separate mailing, the 
requirement that disclosures be ``prominent and conspicuous'', and the 
ability to include other related information in the disclosure--such as 
explaining why an institution had a capital deficiency. The respondents 
opposed requiring an institution to obtain a written acknowledgement 
from employee benefit plan depositors or requiring that the disclosures 
be part of the deposit agreement.
    The FDIC has decided not to establish any specific forms or 
procedures on the required disclosures except for a general requirement 
that the required disclosures be ``clear and conspicuous.'' This phrase 
is believed to be more representative of the standard that disclosures 
must be in a reasonably understandable form. It does not require that 
disclosures be segregated from other material or located in any 
particular place or be in any particular type size.
    Institutions may, at their discretion, use any of the above or 
other disclosure methods as long as it meets the ``clear-and-
conspicuous'' standard and the time requirements. For example, an 
institution that is opening an employee benefit plan account may 
provide a separate written disclosure statement to the customer or 
reference the specific section of the deposit agreement that contains 
the disclosure information.
    A reasonableness standard will be used when reviewing compliance 
with this section of the regulation. Institutions should consider the 
level of sophistication of a depositor when providing required 
disclosures to assure that they are communicated in a clear and 
understandable fashion. The FDIC believes that, in general, managers 
and administrators of employee benefit plans are more sophisticated 
financial persons than the average depositor.

F. Discussion of Sample Disclosures

    The FDIC requested comment on whether the final rule should include 
a specific notice that institutions would have to provide to employee 
benefit plan depositors when an institution's PCA capital category 
changed from ``well capitalized'' to ``adequately capitalized'' or to a 
level below ``adequately capitalized.'' The majority of commenters 
specifically addressing this issue suggested that the FDIC provide 
sample language in the final rule but recommended that any sample 
disclosures be optional and that additional information be permitted to 
be disclosed to the employee benefit plan depositor--such as the 
reasons for an institution's capital deficiency. Other commenters 
expressed concern about the tone of the sample language included in the 
proposed rule while others suggested alternate language.
    One commenter recommended that the FDIC also provide a sample 
disclosure when a depositor opens an employee benefit plan account. 
Other commenters suggested a disclosure that only informs the depositor 
whether employee benefit plan deposits would be eligible for ``pass-
through'' coverage under the regulations.
    Based on these comments, the FDIC has provided below two sample 
disclosure notices. One applies when a depositor opens an employee 
benefit plan account and includes a description of the requirements for 
``pass-through'' insurance coverage. The other is when new, renewed or 
rolled-over employee benefit plan deposits would not be eligible for 
``pass-through'' insurance coverage.
    Additional information can be included with the disclosure as long 
as the overall disclosure statement meets the clear-and-conspicuous 
standard in the regulation. This may include, for example, additional 
information on an institution's capital deficiency and when, in the 
institution's opinion, the deficiency is expected to be corrected.
    A few commenters noted that the sample disclosure statements 
indicate that the FDIC is not bound, in its insurance determinations, 
by information provided by insured institutions to depositors on the 
eligibility of the employee benefit plan deposits to ``pass-through'' 
insurance coverage. It is correct that the FDIC is not bound in its 
insurance determinations by information provided by an insured 
institution to its customers. The FDIC also is not responsible for or 
bound by a depository institution's failure to provide the required 
disclosure statements.
    Although it may be helpful for an insured institution to inform 
employee benefit plan depositors that the FDIC is not bound by 
information provided by an insured institution to its customers, the 
Board believes the inclusion of that information in the required 
disclosure statements should be optional. The thrust of the disclosure 
requirements imposed by the final rule is to alert employee benefit 
plan depositors to the rules regarding ``pass-through'' insurance 
coverage and, in particular, to inform them when such coverage is no 
longer available. Requiring insured institutions to indicate whether 
the FDIC would be bound by incorrect information in the disclosure 
statements goes beyond the necessary scope of the required disclosure.

G. Separate Enforcement Provision

    The FDIC requested comment on whether a free-standing enforcement 
and/or penalty provision should be included in the final rule. The few 
commenters that addressed this question requested that any sanctions 
imposed be limited to cases of intentional disregard or willful 
noncompliance and that civil money penalties should not be assessed. In 
the proposed rule, the FDIC indicated that violations of regulatory 
requirements would be subject to the full array of enforcement 
sanctions (including the imposition of civil monetary penalties) 
contained in section 8 of the FDI Act (12 U.S.C. 1818).
    The FDIC has decided that separate enforcement provisions are not 
required to enforce the requirements of the final rule. The current 
provisions in section 8 of the FDI Act (12 U.S.C. 1818) are considered 
adequate and will be used to enforce compliance when deemed 
appropriate.

