[Federal Register Volume 75, Number 219 (Monday, November 15, 2010)]
[Rules and Regulations]
[Pages 69577-69583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28627]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AD65


Deposit Insurance Regulations; Unlimited Coverage for 
Noninterest-Bearing Transaction Accounts

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule amending its deposit 
insurance regulations to implement section 343 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act''),\1\ 
providing for unlimited deposit insurance for ``noninterest-bearing 
transaction accounts'' for two years starting December 31, 2010.
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    \1\ Public Law 111-203 (July 21, 2010).

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DATES: Effective Date: The final rule is effective December 31, 2010.

FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Supervisory 
Counsel, Legal Division (202) 898-7349 or [email protected]; Mike 
Figge, Honors Attorney, Legal Division (202) 898-6750 or 
[email protected]; or James V. Deveney, Chief, Deposit Insurance Section, 
Division of Supervision and Consumer Protection (202) 898-6687 or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. The Proposed Rule

    On September 30, 2010, the FDIC published a proposed rule 
(``proposed rule'') to implement section 343 of the Dodd-Frank Act 
(``Section 343'').\2\ Section 343 amended the deposit insurance 
provisions of the FDI Act (12 U.S.C. 1821(a)(1)) to provide temporary

[[Page 69578]]

separate insurance coverage for noninterest-bearing transaction 
accounts. In summary, the proposed rule: Followed the Section 343 
definition of noninterest-bearing transaction account; identified and 
discussed the differences between Section 343 and the FDIC's 
Transaction Account Guarantee Program (``TAGP''); explained the 
separate deposit insurance available for noninterest-bearing 
transaction accounts under Section 343; proposed disclosure and notice 
requirements as part of the implementation of Section 343; announced 
that, because of this Congressional action, the FDIC would not be 
extending the TAGP beyond its sunset date of December 31, 2010; and 
requested comments on all aspects of the proposed rule.
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    \2\ 75 FR 60341 (Sept. 30, 2010).
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II. Comments on the Proposed Rule

    The comment period on the proposed rule ended on October 15, 2010. 
The FDIC received ninety-three comments from trade associations, 
insured depository institutions (``IDIs'') and law firms, among others. 
In particular, the FDIC received eighty-four comments from state-bar 
affiliated associations and five comments from banking and other 
associations. The remaining four comments were from individual IDIs.
    Trade associations and bankers commented that the proposed rule 
reflects an accurate interpretation of Section 343. A number of banks 
and state bar associations commented that the exclusion of Interest on 
Lawyer Trust Accounts (``IOLTAs'') from Section 343, and consequently 
the proposed rule, was the result of an inadvertent omission on the 
part of Congress. These comments referenced a pending bi-partisan 
Senate bill to include IOLTAs in the Section 343 definition of 
noninterest-bearing transaction account. The commenters oppose the 
proposed rule's requirement that IDIs notify IOLTA and negotiable order 
of withdrawal (``NOW'') account holders of changes in the deposit 
insurance scheme before Congress has the opportunity to amend Section 
343 to include IOLTAs. Their comments reflect a concern that the 
exclusion of IOLTA and NOW accounts from the definition of noninterest-
bearing transaction account will cause large IOLTA and NOW account 
depositors to spread these deposits across multiple IDIs to ensure full 
deposit insurance coverage or to place their deposits with institutions 
deemed ``too big to fail.'' Their comments also reflect a concern that 
failure to provide unlimited insurance to IOLTA and NOW accounts will 
significantly restrict community lending.
    One commenter requested that the final rule clarify whether the 
notice requirements apply to all depositors who hold NOW accounts in 
IDIs participating in the TAGP, or only to depositors who may be 
affected by the change in deposit insurance coverage. According to this 
comment letter, most NOW account holders will not be affected by the 
change because they have less than the standard maximum deposit 
insurance amount of $250,000 (``SMDIA'') and remain fully insured 
should an IDI default. Another commenter requested clarification that 
one notice per account, rather than one notice per account holder, will 
satisfy the notice requirement. Similarly, when depositors have 
multiple accounts that are affected, the commenter requested 
clarification that compliance with the notice requirement is achieved 
by sending one notice which lists all affected accounts along with the 
account holder's statement. Another comment letter requested 
clarification that the language included in the proposed rule under 12 
CFR 330.16(c)(1) is language that may be used to comply with the notice 
requirement.
    Several commenters expressed concerns over the unintended 
consequences of providing unlimited deposit insurance coverage for 
noninterest-bearing transaction accounts, contending that providing 
such coverage for these accounts promotes moral hazard. Four commenters 
suggested charging a separate assessment, in addition to the normal 
assessment rates, to address what they deem to be disproportionately 
high assessment rates on banks with a relatively low level of 
noninterest-bearing transaction accounts. One commenter requested 
clarification on how the FDIC intends to treat official checks for 
deposit insurance purposes under the proposed rule, in light of the 
provision in the FDIC's current deposit insurance regulations dealing 
with negotiable instruments,12 CFR 330.5(b)(4)(i).
    Finally, one commenter requested clarification that the absence of 
a contract interest rate will determine whether an account qualifies 
for unlimited deposit-insurance coverage. Likewise, the commenter 
requested confirmation that interest-bearing accounts may be converted 
to noninterest-bearing accounts after December 31, 2010, and still 
obtain unlimited insurance.

