[Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
[Proposed Rules]
[Pages 26435-26449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11965]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB73


Simplification of Deposit Insurance Rules

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Proposed rule.

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SUMMARY: The FDIC is seeking comment on specific proposed revisions to 
the FDIC's deposit insurance regulations. The intended effect of the 
proposed rule is to simplify and revise the FDIC's regulations on 
deposit insurance by making several technical revisions and certain 
substantive revisions.

DATES: Written comments must be received by the FDIC on or before 
August 12, 1997.

ADDRESSES: Written comments are to be addressed to the Office of the 
Executive Secretary, Federal Deposit Insurance Corporation, 550 17th 
Street, N.W.,

[[Page 26436]]

Washington, D.C. 20429. Comments may be hand-delivered to Room F-402, 
1776 F Street, N.W., Washington, D.C. 20429, on business days between 
8:30 a.m. and 5 p.m. (FAX number: (202) 898-3838; Internet address: 
[email protected]). Comments will be available for inspection in the 
FDIC Public Information Center, room 100, 801 17th Street, N.W., 
Washington, D.C., between 9:00 a.m. and 5:00 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Counsel, Legal 
Division, (202) 898-7349, Federal Deposit Insurance Corporation, 550 
17th Street, N.W., Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

Background

    One of the FDIC's corporate operating projects under its Strategic 
Plan is to simplify the deposit insurance rules. The purpose is to 
promote public understanding of deposit insurance and to increase 
financial institution and consumer understanding of deposit insurance. 
This effort to simplify the FDIC's insurance regulations, found in 12 
CFR part 330 (part 330), is also intended to satisfy the provisions in 
section 303(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994, 12 U.S.C. 4803(a), to reduce regulatory burden 
and improve efficiency.
    The FDIC revised its insurance regulations twice in the recent 
past. The first time, in 1990, was necessitated by the termination of 
the Federal Savings and Loan Insurance Corporation (FSLIC). The 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 
(FIRREA) (Pub. L. 101-73, 103 Stat. 183 (1989)) required the FDIC to 
issue uniform insurance regulations for deposits in all insured 
depository institutions, including those previously insured by the 
FSLIC. The second set of recent changes in the FDIC insurance rules 
were made pursuant to provisions in the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (FDICIA) (Pub. L. 102-242 (1991)). 
A provision in FDICIA, in essence, limited the insurance coverage of 
employee benefit and retirement plans. Also, in February 1995, the FDIC 
issued disclosure requirements in connection with the limited 
availability of insurance for employee benefit plan accounts, 60 FR 
7701 (Feb. 9, 1995), codified at 12 CFR 330.12.
    The amendments made to the insurance rules in 1990 reconciled 
differences between the FSLIC insurance regulations and the then-
existing FDIC regulations. They also revised the insurance regulations 
to, among other things, better organize and define terms used in the 
regulations, convert long-standing interpretive opinions into 
regulations, resolve outstanding issues and clarify ambiguous 
provisions. Although the insurance rules were revised in 1990 and, to a 
lesser extent in 1993 and 1995, the Board of Directors believes that 
the revisions in the proposed rule would be helpful. The need for these 
changes has been brought to the FDIC's attention in several ways, 
especially through the steady receipt of letters and phone calls on 
insurance questions. Experience with bank and thrift failures also has 
enabled the staff to identify procedural aspects of the regulations 
which, when applied in accordance with the regulations, may prove 
unfair to certain depositors in some situations.
    The FDIC must be mindful of the applicable statutory parameters in 
considering whether and to what extent to modify the insurance 
regulations. The general statutory basis for and guidance on deposit 
insurance is found in section 11(a) of the Federal Deposit Insurance 
Act (FDI Act), 12 U.S.C. 1821(a), which provides, in relevant part, 
that depositors are insured up to $100,000 based on the ``right'' and 
``capacity'' in which the deposits are maintained. The statute does not 
define ``depositor,'' ``right'' or ``capacity.'' The FDIC regulations 
implementing the ``right-and-capacity'' language recognize different 
categories of insured accounts based on an analysis of ownership. Thus, 
the rules provide ``separate'' insurance coverage for different types 
of accounts which are owned in different ways. For example, accounts 
owned by an individual are not added to joint accounts in which that 
same individual has an ownership interest. ``Separate'' insurance means 
that each category of account in which a person has an ownership 
interest is covered for up to $100,000 separately insured from the 
funds in other categories of accounts.

Advance Notice of Proposed Rulemaking

    In May 1996 the FDIC issued an Advance Notice of Proposed 
Rulemaking (ANPR), 61 FR 25596 (May 22, 1996), soliciting preliminary 
views on whether and, if so, how the FDIC should simplify its deposit 
insurance regulations. The ANPR requested comment on all aspects of 
streamlining, simplifying and clarifying the insurance rules, including 
the likely effect of such changes on consumers and the banking 
industry. The FDIC also sought comment on several specific revisions to 
the insurance rules that the Board was then considering.
    The possible areas of simplification identified in the ANPR were: 
(1) Rewriting certain parts of the rules to make them clearer and 
easier to understand; (2) eliminating step one of the two steps 
involved in determining the insurance coverage for joint accounts; (3) 
revising the recordkeeping rules allowing the FDIC more flexibility 
(for the benefit of depositors) in determining the ownership of 
deposits held in a custodial or fiduciary capacity; (4) changing the 
rules on ``payable upon death'' accounts; (5) modifying the way the 
FDIC insures certain types of accounts upon the death of the owner(s) 
of the accounts; (6) recommending to Congress that the FDI Act be 
amended to change the way employee benefit plans are insured; and (7) 
revising the rules on living trust accounts.
    The comment period for the ANPR closed on August 20, 1996. The FDIC 
received sixty-eight comments on the ANPR, almost all of which 
supported the FDIC's deposit insurance simplification efforts. The FDIC 
considered the comments received on the ANPR in preparing the specific 
revisions in the proposed rule. Comments on the ANPR are identified and 
discussed below in the context of specific issues and proposed 
revisions.

Approach to Deposit Insurance Simplification

    The Board believes that certain technical revisions and moderate 
substantive revisions to the deposit insurance rules are warranted. The 
technical changes are described below in the section-by-section 
discussion of the proposed rule. They consist of numerous wording and 
organizational changes to the insurance rules intended to make the 
rules clearer and easier to understand. The technical changes also 
encompass the addition of several examples in the insurance regulations 
illustrating the application of the various deposit insurance rules. 
The proposed substantive revisions in the proposed rule are as follows.

Proposed Substantive Revisions

1. The Recordkeeping Rules for Fiduciary Accounts
    The insurance regulations impose specific recordkeeping 
requirements as a precondition for insuring parties other than those 
whose names appear on the depository institution's deposit account 
records. 12 CFR 330.4(a). 1 For example,

[[Page 26437]]