H. Inclusion of Information in Call Reports

    The FDIC requested comment on whether the capital ratios and PCA 
category of an institution should be made a general disclosure 
requirement in, for example, quarterly Consolidated Reports of 
Condition and Income (Call Reports). In this way, existing and 
prospective employee benefit plan depositors and other interested 
parties would be able to obtain an official, publicly available 
statement of an institution which clearly indicates this important 
information.
    Of the 15 commenters that addressed this issue, 12 favored adding 
the information to the Call Reports. Those in favor suggested that 
including this information would provide depositors with an efficient 
and independent means of obtaining relevant financial data on an 
insured institution. They also recognized that employee benefit plan 
administrators have a fiduciary obligation to determine the capital 
status of an insured institution. Two commenters also recommended that 
this information be disclosed on Thrift Financial Reports (TFRs). Two 
others suggested that this information be in lieu of the required 
disclosures in the proposed rule. One commenter specifically opposed 
any revision to the Call Report indicating that plan administrators had 
the sophistication to determine an institution's capital ratios and PCA 
capital category. [[Page 7706]] 
    Two other commenters suggested that a ``yes/no'' box be included on 
the Call Report that would indicate whether ``pass-through'' coverage 
was available. They opined that this one disclosure would provide 
employee benefit plan depositors with an explicit statement on a 
quarterly basis on whether an institution could provide ``pass-
through'' coverage and would avoid the question whether an institution 
classified as ``adequately capitalized'' was able to offer ``pass-
through'' insurance coverage.
    The FDIC does not have the authority to change the Call Report or 
the TFR on its own and has decided not to reach a conclusion at this 
time. Instead it will recommend to the Federal Financial Institutions 
Examination Council that it consider whether the Call Report and the 
TFR should be amended to include a line item for designating an 
institution's PCA capital category.
    Although public disclosure of this information would be beneficial 
to the public, it also could be misleading without further information 
or investigation. For example, the continued availability of ``pass-
through'' coverage would not be known in the case of institutions 
reporting an ``adequately capitalized'' condition, although this 
information would raise a ``red flag'' that depositors could 
investigate further. In addition, a Call Report disclosure is as of the 
date of the report and it may not reflect interim events between Call 
Report dates. Moreover, an institution's PCA capital category may not 
constitute an accurate representation of an institution's overall 
financial condition or future prospects--factors that employee benefit 
plan depositors also need to consider. Finally, it should be noted that 
the PCA rules do not prohibit an institution from disclosing its PCA 
capital category in response to inquiries from investors, depositors, 
or other third parties. However, such disclosures should include 
appropriate caveats in order to avoid misleading the public.
    The FDIC considered the recommendation of including a ``yes/no'' 
box on the Call Report but does not favor this proposal out of a 
concern that the disclosure would be more prone to reporting error and 
would create a greater regulatory burden on institutions.

I. Definition of ``Employee Benefit Plan Depositor''

    The FDIC indicated in the preamble of the proposed rule that the 
required information may be provided to an employee benefit plan 
administrator or manager instead of to each participant in a plan. One 
commenter recommended that the final rule define the term ``employee 
benefit plan depositor'' to mean managers or administrators of such 
plans. Thus, it would make clear that the required disclosures only 
need be made to the administrator or manager of an employee benefit 
plan and not to each individual beneficiary of the plan. The FDIC has 
decided to include such a definition in the final rule. The final rule 
also specifies that, for purposes of the requirements of the final 
rule, the definition of the term ``employee benefit plan'' includes 
eligible deferred compensation plans described in section 457 of the 
Internal Revenue Code (26 U.S.C. 457).

J. Sample Disclosures

    1. A sample disclosure that an insured depository institution may 
use when a depositor opens an account consisting of employee benefit 
plan deposits is as follows:

    Under federal law, whether an employee benefit plan deposit is 
entitled to per-participant (or ``pass-through'') deposit insurance 
coverage is based, in part, upon the capital status of the insured 
institution at the time each deposit is made. Specifically, ``pass-
through'' coverage is not provided if, at the time an employee 
benefit plan deposit is accepted by an FDIC-insured bank or savings 
association, the institution may not accept brokered deposits under 
the applicable provisions of the Federal Deposit Insurance Act. 
Whether an institution may accept brokered deposits depends, in 
turn, upon the institution's capital level. If an institution's 
capital category is either ``well capitalized,'' or is ``adequately 
capitalized'' and the institution has received the necessary broker 
deposit waiver from the FDIC, then the institution may accept 
brokered deposits. If an institution is either ``adequately 
capitalized'' without a waiver from the FDIC or is in a capital 
category below ``adequately capitalized,'' then the institution may 
not accept brokered deposits. The FDI Act and FDIC regulations 
provide an exception from this general rule on the availability of 
``pass-through'' insurance coverage for employee benefit plan 
deposits when, although an institution is not permitted to accept 
brokered deposits, the institution is ``adequately capitalized'' and 
the depositor receives a written statement from the institution 
indicating that such deposits are eligible for insurance coverage on 
a ``pass-through'' basis. The availability of ``pass-through'' 
insurance coverage for employee benefit plan deposits also is 
dependent upon the institution's compliance with FDIC recordkeeping 
requirements.
    [Name of institution]'s capital category currently is [insert 
prompt corrective action capital category]. Thus, in our best 
judgment, employee benefit plan deposits are currently eligible for 
``pass-through'' insurance coverage under the applicable federal law 
and FDIC insurance regulations.
    Under the FDIC's insurance regulations on employee benefit plan 
deposits, an insured bank or savings association must notify 
employee benefit plan depositors if new, rolled-over or renewed 
employee benefit plan deposits would be ineligible for ``pass-
through'' insurance and must provide certain ratios on the 
institution's capital condition to employee benefit plan depositors 
who request such information. If you would like additional 
information on [name of institution]'s capital condition, please 
make a request [describe procedures for obtaining the additional 
capital information].

