[Federal Register Volume 71, Number 34 (Tuesday, February 21, 2006)]
[Rules and Regulations]
[Pages 8789-8792]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1568]



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  Federal Register / Vol. 71, No. 34 / Tuesday, February 21, 2006 / 
Rules and Regulations  

[[Page 8789]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 307

RIN 3064-AC93


Certification of Assumption of Deposits and Notification of 
Changes of Insured Status

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule which clarifies and 
simplifies the procedures to be used when all of the deposit 
liabilities of an insured depository institution have been assumed by 
another insured depository institution or institutions. The final 
regulation would modify the current rule's requirements by: Making 
clear that an insured institution is required to file a 
``certification'' when all of its deposits are assumed, but no 
certification is required if only a portion of its deposits are 
assumed; and requiring that the transferring institution, or its legal 
successor, file the certification rather than the assuming institution. 
The rule also clarifies that the transferring institution's status as 
an insured institution automatically terminates upon the FDIC's receipt 
of an accurate certification stating that: All of its deposits have 
been assumed by an insured depository institution or institutions, and 
the legal authority of the transferring institution to accept deposits 
has been terminated contemporaneously with the deposit assumption. In 
such a situation, and in a situation in which the FDIC has been 
appointed receiver of an insured institution, little practical purpose 
would be served by an order terminating deposit insurance, and the 
final rule provides that no such order will be issued in such 
situations. Finally, the rule would provide more specificity concerning 
how notice is given to depositors when an insured depository 
institution voluntarily terminates its insured status without the 
assumption of all of its deposits by an insured institution. In sum, 
the revisions would make the insurance termination process somewhat 
easier for insured depository institutions, and somewhat more efficient 
for the FDIC.

DATES: This rule will be effective on March 23, 2006.

FOR FURTHER INFORMATION CONTACT: Donald R. Hamm, Review Examiner, 
Division of Supervision and Consumer Protection, (202) 898-3528; Thomas 
Nixon, Counsel, Legal Division, (202) 898-8766; Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 14, 2005, the FDIC published a notice of proposed 
rulemaking concerning its Part 307 (12 CFR) ``Notification of Changes 
in Insured Status.'' (70 FR 60015) The rule currently has two sections. 
Section 307.1 applies to situations where one or more insured 
institutions have assumed the deposit liabilities of another insured 
institution. Section 307.2 applies to situations where an insured 
institution seeks to terminate its insured status without its deposit 
liabilities being assumed. The FDIC received no comments in response to 
the notice of proposed rulemaking. The FDIC has determined to make its 
October 2005 proposed revision to Part 307 final. A section-by-section 
analysis follows.

II. Revised Caption; New Section 307.1--Scope and Purpose

    The caption of the Part would be changed from ``Notification of 
Changes of Insured Status'' to ``Certification of Assumption of 
Deposits and Notification of Changes of Insured Status'' to make it 
more descriptive of the Part's content and alert institutions that the 
Part addresses deposit assumptions as well as changes in insured 
status.
    The current Part 307 does not have a scope and purpose section. In 
addition, since Part 307 had not been revised since 1983, Sec. Sec.  
307.1 and 307.2 continued to refer to an ``insured bank'' rather than 
to an ``insured depository institution,'' consistent with the changes 
made to the FDIC's responsibilities and terminology by sections 201 and 
202 of the Financial Institutions Reform, Recovery, and Enforcement Act 
of 1989.\1\ The final rule adds a new Sec.  307.1 to describe the 
purpose of the Part and to indicate that the Part applies to insured 
depository institutions as defined in section 3(c)(2) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(c)(2), FDI Act). The existing 
Sec. Sec.  307.1 and 307.2 are redesignated as Sec. Sec.  307.2 and 
307.3, respectively.
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    \1\ Pub. L. 101-73, 103 Stat. 103.
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III. Section 307.2--Certification of Assumption of Deposit Liabilities

    The current section 307.1 implements section 8(q) of the FDI Act 
(12 U.S.C. 1818(q)), which states:

    Whenever the liabilities of an insured depository institution 
for deposits shall have been assumed by another insured depository 
institution or depository institutions, whether by way of merger, 
consolidation, or other statutory assumption, or pursuant to 
contract
    (1) The insured status of the depository institution whose 
liabilities are so assumed shall terminate on the date of receipt by 
the Corporation of satisfactory evidence of such assumption;
    (2) The separate insurance of all deposits so assumed shall 
terminate at the end of six months from the date such assumption 
takes effect or, in the case of any time deposit, the earliest 
maturity date after the six-month period * * *

