[Federal Register Volume 74, Number 177 (Tuesday, September 15, 2009)]
[Rules and Regulations]
[Pages 47050-47052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-22070]


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

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 329

RIN 3064-AD46


Interest on Deposits

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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

SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending 
its regulations to eliminate restrictions on certain kinds of transfers 
from savings deposits for state chartered banks that are not members of 
the Federal Reserve System and insured branches of foreign banks. The 
Board of Governors of the Federal Reserve System (the FRB) has already 
amended its regulations to eliminate these restrictions for member 
banks. Because this change is ministerial, the FDIC has determined for 
good cause that public notice and comment is unnecessary and 
impracticable under the Administrative Procedure Act (the APA) and is 
implementing this change by means of a final rule without notice and 
comment.

DATES: This rule is effective on September 15, 2009.

FOR FURTHER INFORMATION CONTACT: Mark Mellon, Counsel, Legal Division, 
(202) 898-3884 or Samuel Frumkin, Senior Policy Analyst (Compliance), 
Compliance Policy Section, Division of Supervision and Consumer 
Protection, (202) 898-6602, 550 17th Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

I. Background

A. FRB Amendments to Regulation D

    On May 20, 2009, the FRB announced the approval of final amendments 
to 12 CFR part 204, Reserve Requirements of Depository Institutions 
(Regulation D). Among other changes, the amendments will eliminate 
restrictions on certain types of transfers that consumers can make from 
savings deposits. See 74 FR 25629 (May 29, 2009). The changes were 
effective 30 days from the date of publication in the Federal Register, 
that is, July 2, 2009.
    Prior to the FRB amendments, Regulation D limited the number of 
``convenient'' transfers and withdrawals from savings deposits to not 
more than six per month. Within this overall limit of six, not more 
than three transfers or withdrawals could be made by check, debit card, 
or similar order made by the depositor and payable to third parties 
(the three transfer sublimit). Under the FRB final amendments, the 
permissible monthly number of transfers or withdrawals from savings 
deposits by check, debit card, or similar order payable to third 
parties has been increased from three to six. In other words, while the 
FRB has decided to retain the overall six-transfer limit for savings 
deposits, it has eliminated the three-transfer sublimit within the 
overall limit that applied to transfers or withdrawals from savings 
deposits by check, debit card, or similar order payable to third 
parties. The FRB decided to eliminate the three transfer sublimit 
because distinctions between such transfers and other types of pre-
authorized or automatic transfers subject to the six-per-month limit 
were no longer logical in light of technological advances. See 74 FR 
25631.

B. FDIC Responsibilities Under Section 18(g) of the Federal Deposit 
Insurance (FDI) Act

    Section 18(g) of the FDI Act (12 U.S.C. 1828(g)) provides that the 
Board of Directors of the FDIC shall by regulation prohibit the payment 
of interest or dividends on demand deposits in insured nonmember banks 
and in insured branches of foreign banks. Accordingly, the FDIC 
promulgated regulations prohibiting the payment of interest or 
dividends on demand deposits at 12 CFR part 329. See 51 FR 10808 (Mar. 
31, 1986). Section 18(g) of the FDI Act also provides that the FDIC 
shall make such exceptions to this prohibition as are prescribed with 
respect to demand deposits in member banks by section 19 of the Federal 
Reserve Act, as amended, or by regulation of the FRB.
    Generally, member banks, state nonmember banks and insured branches 
of foreign banks are subject to the statutory prohibition and 
exceptions to that prohibition, although under different statutes and 
regulations. From time to time the FRB issues or authorizes a new 
exception to the prohibition applicable to member banks, and the FDIC 
later issues or authorizes a similar exception affecting state 
nonmember banks and insured branches of foreign banks, as is the case 
in this particular rulemaking. Note, however, that under section 329.3 
of part 329, state nonmember banks and insured branches of foreign 
banks are already subject to the same exceptions to the prohibition 
that member banks are subject to, regardless of whether the FDIC has 
issued or authorized the specific exception. See 63 FR 8341 (Feb. 19, 
1998).

[[Page 47051]]

C. Amendments to Sections 329.1(b)(3) and 329.102 of Part 329

    Therefore, in accord with the FRB amendments to Regulation D, the 
FDIC is amending the part 329 definition of ``demand deposit'' to 
eliminate the three transfer sublimit. This will be done by eliminating 
the first proviso of subsection 329.1(b)(3). A minor change is also 
made to the interpretive rule set forth in section 329.102 to make it 
conform to section 329.1(b)(3) as amended by this rule.

II. Exemption From Public Notice and Comment

    The FDIC is required by law to promulgate the same exception to the 
prohibition against the payment of interest on demand deposits that has 
been prescribed with respect to demand deposits in member banks by the 
FRB by regulation. Given this statutory requirement, the FDIC has no 
discretion in this matter, but must instead eliminate the three 
transfer sublimit for state nonmember banks and insured branches of 
foreign banks in the same way that the FRB has done for member banks. 
Moreover, under section 329.3 of FDIC Rules and Regulations, state 
nonmember banks and insured branches of foreign banks are already 
covered by the FRB elimination of the three transfer sublimit when that 
regulatory change becomes effective on July 2, 2009. As a result, 
amending part 329 to eliminate reference to the three transfer sublimit 
would essentially only be an official recognition by the FDIC of an 
already established requirement.
    For these reasons, the FDIC has thus determined for good cause that 
public notice and comment is unnecessary and impracticable under the 
APA (5 U.S.C. 553(b)(3)(B)), and that the rule should be published in 
the Federal Register as a final rule.