    2. A sample disclosure that an insured depository institution may 
use when new, renewed or rolled-over employee benefit plan deposits 
will not be eligible for ``pass-through'' insurance coverage is as 
follows:

    On [date] [name of institution]'s capital category changed from 
[previous PCA category] to [current PCA category]. Because of this 
change in [name of institution]'s capital category and the 
institution's inability otherwise to satisfy the applicable FDIC 
requirements in this regard, any employee benefit plan funds 
deposited, rolled-over or renewed with [name of institution] after 
[date] will NOT be eligible for ``pass-through'' (or per-
participant) deposit insurance coverage under Sec. 330.12 of the 
FDIC's regulations. Accordingly, plan deposits made, rolled-over or 
renewed after [date] will be aggregated and insured only up to 
$100,000. This unavailability of ``pass-through'' insurance coverage 
on new, rolled-over or renewed deposits will continue until the 
institution's capital category improves and/or other applicable 
requirements are satisfied. Deposits made over the period of time 
when ``pass-through'' insurance coverage is unavailable will not be 
eligible for ``pass-through'' coverage unless and until these 
deposits are rolled-over or renewed at a time when ``pass-through'' 
insurance coverage is again available. ``Pass-through'' insurance 
coverage on deposits made before [insert date when ``pass-through'' 
coverage no longer is available] is not affected.

K. Delayed Effective Date of the Disclosure Requirements

    Four commenters recommended that the effective date of the final 
rule be delayed 150 to 180 days to permit institutions the time needed 
to develop automation systems, and policies and procedures to ensure 
compliance. Many commenters indicated they presently do not have a 
recordkeeping system that will identify employee benefit plan accounts. 
Some commenters indicated that they would have to notify all existing 
depositors in order to develop such a recordkeeping system.
    As indicated in Sec. 330.12 of the FDIC's regulations, in order for 
employee benefit plan deposits to be eligible for pass-through 
insurance coverage, among other things, the recordkeeping requirements 
of Sec. 330.4 of the FDIC's [[Page 7707]] regulations (12 CFR 330.4) 
must be satisfied. Under Sec. 330.4, in order for pass-through 
insurance to be available for fiduciary-type accounts (in which one 
party has deposited funds for the benefit of others) the bank's deposit 
account records must disclose the existence of the fiduciary 
relationship, and the details of the relationship and the interests of 
the other party(ies) must be ascertainable from the deposit account 
records of the insured depository institution or records maintained by 
the depositor, or a third party who has contracted with the depositor 
to maintain such records on his/her behalf.
    Some insured depository institutions that commented on the proposed 
rule stated that their records did not classify deposits specifically 
as employee benefit plan deposits; thus, they contended that it would 
be burdensome to develop and implement a new system for purposes of 
complying with the proposed disclosure requirements. The FDIC believes 
the final rule addresses this issue. A list can be maintained for new 
accounts going forward and a list of existing customers can be 
established over time. An event triggering the required disclosures 
when an institution no longer can offer ``pass-through'' insurance 
coverage is believed to be an infrequent occurrence.
    The changes made by FDICIA to insurance coverage applicable to 
employee benefit plan deposits have been in effect since December 1992. 
Thus, institutions should be aware of the need to provide customers 
with timely disclosures on the availability of ``pass-through'' 
coverage for employee benefit plan deposits. We assume that this 
already has been done by a general or specific mailing by institutions 
to affected depositors.
    Taking into consideration the period of time the revised ``pass-
through'' insurance rules have been in effect but factoring in the 
``lead-time'' several commenters said was needed to develop and 
implement the mechanisms required to comply with the ``upon-request'' 
disclosure provisions of the final rule, the Board has decided to delay 
the effective date of the revisions to Sec. 330.12 until July 1, 1995. 
This should provide insured depository institutions a sufficient period 
of time to satisfy all of the disclosure requirements of the final 
rule. This delay in the effective date also takes into consideration 
section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Pub. L. 103-325) (RCDRIA), which states, in 
part, that any new regulations and amendments to existing regulations 
which impose reporting, disclosure, or other requirements on insured 
depository institutions may only take effect on the first day of a 
calendar quarter unless certain exceptions are met.