    All assumptions of insured deposit liabilities, whether a ``total'' 
assumption of all the transferring institution's deposits or an 
assumption of only a portion of its deposits (a ``partial'' 
assumption), by an insured institution are subject to the Bank Merger 
Act and require the prior written approval of the ``responsible 
agency.'' \2\ The responsible agency is the primary Federal regulator 
of the assuming institution.
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    \2\ FDI Act section 18(c)(2), (12 U.S.C. 1828(c)(2)), reads as 
follows:
    No insured depository institution shall merge or consolidate 
with any other insured depository institution or, either directly or 
indirectly, acquire the assets of, or assume liability to pay any 
deposits made in, any other insured depository institution except 
with the prior written approval of the responsible agency * * *
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    The present section 307.1 requires the institution assuming 
deposits to certify to the FDIC that it has assumed the deposits. It 
does not specify whether a certification is required only where a total 
deposit assumption occurs or

[[Page 8790]]

whether a certification is also required for a partial deposit 
assumption, for example, when a single branch of an institution is 
sold. This rule clarifies that a certification is required only when 
there has been a total assumption of deposits. No certification is 
required in the case of a partial transfer of deposits. Clarifying that 
no certification is necessary for a partial assumption is consistent 
with the FDIC's goal of reducing regulatory burden pursuant to Section 
2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 
1996 \3\ while obtaining sufficient information for the proper 
implementation of section 8(q) of the FDI Act.
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    \3\ Pub. L. 104-208, Sept. 30, 1996, 12 U.S.C. 3311.
---------------------------------------------------------------------------