III. Effective Date

    For the same reasons that the FDIC has determined that public 
notice and comment is unnecessary and impractical for good cause, the 
FDIC also finds that it has good cause to adopt an effective date that 
would be less than 30 days after the date of publication in the Federal 
Register pursuant to the APA (5 U.S.C. 553(d)). The amendment to Part 
329 will be effective as of the date of its publication in the Federal 
Register.

IV. Regulatory Flexibility Act

    An initial regulatory flexibility analysis under the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 603) is required only when an agency 
must publish a general notice of proposed rulemaking. As already noted, 
the FDIC has determined that publication of a notice of proposed 
rulemaking is not necessary for this final rule. Accordingly, the RFA 
does not require an initial regulatory flexibility analysis. 
Nevertheless, the FDIC has considered the likely impact of the rule on 
small entities and believes that the rule will not have a significant 
impact on a substantial number of small entities.

V. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA) (Pub. L. 104-121, 110 Stat. 857) provides generally for 
agencies to report rules to Congress and for Congress to review such 
rules. The reporting requirement is triggered in instances where the 
FDIC issues a final rule as defined by the APA (5 U.S.C. 551 et seq.). 
Because the FDIC is issuing a final rule as defined by the APA, the 
FDIC will file the reports required by the SBREFA.

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

    The FDIC has determined that this final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999 (Pub. L. 105-277, 112 Stat. 
2681 (1998)).

VII. Paperwork Reduction Act

    No collection of information pursuant to section 3504(h) of the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) is contained 
in this rule. Consequently, no information has been submitted to the 
Office of Management and Budget for review.

VIII. Riegle Community Development and Regulatory Improvement Act

    The final rule does not impose any new reporting or disclosure 
requirements on insured depository institutions under the Riegle 
Community Development and Regulatory Improvement Act.

IX. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The final rule makes part 329 plainer by eliminating 
unnecessary language.

X. Authority for the Regulation

    This regulation is authorized by the FDIC's general rulemaking 
authority. Specifically, 12 U.S.C. 1819(a)(Tenth) provides the FDIC 
with general authority to issue such rules and regulations as it deems 
necessary to carry out the statutory mandates of the FDI Act and other 
laws that the FDIC is charged with administering or enforcing. 
Moreover, as previously noted, section 18(g) of the FDI Act provides 
that the FDIC shall make such exceptions to the statutory prohibition 
against the payment of interest on demand deposits as are prescribed 
with respect to demand deposits in member banks by section 19 of the 
Federal Reserve Act, as amended, or by regulation of the FRB (12 U.S.C. 
1828(g)).

List of Subjects in 12 CFR Part 329

    Banks, Banking, Interest rates.

0
For the reasons set out in the preamble, the Board of Directors of the 
FDIC hereby amends part 329 of title 12 of the Code of Federal 
Regulations as follows:

PART 329--INTEREST ON DEPOSITS

0
1. The authority for part 329 continues to read as follows:

    Authority:  12 U.S.C. 1819, 1828(g), 1832(a).


0
2. Section 329.1 is amended by revising paragraph (b)(3) to read as 
follows:


Sec.  329.1  Definitions.

* * * * *
    (b)* * *
    (3) Any other deposit from which, under the terms of the deposit 
contract, the depositor is authorized to make, during any month or 
statement cycle of at least four weeks, more than six transfers by 
means of a preauthorized or automatic transfer or telephonic (including 
data transmission) agreement, order or instruction, which transfers are 
made to another account of the depositor at the same bank, to the bank 
itself, or to a third party, provided that no deposit specified in this 
paragraph (3) will be deemed to be a demand deposit if the entire 
beneficial interest of the deposit is held by a depositor identified in 
paragraph (2) of section 2(a) of Public Law 93-100 (12 U.S.C. 
1832(a)(2)).\1\
---------------------------------------------------------------------------

    \1\ Paragraph (1) of 12 U.S.C. 1832(a) authorizes banks to let 
certain depositors make withdrawals from interest-bearing deposits 
by negotiable or transferable instruments for the purpose of making 
transfers to third parties--i.e., to hold deposits commonly called 
NOW accounts.
    Paragraph (2) of 12 U.S.C. 1832(a) provides: ``Paragraph (1) 
shall apply only with respect to deposits or accounts which consist 
solely of funds in which the entire beneficial interest is held by 
one or more individuals or by an organization which is operated 
primarily for religious, philanthropic, charitable, educational, 
political, or other similar purposes and which is not operated for 
profit, and with respect to deposits of public funds by an officer, 
employee, or agent of the United States, any State, county, 
municipality, or political subdivision thereof, the District of 
Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, any 
territory or possession of the United States, or any political 
subdivision thereof.''
---------------------------------------------------------------------------

* * * * *

[[Page 47052]]


0
3. Section 329.102 is amended by revising the introductory text to read 
as follows:


Sec.  329.102  Deposits described in Sec.  329.1(b)(3).

    This interpretive rule explains the proviso of Sec.  329.1(b)(3).
* * * * *

    Dated this 9th day of September 2009.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9-22070 Filed 9-14-09; 8:45 am]
BILLING CODE 6714-01-P