[Federal Register Volume 81, Number 233 (Monday, December 5, 2016)]
[Rules and Regulations]
[Pages 87734-87767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28396]



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Vol. 81

Monday,

No. 233

December 5, 2016

Part III





 Federal Deposit Insurance Corporation





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12 CFR Part 370





 Recordkeeping for Timely Deposit Insurance Determination; Final Rule

  Federal Register / Vol. 81 , No. 233 / Monday, December 5, 2016 / 
Rules and Regulations  

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 370

RIN 3064-AE33


Recordkeeping for Timely Deposit Insurance Determination

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule to facilitate prompt payment 
of FDIC-insured deposits when large insured depository institutions 
fail. The final rule requires each insured depository institution that 
has two million or more deposit accounts to (1) configure its 
information technology system to be capable of calculating the insured 
and uninsured amount in each deposit account by ownership right and 
capacity, which would be used by the FDIC to make deposit insurance 
determinations in the event of the institution's failure, and (2) 
maintain complete and accurate information needed by the FDIC to 
determine deposit insurance coverage with respect to each deposit 
account, except as otherwise provided.

DATES: Effective April 1, 2017.

FOR FURTHER INFORMATION CONTACT: Marc Steckel, Deputy Director, 
Division of Resolutions and Receiverships, 571-858-8224; Teresa J. 
Franks, Associate Director, Division of Resolutions and Receiverships, 
571-858-8226; Shane Kiernan, Counsel, Legal Division, 703-562-2632; 
Karen L. Main, Counsel, Legal Division, 703-562-2079.

SUPPLEMENTARY INFORMATION: 

I. Policy Objectives

    With this final rule (``final rule''), the FDIC adopts regulatory 
requirements that will facilitate the FDIC's prompt payment of deposit 
insurance after the failure of insured depository institutions 
(``IDIs'') with two million or more deposit accounts. These 
institutions are typically large and complex. By law, the FDIC must pay 
deposit insurance ``as soon as possible'' after an IDI fails while also 
resolving the IDI in the manner least costly to the Deposit Insurance 
Fund (``DIF'').\1\ The FDIC believes that prompt payment of deposit 
insurance is essential to the FDIC's mission for several reasons. 
First, prompt payment of deposit insurance maintains public confidence 
in the FDIC, the banking system and overall financial stability. 
Second, facilitating prompt access to insured funds for depositors 
enables them to meet their financial needs and obligations. A delay in 
the payment of deposit insurance--especially in the case of the failure 
of one of the largest IDIs--could harm the entire financial system and 
national economy. For example, the failure of such a large IDI could 
cause disruptions to check clearing processes, direct debit 
arrangements, or other payment system functions. Third, prompt payment 
can help to avoid a reduction in franchise value by expanding options 
for resolution thereby decreasing potential losses to the DIF. Fourth, 
the final rule seeks to promote long term stability in the banking 
system by reducing moral hazard.
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    \1\ 12 U.S.C. 1821(f)(1); 12 U.S.C. 1823(c)(4).
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    The final rule is expected to significantly reduce the difficulties 
the FDIC would face in making prompt deposit insurance determinations 
at the largest IDIs. While the FDIC is authorized to rely upon the 
deposit account records of a failed IDI to determine deposit insurance 
coverage, the institution's records can be voluminous and inconsistent. 
Moreover, they may be incomplete for deposit insurance purposes. 
Consolidation of the banking industry has resulted in larger 
institutions that have more complex information technology systems 
(``IT systems'') and data management challenges. The final rule 
generally requires IDIs with two million or more deposit accounts 
(``covered institutions'') to maintain complete and accurate depositor 
information and to configure their IT systems in a manner that permits 
the FDIC to calculate deposit insurance coverage promptly in the event 
of failure.
    The final rule will facilitate consideration of the full range of 
resolution options that can be invoked by the FDIC to resolve a covered 
institution in a manner that satisfies the least-cost resolution 
requirement. These resolution methods include: Purchase-and-assumption 
transactions; establishment of bridge depository institutions; and 
payout and liquidation, in which the FDIC pays depositors the insured 
amount of their deposits and liquidates the failed IDI's assets to pay 
remaining claims. Expanding the range of resolution options and 
including those that impose losses on uninsured depositors can also 
improve market discipline.
    In order to resolve a bank under the least-cost requirement, the 
FDIC must be able to estimate the cost to the DIF of each possible 
resolution type. As part of this estimate, the FDIC must be able to 
rapidly identify insured versus uninsured deposits. Insufficient 
information about a bank's insured deposits and the difficulties posed 
in identifying relationships between deposit accounts at the time of 
closing, due in part to the large volume of deposit accounts managed by 
the institution, may impede the FDIC's ability to meet the least-cost 
requirement or to ensure timely access to insured funds.
    Covered institutions often use multiple deposit systems, which 
complicates deposit insurance determinations. Depending on the 
structure of the deposit systems, data aggregation and account 
identification may be burdensome, inefficient, and time-consuming, all 
adding to the cost of resolution. For certain types of deposit 
accounts, depositors need daily access to funds, so prompt payment is 
essential to providing confidence and maintaining financial stability. 
While challenges resulting from incomplete information are present when 
any bank fails, obtaining the necessary information could significantly 
delay the availability of funds when information is incomplete for a 
large number of accounts. Such delays could lead to a decrease in 
public confidence in the FDIC's deposit insurance program. Ensuring the 
swift availability of funds for millions of depositors at a large 
institution promotes financial stability by increasing confidence in 
deposit insurance and availability of funds.
    Another of the final rule's policy objectives is that depositors at 
both large and small failed banks receive the same prompt access to 
their deposits with full recognition of and respect for the deposit 
insurance limits, which should reduce potential disparities that might 
undermine market discipline or create unintended competitive advantages 
in the deposit market. Confidence in the ability of the FDIC to 
promptly determine insured amounts and provide access to insured 
deposits should help uninsured depositors realize that they may face 
losses in a large bank failure. This realization should mitigate moral 
hazard and help to curtail excessive risk taking on the part of the 
largest banks.