if A is acting as an agent for B, C, and D and places funds belonging 
to them in an insured bank or thrift, the institution's deposit account 
records must show that A is holding the account as an agent in order 
for the FDIC to recognize the ownership interests of B, C, and D. The 
FDIC will then insure the account as if it were held directly by B, C, 
and D (the owners of the account) as long as either the institution's 
deposit account records or the agent's records (maintained in ``good 
faith and in the regular course of business'') evidence B, C, and D's 
ownership interests in the account. Id. at 330.4(b). In this context, 
we say that the insurance ``passes-through'' the agent to the owner(s) 
of the account. The same ``pass-through'' principle applies to other 
types of custodial and fiduciary accounts, including those that 
constitute a separate right and capacity, such as irrevocable trust 
accounts and employee benefit plan accounts. Id. at 330.10 & 330.12.
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    \1\  The rules derive from section 12(c) of the FDI Act (12 
U.S.C. 1822(c)) which provides that the FDIC is not required to 
recognize as the owner of a deposit any claimant whose name or 
interest as owner is not disclosed on the records of the depository 
institution if such recognition would increase the aggregate amount 
of the insured deposits in the institution.
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    The concept of ``pass-through'' insurance stems from and is 
consistent with the statutory principle that insurance is provided 
according to the right and capacity in which the funds are owned. In 
this agency situation B, C, and D's ownership interests in the agency 
account would be added to any other funds held at the same bank or 
thrift by or for them (in the same ownership capacity) and insured to a 
limit of $100,000. Id. at 330.6(a). Thus, if A had an individual 
account at a bank and an agent was holding funds for him or her at the 
same bank, the funds in the individual account would be added to his or 
her ownership interest in the agency account and insured to a combined 
limit of $100,000, assuming compliance with the recordkeeping 
requirements explained above. Id. at 330.4.
    The reasons the FDIC imposes recordkeeping requirements for ``pass-
through'' insurance purposes are: (1) To safeguard against fraud when 
an insured institution fails and the FDIC is called upon to pay 
insurance claims and (2) to enable the FDIC to estimate the amount of 
insured deposits when considering the resolution options for a failing 
insured depository institution. 2
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    \2\ In many cases where an insured institution is declared 
insolvent, the FDIC transfers some or all of the assets and deposit 
liabilities to another institution. In such cases, speed and 
accuracy in accounting for the assets and liabilities being 
transferred is critical to the consummation of the transaction. 
Permitting the FDIC to rely on the account records facilitates these 
transactions and prevents post-default fraudulent claims to increase 
insurance coverage.
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    The recordkeeping requirements intentionally limit the FDIC's 
ability to consider evidence outside the deposit account records of an 
insured institution in determining the ownership of deposits. They 
establish a presumption that deposited funds are actually owned in the 
manner indicated on the account records. Those records are binding on 
the depositor if they are ``clear and unambiguous.'' Id. at 330.4(a). 
The FDIC has the discretion, however, to decide whether records are 
clear and unambiguous. If the FDIC determines that the records are 
unclear or ambiguous, then it may consider evidence other than the 
deposit account records. The issue the FDIC has faced from time to time 
is whether this discretion provides the FDIC with sufficient 
flexibility to recognize beneficial and/or multiple ownership of 
accounts when such ownership is not reflected on the bank or thrift's 
deposit account records. In other words, if the deposit account records 
are not unclear or ambiguous, the regulations restrict the FDIC from 
considering extraneous evidence in determining the ownership interest 
of the deposits, even if such evidence exists and would demonstrate 
ownership other than that reflected in the institution's deposit 
account records.
    A specific situation at a recent bank failure involved a deposit 
account held by a title company as agent for customers in the process 
of buying and selling houses. Because the bank's deposit account 
records did not indicate the agency nature of the account, the funds 
were deemed to be owned by the title company and insured to a limit of 
$100,000; thus, the funds were not afforded the ``pass-through'' 
coverage (for each customer of the title company) that would have 
applied if the bank's records had indicated that the title company was 
acting as an agent.
    The revisions to the deposit insurance recordkeeping rules in the 
proposed rule are intended to provide the FDIC with more flexibility in 
considering the actual ownership interests in deposit accounts held by 
fiduciaries and thereby prevent possible hardships. The approach used 
in the proposed rule is to allow the FDIC to look beyond the deposit 
accounts records of the depository institution where account titles are 
indicative of a fiduciary relationship. Two examples would be accounts 
held by escrow agents and those held by entities such as title 
companies, who commonly hold funds for others.3 Another 
situation would be where an account is held in the name of an entity, 
or the nominee of that entity, whose primary business is to hold, for 
safekeeping reasons, deposits for others.
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    \3\ This option also would encompass multi-tiered fiduciary 
relationships where, for example, an agent maintains a deposit 
account for a party who also is an agent. The current regulations 
include special recordkeeping rules for such situations. 12 CFR 
330.4(b)(3).
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    The FDIC received forty-two comments on the ANPR concerning this 
possible revision to the insurance coverage recordkeeping rules. The 
vast majority of those who commented encouraged the FDIC to revise the 
recordkeeping rules to allow the FDIC more flexibility in determining 
the ownership of account funds. Others commented that the FDIC should 
relax the recordkeeping rules only if it can be done without increasing 
the compliance burden on insured banks and thrifts.
    The FDIC requests specific comment on whether the recordkeeping 
rules for ``multi-tiered fiduciary relationships'' should be revised. 
12 CFR 330.4(b)(3). Those rules specify alternative requirements in 
situations where a fiduciary is holding funds for another party who 
also is a fiduciary. The rules were added to the FDIC's insurance 
regulations in 1990 to codify the FDIC staff views on the recordkeeping 
requirements for such multi-tiered (or multiple pass-through) fiduciary 
accounts. Preliminarily, the FDIC believes that the rules provide 
certainty to the industry on the subject and, thus, should be retained. 
As indicated, however, the FDIC seeks comments on the necessity and 
clarity of these special recordkeeping rules.
2. Treatment of Accounts Upon the Death of the Owner(s) of the Accounts
    Depending on the applicable state law, the ownership interest of a 
deposit account often changes upon the death of the owner of a deposit 
account. For deposit insurance purposes, the FDIC has adopted this 
general principle of state law 4 and thus, under the FDIC's 
current position, if the beneficiaries/executor of the decedent do not 
act immediately after the decedent's death to restructure the 
account(s), insurance coverage of the decedent's accounts may be 
decreased, sometimes significantly. For example, if a husband and wife 
hold a joint account, a POD account and two individual accounts in 
their respective names, the death of one spouse would

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result in the surviving spouse's becoming the sole owner of the joint 
account and the POD account. Thus, the accounts would be aggregated 
with the surviving spouse's individual account, possibly resulting in a 
substantial reduction in insurance coverage.
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    \4\ The FDIC's insurance regulations provide that, while 
ownership under state law is a necessary condition for deposit 
insurance, ownership under state law is not decisive in determining 
deposit insurance coverage. 12 CFR 330.3(h).
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    Over the years the FDIC has received several questions and 
complaints about the treatment of deposit accounts, for deposit 
insurance purposes, upon the death of the owner of the deposits. A 
question of fairness has been raised about whether a survivor of a 
decedent should be ``penalized'' for not rearranging the decedent's 
bank accounts quickly enough after the decedent's death so as not to 
cause a reduction in deposit insurance coverage. Some have complained 
that time is needed after the death of an accountholder before proof 
can be shown to the depository institution of the decedent's death. 
Specifically, a delay is sometimes occasioned before death certificates 
are available. Moreover, state laws are not consistent about when, 
after the death of a depositor, the ownership interests in deposit 
accounts actually change.
    The ANPR requested comment on whether the FDIC should provide a 
``grace period'' after the death of a depositor during which the 
accounts would be insured as if the depositor had not died. Almost all 
of those who commented on this issue expressed support for such a grace 
period, noting that it seemed fair and was within the FDIC's authority 
to provide. The FDIC believes that there is merit in allowing survivors 
a limited amount of time to attend to a decedent's deposit accounts, 
particularly if in some situations the survivors would have no control 
over the decedent's accounts until certain administrative and probate 
requirements are satisfied. Although it is infrequent that a depositor 
dies and his or her depository institution closes at or about the same 
time, there have been and will be situations where individuals were and 
will be faced with this unfortunate sequence of events. Although, for 
purposes of national uniformity, the FDIC currently deems the ownership 
interests in deposit accounts to change immediately upon the death of a 
depositor, the laws of all the states are not uniform on this issue.
    For these reasons, the proposed rule would permit a six-month 
period after the death of an accountholder during which time the 
insurance coverage of the accounts in which the decedent has an 
ownership interest would not change, unless those authorized to do so 
restructure the account(s), thereby rendering the grace period 
inapplicable.\5\ The use of the six-month grace period is not intended 
to result in a reduction in coverage. The regulation therefore provides 
that the grace period is optional and shall not be applied if the 
result would be a decrease in deposit insurance coverage. The FDIC 
specifically requests comment on whether the proposed six months is the 
appropriate length of time for the grace period.
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    \5\ The former FSLIC, as a matter of policy, allowed a grace 
period of six months following the death of a depositor for the 
decedent's deposits to be restructured. If an insured thrift failed 
during the grace period and additional insurance would be available 
if the decedent had not died, the FSLIC insured the account(s) based 
on the account ownership shown on the institution's records as if 
the decedent were still living. The reason for the FSLIC policy was 
to ``lessen the hardship'' that might be caused otherwise.
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3. The Rules on Living Trust Accounts
    A ``living trust'' is a formal trust in which the owner retains 
control of the trust assets during his or her lifetime and designates 
the beneficiaries of the assets upon his or her death. The owner may 
revoke or change the terms of the trust during his or her lifetime. In 
1993 the FDIC Legal Division prepared guidelines on the insurance of 
revocable accounts, with an emphasis on living trusts. The guidelines 
were updated in 1994. FDIC Adv. Op. 94-32 (May 18, 1994) (Guidelines). 
The Guidelines are necessarily detailed and somewhat complex. At the 
same time the Legal Division prepared the Guidelines, the FDIC also 
adopted an informal policy not to review complex living trust documents 
to determine POD coverage but, instead, to make copies of the 
Guidelines available and recommend that persons inquiring about such 
coverage consult with the lawyer who drafted the living trust. Despite 
the availability of the FDIC's Guidelines and the existence of the 
FDIC's current policy not to review trust documents, the FDIC still 
receives numerous questions about the insurance of POD accounts held in 
connection with living trusts.
    Over the years the FDIC has found that the vast majority of deposit 
accounts held pursuant to a living trust are not eligible for insurance 
coverage under the POD rules because the trusts contain ``defeating 
contingencies.'' As explained in the Guidelines, a defeating 
contingency exists when a named beneficiary in a living trust would 
not, simply by operation of the settlor's death, become the owner of 
the trust assets. A contingency of some sort has to be satisfied before 
the beneficiary becomes entitled to the assets. One example would be 
that the beneficiary must be married at the time of the settlor's death 
to be entitled to the assets. The existence of a defeating contingency 
in a living trust would disqualify the portion of the funds in the POD 
account corresponding to the unqualified beneficiary for POD insurance 
coverage treatment, because POD coverage is conditioned in part upon 
the intention of the owner that the funds in the account pass to the 
named beneficiary(ies) upon the owner's death. 12 CFR 330.8(a). In such 
situations, the funds in the POD account corresponding to an 
unqualified beneficiary would be treated as single-ownership funds of 
the owner of the account. Id. at 330.8(b).
    Because, in the FDIC's experience, it seems that at least a 
majority of POD accounts held in connection with living trusts do not 
qualify for POD coverage, an argument can be made that, to avoid 
depositor confusion, the FDIC should simply amend its regulations to 
indicate accounts held pursuant to living trusts would not qualify for 
insurance coverage under the POD account category. In fact, the FDIC 
suggested this option in the ANPR. As indicated in some of the comments 
received on this alternative, however, the POD coverage category is 
broader than just POD accounts and includes all types of accounts held 
in connection with revocable trusts that satisfy the requirements in 
the POD insurance coverage regulations. It seems inappropriate, 
therefore, to exclude accounts held in connection with living trusts 
from POD insurance treatment where the requirements of the regulation 
are otherwise satisfied.
    As an alternative to eliminating the living trust deposit accounts 
from the POD insurance category, the FDIC is proposing to amend the POD 
rules to indicate that those rules might apply to accounts held in 
connection with living trusts, but only if the requirements of the POD 
regulation are satisfied. The revised rules would specify that the 
existence of a ``defeating contingency'' would prevent corresponding 
funds in a POD account from receiving POD deposit insurance coverage, 
as to the beneficiary whose interest in the assets of the living trust 
is subject to the defeating contingency.