    There may be situations in which an insured depository institution 
disposes of all of its deposits through a series of simultaneous 
partial deposit assumptions involving multiple assuming institutions, 
rather than through a single total deposit assumption by one assuming 
institution. An example of this would be where all of the deposits of a 
transferring institution were assumed through a series of branch 
acquisitions by different assuming institutions that occurred on the 
same day. Viewed cumulatively, these partial assumptions would amount 
to a total assumption of the deposits of the transferring institution 
making certification necessary. In this situation, this final rule 
would require that the transferring institution file a certification.
    The current section 307.1 also does not distinguish between a 
deposit assumption involving operating institutions versus an 
assumption involving an institution in default and in FDIC 
receivership. The FDIC plays an integral role in the transfer and 
assumption of deposit liabilities when it is appointed as receiver for 
an insured depository institution in default, and has in its possession 
information regarding the deposit transfer and assumption transaction. 
Section 307.2(a) of this final rule creates an explicit exception from 
the certification requirement when the deposit liabilities are being 
transferred from an insured depository institution in default and the 
FDIC has been appointed as receiver.
    Who must make the certification. As noted, the current section 
307.1 requires the assuming institution to provide certification to the 
FDIC. This final rule requires the transferring institution, or its 
legal successor (``transferring institution''), to make the 
certification. Generally, an institution transferring deposit 
liabilities will be in a better position than the assuming institution 
to know whether the transfer constitutes all of its deposits, thus 
triggering application of Part 307 and FDI Act section 8(q). This is 
particularly true in the case of an institution that transfers all of 
its deposit liabilities through multiple transfers to a variety of 
assuming institutions. In such a situation, it may be difficult for the 
assuming institutions to have sufficient knowledge of key facts in 
order to make certifications that make clear whether the transferring 
institution continues to hold insured deposits. In a merger or 
consolidation there may be only one surviving entity which is the legal 
successor to both the transferring and assuming institutions. In such 
instances, that surviving entity would provide any required 
certification.
    Content and form of the certification. Section 307.2(b) of this 
final rule establishes the certification's content. The requirements 
are similar to the current section 307.1 but clarify certain issues, 
such as where certifications should be filed with the FDIC, and the 
need for the certification to be on the letterhead of the transferring 
institution or its legal successor and to be signed by an authorized 
official. The rule also requires an institution that is 
contemporaneously relinquishing its authority to engage in the business 
of receiving deposits to provide the date that its authority terminated 
(or will terminate) as well as the method of termination (e.g., whether 
by the surrender of its charter, the cancellation of its charter or 
license to conduct a banking business, or otherwise). As discussed 
below, this information will be used by the FDIC to evaluate the need 
to issue an order terminating insurance. To assist the industry with 
compliance, the rule provides a template (Appendix A) that may be used 
to satisfy the section 307.2 certification requirements.
    Evidence of Assumption. Similar to the current section 307.1, 
section 307.2(d) of this final rule states that the receipt by the FDIC 
of an accurate certification for a total assumption as required by 
paragraphs (a), (b) and (c) of section 307.2 shall constitute 
satisfactory evidence of such deposit assumption, as required by 
section 8(q) of the FDI Act, and the insured status of the transferring 
institution shall terminate on the date of the receipt of the 
certification. The term ``accurate'' has been included to indicate that 
a materially inaccurate certification will not trigger the automatic 
termination of the transferring institution's insured status. Section 
307.2(d) allows the FDIC to consider other evidence, in addition to a 
certification, of a total deposit assumption to constitute satisfactory 
evidence of an assumption for the purposes of section 8(q).
    Issuance of an Order. As noted in the October 2005 notice of 
proposed rulemaking, section 8(q) can be construed as automatically 
terminating an institution's insured status upon the FDIC's receipt of 
satisfactory evidence of a total assumption. The FDIC did not generally 
issue orders terminating the insured status of transferring 
institutions before 1983 when the rule was last revised, and the 
current section 307.1 does not discuss the issuance of such orders. In 
most cases of total deposit assumptions, the transferring institution's 
authority to engage in banking is contemporaneously cancelled. In such 
a situation, an FDIC order terminating insurance has no practical 
effect and is unnecessary. Accordingly, under this final rule no order 
terminating an institution's insured status will generally be issued 
when the transferring institution's authority to engage in banking is 
cancelled contemporaneously (i.e., generally within five business days 
after all deposits have been assumed). The rule also will not require 
orders when deposits are transferred and assumed after a default when 
the FDIC has been appointed as receiver of an insured institution.
    The rule does provide for the issuance of an FDIC order terminating 
the insured status of a transferring institution in the relatively 
limited circumstance in which a total transfer of deposit liabilities 
has occurred but the transferring institution's charter is not 
contemporaneously cancelled (the proposed rule had referred to this as 
an order confirming the termination of insurance). Absent the entry of 
an order terminating insured status, an institution in such a situation 
might attempt to resume accepting deposits sometime after the 
assumption transaction occurs. An institution might also attempt to 
sell its charter, which could allow what is in fact a new entity to 
conduct banking operations without FDIC review and approval.\4\
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    \4\ Such a sale would require prior approval by the primary 
Federal regulator under the Bank Merger Act or the Change in Bank 
Control Act.
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IV. Section 307.3--Notice to Depositors When Insurance Is Voluntarily 
Terminated and Deposits Are Not Assumed

    An insured depository institution that proposes to voluntarily 
terminate its insured status without transferring all of its deposits 
to an FDIC-insured

[[Page 8791]]

institution must obtain the FDIC's permission.\5\ The current Sec.  
307.2 requires an insured bank or insured branch of a foreign bank 
seeking to voluntarily terminate its insured status, but whose deposits 
will not be assumed by another insured depository institution, to 
provide notice to its depositors of the date its insured status will 
terminate. A copy of this notice must be provided to and approved by 
the appropriate Regional Director of the Division of Supervision and 
Consumer Protection prior to the notice being distributed to the 
institution's depositors. This final rule clarifies that the notice 
must be on the institution's letterhead, signed by a duly authorized 
officer and sent to the depositor's last known address on the 
institution's books. To assist the industry with compliance, the rule 
provides a template (Appendix B) that may be used to satisfy the 
section 307.3 certification requirements.
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    \5\ FDI Act section 18(i)(3), 12 U.S.C. 1828(i)(3). This rule 
does not affect the requirements for FDIC approval of voluntary 
deposit insurance terminations under sections 8(a) and 8(p) of the 
FDI Act or for prior written consent for the conversion of an 
insured depository institution into a noninsured bank or institution 
as required by section 18(i)(3).
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V. Regulatory Analysis and Procedure

A. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.), the FDIC may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid Office of Management and Budget (OMB) control number. 
The collection of information contained in this rule was submitted to 
OMB for review and was approved under control number 3064-0124, which 
will expire on December 31, 2008.

B. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), the FDIC certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
The rule will reduce regulatory burden by eliminating the need for a 
certification to be filed with the FDIC when the liability for some, 
but not all, of the deposits of an insured institution are transferred 
to another institution. A certification requires a minimal amount of 
time and resources since it reports information readily available to 
the institution making the certification.

C. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA) (Title II, Pub. L. 104-121) provides generally for agencies to 
report rules to Congress and the General Accounting Office (GAO) for 
review. The reporting requirement is triggered when a Federal agency 
issues a final rule. The FDIC will file the appropriate reports with 
Congress and the GAO as required by SBREFA. The Office of Management 
and Budget has determined that the rule does not constitute a ``major 
rule'' as defined by SBREFA.

List of Subjects in 12 CFR Part 307

    Bank deposit insurance, Reporting and recordkeeping requirements.


0
For the reasons set forth in the preamble, the Board of Directors of 
the FDIC hereby revises Part 307 of Title 12 of the Code of Federal 
Regulations to read as follows:

PART 307--CERTIFICATION OF ASSUMPTION OF DEPOSITS AND NOTIFICATION 
OF CHANGES OF INSURED STATUS

Sec.
307.1 Scope and purpose.
307.2 Certification of assumption of deposit liabilities.
307.3 Notice to depositors when insured status is voluntarily 
terminated and deposits are not assumed.
Appendix A to Part 307--Transferring Institution Letterhead
Appendix B to Part 307--Institution Letterhead

    Authority: 12 U.S.C. 1818(a)(6); 1818(q); and 1819(a) [Tenth].


Sec.  307.1  Scope and purpose.

    (a) Scope. This Part applies to all insured depository 
institutions, as defined in section 3(c)(2) of the Federal Deposit 
Insurance Act (FDI Act) (12 U.S.C. 1813(c)(2)).
    (b) Purpose. This Part sets forth the rules governing:
    (1) The time and manner for providing certification to the FDIC 
regarding the assumption of all of the deposit liabilities of an 
insured depository institution by one or more insured depository 
institutions; and
    (2) The notification that an insured depository institution shall 
provide its depositors when a depository institution's insured status 
is being voluntarily terminated without its deposits being assumed by 
one or more insured depository institutions.


Sec.  307.2  Certification of assumption of deposit liabilities.

    (a) When certification is required. Whenever all of the deposit 
liabilities of an insured depository institution are assumed by one or 
more insured depository institutions by merger, consolidation, other 
statutory assumption, or by contract, the transferring insured 
depository institution, or its legal successor, shall provide an 
accurate written certification to the FDIC that its deposit liabilities 
have been assumed. No certification shall be required when deposit 
liabilities are assumed by an operating insured depository institution 
from an insured depository institution in default, as defined in 
section 3(x)(1) of the FDI Act (12 U.S.C. 1813(x)(1)), and that has 
been placed under FDIC receivership.
    (b) Certification requirements. The certification required by 
paragraph (a) of this section shall be provided on official letterhead 
of the transferring insured depository institution or its legal 
successor, signed by a duly authorized official, and state the date the 
assumption took effect. The certification shall indicate the date on 
which the transferring institution's authority to engage in banking has 
terminated or will terminate as well as the method of termination 
(e.g., whether by the surrender of its charter, by the cancellation of 
its charter or license to conduct a banking business, or otherwise). 
The certification may follow the form contained in Appendix A of this 
part. In a merger or consolidation where there is only one surviving 
entity which is the legal successor to both the transferring and 
assuming institutions, the surviving entity shall provide any required 
certification.
    (c) Filing. The certification required by paragraph (a) of this 
section shall be provided within 30 calendar days after the assumption 
takes effect, and shall be submitted to the appropriate Regional 
Director of the FDIC's Division of Supervision and Consumer Protection, 
as defined in 12 CFR 303.2(g).
    (d) Evidence of assumption. The receipt by the FDIC of an accurate 
certification for a total assumption as required by paragraphs (a), (b) 
and (c) of this section shall constitute satisfactory evidence of such 
deposit assumption, as required by section 8(q) of the FDI Act (12 
U.S.C. 1818(q)), and the insured status of the transferring institution 
shall terminate on the date of the receipt of the certification. In 
appropriate circumstances, the FDIC, in its sole discretion, may 
require additional information, or may consider other evidence of a 
deposit assumption to