III. The Final Rule

Definition of Noninterest-Bearing Transaction Account

    As in the proposed rule, the final rule follows the definition of 
noninterest-bearing transaction account in Section 343. Section 343 
defines a noninterest-bearing transaction account as ``a deposit or 
account maintained at an insured depository institution with respect to 
which interest is neither accrued nor paid; on which the depositor or 
account holder is permitted to make withdrawals by negotiable or 
transferable instrument, payment orders of withdrawal, telephone or 
other electronic media transfers, or other similar items for the 
purpose of making payments or transfers to third parties or others; and 
on which the IDI does not reserve the right to require advance notice 
of an intended withdrawal.'' One commenter on the proposed rule 
suggested that the FDIC define a depositor's balance in a noninterest-
bearing transaction account as the ``average balance collected within 
the insured account over the past 30 days'' prior to the date of 
failure of the IDI. The FDIC believes this definition would be 
inconsistent with the definition of noninterest-bearing transaction 
account in Section 343 and would lead to depositor confusion and 
uncertainty as to the extent of deposit insurance coverage available on 
noninterest-bearing transaction accounts.
    The Section 343 definition of noninterest-bearing transaction 
account is similar to the definition of that term in the TAGP, but it 
includes no interest-bearing accounts. The Section 343 definition of 
noninterest-bearing transaction account encompasses only traditional, 
noninterest-bearing demand deposit (or checking) accounts that allow 
for an unlimited number of deposits and withdrawals at any time, 
whether held by a business, an individual or other type of depositor. 
Unlike the definition of noninterest-bearing transaction account in the 
TAGP, the Section 343 definition of noninterest-bearing transaction 
account does not include NOW accounts (regardless of the interest rate 
paid on the account) or IOLTAs. Therefore, under the final rule, 
neither NOW accounts nor IOLTAs are within the definition of 
noninterest-bearing transaction account. Also, like the TAGP, the final 
rule does not include money market deposit accounts (``MMDAs'') within 
the definition of noninterest-bearing transaction account.
    As noted in the comment summary, the FDIC received numerous 
comments from law firms, IDIs, attorney trade

[[Page 69579]]