Other Possible Substantive Changes Mentioned in the ANPR

    In the ANPR the FDIC requested comments on three additional 
possible substantive revisions to the deposit insurance rules. For the 
reasons indicated below, however, those possible revisions are not 
included as part of the proposed rule.

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1. The Joint Account Rules
    Joint ownership is one of the account categories that qualifies for 
separate insurance coverage. 12 CFR 330.7. Thus, a depositor who has an 
individual deposit and interests in joint accounts at the same insured 
bank or thrift is insured for up to $100,000 per category of account. 
Currently deposit insurance for joint accounts is determined by a two-
step process: first, all joint accounts that are identically owned 
(i.e., held by the same combination of individuals) are added together 
and the combined total is insurable up to the $100,000 maximum; second, 
each person's interests in joint accounts involving different 
combinations of individuals are combined and the total is insured up to 
the $100,000 maximum. The general rules are: (1) No one joint account 
can be insured for over $100,000, (2) multiple joint accounts with 
identical ownership cannot be insured for over $100,000 in the 
aggregate, and (3) no one person's insured interest in the joint 
account category can exceed $100,000.
    These rules governing joint accounts are somewhat complex and 
sometimes misunderstood by both consumers and bankers. Thus, in the 
ANPR the FDIC raised the possibility of simplifying the current joint 
account rules by eliminating the first step of the two-step process. 
Under this alternative, all funds held in joint accounts would be 
allocated among the owners and each owner's interests in all joint 
accounts (held at the same depository institution) would be added and 
insured up to $100,000 in the aggregate. The ANPR comments on this 
possible revision to the joint account rules were uniformly favorable. 
Members of the banking industry and others, however, have raised 
questions about the potential ``moral hazard'' of expanding deposit 
insurance coverage beyond current limits. The moral hazard exists, in 
this context, because insured depositors do not have an incentive to 
monitor and discipline their institutions. The managers of those 
insured banks and thrifts, consequently, may take more risks than they 
otherwise would. Members of Congress also have expressed concerns about 
expanding federal deposit insurance coverage. Moreover, there are 
legislative proposals that take the opposite approach by seeking to 
limit FDIC insurance.
    The FDIC acknowledges that, while the possible amendment to the 
joint account rules mentioned in the ANPR would simplify and likely 
improve public understanding of the joint account rules, it also could 
increase deposit insurance coverage significantly. For example, under 
the current rules a qualifying joint deposit account held by A&B for 
$200,000 would be insured for $100,000 based on the ``step one'' rule 
that no joint account owned by the same combination of individuals can 
be insured for more than $100,000. If step one were eliminated, that 
same account would be insured for up to $200,000. In this connection, 
the staff of the Board of Governors of the Federal Reserve System 
performed an analysis in 1992 in conjunction with the FDIC study, The 
Costs, Feasibility and Privacy Implications of Tracking Deposits. The 
Federal Reserve analysis concluded that eliminating step one of the 
joint account rules would result in a $22 billion increase in insurance 
coverage. Although the FDIC is uncertain that the Federal Reserve 
analysis is an accurate measurement of the potential increase in 
deposit insurance, the analysis raises concerns that require further 
consideration.
    For these reasons, the FDIC has decided to further study the 
policy, economic and other implications of eliminating step one of the 
joint account rules. The FDIC staff will conduct such a study and 
report its findings to the Board. The objective is to simplify the 
joint account rules without significantly increasing deposit insurance.
2. The Rules on ``Payable on Death'' Accounts
    The insurance rules provide for separate coverage for funds owned 
by an individual and deposited into any account commonly referred to as 
a ``payable-on-death'' account, tentative or ``Totten'' trust account, 
revocable trust account, or similar account (POD accounts). 12 CFR 
330.8. The regulation limits qualifying beneficiaries to the owner's 
spouse, children and grandchildren. Id. at 330.8(a). The owner is 
insured up to $100,000 as to each such named qualifying beneficiary, 
separately from any other accounts of the owner or the beneficiaries. 
Thus, if the individual names his spouse, three children and two 
grandchildren as beneficiaries, the account would be insured up to 
$600,000, assuming the other requirements of the regulation are 
satisfied. Over the years the FDIC has received numerous questions on 
why other types of relatives of POD account owners are not included 
within the qualifying degree of kinship. Thus, in the ANPR the FDIC 
requested comment on whether and, if so, how the POD insurance rules 
should be changed. The FDIC received fifty-one ANPR comments on this 
issue. The majority of those who commented encouraged the FDIC to 
expand the qualifying beneficiaries to include those likely to be named 
by a POD account owner/settlor. Others commented that the current rules 
seem fair and should be retained. As with the possible amendments to 
the joint account rules mentioned in the ANPR, however, members of the 
banking industry and others have raised questions about the potential 
``moral hazard'' of expanding deposit insurance coverage. Members of 
Congress also have expressed concerns about expanding federal deposit 
insurance.
    Expanding the list of qualifying beneficiaries in the POD accounts 
rules would provide additional depositors with access to POD insurance 
and could significantly expand the scope of deposit insurance. Thus, at 
this time the FDIC believes that the best alternative is to retain the 
current POD rules and to continue to study the nature and scope of POD 
coverage. The staff will conduct such a study and report its findings 
to the Board.
3. Statutory Requirements Regarding Employee Benefit Plans
    Under an amendment to the FDI Act made by FDICIA, pass-through 
insurance coverage is not available to employee benefit plan deposits 
that are accepted by an insured bank or thrift when the institution 
does not meet prescribed capital requirements. 12 U.S.C. 1821(a)(1)(D). 
If an institution accepts employee benefit plan deposits at a time when 
it is not sufficiency capitalized, such deposits are insured only up to 
$100,000 per plan (as opposed to $100,000 per participant of the plan). 
This FDICIA-originated provision is the only one in the FDI Act and the 
FDIC's regulations to base insurance coverage on the capital 
sufficiency of the insured institution where the deposits are placed. 
Section 330.12 of the FDIC's insurance regulations implements this 
statutory limitation on pass-through coverage for employee benefit plan 
deposits. 12 CFR 330.12. The FDIC believes that the statute is complex 
and difficult for the industry and the public to understand.
    The FDIC raised this matter in the ANPR. Based on the varied 
comments received, the FDIC intends to study the issue further to 
determine what, if any, action need be taken by the FDIC.

Section-by-Section Discussion of the Proposed Rule

    The following is an identification and, where appropriate, an 
explanation of the various proposed revisions to each section of the 
FDIC's insurance regulations.