L. Explanation of the Disclosure Requirements Under Sec. 330.12, 
Including the Requirement Affecting Existing Deposits on the Effective 
Date of the Final Rule That Are Not Eligible for ``Pass-Through'' 
Insurance Coverage

    The final rule will apply with respect to employee benefit plan 
funds on deposit with an insured depository institution on the 
effective date of the final rule and such funds deposited on and after 
that date. Institutions with employee benefit plan deposits on the 
effective date of the final rule that, when deposited, were not 
eligible for ``pass-through'' insurance coverage (under Sec. 330.12(a) 
and (b) of the FDIC's regulations) must provide to such existing 
depositors the disclosure statement and notice that ordinarily are 
required under Sec. 330.12(h)(2) of the final rule when an employee 
benefit plan account is opened. This requirement encompasses employee 
benefit plan funds deposited between December 19, 1992 (the effective 
date of the applicable provisions of FDICIA) and the effective date of 
the final rule. These depositors otherwise would not come within the 
scope of the final rule and thus, would not receive the disclosures 
otherwise required. The disclosure documents referred to above must be 
provided within 10 business days after the effective date of the final 
rule.
    After the effective date of the final rule, insured depository 
institutions that accept employee benefit plan deposits that are not 
eligible for ``pass-through'' insurance coverage are subject to the 
disclosure requirements contained in Sec. 330.12(h)(3) of the final 
rule.

M. Coordination With Other Federal Agencies

    The FDIC has consulted with the other federal banking and thrift 
regulators in developing the final rule and intends to continue to work 
with the other federal regulators to assure, among other things, 
consistent and minimally burdensome implementation of the final rule.

Technical Amendments to Part 330 Unrelated to the Proposed Amendments 
to Sec. 330.12

    The following is a discussion of the technical amendments to Part 
330 made by the final rule that are unrelated to the proposed 
amendments to Sec. 330.12. The amendments pertain to commingled 
accounts of bankruptcy trustees, joint accounts, accounts for which an 
insured depository institution is acting in a fiduciary capacity, and 
accounts for which an insured depository institution is acting as the 
trustee of an irrevocable trust. Because, as discussed below, the 
amendments merely clarify current rules applicable to deposit insurance 
coverage, they are outside the scope of section 302 of RCDRIA. Thus, 
they need not take effect on the first day of a calendar quarter; 
instead, the technical amendments will become effective 30 days after 
the final rule is published in the Federal Register.

A. Commingled Accounts of Bankruptcy Trustees

    One technical amendment codifies the FDIC's long-standing staff 
interpretation of the insurance coverage available to a commingled 
bankruptcy trustee's account. For many years, the FDIC's staff has 
advised bankruptcy trustees and other interested parties that, when a 
bankruptcy trustee appointed under title 11 of the United States Code 
commingles the funds of two or more bankruptcy estates in the same 
trust account (such an account is viewed as the account of a statutory 
irrevocable trust created by one of the chapters of title 11 of the 
United States Code), the funds of each title 11 bankruptcy estate will 
receive pass-through coverage--that is, each bankruptcy estate will be 
separately insured for up to $100,000--provided that the recordkeeping 
requirements of 12 CFR 330.4(b) are met.3 However, in spite of the 
FDIC's staff interpretation, the Department of Justice's Executive 
Office for United States Trustees (Executive Office), the organization 
charged with supervising the administration of bankruptcy estates and 
trustees, has declined to recognize that there is pass-through 
insurance for such accounts. In accordance with section 345 of the 
Bankruptcy Code, 11 U.S.C. 345, the Executive Office has required banks 
holding such bankruptcy trustee accounts to provide collateral for any 
such funds that are not insured by the FDIC. But because the Executive 
Office does not recognize pass-through insurance for such accounts, 
banks holding such accounts are being required to pledge more 
collateral than is actually necessary. The Executive Office has stated 
that it will recognize pass-through coverage, and reduce its 
[[Page 7708]] collateral requirements accordingly, provided that the 
FDIC Board takes formal action assuring such accounts pass-through 
coverage. For this reason, the Board has decided to include an 
amendment to the FDIC's insurance regulations, in the form of a new 
Sec. 330.11(d), confirming that pass-through insurance coverage will be 
provided for such bankruptcy trustee accounts.