groups and others requesting that the FDIC either postpone issuance of 
the final rule or exclude from the final rule the requirement that IDIs 
currently participating in the TAGP notify IOLTA customers that, 
beginning January 1, 2011, IOLTAs no longer will be eligible for full 
deposit insurance coverage. The FDIC believes it is critically 
important for depositors to have a clear understanding of the deposit 
insurance rules before placing or retaining deposits at an FDIC-insured 
institution. As a result of the passage of the Dodd-Frank Act, the 
temporary full protection currently afforded to IOLTAs at IDIs 
participating in the TAGP will terminate on January 1, 2011, and the 
FDIC must ensure that IOLTA customers know about this change. If, as 
the commenters suggest, Congress acts before December 31, 2010, to add 
IOLTAs to Section 343, thus providing temporary full coverage for these 
accounts, the FDIC will act quickly to notify IDIs of the statutory 
change and explain how to respond to this change in complying with the 
disclosure requirements in the final rule.
    Importantly, under the FDIC's general deposit insurance rules, 
IOLTAs may qualify for ``pass-through'' deposit insurance coverage, so 
long as the regulatory requirements are met. 12 CFR 330.7. That means 
each client for whom a law firm holds funds in an IOLTA may be insured 
up to $250,000 for his or her funds. In addition, the accrued interest 
to which a legal services entity or program is entitled may be 
separately insured for $250,000. For example, if a law firm maintains 
an IOLTA with $250,000 attributable to Client A, $150,000 to Client B 
and $75,000 to Client C, and the accrued interest of $5,000 is payable 
to a legal services program, the account likely would be fully insured. 
If the clients or the legal services entity have other funds at the 
same IDI, those funds would be added to their respective ownership 
interest in the IOLTA for insurance coverage purposes. But, coverage is 
available, generally, on a per-client basis; thus, a generous amount of 
deposit insurance coverage is available for IOLTAs, absent the 
availability of unlimited coverage for IOLTAs under either the TAGP or 
Section 343.
    Some commenters noted that, pursuant to Dodd-Frank Act revisions to 
the Federal Deposit Insurance Act, the FDIC would not have the 
authority to extend the TAGP beyond that program's sunset date of 
December 31, 2010. The FDIC agrees with this conclusion. Therefore, in 
response to comments that the FDIC extend the TAGP, so that IOLTAs 
would continue to be fully protected, the FDIC does not have the 
statutory authority to do so. Likewise, in response to comments that 
the FDIC expand the final rule to include IOLTAs, the Dodd-Frank Act 
would not permit such an expansion, given that the Section 343 
definition of noninterest-bearing transaction excludes accounts that 
may pay interest.
    One trade group suggested that the FDIC undertake a study of the 
benefits and costs of a permanent self-supporting, and optional 
insurance program for qualifying accounts above the standard insurance 
limit. The FDIC will consider this suggestion.
    As under the TAGP, under the final rule, whether an account is 
noninterest-bearing is determined by the terms of the account agreement 
and not by the fact that the rate on an account may be zero percent at 
a particular point in time. For example, an IDI might offer an account 
with a rate of zero percent except when the balance exceeds a 
prescribed threshold. Such an account would not qualify as a 
noninterest-bearing transaction account even though the balance is less 
than the prescribed threshold and the interest rate is zero percent. 
Under the final rule, at all times, the account would be treated as an 
interest-bearing account because the account agreement provides for the 
payment of interest under certain circumstances. On the other hand, as 
under the TAGP, the waiving of fees would not be treated as the earning 
of interest. For example, IDIs sometimes waive fees or provide fee-
reducing credits for customers with checking accounts. Under the final 
rule, such account features would not prevent an account from 
qualifying as a noninterest-bearing transaction account, as long as the 
account otherwise satisfies the definition of a noninterest-bearing 
transaction account.
    One commenter on the proposed rule asked that the FDIC clarify that 
``rewards programs'' offered by IDIs on non-interest checking accounts 
also would not prevent an account from meeting the definition of 
noninterest-bearing transaction account under the final rule. 
Generally, the FDIC will look to current requirements and 
interpretations under Part 329 of its regulations (Interest on 
Deposits, 12 CFR part 329) and such interpretations under Regulation Q 
of the Board of Governors of the Federal Reserve System (12 CFR part 
217) to determine whether rewards provided in connection with 
transaction accounts will be considered interest paid on the account 
and, thus, disqualify an account for treatment as a noninterest-bearing 
transaction account.
    The same commenter requested that the FDIC confirm that interest-
bearing accounts may be converted to noninterest-bearing checking 
accounts after December 31, 2010, and still obtain the benefits of 
unlimited FDIC coverage. Such account would be eligible for treatment 
as a noninterest-bearing transaction account as long as, under the 
modified deposit agreement, the depositor may not earn interest on the 
account.
    This same principle for determining whether a deposit account 
qualifies as a noninterest-bearing transaction account will apply when 
IDIs no longer are prohibited from paying interest on demand deposit 
accounts. Pursuant to section 627 of the Dodd-Frank Act, as of July 21, 
2011 (one year after the enactment date of the Dodd-Frank Act), IDIs no 
longer will be restricted from paying interest on demand deposit 
accounts. At that time, demand deposit accounts offered by IDIs that 
allow for the payment of interest will not satisfy the definition of a 
noninterest-bearing transaction account. As discussed below, under the 
final rule, IDIs are required to inform depositors of any changes in 
the terms of an account that will affect their deposit insurance 
coverage under this new provision of the deposit insurance rules.
    As under the TAGP, the final rule's definition of noninterest-
bearing transaction account encompasses ``official checks'' issued by 
IDIs. Official checks, such as cashier's checks and money orders issued 
by IDIs, are ``deposits'' as defined under the FDI Act (12 U.S.C. 
1813(l)) and part 330 of the FDIC's regulations. The payee of the 
official check (the party to whom the check is payable) is the insured 
party. Also, as a clarifying point made in one of the comments received 
on the proposed rule, if an official check is negotiated to a third 
party, the FDIC would recognize that person as the insured party, 
subject to certain requirements. 12 CFR 330.5(b)(4). Because official 
checks meet the definition of a noninterest-bearing transaction 
account, the payee (or the party to whom the payee has endorsed the 
check) would be insured for the full amount of the check upon the 
failure of the IDI that issued the official check.
    Under the FDIC's rules and procedures for determining account 
balances at a failed IDI (12 CFR 360.8), funds swept (or transferred) 
from a deposit account to either another type of deposit account or a 
non-deposit account are treated as being in the account to which the 
funds were transferred prior to the time of failure. So, for example, 
if pursuant to an