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Section 330.1--Definitions
    Various clarifying and technical changes are proposed to be made to 
this definitional section of part 330. Some definitions provided in 
other provisions of part 330 (for example, the definition of 
``independent activity'' in section 330.9) are moved to this section. 
The definition of ``Corporation'' (meaning the FDIC) is added to the 
section.
Section 330.2--Authority and Purpose
    This section is reduced to simply stating the purpose of part 330. 
The narrative description of the FDIC's authority to issue deposit 
insurance regulations is eliminated as no longer necessary.
Section 330.3--General Principles
    Certain examples are added to this section. Because of its 
importance, paragraph (g) on the continuation of separate insurance 
after a merger of depository institutions is moved to a new separate 
Sec. 330.4. The rules on the insurance coverage of bank investment 
contracts and the relevant definitions are moved from the current 
Sec. 330.13 to this section. Section 330.13 is thereby eliminated.
    A new paragraph (j) is added to provide a six-month grace period 
for insurance coverage after a deposit owner dies, if allowing for such 
a grace period would not result in a reduction of insurance coverage.
Section 330.4--Continuation of Separate Deposit Insurance After Merger 
of Insured Depository Institutions
    This is a new section comprised of the provisions in the current 
Sec. 330.3(g). The FDIC receives numerous questions on the deposit 
insurance implications of bank mergers and acquisitions. It seems 
appropriate for these provisions to be contained in a separate, more 
easily accessible section of the regulations.
Section 330.5--Recognition of Deposit Ownership and Recordkeeping 
Requirements
    The section would amend the current Sec. 330.4. The recordkeeping 
requirements would be amended to provide an exception to the general 
rule that the deposit account records of a depository institution must 
expressly disclose the existence of a fiduciary relationship in order 
for the FDIC to recognize the fiduciary nature of the account. The 
exception provides that the general requirement would not apply if the 
FDIC determines, in its discretion, that the titling of the account and 
the underlying deposit account records of the depository institution 
indicate the existence of a fiduciary relation. The section specifies 
that the exception might apply, for example, where the deposit account 
title or records indicate that the account is held by an escrow agent, 
title company, or an entity (or its agent or nominee) whose business is 
to hold, for safekeeping reasons, deposits for others.
    This section also would be amended to allow for the grace period 
provided for in the proposed Sec. 330.3(j).
Section 330.6--Single Ownership Accounts
    This is essentially the same as the current Sec. 330.5. The 
language has been modified slightly and an example is provided. Also, 
the ``decedent's account'' provision in this section would cross-
reference the grace period provided for in the proposed Sec. 330.3(j).
Section 330.7--Accounts Held by an Agent, Nominee, Guardian, Custodian 
or Conservator
    This is the current Sec. 330.6. The language of the section has 
been modified slightly. The provision on mortgage servicing accounts 
has been clarified to indicate that such accounts are not entitled to 
separate insurance, but are insured as custodial accounts under the 
general rules of the section. The provision on annuity contract 
accounts has been moved to a new, separate Sec. 330.8.
Section 330.8--Annuity Contract Accounts
    This is a new section comprised of the provisions in current 
Sec. 330.6(f). Funds in such accounts are entitled to separate 
insurance coverage. It is appropriate, therefore, that the provisions 
be in a separate section of the regulations.
Section 330.9--Joint Ownership Accounts
    This is the current Sec. 330.7. Examples have been added to 
illustrate how the joint account rules operate. The language of other 
parts of the section has been modified.
Section 330.10--Revocable Trust Accounts
    This is the current Sec. 330.8. Examples are provided on the 
general rule and the rule involving the interests of nonqualifying 
beneficiaries. A paragraph on living trusts has been added to clarify 
when accounts held in connection with living trusts would be insured 
under this provision. Other parts of the section have been clarified.
Section 330.11--Accounts of a Corporation, Partnership or 
Unincorporated Association
    These are the rules currently provided in Sec. 330.9. The 
definition of ``independent activity'' is moved to Sec. 330.1. The 
language of other parts of the section has been modified slightly.
Section 330.12--Accounts Held by a Depository Institution as the 
Trustee of an Irrevocable Trust
    This is the current Sec. 330.10. The language is modified slightly.
Section 330.13--Irrevocable Trust Accounts
    This is the current Sec. 330.11. The definitions of ``trust 
interest'' and ``non-contingent trust interest'' are moved to 
Sec. 330.1. The language of other parts of the section is modified 
slightly.
Section 330.14--Retirement and Other Employee Benefit Plan Accounts
    This is the current Sec. 330.12. No changes are proposed to this 
provision.
The Current Section 330.13--Bank Investment Contracts
    The substantive parts of this regulation are moved to Sec. 330.1 
and the remainder is eliminated. The FDIC is proposing to delete this 
section because it is largely definitional and essentially reiterates 
the corresponding statutory provisions.
Section 330.15--Public Unit Accounts
    This is the current Sec. 330.14 and is essentially unchanged.
The Current Section 330.15--Notice to Depositors
    The FDIC proposes to eliminate this section as no longer necessary.
Section 330.16--Effective Dates
    Changes have been made to this section to indicate that the 
designated effective dates apply to former changes to part 330. The 
FDIC proposes to retain the substance of this section because the 
effective dates might be relevant in connection with time deposits 
issued prior to December 19, 1991, that have not yet matured.

Request for Comment

    The Board of Directors of the FDIC is seeking comment on all of the 
above-mentioned possible means of simplifying the deposit insurance 
rules, including the likely effect of such changes on consumers and the 
banking industry. Comments are specifically requested on the identified 
proposed substantive revisions. The Board also is seeking suggestions 
on any other ways

[[Page 26441]]

that the rules might be streamlined, simplified or clarified.

Paperwork Reduction Act

    The proposed rule is intended to simplify the rules governing FDIC 
deposit insurance. No collections of information pursuant to the 
Paperwork Reduction Act are contained in the proposed rule. 
Consequently, no information has been submitted to the Office of 
Management and Budget for review.

Regulatory Flexibility Act

    The proposed rule would not 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). The proposed 
revisions to the deposit insurance rules would apply to all FDIC-
insured depository institutions and would impose no new reporting, 
recordkeeping or other compliance requirements upon those entities. 
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, Reporting and recordkeeping 
requirements, Savings and loan associations, Trusts and trustees.

    The Board of Directors of the Federal Deposit Insurance Corporation 
hereby proposes to revise part 330 of title 12 of the Code of Federal 
Regulations to read as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

Sec.
330.1  Definitions.
330.2  Purpose.
330.3  General principles.
330.4  Continuation of separate deposit insurance after merger of 
insured depository institutions.
330.5  Recognition of deposit ownership and recordkeeping 
requirements.
330.6  Single ownership accounts.
330.7  Accounts held by an agent, nominee, guardian, custodian or 
conservator.
330.8  Annuity contract accounts.
330.9  Joint ownership accounts.
330.10  Revocable trust accounts.
330.11  Accounts of a corporation, partnership or unincorporated 
association.
330.12  Accounts held by a depository institution as the trustee of 
an irrevocable trust.
330.13  Irrevocable trust accounts.
330.14  Retirement and other employee benefit plan accounts.
330.15  Public unit accounts.
330.16  Effective dates.

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


Sec. 330.1  Definitions.

    For the purposes of this part:
    (a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et 
seq.).
    (b) Corporation means the Federal Deposit Insurance Corporation.
    (c) Default has the same meaning as provided under section 3(x) of 
the Act (12 U.S.C. 1813(x)).
    (d) Deposit has the same meaning as provided under section 3(l) of 
the Act (12 U.S.C. 1813(l)).
    (e) Deposit account records means account ledgers, signature cards, 
certificates of deposit, passbooks, corporate resolutions authorizing 
accounts in the possession of the insured depository institution and 
other books and records of the insured depository institution, 
including records maintained by computer, which relate to the insured 
depository institution's deposit taking function, but does not mean 
account statements, deposit slips, items deposited or cancelled checks.
    (f) FDIC means the Federal Deposit Insurance Corporation.
    (g) Independent activity. A corporation, partnership or 
unincorporated association shall be deemed to be engaged in an 
``independent activity'' if the entity is operated primarily for some 
purpose other than to increase deposit insurance.
    (h) Insured branch means a branch of a foreign bank any deposits in 
which are insured in accordance with the provisions of the Act.
    (i) Insured deposit has the same meaning as that provided under 
subsection 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).
    (j) Insured depository institution is any depository institution 
whose deposits are insured pursuant to the Act, including a foreign 
bank having an insured branch.
    (k) Natural person means a human being.
    (l) Non-contingent trust interest means a trust interest capable of 
determination without evaluation of contingencies except for those 
covered by the present worth tables and rules of calculation for their 
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
(26 CFR 20.2031-7) or any similar present worth or life expectancy 
tables which may be adopted by the Internal Revenue Service.
    (m) Sole proprietorship means a form of business in which one 
person owns all the assets of the business, in contrast to a 
partnership or corporation.
    (n) Trust estate means the determinable and beneficial interest of 
a beneficiary or principal in trust funds but does not include the 
beneficial interest of an heir or devisee in a decedent's estate.
    (o) Trust funds means funds held by an insured depository 
institution as trustee pursuant to any irrevocable trust established 
pursuant to any statute or written trust agreement.
    (p) Trust interest means the interest of a beneficiary in an 
irrevocable express trust (other than an employee benefit plan) created 
either by written trust instrument or by statute, but does not include 
any interest retained by the settlor.


Sec. 330.2  Purpose.

    The purpose of this part is to clarify the rules and define the 
terms necessary to afford deposit insurance coverage under the Act and 
provide rules for the recognition of deposit ownership in various 
circumstances.


Sec. 330.3  General principles.

    (a) Ownership rights and capacities. The insurance coverage 
provided by the Act and this part are based upon the ownership rights 
and capacities in which deposit accounts are maintained at insured 
depository institutions. All deposits in an insured depository 
institution which are maintained in the same right and capacity (by or 
for the benefit of a particular depositor or depositors) shall be added 
together and insured in accordance with this part. Deposits maintained 
in different rights and capacities, as recognized under this part, 
shall be insured separately from each other. (Example: single ownership 
accounts and joint ownership accounts are insured separately from each 
other.)
    (b) Deposits maintained in separate insured depository institutions 
or in separate branches of the same insured depository institution. Any 
deposit accounts maintained by a depositor at one insured depository 
institution are insured separately from, and without regard to, any 
deposit accounts that the same depositor maintains at any other 
separately chartered and insured depository institution, even if two or 
more separately chartered and insured depository institutions are 
affiliated through common ownership. (Example: Deposits held by the 
same individual at two different banks owned by the same bank holding 
company would be insured separately, per bank.) The deposit accounts of 
a depositor maintained in the same right and capacity at different 
branches or offices of the same insured depository institution are not 
separately insured; rather they shall be added together and insured in 
accordance with this part.