    \3\FDIC Advisory Opinions published on this subject include 
FDIC-93-59 (August 17, 1993), FDIC 89-21 (June 13, 1989), FDIC-88-74 
(November 9, 1988), FDIC 87-17 (October 9, 1987), and FDIC-82-8 
(March 25, 1982).
---------------------------------------------------------------------------

    The technical amendment codifying the long-standing interpretation 
by FDIC staff of the insurance coverage available to the commingled 
account of a bankruptcy trustee qualifies as an interpretative rule; 
thus, it is exempt from the prior notice and comment requirements 
ordinarily imposed by the Administrative Procedure Act, 5 U.S.C. 
553(b)(3)(A).

B. Joint Deposit Accounts

    Another technical amendment clarifies the meaning of Sec. 330.7(c) 
of the FDIC's regulations (12 CFR 330.7(c)), which specifies the 
requirements an account must meet to qualify for separate insurance 
coverage as a joint account. Section 330.7(c) exempts certain types of 
accounts, such as certificates of deposit, from the general requirement 
that each co-owner must sign a signature card, but the regulation 
states that ``all such deposit accounts, must, in fact, be jointly 
owned''. Contrary to the FDIC's long-standing interpretation, some 
courts have interpreted the quoted language to require the FDIC to 
consider state law and evidence outside the deposit account records of 
the insured institution to contradict otherwise unambiguous deposit 
account records, in connection with claims that what appear to be joint 
accounts are in fact individually-owned. The FDIC intended, however, 
that depositors be bound by its recordkeeping regulation at 12 CFR 
330.4(a), which requires that the deposit account records be considered 
conclusive if they are unambiguous. Reliance on the deposit account 
records is critical if the FDIC is to fulfill its obligation to make 
insurance determinations and issue checks in a timely fashion after a 
bank fails. It is also critical in preventing fraudulent claims. 
Several courts have recognized the need for the FDIC to rely on such 
records in making insurance determinations. Fouad & Sons v. FDIC, 898 
F.2d 482 (5th Cir. 1990), In re Collins Securities Corp., 998 F.2d 551 
(8th Cir. 1993), Jones v. FDIC, 748 F.2d 1400 (10th Cir. 1984).
    For this reason, the amendment as presently proposed would remove 
the ``but all such deposits must, in fact, be jointly owned'' language 
from Sec. 330.7(c), and add that all deposit accounts which meet the 
requirements for qualifying joint accounts, including those which are 
exempted from the requirement that every co-owner must sign a signature 
card, will be deemed to be jointly-owned if the FDIC determines that 
the deposit account records are clear and unambiguous. The signatures 
of two or more persons on a deposit account signature card or the names 
of two or more persons on a certificate of deposit shall be conclusive 
evidence of a joint account if the deposit account records are clear 
and unambiguous. Only if the deposit account records are found to be 
ambiguous on the issue of ownership will evidence outside the deposit 
account records be considered, in accordance with the recordkeeping 
provisions of Sec. 330.4(a). After taking into account the comments 
received on this amendment, FDIC staff has revised the amendment 
proposed earlier (and published for comment at 58 FR 64525 (December 8, 
1993)) to conform more closely to the long-standing FDIC practice 
articulated by Sec. 330.4(a).
    The technical amendment on joint account coverage was published for 
comment as part of the proposed version of this capital disclosure 
regulation. 58 FR 64521 (December 8, 1993). The FDIC received two 
comments on the proposed amendment clarifying what evidence is 
necessary to determine the ownership of a joint account. An industry 
trade group opposed the amendment because of concern that it might 
permit the FDIC to ignore outside evidence of ``fundamental claims'' 
about the ``viability'' of a joint account under state law--for 
example, evidence that an account signature was forged, that one of the 
signers was incompetent when he signed, or that his signature was 
coerced. A savings association cited similar concerns but suggested 
that any outside evidence on such issues be considered under federal 
law, not state law.
    It is important to emphasize that, when the FDIC says that it will 
rely on the deposit account records if they are clear and unambiguous, 
it will do so only to determine the appropriate ownership category for 
insurance purposes. Such reliance will not necessarily preclude a 
depositor from proving that a deposit account existed when the bank's 
deposit account records show no evidence of such an account, or that an 
account actually contained more funds than are reflected in the bank's 
deposit account records. When the FDIC determines that the deposit 
account records are ambiguous or unclear, it has the discretion to 
consider evidence beyond the deposit account records. Of course, the 
FDIC need not find such extrinsic evidence persuasive. However, while 
the FDIC understands that account records may not always accurately 
reflect the intent of the parties to the account, and that 
circumstances may sometimes render the accounts invalid under state 
law,4 the FDIC believes that it is essential to make insurance 
determinations without considering outside evidence concerning the 
ownership category of accounts as long as the account records are 
clear.