[[Page 69580]]

agreement between an IDI and its customer, funds are swept daily from a 
noninterest-bearing transaction account to an account or product (such 
as a repurchase agreement) that is not a noninterest-bearing 
transaction account, the funds in the resulting account or product 
would not be eligible for full insurance coverage. This is how sweep 
account products are treated under the TAGP and under the final rule.
    As under the TAGP, however, the final rule includes an exception 
from the treatment of swept funds in situations where funds are swept 
from a noninterest-bearing transaction account to a noninterest-bearing 
savings account, notably a MMDA. Often referred to as ``reserve 
sweeps,'' these products entail an arrangement in which a single 
deposit account is divided into two sub-accounts, a transaction account 
and an MMDA. The amount and frequency of sweeps are determined by an 
algorithm designed to minimize required reserves. In some situations 
customers may be unaware that this sweep mechanism is in place. Under 
the final rule, the FDIC will consider such accounts noninterest-
bearing transaction accounts. In response to a comment on the proposed 
rule that treating such accounts as noninterest-bearing transaction 
accounts is contrary to Section 343, the FDIC notes that these are 
single accounts divided into sub-accounts, on neither of which the IDI 
pays interest. Considering ``reserve sweep accounts'' to be 
noninterest-bearing transaction accounts also is consistent with the 
treatment of such accounts under the FDIC's regulations on the 
treatment of sweep accounts upon the failure of an IDI. 12 CFR 360.8. 
Apart from this exception for ``reserve sweeps,'' MMDAs and 
noninterest-bearing savings accounts do not qualify as noninterest-
bearing transaction accounts.

Insurance Coverage

    As noted in the proposed rule, pursuant to Section 343, all funds 
held in noninterest-bearing transaction accounts will be fully insured, 
without limit. As also specifically provided for in Section 343, this 
unlimited coverage is separate from, and in addition to, the coverage 
provided to depositors with respect to other accounts held at an IDI. 
This means that funds held in noninterest-bearing transaction accounts 
will not be counted in determining the amount of deposit insurance on 
deposits held in other accounts, and in other rights and capacities, at 
the same IDI. Thus, for example, if a depositor has a $225,000 
certificate of deposit and a no-interest checking account with a 
balance of $300,000, both held in a single ownership capacity, he or 
she would be fully insured for $525,000 (plus interest accrued on the 
CD), assuming the depositor has no other single-ownership funds at the 
same institution. First, coverage of $225,000 (plus accrued interest) 
would be provided for the certificate of deposit as a single ownership 
account (12 CFR 330.6) up to the SMDIA of $250,000. Second, full 
coverage of the $300,000 checking account would be provided separately, 
despite the checking account also being held as a single ownership 
account, because the account qualifies for unlimited separate coverage 
as a noninterest-bearing transaction account.
    One issue raised during the comment period is how the FDIC will 
apply the new Dodd-Frank coverage provision to determine the amount of 
insurance coverage available for revocable trust accounts. Coverage for 
revocable trust accounts, in general, is based on the number of 
``eligible'' beneficiaries named in the account. 12 CFR 330.10. The 
specific question is how the FDIC will ``count up'' the number of 
eligible beneficiaries in determining revocable trust account coverage 
for an account owner who has multiple revocable trust accounts, 
including one or more such accounts that would qualify as noninterest-
bearing transaction accounts under the Dodd-Frank provision. For 
example, if a depositor has an interest-bearing account with a balance 
of $400,000 payable to a niece and a qualifying noninterest-bearing 
transaction account with a balance of $200,000 payable to a friend, how 
much coverage would be available for the accounts? To make this deposit 
insurance calculation, the FDIC would first determine the total number 
of different beneficiaries the account owner has named in all revocable 
trust accounts (both interest-bearing and noninterest-bearing) at the 
same IDI. In this example, there are two (the niece and the friend). We 
would then multiply that number times the SMDIA of $250,000 to 
determine the maximum coverage available on the account owner's 
revocable trust accounts. In this example, the amount is $500,000. We 
then would apply that amount to the total balance of the account 
owner's interest-bearing revocable trust accounts. Here, because that 
amount is $400,000, it would be fully covered. The balance of the 
noninterest-bearing transaction account (in this case, $200,000) would 
be separately and fully covered under the final rule.

No Opting Out

    Under the TAGP, IDIs could choose not to participate in the 
program. Because Section 343 of the Dodd-Frank Act provides 
Congressionally mandated deposit insurance coverage, IDIs are not 
required to take any action (i.e., opt in or opt out) to obtain 
separate coverage for noninterest-bearing transaction accounts. From 
December 31, 2010, through December 31, 2012, noninterest-bearing 
transaction accounts at all IDIs will receive this temporary deposit 
insurance coverage. One commenter complained that the proposed rule did 
not allow IDIs to opt out of the temporary unlimited coverage for 
noninterest-bearing transaction accounts under Dodd-Frank. We note 
that, unlike under the TAGP, Section 343 does not allow IDIs to opt out 
of this statutory provision.