[[Page 26442]]

    (c) Deposits maintained by foreigners and deposits denominated in 
foreign currency. The availability of deposit insurance is not limited 
to citizens and residents of the United States. Any person or entity 
that maintains deposits in an insured depository institution is 
entitled to the deposit insurance provided by the Act and this part. In 
addition, deposits denominated in a foreign currency shall be insured 
in accordance with this part. Deposit insurance for such deposits shall 
be determined and paid in the amount of United States dollars that is 
equivalent in value to the amount of the deposit denominated in the 
foreign currency as of close of business on the date of default of the 
insured depository institution. The exchange rates to be used for such 
conversions are the 12 p.m. rates (the ``noon buying rates for cable 
transfers'') quoted for major currencies by the Federal Reserve Bank of 
New York on the date of default of the insured depository institution, 
unless the deposit agreement specifies that some other widely 
recognized exchange rates are to be used for all purposes under that 
agreement, in which case, the rates so specified shall be used for such 
conversions.
    (d) Deposits in insured branches of foreign banks. Deposits in an 
insured branch of a foreign bank which are payable by contract in the 
United States shall be insured in accordance with this part, except 
that any deposits to the credit of the foreign bank, or any office, 
branch, agency or any wholly owned subsidiary of the foreign bank, 
shall not be insured. All deposits held by a depositor in the same 
right and capacity in more than one insured branch of the same foreign 
bank shall be added together for the purpose of determining the amount 
of deposit insurance.
    (e) Deposits payable solely outside of the United States and 
certain other locations. Any obligation of an insured depository 
institution which is payable solely at an office of such institution 
located outside the States of the United States, the District of 
Columbia, Puerto Rico, Guam, the Commonwealth of the Northern Mariana 
Islands, American Samoa, the Trust Territory of the Pacific Islands, 
and the Virgin Islands, is not a deposit for the purposes of this part.
    (f) International banking facility deposits. An ``international 
banking facility time deposit'', as defined by the Board of Governors 
of the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or 
in any successor regulation, is not a deposit for the purposes of this 
part.
    (g) Bank investment contracts. As required by section 11(a)(8) of 
the Act (12 U.S.C. 1828(a)(8)), any liability arising under any 
investment contract between any insured depository institution and any 
employee benefit plan which expressly permits ``benefit responsive 
withdrawals'' or transfers (as defined in section 11(a)(8) of the Act) 
are not insured deposits for purposes of this part. The term 
``substantial penalty or adjustment'' used in section 11(a)(8) of the 
Act means, in the case of a deposit having an original term which 
exceeds one year, all interest earned on the amount withdrawn from the 
date of deposit or for six months, whichever is less; or, in the case 
of a deposit having an original term of one year or less, all interest 
earned on the amount withdrawn from the date of deposit or three 
months, whichever is less.
    (h) Application of state or local law to deposit insurance 
determinations. In general, deposit insurance is for the benefit of the 
owner or owners of funds on deposit. However, 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. Deposit 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.
    (i) Determination of the amount of a deposit--(1) General rule. The 
amount of a deposit is the balance of principal and interest 
unconditionally credited to the deposit account as of the date of 
default of the insured depository institution, plus the ascertainable 
amount of interest to that date, accrued at the contract rate (or the 
anticipated or announced interest or dividend rate), which the insured 
depository institution in default would have paid if the deposit had 
matured on that date and the insured depository institution had not 
failed. In the absence of any such announced or anticipated interest or 
dividend rate, the rate for this purpose shall be whatever rate was 
paid in the immediately preceding payment period.
    (2) Discounted certificates of deposit. The amount of a certificate 
of deposit sold by an insured depository institution at a discount from 
its face value is its original purchase price plus the amount of 
accrued earnings calculated by compounding interest annually at the 
rate necessary to increase the original purchase price to the maturity 
value over the life of the certificate.
    (3) Waiver of minimum requirements. In the case of a deposit with a 
fixed payment date, fixed or minimum term, or a qualifying or notice 
period that has not expired as of such date, interest thereon to the 
date of closing shall be computed according to the terms of the deposit 
contract as if interest had been credited and as if the deposit could 
have been withdrawn on such date without any penalty or reduction in 
the rate of earnings.
    (j) Continuation of insurance coverage following the death of a 
deposit owner. When a deposit owner dies, eligibility for the category 
of insurance coverage of the account(s) owned by that person shall be 
unaffected until the earlier of: the restructuring of the account(s) or 
six months after the death of the deposit owner. The operation of this 
grace period, however, shall not result in a reduction of coverage 
during the six-month period, unless the account(s) is (are) 
restructured. If an account is not withdrawn or restructured within six 
months after the depositor's death, the insurance shall be provided on 
the basis of actual ownership in accordance with the provisions of 
Sec. 330.5(a)(1).


Sec. 330.4  Continuation of separate deposit insurance after merger of 
insured depository institutions.

    Whenever the liabilities of one or more insured depository 
institutions for deposits are assumed by another insured depository 
institution, whether by merger, consolidation, other statutory 
assumption or contract:
    (a) The insured status of the institutions whose liabilities have 
been assumed terminates on the date of receipt by the FDIC of 
satisfactory evidence of the assumption; and
    (b) The separate insurance of deposits assumed continues for six 
months from the date the assumption takes effect or, in the case of a 
time deposit, the earliest maturity date after the six-month period. In 
the case of time deposits which mature within six months of the date 
the deposits are assumed and which are renewed at the same dollar 
amount (either with or without accrued interest having been added to 
the principal amount) and for the same term as the original deposit, 
the separate insurance applies to the renewed deposits until the first 
maturity date after the six-month period. Time deposits that mature 
within six months of the deposit assumption and that are renewed on any 
other basis, or that are not renewed and thereby become demand 
deposits, are separately insured only until the end of the six-month 
period.

[[Page 26443]]

Sec. 330.5  Recognition of deposit ownership and recordkeeping 
requirements.

    (a) Recognition of deposit ownership--(1) Evidence of deposit 
ownership. Except as indicated in this paragraph (a)(1) or as provided 
in Sec. 330.3(j), in determining the amount of insurance available to 
each depositor, the FDIC shall presume that deposited funds are 
actually owned in the manner indicated on the deposit account records 
of the insured depository institution. If the FDIC, in its sole 
discretion, determines that the deposit account records of the insured 
depository institution are clear and unambiguous, those records shall 
be considered binding on the depositor, and the FDIC shall consider no 
other records on the manner in which the funds are owned. If the 
deposit account records are ambiguous or unclear on the manner in which 
the funds 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. Despite the general requirements of this 
paragraph (a)(1), if the FDIC has reason to believe that the insured 
depository institution's deposit account records misrepresent the 
actual ownership of deposited funds and such misrepresentation would 
increase deposit insurance coverage the FDIC may consider all available 
evidence and pay claims for insured deposits on the basis of the actual 
rather than the misrepresented ownership.
    (2) Recognition of deposit ownership in custodial accounts. In the 
case of custodial deposits, the interest of each beneficial owner may 
be determined on a fractional or percentage basis. This may be 
accomplished in any manner which indicates that where the funds of an 
owner are commingled with other funds held in a custodial capacity and 
a portion thereof is placed on deposit in one or more insured 
depository institutions without allocation, the owner's insured 
interest in the deposit in any one insured depository institution would 
represent, at any given time, the same fractional share as his or her 
share of the total commingled funds.
    (b) Recordkeeping requirements--(1) Disclosure of fiduciary 
relationships. The ``deposit account records'' (as defined in 
Sec. 330.1) of an insured depository institution must expressly 
disclose, by way of specific references, the existence of any fiduciary 
relationship including, but not limited to, relationships involving a 
trustee, agent, nominee, guardian, executor or custodian, pursuant to 
which funds in an account are deposited and on which a claim for 
insurance coverage is based. No claim for insurance coverage based on a 
fiduciary relationship will be recognized if no fiduciary relationship 
is evident from the deposit account records of the insured depository 
institution. The general requirement for the express indication that 
the account is held in a fiduciary capacity will not apply, however, in 
instances where the FDIC determines, in its sole discretion, that the 
titling of the deposit account and the underlying deposit account 
records sufficiently indicate the existence of a fiduciary 
relationship. This exception may apply, for example, where the deposit 
account title or records indicate that the account is held by an escrow 
agent, title company or a company whose business is to hold deposits 
and securities for others.
    (2) Details of fiduciary relationships. If the deposit account 
records of an insured depository institution disclose the existence of 
a relationship which might provide a basis for additional insurance 
(including the exception provided for in paragraph (b)(1) of this 
section), the details of the relationship and the interests of other 
parties in the account must be ascertainable either from the deposit 
account records of the insured depository institution or from records 
maintained, in good faith and in the regular course of business, by the 
depositor or by some person or entity that has undertaken to maintain 
such records for the depositor.
    (3) Multi-tiered fiduciary relationships. In deposit accounts where 
there are multiple levels of fiduciary relationships, there are two 
alternative methods of satisfying paragraphs (b)(1) and (b)(2) of this 
section to obtain insurance coverage for the interests of the true 
beneficial owners of a deposit account.
    (i) One method is to:
    (A) Expressly indicate, on the deposit account records of the 
insured depository institution, the existence of each and every level 
of fiduciary relationships; and
    (B) Disclose, at each level, the name(s) and interest(s) of the 
person(s) on whose behalf the party at that level is acting.
    (ii) An alternative method is to:
    (A) Expressly indicate on the deposit account records of the 
insured depository institution that there are multiple levels of 
fiduciary relationships;
    (B) Disclose the existence of additional levels of fiduciary 
relationships in records, maintained in good faith and in the regular 
course of business, by parties at subsequent levels; and
    (C) Disclose, at each of the levels, the name(s) and interest(s) of 
the person(s) on whose behalf the party at that level is acting. No 
person or entity in the chain of parties will be permitted to claim 
that they are acting in a fiduciary capacity for others unless the 
possible existence of such a relationship is revealed at some previous 
level in the chain.
    (4) Exceptions to recordkeeping requirements--(i) Deposits 
evidenced by negotiable instruments. If any deposit obligation of an 
insured depository institution is evidenced by a negotiable certificate 
of deposit, negotiable draft, negotiable cashier's or officer's check, 
negotiable certified check, negotiable traveler's check, letter of 
credit or other negotiable instrument, the FDIC will recognize the 
owner of such deposit obligation for all purposes of claim for insured 
deposits to the same extent as if his or her name and interest were 
disclosed on the records of the insured depository institution; 
Provided, That the instrument was in fact negotiated to such owner 
prior to the date of default of the insured depository institution. The 
owner must provide affirmative proof of such negotiation, in a form 
satisfactory to the FDIC, to substantiate his or her claim. Receipt of 
a negotiable instrument directly from the insured depository 
institution in default shall, in no event, be considered a negotiation 
of said instrument for purposes of this provision.
    (ii) Deposit obligations for payment of items forwarded for 
collection by depository institution acting as agent. Where an insured 
depository institution in default has become obligated for the payment 
of items forwarded for collection by a depository institution acting 
solely as agent, the FDIC will recognize the holders of such items for 
all purposes of claim for insured deposits to the same extent as if 
their name(s) and interest(s) were disclosed as depositors on the 
deposit account records of the insured depository institution, when 
such claim for insured deposits, if otherwise payable, has been 
established by the execution and delivery of prescribed forms. The FDIC 
will recognize such depository institution forwarding such items for 
the holders thereof as agent for such holders for the purpose of making 
an assignment to the FDIC of their rights against the insured 
depository institution in default and for the purpose of receiving 
payment on their behalf.