    \4\On the subject of state law, Sec. 330.3(h) of the FDIC's 
insurance regulations states that ``while ownership under state law 
of deposited funds is a necessary condition for deposit insurance, 
ownership under state law is not sufficient for, or decisive in, 
determining deposit insurance coverage.'' Instead, ``[d]eposit 
insurance coverage is also a function of the deposit account records 
of the insured depository institution, of recordkeeping 
requirements, and of other provisions of this part, which, in the 
interest of uniform national rules for deposit insurance coverage, 
are controlling for purposes of determining deposit insurance 
coverage''. 12 CFR 330.3(h).
---------------------------------------------------------------------------

    The recordkeeping regulations, by requiring that the deposit 
account records be considered conclusive if they are unambiguous, serve 
several important purposes. When a bank fails, it is important that the 
FDIC be permitted to make insurance determinations and issue checks to 
depositors in a timely fashion, a timeliness made possible by the 
FDIC's reliance on those deposit account records that are clear. 
Reliance on unambiguous account records also permits the FDIC to 
determine the least cost resolution of a failed institution and to 
prevent fraudulent insurance claims. These purposes require that the 
deposit account records, even if they do not correctly reflect the 
parties' intent, be deemed conclusive if they are unambiguous. Of 
course, if the records are ambiguous or unclear, the FDIC may, in its 
discretion, rely on other evidence. Moreover, as the regulations 
already provide, state law concerning ownership of ambiguously-owned 
accounts are only the starting point for determining the ownership 
issue; federal law ultimately controls.
    For this reason, the Board has decided to include as part of this 
final rule the proposed amendment to the FDIC's deposit insurance rules 
on joint accounts. The amendment clarifies that an account holder 
seeking to prove that what appears to be a joint account is actually an 
account held in a right and capacity other than joint ownership (for 
example, as an individually-owned account) must satisfy the 
requirements of Sec. 330.4(a) of the FDIC's regulations 
[[Page 7709]] (12 CFR 330.4(a)) on the recognition of deposit 
ownership. Section 330.4(a) provides, in part, that, if the FDIC 
determines that the deposit account records of an insured depository 
institution are clear and unambiguous, no other records will be 
considered as to the manner in which those funds are owned. Section 
330.5(a) of the FDIC's regulations (12 CFR 330.5(a)) already explicitly 
addresses the situation where more than one natural person has the 
right to withdraw funds from an account that is actually viewed as 
individually-owned. The amendment applies to situations involving 
deposits which appear to be jointly-owned but which are claimed to be 
held in other rights and capacities.

C. Accounts for Which an Insured Depository Institution Acts as an 
Agent, Nominee, Guardian, Custodian or Conservator

    Another technical amendment concerns Sec. 330.6(a) of the FDIC's 
regulations (12 CFR 330.6(a)), which governs the insurance coverage 
provided for agency or fiduciary accounts. Section 330.6(a) currently 
indicates that funds deposited by an insured depository institution 
acting in a fiduciary capacity are governed by Sec. 330.10 of the 
insurance regulations. However, in May 1993 the FDIC amended 
Sec. 330.10, along with several other sections of the insurance 
regulations, primarily to implement revisions to the insurance rules 
made by section 311 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (FDICIA, Pub. L. 102-242, 105 Stat. 2236) (58 
FR 29952 (May 25, 1993)). One of those required revisions limits, 
effective December 19, 1993, the separate insurance formerly applicable 
to an account held by an insured depository institution in a fiduciary 
capacity to an account held by an insured depository institution as a 
trustee of an irrevocable trust. However, the May 1993 amendment simply 
revised Sec. 330.10; Sec. 330.6 continued to refer to Sec. 330.10 but 
was not revised, stating instead that ``[w]hen such funds are deposited 
by an insured depository institution acting in a fiduciary capacity, 
the insurance coverage shall be governed by the provisions of 
Sec. 330.10 of this part''.
    The present technical amendment conforms Sec. 330.6(a) to section 
311 of FDICIA. The first sentence of Sec. 330.6(a) states the general 
rule--that funds owned by a principal or principals and deposited into 
one or more deposit accounts in the name of a fiduciary shall be 
insured as if deposited in the name of the principal or principals. The 
second sentence implements the FDICIA change by stating that, when such 
funds are deposited by an insured depository institution acting as a 
trustee of an irrevocable trust, the insurance coverage will be 
governed by the provisions of Sec. 330.10.
    Like the technical amendment on joint account coverage, this 
technical amendment was published for comment as part of the proposed 
version of this capital disclosure regulation. 58 FR 64521 (December 8, 
1993). The amendment proposed to state clearly, in Sec. 330.6(a), that 
only funds deposited by an insured depository institution acting as a 
trustee of an irrevocable trust will be eligible for the separate 
insurance coverage described in Sec. 330.10. Up until this time, 
Sec. 330.6(a) had stated that funds deposited by an insured depository 
institution acting in a fiduciary capacity would be insured as provided 
by Sec. 330.10, while Sec. 330.10 stated that it pertains only to funds 
held by an institution acting as the trustee of an irrevocable trust. 
Thus, the amendment merely clarifies the language.
    The FDIC received four comments on this technical amendment, all of 
which were favorable. Two, however, noted that the proposed regulatory 
language for Sec. 330.6(a) seemed to except deposits held by insured 
depository institutions acting in a representative capacity from the 
general rule that all deposits held by fiduciaries are insured as if 
owned by the party represented by the fiduciary. Of course, even 
deposits held by insured depository institutions acting in a 
representative capacity follow this general rule. Thus, this final rule 
includes the proposed amendment to Sec. 330.6(a), as revised to reflect 
the suggested clarification.