No Separate Assessment

    The FDIC imposes a separate assessment, or premium, on IDIs that 
participate in the TAGP.\3\ The FDIC will not charge a separate 
assessment for the insurance of noninterest-bearing transaction 
accounts pursuant to Section 343. The FDIC will take into account the 
cost for this additional insurance coverage in determining the amount 
of the deposit insurance assessment the FDIC charges IDIs under its 
risk-based assessment system.\4\ Four comments from trade groups and 
IDIs suggested that the FDIC charge more for the additional coverage on 
noninterest-bearing transaction accounts similar to the way additional 
coverage is charged for under the TAGP. The proposed rule was not 
intended to address assessment issues, but the FDIC will take this 
comment into consideration when considering future changes to the 
assessment rate system. The FDIC notes, however, that the deposits 
covered by the TAGP were not defined as insured deposits. In contrast, 
Congress has specifically determined that noninterest-bearing 
transaction accounts are fully insured deposits.
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    \3\ 12 CFR 370.7.
    \4\ 12 CFR part 327.
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Disclosure and Notice Requirements

    The final rule includes disclosure and notice requirements as part 
of the implementation of Section 343. As indicated in the proposed 
rule, the purpose of these requirements is to ensure that depositors 
are aware of and understand what types of accounts will be covered by 
this temporary deposit insurance coverage for noninterest-bearing 
transaction accounts. As in the proposed rule, the final rule includes

[[Page 69581]]

three such requirements. As explained in detail below: (1) IDIs must 
post a prescribed notice in their main office, each branch and, if 
applicable, on their Web site; (2) IDIs currently participating in the 
TAGP must notify NOW account depositors (that are currently protected 
under the TAGP because of interest rate restrictions on those accounts) 
and IOLTA depositors that, beginning January 1, 2011, those accounts no 
longer will be eligible for unlimited protection; and (3) IDIs must 
notify customers individually of any action they take to affect the 
deposit insurance coverage of funds held in noninterest-bearing 
transaction accounts.
1. Posted Notice
    The final rule requires each IDI to post, prominently, a copy of 
the following notice in the lobby of its main office, in each domestic 
branch and, if it offers Internet deposit services, on its Web site. In 
response to comments received on the proposed rule, this notice has 
been revised from the notice in the proposed rule to make it more 
concise and reader-friendly:

NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION 
ACCOUNTS

    All funds in a ``noninterest-bearing transaction account'' are 
insured in full by the Federal Deposit Insurance Corporation from 
December 31, 2010, through December 31, 2012. This temporary 
unlimited coverage is in addition to, and separate from, the 
coverage of at least $250,000 available to depositors under the 
FDIC's general deposit insurance rules.
    The term ``noninterest-bearing transaction account'' includes a 
traditional checking account or demand deposit account on which the 
insured depository institution pays no interest. It does not include 
other accounts, such as traditional checking or demand deposit 
accounts that may earn interest, NOW accounts, money-market deposit 
accounts, and Interest on Lawyers Trust Accounts (``IOLTAs'').
    For more information about temporary FDIC insurance coverage of 
transaction accounts, visit www.fdic.gov.
2. Notice to Depositors Protected Under the TAGP But Not Under the 
Dodd-Frank Provision
    As discussed above, through December 31, 2010, low-interest NOW 
accounts and all IOLTAs are protected in full at IDIs participating in 
the TAGP. These accounts, however, are not eligible for unlimited 
deposit insurance coverage under the Dodd-Frank provision. Thus, 
starting January 1, 2011, all NOW accounts and IOLTAs will be insured 
under the general deposit insurance rules and will no longer be 
eligible for unlimited protection. Because of the potential depositor 
confusion about this change in the FDIC's treatment of NOWs and IOLTAs, 
the final rule requires IDIs currently participating in the TAGP to 
provide individual notices to depositors with NOW accounts currently 
protected in full under the TAGP and IOLTAs that those accounts will 
not be insured under the new temporary insurance category for 
noninterest-bearing transaction accounts. IDIs are required to provide 
such notice to applicable depositors by mail no later than December 31, 
2010. To comply with this requirement, IDIs may use electronic mail for 
depositors who ordinarily receive account information in this manner. 
The notice may be in the form of a copy of the notice required to be 
posted in IDI main offices, branches and on Web sites.
    One commenter asked that the FDIC address certain specifics about 
complying with this notice requirement. In response to that comment: 
(1) As to joint accounts protected under the TAGP as of December 31, 
2010, IDIs need only mail the notice to the address designated on the 
account; (2) if depositors have more than one affected account, one 
notice is sufficient if it identifies all the applicable accounts; and 
(3) the notice mailed to affected depositors may be in the form of the 
``posting'' notice in Sec.  330.16(c) (1) of the final rule.
    Several commenters requested that this notice requirement either be 
eliminated, limited to NOW account owners with balances over the SMDIA 
or postponed until a date after the effective date of December 31, 
2010. The FDIC has not adopted these suggestions because the Dodd-Frank 
coverage provision becomes effective on December 31, 2010; thus, 
starting January 1, 2011, low-interest NOW accounts and IOLTAs at IDIs 
participating in the TAGP no longer will be eligible for unlimited 
protection. As noted, the FDIC believes it is critical that depositors 
understand the current deposit insurance rules in placing or retaining 
funds at FDIC-insured institutions.
3. Notice To Sweep Account and Other Depositors Whose Coverage on 
Noninterest-Bearing Transaction Accounts Is Affected by an IDI Action
    Under the TAGP regulations, if an IDI offers an account product in 
which funds are automatically transferred, or ``swept,'' from a 
noninterest-bearing transaction account to another account (such as a 
savings account) or bank product that does not qualify as a 
noninterest-bearing transaction account, it must inform those customers 
that, upon such transfer, the funds will no longer be fully protected 
under the TAGP. As in the proposed rule, the final rule contains a 
similar, though somewhat more expansive, requirement, mandating that 
IDIs notify customers of any action that affects the deposit insurance 
coverage of their funds held in noninterest-bearing transaction 
accounts. This notice requirement is intended primarily to apply when 
IDIs begin paying interest on demand deposit accounts, as will be 
permitted beginning July 21, 2011, under section 627 of the Dodd-Frank 
Act (discussed above). Thus, under the final rule's notice 
requirements, if an IDI modifies the terms of its demand deposit 
account agreement so that the account may pay interest, the IDI must 
notify affected customers that the account no longer will be eligible 
for full deposit insurance coverage as a noninterest-bearing 
transaction account. Though such notifications are mandatory, the final 
rule does not impose specific requirements regarding the form of the 
notice. Rather, the FDIC expects IDIs to act in a commercially 
reasonable manner and to comply with applicable state and federal laws 
and regulations in informing depositors of changes to their account 
agreements.
    One commenter on the proposed rule recommended that the FDIC issue 
additional guidance on the implementation of Section 343. The FDIC will 
consider publishing such guidance if it seems helpful to do so.