II. Background

A. Legal Authority

    The FDIC is authorized to prescribe rules and regulations as it may 
deem necessary to carry out the provisions of the Federal Deposit 
Insurance Act (``FDI Act'').\2\ Under the FDI Act, the FDIC is 
responsible for paying deposit insurance ``as soon as possible'' 
following the

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failure of an IDI.\3\ It must also implement the resolution of a failed 
IDI at the least cost to the DIF.\4\ To pay deposit insurance, the FDIC 
uses a failed IDI's records to aggregate the amounts of all deposits 
that are maintained by a depositor in the same right and capacity and 
then applies the standard maximum deposit insurance amount (``SMDIA'') 
of $250,000.\5\ As authorized by law, the FDIC generally relies on the 
failed institution's deposit account records to identify deposit owners 
and the right and capacity in which deposits are maintained.\6\ The 
FDIC has a right and a duty under section 7(a)(9) of the FDI Act to 
take action as necessary to ensure that each IDI maintains, and the 
FDIC receives on a regular basis from such IDI, information on the 
total amount of all insured deposits, preferred deposits, and uninsured 
deposits at the institution.\7\ Requiring covered institutions to 
maintain complete and accurate records regarding the ownership and 
insurability of deposits and to have an IT system that can be used to 
calculate deposit insurance coverage in the event of failure will 
facilitate the FDIC's prompt payment of deposit insurance and enhance 
the ability to implement the least costly resolution of these 
institutions.
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    \2\ 12 U.S.C. 1819(a) (Tenth), 1820(g), 1821(d)(4)(B)(iv).
    \3\ 12 U.S.C. 1821(f)(1).
    \4\ 12 U.S.C. 1823(c)(4).
    \5\ 12 U.S.C. 1821(a)(1)(C), 1821(a)(1)(E).
    \6\ 12 U.S.C. 1822(c), 12 CFR 330.5.
    \7\ 12 U.S.C. 1817(a)(9).
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B. Current Regulatory Approach