[[Page 8792]]

constitute satisfactory evidence of such assumption for purposes of 
section 8(q).
    (e) Issuance of an order. The Executive Secretary, upon request 
from the Director of the Division of Supervision and Consumer 
Protection and with the concurrence of the General Counsel, or their 
respective designees, shall issue an order terminating the insured 
status of the transferring insured depository institution as of the 
date of receipt by the FDIC of satisfactory evidence of such 
assumption, pursuant to section 8(q) of the FDI Act and this 
regulation. Generally, no order shall be issued, under this paragraph, 
and insured status shall be cancelled by operation of law:
    (1) If the charter of the transferring institution has been 
cancelled, revoked, rescinded, or otherwise terminated by operation of 
applicable state or federal statutes or regulations, or by action of 
the chartering authority for the transferring institution essentially 
contemporaneously, that is, generally within five business days after 
all deposits have been assumed; or
    (2) If the transferring institution is an insured depository 
institution in default and for which the FDIC has been appointed 
receiver.


Sec.  307.3  Notice to depositors when insured status is voluntarily 
terminated and deposits are not assumed.

    (a) Notice required. An insured depository institution that has 
obtained authority from the FDIC to terminate its insured status under 
sections 8(a), 8(p) or 18(i)(3) of the FDI Act without its deposit 
liabilities being assumed by one or more insured depository 
institutions shall provide to each of its depositors, at the 
depositor's last known address of record on the books of the 
institution, prior written notification of the date the institution's 
insured status shall terminate.
    (b) Prior approval of notice. The insured depository institution 
shall provide the appropriate Regional Director of the FDIC's Division 
of Supervision and Consumer Protection, as defined in 12 CFR 303.2(g), 
a copy of the proposed notice for approval. After being approved, the 
notice shall be provided to depositors by the insured depository 
institution at the time and in the manner specified by the appropriate 
Regional Director.
    (c) Form of notice. The notice to depositors required by paragraph 
(a) of this section shall be provided on the official letterhead of the 
insured depository institution, shall bear the signature of a duly 
authorized officer, and, unless otherwise specified by the appropriate 
Regional Director, may follow the form of the notice contained in 
Appendix B of this part.
    (d) Other requirements possible. The FDIC may require the insured 
depository institution to take such other actions as the FDIC considers 
necessary and appropriate for the protection of depositors.

Appendix A to Part 307--Transferring Institution Letterhead

[Date]

[Name and Address of appropriate FDIC Regional Director]

SUBJECT: Certification of Total Assumption of Deposits

    This certification is being provided pursuant to 12 U.S.C. 
1818(q) and 12 CFR 307.2. On [state the date the deposit assumption 
took effect], [state the name of the depository institution assuming 
the deposit liabilities] assumed all of the deposits of [state the 
name and location of the transferring institution whose deposits 
were assumed]. [If applicable, state the date and method by which 
the transferring institution's authority to engage in banking was or 
will be terminated.] Please contact the undersigned, at [telephone 
number], if additional information is needed.

Sincerely,

By:

[Name and Title of Authorized Representative]

Appendix B to Part 307--Institution Letterhead

[Date]

[Name and Address of Depositor]

SUBJECT: Notice to Depositor of Voluntary Termination of Insured 
Status

    The insured status of [name of insured depository institution], 
under the provisions of the Federal Deposit Insurance Act, will 
terminate as of the close of business on [state the date] 
(``termination date''). Insured deposits in the [name of insured 
depository institution] on the termination date, less all 
withdrawals from such deposits made subsequent to that date, will 
continue to be insured by the Federal Deposit Insurance Corporation, 
to the extent provided by law, until [state the date]. The Federal 
Deposit Insurance Corporation will not insure any new deposits or 
additions to existing deposits made by you after the termination 
date.
    This Notice is being provided pursuant to 12 CFR 307.3.
    Please contact [name of institution official in charge of 
depositor inquiries], at [name and address of insured depository 
institution] if additional information is needed regarding this 
Notice or the insured status of your account(s).

Sincerely,

By:

[Name and Title of Authorized Representative]


    By order of the Board of Directors, at Washington, DC, on this 
10th day of February, 2006.

Federal Deposit Insurance Corporation.
Robert Feldman,
Executive Secretary.
[FR Doc. 06-1568 Filed 2-17-06; 8:45 am]
BILLING CODE 6714-01-P