IV. Regulatory Analysis and Procedure

A. Effective Date

    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (12 U.S.C. Section 4802(b)) requires, subject 
to certain exceptions, that regulations imposing additional reporting, 
disclosure or other requirements take effect on the first day of the 
calendar quarter after publication of the final rule. One of the 
statutory exceptions to this requirement is when the regulation is 
required to take effect on a date other than on the first day of the 
calendar quarter after publication of the final rule. The effective 
date of Section 343 is December 31, 2010. Thus, the effective date of 
the final rule is December 31, 2010.

B. Paperwork Reduction Act

    In accordance with section 3512 of the Paperwork Reduction Act of 
1995 (``PRA''), 44 U.S.C. 3501 et seq., an agency may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless it

[[Page 69582]]

displays a currently valid Office of Management and Budget (``OMB'') 
control number. This final rule contains disclosure requirements, some 
of which implicate PRA as more fully explained below. In the proposed 
rule, the Board announced that the TAGP will not continue beyond 
December 31, 2010, thereby eliminating the need for an associated, 
currently approved information collection. Consequently, the FDIC will 
discontinue its information titled ``Transaction Account Guarantee 
Extension,'' OMB No. 3064-0170.
    The new disclosure requirements are contained in Sec.  
330.16(c)(1), (2) and (3). More specifically, Sec.  330.16(c)(1) 
requires that each IDI post a ``Notice of Changes in Temporary FDIC 
Insurance Coverage for Transaction Accounts'' in the lobby of its main 
office and domestic branches and, if it offers Internet deposit 
services, on its Web site; Sec.  330.16(c)(2) requires IDIs currently 
participating in the TAGP to provide individual notices to depositors 
alerting them to the fact that low-interest NOWs and IOLTAs are not 
eligible for unlimited coverage under the new temporary insurance 
category for noninterest-bearing transaction accounts; and Sec.  
330.16(c)(3) requires that IDIs notify customers of any action that 
affects the deposit insurance coverage of their funds held in 
noninterest-bearing transaction accounts.
    The disclosure requirement in Sec.  330.16(c)(1) would normally be 
subject to PRA. However, because the FDIC has provided the specific 
text for the notice and allows for no variance in the language, the 
disclosure is excluded from coverage under PRA because ``the public 
disclosure of information originally supplied by the Federal government 
to the recipient for the purpose of disclosure to the public is not 
included'' within the definition of ``collection of information.'' 5 
CFR 1320.3(c)(2). Therefore, the FDIC is not submitting the Sec.  
330.16(c)(1) disclosure to OMB for review.
    The disclosure requirement in Sec.  330.16(c)(2) provides that IDIs 
currently participating in the TAGP provide individual notices to 
affected depositors alerting them to the fact that low-interest NOWs 
and IOLTAs will not be insured under the new temporary insurance 
category for noninterest-bearing transaction accounts. The estimated 
burden for this new disclosure requirement has been added to the burden 
for an existing information collection, OMB No. 3064-0168, currently 
entitled SWEEP Accounts: Disclosure of Deposit Status. In conjunction 
with the revision of OMB No. 3064-0168, the FDIC has requested 
permission to modify the title of the collection as more fully 
explained below.
    The disclosure requirement in Sec.  330.16(c)(3) expands upon a 
similar, pre-existing requirement for sweep accounts offered by IDIs 
participating in the TAGP. The existing disclosure requirement is 
approved under OMB No. 3064-0168. The expanded disclosure requirement 
is mandatory for all IDIs, although institutions retain flexibility 
regarding the form of the notice. Therefore, in conjunction with 
publication of this final rule, the FDIC, on September 30, 2010, 
submitted to OMB a request to revise OMB No. 3064-0168 to reflect the 
estimated burden associated with the expanded disclosure requirement 
and to modify the title of the collection to ``Disclosure of Deposit 
