[Federal Register Volume 76, Number 18 (Thursday, January 27, 2011)]
[Rules and Regulations]
[Pages 4813-4816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1732]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AD37


Deposit Insurance Regulations; Unlimited Coverage for 
Noninterest-Bearing Transaction Accounts; Inclusion of Interest on 
Lawyers Trust Accounts

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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[[Page 4814]]

SUMMARY: The FDIC is adopting a final rule amending its deposit 
insurance regulations to implement an amendment to section 
11(a)(1)(B)(iii) of the Federal Deposit Insurance Act (FDI Act), as 
added by section 343 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Pub. L. 111-203), that includes Interest on Lawyers 
Trust Accounts (``IOLTAs'') in the definition of ``noninterest-bearing 
transaction account'' for purposes of providing unlimited deposit 
insurance for such accounts for two years starting December 31, 2010.

DATES: Effective Date: The final rule is effective January 27, 2011.

FOR FURTHER INFORMATION CONTACT: Joseph A. DiNuzzo, Supervisory 
Counsel, Legal Division (202) 898-7349 or [email protected]; William 
Piervincenzi, Attorney, Legal Division (202) 898-6957 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. Background

    On November 15, 2010, the FDIC published a final rule (``November 
final rule'') \1\ to implement section 343 of the Dodd-Frank Wall 
Street Reform and Consumer Protection 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 separate insurance coverage for 
noninterest-bearing transaction accounts. The November final rule 
followed the definition of noninterest-bearing transaction account in 
Section 343. Section 343 defined 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 insured depository institution does 
not reserve the right to require advance notice of an intended 
withdrawal.''
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    \1\ 75 FR 69577 (Nov. 15, 2010).
    \2\ Public Law 111-203 (July 21, 2010).
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    In the November final rule, the FDIC noted that, unlike the 
definition of noninterest-bearing transaction account in the FDIC's 
Transaction Account Guarantee Program (``TAGP''), the Section 343 
definition did not include NOW accounts (regardless of the interest 
rate paid on the account) or IOLTAs. Therefore, neither NOW accounts 
nor IOLTAs were within the November final rule's definition of 
noninterest-bearing transaction account.
    The November final rule included disclosure and notice requirements 
as part of the implementation of Section 343. These included, among 
other requirements, the requirements that: (1) Insured depository 
institutions (``IDIs'') post a prescribed notice in their main office, 
at each branch and, if applicable, on their Web site that indicated 
that noninterest-bearing transactions accounts do not include NOW 
accounts or IOLTAs; and (2) IDIs then participating in the TAGP notify 
NOW account and IOLTA depositors that, beginning January 1, 2011, those 
accounts no longer will be eligible for unlimited protection but would 
be insured under the general deposit insurance rules.
    On December 29, 2010, the President signed an act (the ``Act'') 
that amended the definition of noninterest-bearing transaction account 
in Section 11(a)(1)(B)(iii) of the FDI Act. The Act replaced the 
Section 343 definition with one that explicitly includes IOLTAs. 
Section 11(a)(1)(B)(iii), as amended, defines the term 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 insured 
depository institution does not reserve the right to require advance 
notice of an intended withdrawal; and a trust account established by an 
attorney or law firm on behalf of a client, commonly known as an 
Interest on Lawyers Trust Account, or a functionally equivalent 
account, as determined by the Corporation.''

II. The Final Rule

    This final rule is in the form of a technical amendment that 
generally leaves intact the notice requirements of the November final 
rule, but amends the prescribed notice required by 12 CFR 330.16(c)(1). 
IDIs must post the revised notice no later than February 28, 2011. 
Also, this final rule eliminates the requirement that IDIs 
participating in the TAGP as of December 31, 2010 notify IOLTA 
depositors that, beginning January 1, 2011, IOLTAs will no longer will 
be eligible for unlimited protection.
    As indicated in informal guidance the FDIC has provided to the 
industry,\3\ IDIs that already have sent the notice required in the 
November final rule to IOLTA depositors are encouraged, but not 
required, to send a revised notice to such IOLTA depositors that their 
funds will be fully insured from December 31, 2010 through December 31, 
2012.
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    \3\ See FIL-2-2011 (Jan. 21, 2011); See also: http://www.fdic.gov/deposit/deposits/changes2.html.
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III. Administrative Procedure Act

    The FDIC invokes the good cause exception to the requirement in the 
Administrative Procedure Act (``APA'') \4\ that, before a rulemaking 
can be finalized, it must first be issued for public comment. The FDIC 
believes that good cause exists for issuing a final rule without 
providing an opportunity for comment because seeking public comment is 
``unnecessary,'' ``impracticable,'' and ``contrary to the public 
interest'' under these circumstances.\5\
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    \4\ 5 U.S.C. 553.
    \5\ 5 U.S.C. 553(b)(3)(B).
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    The Act, signed into law on December 29, 2010, revises Section 
11(a)(1)(B) of the Federal Deposit Insurance Act \6\ to include IOLTAs 
within the definition of noninterest-bearing transaction account for 
purposes of providing IOLTAs with temporary unlimited deposit insurance 
coverage. This amendment is effective December 31, 2010, to coincide 
with the amendment to the FDI Act providing temporary unlimited deposit 
insurance coverage to noninterest-bearing transaction accounts 
generally, as required by Section 343. This final rule amends the 
FDIC's deposit insurance regulations to reflect this change made by 
Congress; none of the other regulations affecting the calculation of 
deposit insurance are changed by the final rule. Additionally, the 
final rule revises the prescribed notice to reflect that IOLTAs are not 
excluded from the separate deposit insurance coverage for noninterest-
bearing accounts enacted by Congress; this change in the prescribed 
notice is meant to allow institutions to post the updated prescribed 
notice immediately so that depositors will be aware of this change in 
deposit insurance coverage. Finally, the final rule eliminates the 
requirement that IDIs participating in the TAGP notify IOLTA holders 
that, as of January 1, 2011, such