    Although the statutory requirement that the FDIC pay insurance ``as 
soon as possible'' does not specify a time period for paying insured 
depositors, the FDIC strives to pay depositors promptly in the event of 
an IDI's failure. Indeed, the FDIC strives to make most insured 
deposits available to depositors by the next business day after a bank 
fails. For the reasons set forth earlier, the FDIC believes that prompt 
payment of deposit insurance is essential.
    The FDIC took an initial step toward ensuring that prompt deposit 
insurance determinations could be made at large IDIs through the 
issuance of Sec.  360.9 of the FDIC's regulations.\8\ Section 360.9 
applies to IDIs with at least $2 billion in domestic deposits and at 
least 250,000 deposit accounts or $20 billion in total assets.\9\ 
Currently, there are 155 IDIs that meet those criteria. Section 360.9 
requires these institutions to be able to provide the FDIC with 
standard deposit account information that can be used in the event of 
the institution's failure. The appendices to 12 CFR part 360 prescribe 
the form and content of the data files that those institutions must 
provide to the FDIC. Section 360.9 also requires these institutions to 
maintain the technological capability to automatically place (and later 
release) provisional holds on deposit accounts if an insurance 
determination could not be made by the FDIC by the next business day 
after failure. Additionally, large volumes of deposit account data must 
be transferred from the IDI to the FDIC pursuant to Sec.  360.9, which 
could cause further delay.
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    \8\ 12 CFR 360.9. See 73 FR 41180 (July 17, 2008).
    \9\ 12 CFR 360.9(b)(1).
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    While Sec.  360.9 would assist the FDIC in fulfilling its legal 
mandates regarding the resolution of a failed institution that is 
subject to that rule, the FDIC believes that if the largest of 
depository institutions were to fail with little prior warning, 
additional measures would be needed to ensure the prompt and accurate 
payment of deposit insurance to all depositors.

C. Need for Further Rulemaking

    The FDIC is authorized to rely upon the deposit account records of 
a failed IDI to determine the amount of deposit insurance available on 
each account. However, in the FDIC's experience, it is not unusual for 
a failed bank's records to be ambiguous or incomplete. For example, an 
account may be titled as a joint account but may not qualify to be 
insured as a joint account because signature cards are missing or have 
not been signed by all joint account holders. A further complication is 
that bank records on trust accounts are often in paper form or 
electronically scanned images that require a time-consuming manual 
review.
    In addition to problems with ambiguity or incompleteness of an 
institution's records, it is also possible that an institution simply 
is not required to maintain record of the beneficial owners of deposits 
with respect to certain types of deposit accounts under the existing 
regulatory framework. For example, under part 330, a deposit may be 
insured even if record of beneficial ownership is maintained outside of 
the IDI by an agent or third party that has been designated to maintain 
such record.
    Under each of these circumstances, in order to ensure the accurate 
payment of deposit insurance without imposing risk of overpayment by 
the DIF, the FDIC would need to delay the payment of deposit insurance 
while it manually reviews files and obtains additional information. 
Such delays in the insurance determination process could increase the 
likelihood of disruptions to an assuming institution's or an FDIC-
managed bridge depository institution's payment processing functions, 
such as clearing checks and authorizing direct debits.
    While these challenges to accurately determining and promptly 
paying deposit insurance may be present at any size of failed 
institution, they become increasingly formidable as the size and 
complexity of the institution increases. Larger institutions are 
generally more complex, have more deposit accounts, greater geographic 
dispersion, multiple deposit systems, and more issues with data 
accuracy and completeness. The largest IDIs which grew through 
acquisition have inherited the legacy recordkeeping and deposit account 
systems of the acquired banks. Those systems might have inaccurate or 
incomplete deposit account records. Additionally, acquired records 
might not be automated or compatible with the acquiring institution's 
deposit systems, resulting in use of multiple deposit platforms.
    Although some of the largest institutions are able to conduct their 
banking operations without integrating these inherited systems or 
updating the acquired deposit account records, the state of their 
deposit systems would complicate and prolong the deposit insurance 
determination process in the event of failure. Because of the potential 
problems posed by delays in determination and payment of deposit 
insurance, improved strategies must be implemented to ensure that 
deposit insurance can be paid promptly.
    The FDIC's experiences during the most recent financial crisis, 
which peaked in the months following the promulgation of Sec.  360.9, 
indicated that failures can often happen with very little notice and 
time for the FDIC to prepare. Since 2009, the FDIC was called upon to 
resolve 47 institutions with 30 days or less to plan the resolution 
(which includes review of deposit account records). While these 47 
institutions were smaller, the financial condition of two banks with a 
very large number of deposit accounts--Washington Mutual Bank and 
Wachovia--deteriorated very quickly, also leaving the FDIC little time 
to prepare.\10\ If a large bank were to fail because of liquidity 
problems rather than capital deterioration, for example, the FDIC would 
anticipate having less lead time to prepare to make deposit insurance 
determinations, which could result in the need for more time post-