Status'' to more accurately reflect the broader application of the 
requirement. This final rule results in no changes to the previously 
submitted burden estimates.
    The estimated burden for the new disclosure under Sec. Sec.  
330.16(c)(2) and (3) is as follows:
    Title: ``Disclosure of Deposit Status.''.
    Affected Public: Insured depository institutions.
    OMB Number: 3064-0168.
    Estimated Number of Respondents:

Disclosure of action affecting deposit insurance coverage of funds in 
noninterest-bearing transaction accounts--7,830.
Disclosure to NOW account and IOLTA depositors of change in insurance 
category--6,249.

    Frequency of Response:

Disclosure of action affecting deposit insurance coverage of funds in 
noninterest-bearing transaction accounts--on occasion (average of once 
per year per bank).
Disclosure to NOW account and IOLTA depositors of change in insurance 
category--once.

    Average Time per Response:

Disclosure of action affecting deposit insurance coverage of funds in 
noninterest-bearing transaction accounts--8 hours.
Disclosure to NOW account and IOLTA depositors of change in insurance 
category--8 hours.
    Estimated Annual Burden:

Disclosure of action affecting deposit insurance coverage of funds in 
noninterest-bearing transaction accounts--62,640 hours.
Disclosure to NOW account and IOLTA depositors of change in insurance 
category--49,992 hours.

    Total Annual Burden--112,632 hours.

C. Regulatory Flexibility Act

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(``RFA''), 5 U.S.C. 603(a), the FDIC must publish an initial regulatory 
flexibility analysis with this final rulemaking or certify that the 
final rule does not have a significant economic impact on a substantial 
number of small entities. For purposes of the RFA analysis or 
certification, financial institutions with total assets of $175 million 
or less are considered to be ``small entities.'' The FDIC hereby 
certifies pursuant to 5 U.S.C. 605(b) that the final rule will not have 
a significant economic impact on a substantial number of small 
entities.
    As of June 30, 2010, there were 4,294 IDIs that were considered 
small entities. A total of 1,121 of these institutions do not 
participate in the TAGP and receive additional insurance coverage under 
the final rule. Currently 3,173 small IDIs participate in the TAGP. 
Within this group of small institutions, 618, or 19.5 percent, did not 
have TAGP eligible deposits as of the June 2010 Report of Condition and 
Income for banks and the Thrift Financial Report for thrifts 
(collectively, ``June 2010 Call Reports''); thus, they were not 
required to pay the fee currently assessed for participation in the 
TAGP. As to the remaining 2,555 small entities that had TAGP eligible 
deposits as of the June 2010 Call Reports, they will no longer be 
assessed a fee after the termination of the TAGP, and they will not be 
charged a separate assessment for the new deposit insurance coverage.
    The FDIC has determined that under the final rule, the economic 
impact on small entities will not be significant for the following 
reasons. Because there is no separate FDIC assessment for the insurance 
of noninterest-bearing transaction accounts under section 343 of the 
Dodd-Frank Act, small entities currently assessed fees for 
participation in the TAGP will realize an average annual cost savings 
of $2,373 per institution. All other small entities, whether they are 
currently in the TAGP or not, will gain additional insurance coverage 
with no direct cost. The FDIC asserts that the economic benefit of 
additional insurance coverage and coverage extension until 2013 
outweighs any future costs associated with the temporary insurance of 
noninterest-bearing transaction accounts.
    With respect to amending the disclosures related to Section 343, 
the FDIC asserts that the economic impact on all small entities 
participating in the program (regardless of whether they

[[Page 69583]]

currently pay a fee) is de minimis in nature and is outweighed by the 
economic benefit of additional insurance coverage.
    Accordingly, the final rule does not have a significant economic 
impact on a substantial number of small entities.