D. Accounts Held by Depository Institutions in Fiduciary Capacities

    The final technical amendment further conforms the FDIC's 
regulations to section 311 of FDICIA, by changing the present title of 
Sec. 330.10, ``Accounts held by depository institutions in fiduciary 
capacities'', to ``Accounts held by a depository institution as the 
trustee of an irrevocable trust''. This change conforms Sec. 330.10 to 
section 311 of FDICIA and to the rest of Sec. 330.10 itself. Because 
the amendment merely makes the title consistent with Sec. 330.10, and 
because the text of Sec. 330.10 was itself published for comment (57 FR 
49026 (October 29, 1992), it is unnecessary, under the Administrative 
Procedure Act, to publish this proposed change for comment. 5 U.S.C. 
553(b)(3)(B).

Paperwork Reduction Act

    The final rule is intended to reduce uncertainty about whether 
employee benefit plan deposits are eligible for ``pass-through'' 
insurance coverage and to require depository institutions to provide 
timely disclosure to employee benefit plan depositors when ``pass-
through'' deposit insurance coverage is no longer available. No 
collections of information pursuant to the Paperwork Reduction Act are 
contained in the final rule. Consequently, no information has been 
submitted to the Office of Management and Budget for review.
    The technical amendments do not require any collections of 
information pursuant to section 3504(h) of the Paperwork Reduction Act, 
44 U.S.C. 3501 et seq. Accordingly, no information has been submitted 
to the Office of Management and Budget for review.

Regulatory Flexibility Act

    Neither the final rule nor the technical amendments will have a 
significant impact on a substantial number of small businesses within 
the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
Accordingly, the Act's requirements relating to an initial and final 
regulatory flexibility analysis are not applicable.

List of Subjects in 12 CFR Part 330

    Bank deposit insurance, Banks, Banking, Savings and loan 
associations, Trusts and trustees.

    The Board of Directors of the Federal Deposit Insurance Corporation 
hereby amends Part 330 of title 12 of the Code of Federal Regulations 
as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

    1. The authority citation for Part 330 continues to read as 
follows:

    Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 
1819(Tenth), 1820(f), 1821(a), 1822(c).

    2. Section 330.6 is amended by revising paragraph (a) to read as 
follows:


Sec. 330.6  Accounts held by an agent, nominee, guardian, custodian or 
conservator.

    (a) Agency or nominee accounts. Funds owned by a principal or 
principals and deposited into one or more deposit accounts in the name 
of an agent, custodian or nominee shall be insured to the same extent 
as if deposited in the name of the principal(s). When such funds are 
deposited by an insured depository institution acting as a trustee of 
an irrevocable trust, the insurance coverage [[Page 7710]] shall be 
governed by the provisions of Sec. 330.10 of this part.
* * * * *
    3. Section 330.7 is amended by revising paragraph (c) to read as 
follows:


Sec. 330.7  Joint ownership accounts.

* * * * *
    (c) Qualifying joint accounts. (1) A joint deposit account shall be 
deemed to be a qualifying joint account, for purposes of this section, 
only if:
    (i) All co-owners of the funds in the account are natural persons; 
and
    (ii) Each co-owner has personally signed a deposit account 
signature card; and
    (iii) Each co-owner possesses withdrawal rights on the same basis.
    (2) The requirement of paragraph (c)(1)(ii) of this section shall 
not apply to certificates of deposit, to any deposit obligation 
evidenced by a negotiable instrument, or to any account maintained by 
an agent, nominee, guardian, custodian or conservator on behalf of two 
or more persons.
    (3) All deposit accounts that satisfy the criteria in paragraph 
(c)(1) of this section, and those accounts that come within the 
exception provided for in paragraph (c)(2) of this section, shall be 
deemed to be jointly owned provided that, in accordance with the 
provisions of Sec. 330.4(a) of this part, the FDIC determines that the 
deposit account records of the insured depository institution are clear 
and unambiguous as to the ownership of the accounts. If the deposit 
account records are ambiguous or unclear as to the manner in which the 
deposit accounts are owned, then the FDIC may, in its sole discretion, 
consider evidence other than the deposit account records of the insured 
depository institution for the purpose of establishing the manner in 
which the funds are owned. The signatures of two or more persons on the 
deposit account signature card or the names of two or more persons on a 
certificate of deposit or other deposit instrument shall be conclusive 
evidence that the account is a joint account unless the deposit records 
as a whole are ambiguous and some other evidence indicates, to the 
satisfaction of the FDIC, that there is a contrary ownership capacity.
* * * * *
    4. The heading of Sec. 330.10 is revised to read as follows:


Sec. 330.10  Accounts held by a depository institution as the trustee 
of an irrevocable trust.

    5. Section 330.11 is amended by adding a new paragraph (d) to read 
as follows:


Sec. 330.11  Irrevocable trust accounts.

* * * * *
    (d) Commingled accounts of bankruptcy trustees. Whenever a 
bankruptcy trustee appointed under Title 11 of the United States Code 
commingles the funds of various bankruptcy estates in the same account 
at an insured depository institution, the funds of each Title 11 
bankruptcy estate will be added together and insured for up to 
$100,000, separately from the funds of any other such estate.
    6. Section 330.12 is amended by revising the heading and 
introductory text of paragraph (g), redesignating paragraphs (g)(1), 
(g)(2) and (g)(3) as paragraphs (g)(2), (g)(3) and (g)(4), 
respectively, and adding new paragraphs (g)(1) and (h) to read as 
follows:


Sec. 330.12  Retirement and other employee benefit plan accounts.

* * * * *
    (g) Definitions of ``depositor'', ``employee benefit plan'', 
``employee organizations'' and ``non-contingent interest''. Except as 
otherwise indicated in this section, for purposes of this section:
    (1) The term depositor means the person(s) administering or 
managing an employee benefit plan.
* * * * *
    (h) Disclosure of capital status--(1) Disclosure upon request. An 
insured depository institution shall, upon request, provide a clear and 
conspicuous written notice to any depositor of employee benefit plan 
funds of the institution's leverage ratio, Tier 1 risk-based capital 
ratio, total risk-based capital ratio and prompt corrective action 
(PCA) capital category, as defined in the regulations of the 
institution's primary federal regulator, and whether, in the depository 
institution's judgment, employee benefit plan deposits made with the 
institution, at the time the information is requested, would be 
eligible for ``pass-through'' insurance coverage under paragraphs (a) 
and (b) of this section. Such notice shall be provided within five 
business days after receipt of the request for disclosure.
    (2) Disclosure upon opening of an account. (i) An insured 
depository institution shall, upon the opening of any account comprised 
of employee benefit plan funds, provide a clear and conspicuous written 
notice to the depositor consisting of: an accurate explanation of the 
requirements for pass-through deposit insurance coverage provided in 
paragraphs (a) and (b) of this section; the institution's PCA capital 
category; and a determination of whether or not, in the depository 
institution's judgment, the funds being deposited are eligible for 
``pass-through'' insurance coverage.
    (ii) An insured depository institution shall provide the notice 
required in paragraph (h)(2)(i) of this section to depositors who have 
employee benefit plan deposits with the insured depository institution 
on July 1, 1995 that, at the time such deposits were placed with the 
insured depository institution, were not eligible for pass-through 
insurance coverage under paragraphs (a) and (b) of this section. The 
notice shall be provided to the applicable depositors within ten 
business days after July 1, 1995.
    (3) Disclosure when ``pass-through'' coverage is no longer 
available. Whenever new, rolled-over or renewed employee benefit plan 
deposits placed with an insured depository institution would no longer 
be eligible for ``pass-through'' insurance coverage, the institution 
shall provide a clear and conspicuous written notice to all existing 
depositors of employee benefit plan funds of its new PCA capital 
category, if applicable, and that new, rolled-over or renewed deposits 
of employee benefit plan funds made after the applicable date shall not 
be eligible for ``pass-through'' insurance coverage under paragraphs 
(a) and (b) of this section. Such written notice shall be provided 
within 10 business days after the institution receives notice or is 
deemed to have notice that it is no longer permitted to accept brokered 
deposits under section 29 of the Act and the institution no longer 
meets the requirements in paragraph (b) of this section.
    (4) Definition of ``employee benefit plan''. For purposes of this 
paragraph, the term employee benefit plan has the same meaning as 
provided under paragraph (g)(2) of this section but also includes any 
eligible deferred compensation plans described in section 457 of the 
Internal Revenue Code of 1986 (26 U.S.C. 457).

    By order of the Board of Directors.

    Dated at Washington, D.C., this 31st day of January, 1995.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95-3178 Filed 2-8-95; 8:45 am]
BILLING CODE 6714-01-P