Sec. 330.6  Single ownership accounts.

    (a) Individual accounts. Funds owned by a natural person and 
deposited in one or more deposit accounts in his or

[[Page 26444]]

her own name shall be added together and insured up to $100,000 in the 
aggregate. Exception: Despite the general requirement in this paragraph 
(a), if more than one natural person has the right to withdraw funds 
from an individual account (excluding persons who have the right to 
withdraw by virtue of a Power of Attorney) the account shall be treated 
as a joint ownership account (although not necessarily a qualifying 
joint account) and shall be insured in accordance with the provisions 
of Sec. 330.9, unless the deposit account records clearly indicate, to 
the satisfaction of the FDIC, that the funds are owned by one 
individual and that other signatories on the account are merely 
authorized to withdraw funds on behalf of the owner.
    (b) Sole proprietorship accounts. Funds owned by a business which 
is a ``sole proprietorship'' (as defined in Sec. 330.1) and deposited 
in one or more deposit accounts in the name of the business, shall be 
treated as the individual account(s) of the person who is the sole 
proprietor, added to any other individual accounts of that person, and 
insured up to $100,000 in the aggregate.
    (c) Single-name accounts containing community property funds. 
Community property funds deposited into one or more deposit accounts in 
the name of one member of a husband-wife community shall be treated as 
the individual account(s) of the named member, added to any other 
individual accounts of that person, and insured up to $100,000 in the 
aggregate.
    (d) Accounts of a decedent and accounts held by executors or 
administrators of a decedent's estate. Funds held in the name of a 
decedent or in the name of the executor, administrator, or other 
personal representative of his or her estate and deposited into one or 
more deposit accounts shall be added together and insured up to 
$100,000 in the aggregate; provided, however, that nothing in this 
paragraph shall affect the operation of Sec. 330.3(j). The deposit 
insurance provided by this paragraph (d) shall be separate from any 
insurance coverage provided for the individual deposit accounts of the 
executor, administrator, other personal representative or the 
beneficiaries of the estate.


Sec. 330.7  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 shall be governed by the 
provisions of Sec. 330.13.
    (b) Guardian, custodian or conservator accounts. Funds held by a 
guardian, custodian, or conservator for the benefit of his or her ward, 
or for the benefit of a minor under the Uniform Gifts to Minors Act, 
and deposited into one or more accounts in the name of the guardian, 
custodian or conservator shall, for purposes of this part, be deemed to 
be agency or nominee accounts and shall be insured in accordance with 
paragraph (a) of this section.
    (c) Accounts held by fiduciaries on behalf of two or more persons. 
Funds held by an agent, nominee, guardian, custodian, conservator or 
loan servicer, on behalf of two or more persons jointly, shall be 
treated as a joint ownership account and shall be insured in accordance 
with the provisions of Sec. 330.9.
    (d) Mortgage servicing accounts. Accounts maintained by a mortgage 
servicer, in a custodial or other fiduciary capacity, which are 
comprised of payments by mortgagors of principal and interest, shall be 
insured in accordance with paragraph (a) of this section for the 
interest of each owner (mortgagee, investor or security holder) in such 
accounts. Accounts maintained by a mortgage servicer, in a custodial or 
other fiduciary capacity, which are comprised of payments by mortgagors 
of taxes and insurance premiums shall be added together and insured in 
accordance with paragraph (a) of this section for the ownership 
interest of each mortgagor in such accounts.
    (e) Custodian accounts for American Indians. Paragraph (a) of this 
section shall not apply to any interest an individual American Indian 
may have in funds deposited by the Bureau of Indian Affairs of the 
United States Department of the Interior the (``BIA'') on behalf of 
that person pursuant to 25 U.S.C. 162(a), or by any other disbursing 
agent of the United States on behalf of that person pursuant to similar 
authority, in an insured depository institution. The interest of each 
American Indian in all such accounts maintained at the same insured 
depository institution shall be added together and insured, up to 
$100,000, separately from any other accounts maintained by that person 
in the same insured depository institution.


Sec. 330.8  Annuity contract accounts.

    (a) Funds held by an insurance company or other corporation in a 
deposit account for the sole purpose of funding life insurance or 
annuity contracts and any benefits incidental to such contracts, shall 
be insured separately in the amount of up to $100,000 per annuitant, 
provided that, pursuant to a state statute:
    (1) The corporation establishes a separate account for such funds; 
and
    (2) The account cannot be charged with the liabilities arising out 
of any other business of the corporation; and
    (3) The account cannot be invaded by other creditors of the 
corporation in the event that the corporation becomes insolvent and its 
assets are liquidated.
    (b) Such insurance coverage shall be separate from the insurance 
provided for any other accounts maintained in a different right and 
capacity by the corporation or the annuitants at the same insured 
depository institution.


Sec. 330.9  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether 
owned as joint tenants with right of survivorship, as tenants in common 
or as tenants by the entirety, shall be insured separately from any 
individually owned (single ownership) deposit accounts maintained by 
the co-owners. (Example: If A has a single ownership account and also 
is a joint owner of a qualifying joint account, A's interest in the 
joint account would be insured separately from his or her interest in 
the individual account.) Qualifying joint accounts in the names of both 
husband and wife which are comprised of community property funds shall 
be added together and insured up to $100,000, separately from any funds 
deposited into accounts bearing their individual names.
    (b) Determination of insurance coverage. Step one: all qualifying 
joint accounts owned by the same combination of individuals shall first 
be added together and insurable up to $100,000 in the aggregate. 
(Example: A qualifying joint account owned by ``A&B'' would be added to 
a qualifying joint account owned by ``B&A'' and the insurable limit on 
the combined balances in those accounts would be $100,000.) Step two: 
the interests of each co-owner in all qualifying joint accounts, 
whether owned by the same or different combinations of persons, shall 
then be added together and the total shall be insured up to $100,000. 
(Example: ``A&B'' have a qualifying joint account with a balance of 
$100,000; ``A&C'' have a qualifying joint account with a balance of 
$150,000; and ``A&D''

[[Page 26445]]

have a qualifying joint account with a balance of $100,000. The balance 
in the account owned by ``A&C'' exceeds $100,000, so under step one the 
excess amount, $50,000, would be uninsured. A's combined ownership 
interests in the insurable amounts in the accounts would be $150,000, 
of which under step two $100,000 would be insured and $50,000 would be 
uninsured; B's ownership interest would be $50,000, all of which would 
be insured; C's insurable ownership interest would be $50,000, all of 
which would be insured; and D's ownership interest would be $50,000, 
all of which would be insured.)
    (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'' (as defined in Sec. 330.1); 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 signature-card 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. 330.5(a), 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 (although not necessarily 
a qualifying 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.
    (d) Nonqualifying joint accounts. A deposit account held in two or 
more names which is not a qualifying joint account, for purposes of 
this section, shall be treated as being owned by each named owner, as 
an individual, corporation, partnership, or unincorporated association, 
as the case may be, and the actual ownership interest of each 
individual or entity in such account shall be added to any other single 
ownership accounts of such individual or other accounts of such entity, 
and shall be insured in accordance with the rules in this part 
governing the insurance of such accounts.
    (e) Determination of interests. The interests of the co-owners of 
qualifying joint accounts, held as tenants in common, shall be deemed 
equal, unless otherwise stated in the depository institution's deposit 
account records. This section applies regardless of whether the 
conjunction ``and'' or ``or'' is used in the title of a joint deposit 
account, even when both terms are used, such as in the case of a joint 
deposit account with three or more co-owners.


Sec. 330.10  Revocable trust accounts.