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

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

E. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final 
rule is not a ``major rule'' within the meaning of the relevant 
sections of the Small Business Regulatory Enforcement Act of 1996 
(``SBREFA'') (5 U.S.C. 801 et seq.). As required by SBREFA, the FDIC 
will file the appropriate reports with Congress and the General 
Accounting Office so that the final rule may be reviewed.

F. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat. 1338, 1471), requires the Federal banking agencies to use plain 
language in all proposed and final rules published after January 1, 
2000. The FDIC has sought to present the final rule in a simple and 
straightforward manner, and has made revisions to the proposed rule in 
response to commenter concerns seeking clarification of the application 
of the deposit insurance rules.

List of Subjects in 12 CFR Part 330

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

0
For the reasons stated above, the Board of Directors of the Federal 
Deposit Insurance Corporation hereby amends part 330 of title 12 of the 
Code of Federal Regulations as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

0
1. The authority citation for part 330 continues to read as follows:

    Authority:  12 U.S.C. 1813(1), 1813(m), 1817(i), 1818(q), 1819 
(Tenth), 1820(f), 1821(a), 1822(c).


0
2. In Sec.  330.1, paragraph (r) is added to read as follows:


Sec.  330.1.  Definitions.

* * * * *
    (r) Noninterest-bearing transaction account means a deposit or 
account maintained at an insured depository institution--
    (1) With respect to which interest is neither accrued nor paid;
    (2) On which the depositor or account holder is permitted to make 
withdrawals by negotiable or transferable instrument, payment orders of 
withdrawal, telephone or other electronic media transfers, or other 
similar items for the purpose of making payments or transfers to third 
parties or others; and
    (3) On which the insured depository institution does not reserve 
the right to require advance notice of an intended withdrawal.
* * * * *

0
3. New Sec.  330.16 is added to read as follows:


Sec.  330.16  Noninterest-bearing transaction accounts.

    (a) Separate insurance coverage. From December 31, 2010, through 
December 31, 2012, a depositor's funds in a ``noninterest-bearing 
transaction account'' (as defined in Sec.  330.1(r)) are fully insured, 
irrespective of the SMDIA. Such insurance coverage shall be separate 
from the coverage provided for other accounts maintained at the same 
insured depository institution.
    (b) Certain swept funds. Notwithstanding its normal rules and 
procedures regarding sweep accounts under 12 CFR 360.8, the FDIC will 
treat funds swept from a noninterest-bearing transaction account to a 
noninterest-bearing savings deposit account as being in a noninterest-
bearing transaction account.
    (c) Disclosure and notice requirements. (1) Each depository 
institution that offers noninterest-bearing transaction accounts must 
post prominently the following notice in the lobby of its main office, 
in each domestic branch and, if it offers Internet deposit services, on 
its Web site:

NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION 
ACCOUNTS

    All funds in a ``noninterest-bearing transaction account'' are 
insured in full by the Federal Deposit Insurance Corporation from 
December 31, 2010, through December 31, 2012. This temporary 
unlimited coverage is in addition to, and separate from, the 
coverage of at least $250,000 available to depositors under the 
FDIC's general deposit insurance rules.
    The term ``noninterest-bearing transaction account'' includes a 
traditional checking account or demand deposit account on which the 
insured depository institution pays no interest. It does not include 
other accounts, such as traditional checking or demand deposit 
accounts that may earn interest, NOW accounts, money-market deposit 
accounts, and Interest on Lawyers Trust Accounts (``IOLTAs'').
    For more information about temporary FDIC insurance coverage of 
transaction accounts, visit www.fdic.gov.

    (2) Institutions participating in the FDIC's Transaction Account 
Guarantee Program on December 31, 2010, must provide a notice by mail 
to depositors with negotiable order of withdrawal accounts that are 
protected in full as of that date under the Transaction Account 
Guarantee Program and to depositors with Interest on Lawyer Trust 
Accounts that, as of January 1, 2011, such accounts no longer will be 
eligible for unlimited protection. This notice must be provided to such 
depositors no later than December 31, 2010.
    (3) If an institution uses sweep arrangements, modifies the terms 
of an account, or takes other actions that result in funds no longer 
being eligible for full coverage under this section, the institution 
must notify affected customers and clearly advise them, in writing, 
that such actions will affect their deposit insurance coverage.

    Dated at Washington DC, this 9th day of November 2010.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010-28627 Filed 11-12-10; 8:45 am]
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