[[Page 4815]]

accounts no longer will be eligible for unlimited protection.
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    \6\ 12 U.S.C. 1821(a)(1)(B).
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    Because the final rule involves mere technical amendments that 
conform the FDIC's definition of noninterest-bearing transaction 
account to the language of the revised statute, revise the prescribed 
notice to indicate this change in deposit insurance coverage, and 
reduce the number of required notifications, the FDIC finds that notice 
and comment procedures are ``unnecessary,'' and the good cause 
exception to the APA's notice-and-comment requirement applies. See, 
e.g., Gray Panthers Advocacy Comm. v. Sullivan, 936 F.2d 1284, 1290-92 
(DC Cir. 1991) (regulations that ``either restate or paraphrase the 
detailed requirements'' of a self-executing statute do not require 
notice and comment); Nat'l Customs Brokers & Forwarders Ass'n v. United 
States, 59 F.3d 1219, 1223-24 (Fed. Cir. 1995) (notice and comment 
unnecessary where Congress directed agency to change regulations and 
public would benefit from amendments).
    Additionally, staff believes that a finding of good cause is 
warranted because it would be ``impracticable'' and ``contrary to the 
public interest'' to delay revising the disclosure requirements to seek 
public comment on the revision. Because the amendment to the definition 
of noninterest-bearing transaction account was effective two days after 
enactment of the December 29 Act, it is in the public interest for the 
Corporation to take immediate steps to make depositors aware of this 
change in deposit insurance coverage. A delay in distribution of 
required notices and prescribed lobby disclosures would be detrimental 
to this goal, and therefore, complying with formal notice and comment 
procedures would be ``impracticable'' and ``contrary to the public 
interest.''
    Finally, a finding of good cause for waiving the requirement of a 
30-day delayed effective date is warranted because of the need for 
immediate guidance to depositors, which implementation and posting of 
the prescribed notice would provide. A delayed effective date is 
unnecessary because the only provision of the final rule requiring 
institutions to take certain actions--i.e., the change in the 
prescribed notice--would not be enforced until February 28, 2011.

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, and the effective date of the 
additional amendments to Section 11(a)(i)(B) of the FDI Act is December 
31, 2010. Thus, the effective date of the final rule is the Federal 
Register publication date.

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 displays a currently valid Office of Management 
and Budget (``OMB'') control number. This final rule modifies existing 
disclosure requirements in sections 330.16(c)(1) and (c)(2). 
Specifically, section 330.16(c)(1) revises the language of the ``Notice 
of Changes In Temporary FDIC Insurance Coverage For Transaction 
Accounts'' to be posted by insured depository institutions offering 
noninterest-bearing transaction accounts in the lobbies of their main 
office and domestic branches and, if they offer Internet deposit 
services, on their Web sites. Disclosure requirements are typically 
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 revised 
section 330.16(c)(1) disclosure to OMB for review.
    This final rule also modifies the existing section 330.16(c)(2). 
Currently, section 330.16(c)(2) requires IDIs participating in the TAGP 
to provide individual notices to depositors alerting them to the fact 
that IOLTAs and low-interest NOWs are not eligible for unlimited 
coverage under the new temporary insurance category for noninterest-
bearing transaction accounts. Although this final rule will eliminate 
the requirement for institutions to provide the disclosure to 
depositors with IOLTAs, any change to current burden estimates is 
assumed by the FDIC to be negligible because the rule retains the 
disclosure requirements for low-interest NOW accounts. Since there is 
no change to the current estimated burden for section 330.16(c)(2), the 
FDIC is not submitting the revised section 330.16(c)(2) disclosure to 
OMB for review.

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. As of December 31, 2010, 3,173 of these small IDIs 
participated 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 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 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 participated in the 
TAGP or not, will gain additional insurance coverage with no separate 
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.

[[Page 4816]]

    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 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 previously 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.
    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 revised to read as follows:


Sec.  330.1.  Definitions.

* * * * *
    (r) Noninterest-bearing transaction account means--
    (1) A deposit or account maintained at an insured depository 
institution--
    (i) With respect to which interest is neither accrued nor paid;
    (ii) 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
    (iii) On which the insured depository institution does not reserve 
the right to require advance notice of an intended withdrawal; and
    (2) A trust account established by an attorney or law firm on 
behalf of a client, commonly known as an Interest on Lawyers Trust 
Account, or a functionally equivalent account, as determined by the 
Corporation.

0
3. In Sec.  330.16, revise paragraphs (c)(1) and (c)(2) to read as 
follows:


Sec.  330.16  Noninterest-bearing transaction accounts.

* * * * *
    (c) * * *
    (1) By no later than February 28, 2011, 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 also includes 
Interest on Lawyers Trust Accounts (``IOLTAs''). It does not include 
other accounts, such as traditional checking or demand deposit 
accounts that may earn interest, NOW accounts, and money-market 
deposit accounts.
    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 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.
* * * * *

    Dated at Washington, DC, this 18th day of January 2011.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2011-1732 Filed 1-26-11; 8:45 am]
BILLING CODE 6741-01-P