    (a) General rule. Funds owned by an individual and deposited into 
an account evidencing an intention that upon the death of the owner the 
funds shall belong to one or more qualified beneficiaries shall be 
insured in the amount of up to $100,000 in the aggregate as to each 
such named qualifying beneficiary, separately from any other accounts 
of the owner or the beneficiaries. For purposes of this provision, the 
term ``qualifying beneficiaries'' means the owner's spouse, child/
children or grandchild/grandchildren. (Example: If A establishes a 
qualifying account payable upon death to his spouse, two children and 
one grandchild, assuming compliance with the rules of this provision, 
the account would be insured up to $400,000 separately from any other 
different types of accounts either A or the beneficiaries may have with 
the same depository institution.) Accounts covered by this provision 
are commonly referred to as a tentative or ``Totten trust'' account, 
``payable-on-death'' account, or revocable trust account.
    (b) Required intention. The required intention in paragraph (a) of 
this section that upon the owner's death the funds shall belong to one 
or more qualifying beneficiaries must be manifested in the title of the 
account using commonly accepted terms such as, but not limited to, ``in 
trust for'', ``as trustee for'', ``payable-on-death to'' or any acronym 
therefor. In addition, the beneficiaries must be specifically named in 
the deposit account records of the insured depository institution. The 
settlor of a revocable trust account shall be presumed to own the funds 
deposited into the account.
    (c) Interests of nonqualifying beneficiaries. If a named 
beneficiary of an account covered by this section is not a qualifying 
beneficiary, the funds corresponding to that beneficiary shall be 
treated as individually owned (single ownership) accounts of such 
owner(s), aggregated with any other single ownership accounts of such 
owners, and insured up to $100,000 per owner. (Examples: If A 
establishes an account payable upon death to his or her nephew, the 
account would be insured as a single ownership account owned by A. 
Similarly, if B establishes an account payable upon death to her 
husband, son and nephew, the POD account would be eligible for POD 
coverage up to $200,000 corresponding to the two qualifying 
beneficiaries (i.e., the spouse and child). The amount corresponding to 
the non-qualifying beneficiary (i.e., the nephew) would be deemed to be 
owned by B in her single-ownership capacity and insured accordingly.)
    (d) Joint revocable trust accounts. Where an account described in 
paragraph (a) of this section is established by more than one owner and 
held for the benefit of others, some or all of whom are within the 
qualifying degree of kinship, the respective interests of each owner 
(which shall be deemed equal unless otherwise stated in the insured 
depository institution's deposit account records) held for the benefit 
of each qualifying beneficiary shall be separately insured up to 
$100,000. However, where a husband and a wife establish a revocable 
trust account naming themselves as the sole beneficiaries, such account 
shall not be insured according to the provisions of this section but 
shall instead be insured in accordance with the joint account 
provisions of Sec. 330.9.
    (e) Definition of ``children'' and ``grandchildren''. For the 
purpose of establishing the qualifying degree of kinship set forth in 
paragraph (a) of this section, the term ``children'' includes any 
biological, adopted and step-children of the owner and 
``grandchildren'' includes biological, adopted, or step-children of any 
of the owner's children.
    (f) Living trusts. This section also applies to revocable trust 
accounts held in connection with a so-called ``living trust'', a formal 
trust which an owner creates and retains control over during his or her 
lifetime. If a named

[[Page 26446]]

beneficiary in a living trust is a qualifying beneficiary under this 
section, then the deposit account held in connection with the living 
trust may be eligible for deposit insurance under this section, 
assuming compliance with all the provisions of this part. If, however, 
for example, the living trust includes a ``defeating contingent'' 
relative to that beneficiary's interest in the trust assets, then 
insurance coverage under this section would not be provided. For 
purposes of this section, a ``defeating contingency'' is generally 
defined as a condition which would prevent the beneficiary from 
acquiring a vested and non-contingent interest in the funds in the 
deposit account upon the owner's death.


Sec. 330.11  Accounts of a corporation, partnership or unincorporated 
association.

    (a) Corporate accounts. (1) The deposit accounts of a corporation 
engaged in any ``independent activity'' (as defined in Sec. 330.1) 
shall be added together and insured up to $100,000 in the aggregate. If 
a corporation has divisions or units which are not separately 
incorporated, the deposit accounts of those divisions or units shall be 
added to any other deposit accounts of the corporation. If a 
corporation maintains deposit accounts in a representative or fiduciary 
capacity, such accounts shall not be treated as the deposit accounts of 
the corporation but shall be treated as fiduciary accounts and insured 
in accordance with the provisions of Sec. 330.7.
    (2) Notwithstanding any other provision of this part, any trust or 
other business arrangement which has filed or is required to file a 
registration statement with the Securities and Exchange Commission 
pursuant to section 8 of the Investment Company Act of 1940 or that 
would be required so to register but for the fact it is not created 
under the laws of the United States or a state or but for sections 
2(b), 3(c)(1), or 6(a)(1) of that act shall be deemed to be a 
corporation for purposes of determining deposit insurance coverage.
    (b) Partnership accounts. The deposit accounts of a partnership 
engaged in any ``independent activity'' (as defined in Sec. 330.1) 
shall be added together and insured up to $100,000 in the aggregate. 
Such insurance coverage shall be separate from any insurance provided 
for individually owned (single ownership) accounts maintained by the 
individual partners. A partnership shall be deemed to exist, for 
purposes of this paragraph, any time there is an association of two or 
more persons or entities formed to carry on, as co-owners, an 
unincorporated business for profit.
    (c) Unincorporated association accounts. The deposit accounts of an 
unincorporated association engaged in any independent activity shall be 
added together and insured up to $100,000 in the aggregate, separately 
from the accounts of the person(s) or entity(ies) comprising the 
unincorporated association. An unincorporated association shall be 
deemed to exist, for purposes of this paragraph, whenever there is an 
association of two or more persons formed for some religious, 
educational, charitable, social or other noncommercial purpose.
    (d) Non-qualifying entities. The deposit accounts of an entity 
which is not engaged in an ``independent activity'' (as defined in 
Sec. 330.1) shall be deemed to be owned by the person or persons owning 
the corporation or comprising the partnership or unincorporated 
association, and, for deposit insurance purposes, the interest of each 
person in such a deposit account shall be added to any other deposit 
accounts individually owned by that person and insured up to $100,000 
in the aggregate.


Sec. 330.12  Accounts held by a depository institution as the trustee 
of an irrevocable trust.

    (a) Separate insurance coverage. ``Trust funds'' (as defined in 
Sec. 330.1) held by an insured depository institution in its capacity 
as trustee of an irrevocable trust, whether held in its trust 
department, held or deposited in any other department of the fiduciary 
institution, or deposited by the fiduciary institution in another 
insured depository institution, shall be insured up to $100,000 of each 
owner or beneficiary represented. This insurance shall be separate 
from, and in addition to, the insurance provided for any other deposits 
of the owners or the beneficiaries.
    (b) Determination of interests. The insurance for funds held by an 
insured depository institution in its capacity as trustee of an 
irrevocable trust shall be determined in accordance with the following 
rules:
    (1) Allocated funds of a trust estate. If trust funds of a 
particular ``trust estate'' (as defined in Sec. 330.1) are allocated by 
the fiduciary and deposited, the insurance with respect to such trust 
estate shall be determined by ascertaining the amount of its funds 
allocated, deposited and remaining to the credit of the claimant as 
fiduciary at the insured depository institution in default.
    (2) Interest of a trust estate in unallocated trust funds. If funds 
of a particular trust estate are commingled with funds of other trust 
estates and deposited by the fiduciary institution in one or more 
insured depository institutions to the credit of the depository 
institution as fiduciary, without allocation of specific amounts from a 
particular trust estate to an account in such institution(s), the 
percentage interest of that trust estate in the unallocated deposits in 
any institution in default is the same as that trust estate's 
percentage interest in the entire commingled investment pool.
    (c) Limitation on applicability. This section shall not apply to 
deposits of trust funds belonging to a trust which is classified as a 
corporation under Sec. 330.11(a)(2).


Sec. 330.13  Irrevocable trust accounts.

    (a) General rule. Funds representing the ``non-contingent trust 
interest(s)'' (as defined in Sec. 330.1) of a beneficiary deposited 
into one or more deposit accounts established pursuant to one or more 
irrevocable trust agreements created by the same settlor(s) 
(grantor(s)) shall be added together and insured up to $100,000 in the 
aggregate. Such insurance coverage shall be separate from the coverage 
provided for other accounts maintained by the settlor(s), trustee(s) or 
beneficiary(ies) of the irrevocable trust(s) at the same insured 
depository institution. Each ``trust interest'' (as defined in 
Sec. 330.1) in any irrevocable trust established by two or more 
settlors shall be deemed to be derived from each settlor pro rata to 
his or her contribution to the trust.
    (b) Treatment of contingent trust interests. In the case of any 
trust in which certain trust interests do not qualify as non-contingent 
trust interests, the funds representing those interests shall be added 
together and insured up to $100,000 in the aggregate. Such insurance 
coverage shall be in addition to the coverage provided for the funds 
representing non-contingent trust interests which are insured pursuant 
to paragraph (a) of this section.
    (c) 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.

[[Page 26447]]

Sec. 330.14  Retirement and other employee benefit plan accounts.

    (a) ``Pass-through'' insurance. Except as provided in paragraph (b) 
of this section, any deposits of an employee benefit plan or of any 
eligible deferred compensation plan described in section 457 of the 
Internal Revenue Code of 1986 (26 U.S.C. 457) in an insured depository 
institution shall be insured on a ``pass-through'' basis, in the amount 
of up to $100,000 for the non-contingent interest of each plan 
participant, provided that the FDIC's recordkeeping requirements, as 
outlined in Sec. 330.5, are satisfied.
    (b) Exception. ``Pass-through'' insurance shall not be provided 
pursuant to paragraph (a) of this section with respect to any deposit 
accepted by an insured depository institution which, at the time the 
deposit is accepted, may not accept brokered deposits pursuant to 
section 29 of the Act 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.
    (c) Aggregation--(1) Multiple plans. Funds representing the non-
contingent interests of a beneficiary in an employee benefit plan, or 
eligible deferred compensation plan described in section 457 of the 
Internal Revenue Code of 1986, which are deposited in one or more 
deposit accounts shall be aggregated with any other deposited funds 
representing such interests of the same beneficiary in other employee 
benefit plans, or eligible deferred compensation plans described in 
section 457 of the Internal Revenue Code of 1986, established by the 
same employer or employee organization.
    (2) Certain retirement accounts. (i) Deposits in an insured 
depository institution made in connection with the following types of 
retirement plans shall be aggregated and insured in the amount of up to 
$100,000 per participant:
    (A) Any individual retirement account described in section 408(a) 
of the Internal Revenue Code of 1986 (26 U.S.C. 408(a));
    (B) Any eligible deferred compensation plan described in section 
457 of the Internal Revenue Code of 1986; and
    (C) Any individual account plan defined in section 3(34) of the 
Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and 
any plan described in section 401(d) of the Internal Revenue Code of 
1986 (26 U.S.C. 401(d)), to the extent that participants and 
beneficiaries under such plans have the right to direct the investment 
of assets held in individual accounts maintained on their behalf by the 
plans.
    (ii) The provisions of this paragraph (c) shall not apply with 
respect to the deposits of any employee benefit plan, or eligible 
deferred compensation plan described in section 457 of the Internal 
Revenue Code of 1986, which is not entitled to ``pass-through'' 
insurance pursuant to paragraph (b) of this section. Such deposits 
shall be aggregated and insured in the amount of $100,000 per-plan.
    (d) Determination of interests--(1) Defined contribution plans. The 
value of an employee's non-contingent interest in a defined 
contribution plan shall be deemed to be the employee's account balance 
as of the date of default of the insured depository institution, 
regardless of whether said amount was derived, in whole or in part, 
from contributions of the employee and/or the employer to the account.
    (2) Defined benefit plans. The value of an employee's non-
contingent interest in a defined benefit plan shall be deemed to be the 
present value of the employee's interest in the plan, evaluated in 
accordance with the method of calculation ordinarily used under such 
plan, as of the date of default of the insured depository institution.
    (3) Amounts taken into account. For the purposes of applying the 
rule under paragraph (c)(2) of this section, only the present vested 
and ascertainable interests of each participant in an employee benefit 
plan or ``457 Plan,'' excluding any remainder interest created by, or 
as a result of, the plan, shall be taken into account in determining 
the amount of deposit insurance accorded to the deposits of the plan.
    (e) Treatment of contingent interests. In the event that employees' 
interests in an employee benefit plan are not capable of evaluation in 
accordance with the rules contained in this section, or an account 
established for any such plan includes amounts for future participants 
in the plan, payment by the FDIC with respect to all such interests 
shall not exceed $100,000 in the aggregate.
    (f) Overfunded pension plan deposits. Any portion(s) of an employee 
benefit plan's deposits which are not attributable to the interests of 
the beneficiaries under the plan shall be deemed attributable to the 
overfunded portion of the plan's assets and shall be aggregated and 
insured up to $100,000, separately from any other deposits.
    (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.
    (2) The term employee benefit plan has the same meaning given to 
such term in section 3(3) of the Employee Retirement Income Security 
Act of 1974 (ERISA)(29 U.S.C. 1002) and includes any plan described in 
section 401(d) of the Internal Revenue Code of 1986.
    (3) The term employee organization means any labor union, 
organization, employee representation committee, association, group, or 
plan, in which employees participate and which exists for the purpose, 
in whole or in part, of dealing with employers concerning an employee 
benefit plan, or other matters incidental to employment relationships; 
or any employees' beneficiary association organized for the purpose, in 
whole or in part, of establishing such a plan.
    (4) The term non-contingent interest means an interest capable of 
determination without evaluation of contingencies except for those 
covered by the present worth tables and rules of calculation for their 
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
(26 CFR 20.2031-7) or any similar present worth or life expectancy 
tables as may be published by the Internal Revenue Service.
    (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

[[Page 26448]]

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 (h), 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).


Sec. 330.15  Public unit accounts.

    (a) Extent of insurance coverage--(1) Accounts of the United 
States. Each official custodian of funds of the United States lawfully 
depositing such funds in an insured depository institution shall be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.
    (2) Accounts of a state, county, municipality or political 
subdivision. Each official custodian of funds of any state of the 
United States, or any county, municipality, or political subdivision 
thereof, lawfully depositing such funds in an insured depository 
institution in the state comprising the public unit or wherein the 
public unit is located (including any insured depository institution 
having a branch in said state) shall be separately insured in the 
amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits. In 
addition, each such official custodian depositing such funds in an 
insured depository institution outside of the state comprising the 
public unit or wherein the public unit is located, shall be insured in 
the amount of up to $100,000 in the aggregate for all deposits, 
regardless of whether they are time savings or demand deposits.
    (3) Accounts of the District of Columbia. (i) Each official 
custodian of funds of the District of Columbia lawfully depositing such 
funds in an insured depository institution in the District of Columbia 
(including an insured depository institution having a branch in the 
District of Columbia) shall be separately insured in the amount of:
    (A) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (B) Up to $100,000 in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such 
funds in an insured depository institution outside of the District of 
Columbia shall be insured in the amount of up to $100,000 in the 
aggregate for all deposits, regardless of whether they are time, 
savings or demand deposits.
    (4) Accounts of the Commonwealth of Puerto Rico and other 
government possessions and territories. (i) Each official custodian of 
funds of the Commonwealth of Puerto Rico, the Virgin Islands, American 
Samoa, the Trust Territory of the Pacific Islands, Guam, or The 
Commonwealth of the Northern Mariana Islands, or of any county, 
municipality, or political subdivision thereof lawfully depositing such 
funds in an insured depository institution in Puerto Rico, the Virgin 
Islands, American Samoa, the Trust Territory of the Pacific Islands, 
Guam, or The Commonwealth of the Northern Mariana Islands, 
respectively, shall be separately insured in the amount of:
    (A) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (B) Up to $100,000 in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such 
funds in an insured depository institution outside of the commonwealth, 
possession or territory comprising the public unit or wherein the 
public unit is located, shall be insured in the amount of up to 
$100,000 in the aggregate for all deposits, regardless of whether they 
are time, savings or demand deposits.
    (5) Accounts of an Indian tribe. Each official custodian of funds 
of an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an 
agency thereof having official custody of tribal funds, lawfully 
depositing the same in an insured depository institution shall be 
separately insured in the amount of:
    (i) Up to $100,000 in the aggregate for all time and savings 
deposits; and
    (ii) Up to $100,000 in the aggregate for all demand deposits.
    (b) Rules relating to the official custodian--(1) Qualifications 
for an official custodian. In order to qualify as an ``official 
custodian'' for the purposes of paragraph (a) of this section, such 
custodian must have plenary authority, including control, over funds 
owned by the public unit which the custodian is appointed or elected to 
serve. Control of public funds includes possession, as well as the 
authority to establish accounts for such funds in insured depository 
institutions and to make deposits, withdrawals, and disbursements of 
such funds.
    (2) Official custodian of the funds of more than one public unit. 
For the purposes of paragraph (a) of this section, if the same person 
is an official custodian of the funds of more than one public unit, he 
or she shall be separately insured with respect to the funds held by 
him or her for each such public unit, but shall not be separately 
insured by virtue of holding different offices in such public unit or, 
except as provided in paragraph (c) of this section, holding such funds 
for different purposes.
    (3) Split of authority or control over public unit funds. If the 
exercise of authority or control over the funds of a public unit 
requires action by, or the consent of, two or more officers, employees, 
or agents of such public unit, then they will be treated as one 
``official custodian'' for the purposes of this section.
    (c) Public bond issues. Where an officer, agent or employee of a 
public unit has custody of certain funds which by law or under a bond 
indenture are required to be set aside to discharge a debt owed to the 
holders of notes or bonds issued by the public unit, any deposit of 
such funds in an insured

[[Page 26449]]

depository institution shall be deemed to be a deposit by a trustee of 
trust funds of which the noteholders or bondholders are pro rata 
beneficiaries, and the beneficial interest of each noteholder or 
bondholder in the deposit shall be separately insured up to $100,000.
    (d) Definition of ``political subdivision''. The term ``political 
subdivision'' includes drainage, irrigation, navigation, improvement, 
levee, sanitary, school or power districts, and bridge or port 
authorities and other special districts created by state statute or 
compacts between the states. It also includes any subdivision of a 
public unit mentioned in paragraphs (a)(2), (a)(3) and (a)(4) of this 
section or any principal department of such public unit:
    (1) The creation of which subdivision or department has been 
expressly authorized by the law of such public unit;
    (2) To which some functions of government have been delegated by 
such law; and
    (3) Which is empowered to exercise exclusive control over funds for 
its exclusive use.


Sec. 330.16  Effective dates.

    (a) Prior effective dates. Former Secs. 330.1(j), 330.10(a), 
330.12(c), 330.12(d)(3) and 330.13 (See 12 CFR part 330, as revised 
January 1, 1997.) became effective on December 19, 1993.
    (b) Time deposits. Except with respect to the provisions in former 
Sec. 330.12 (a) and (b), (See 12 CFR part 330, as revised January 1, 
1997.) and current Sec. 330.14 (a) and (b), any time deposits made 
before December 19, 1991 that do not mature until after December 19, 
1993, shall be subject to the rules as they existed on the date the 
deposits were made. Any time deposits made after December 19, 1991 but 
before December 19, 1993 shall be subject to the rules as they existed 
on the date the deposits were made. Any rollover or renewal of such 
time deposits prior to December 19, 1993 shall subject those deposits 
to the rules in effect on the date of such rollover or renewal. With 
respect to time deposits which mature only after a prescribed notice 
period, the provisions of these rules shall be effective on the 
earliest possible maturity date after June 24, 1993 assuming (solely 
for purposes of this section) that notice had been given on that date.

    By order of the Board of Directors.

    Dated at Washington, D.C., this 29th day of April, 1997.

    Federal Deposit Insurance Corporation
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97-11965 Filed 5-13-97; 8:45 am]
BILLING CODE 6714-01-P