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failure and less prompt payment of deposit insurance.
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    \10\ In their final Call Reports (2Q-08) Washington Mutual 
reported 42 million deposit accounts and Wachovia reported 29 
million deposit accounts.
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    The FDIC has worked with institutions covered by Sec.  360.9 for 
several years to confirm their ability to comply with that rule's 
requirements. This implementation process has led the FDIC to conclude 
that the standard data sets and other requirements of Sec.  360.9 are 
not sufficient to mitigate the complexities presented in the failure of 
the largest institutions. Based on its experience reviewing deposit 
data (and often finding inaccurate or incomplete data), deposit 
recordkeeping systems, and capabilities for imposing provisional holds 
in the course of its Sec.  360.9 compliance visits, the FDIC believes 
that Sec.  360.9 has not been as effective as intended in enhancing the 
capacity of the FDIC to make prompt deposit insurance determinations 
necessary for the largest IDIs. Specifically, the continued growth in 
the number of deposit accounts at larger IDIs and the number and 
complexity of deposit systems used by many of these institutions since 
the promulgation of Sec.  360.9 would exacerbate the difficulties 
present in making prompt deposit insurance determinations. 
Additionally, the institutions covered by Sec.  360.9 are permitted 
discretion when populating the data fields that often results in 
missing information.
    A failed IDI that has multiple deposit systems would further 
complicate the aggregation of deposits by depositor in a particular 
right and capacity, causing additional delay. Additionally, deposit 
taking practices have evolved, and innovative products and services 
have proliferated throughout the financial services markets. Customer 
use of deposit accounts has changed. Accounts that may have been used 
in the past as traditional savings vehicles are now used more 
frequently for transactional purposes. For example, checking accounts 
held in connection with a formal revocable trust are used to pay for 
everyday living expenses. Brokered deposits are sometimes held in money 
market deposit accounts (``MMDAs'').
    Using the FDIC's IT system to make deposit insurance determinations 
at a failed institution with a large number of deposit accounts would 
require the transmission of massive amounts of deposit data from the 
IDI's IT system to the FDIC's IT system. The transfer of such a large 
volume of data would be very time consuming and the time required for 
processing that data would present a significant impediment to making 
deposit insurance determinations in the timely manner that the public 
has come to expect. The 38 institutions currently covered by the final 
rule each have between 2 million and 87 million deposit accounts as of 
June 30, 2016. Requiring these covered institutions to enhance their 
deposit account data and upgrade their IT systems so that the FDIC can 
promptly determine deposit insurance available on most deposit accounts 
using the covered institutions' IT systems would help to resolve the 
timing issues presented when transferring and processing such a large 
volume of deposit data.
Advance Notice of Proposed Rulemaking
    On April 28, 2015, the FDIC published in the Federal Register an 
Advance Notice of Proposed Rulemaking (``ANPR'') seeking comment on 
whether certain IDIs such as those that have two million or more 
deposit accounts should be required to take steps to ensure that 
depositors would have access to their FDIC-insured funds in a timely 
manner (usually within one business day of failure) if one of these 
institutions were to fail.\11\ Specifically, the FDIC sought comment on 
whether these IDIs should be required to enhance their recordkeeping to 
maintain and be able to provide substantially more accurate and 
complete data on each depositor's ownership interest by right and 
capacity for all or a large subset of the institution's deposit 
accounts. The FDIC sought comment on whether these IDIs' IT systems 
should have the capability to calculate the insured and uninsured 
amounts for each depositor by deposit insurance right and capacity for 
all or a substantial subset of deposit accounts at the end of any 
business day. The FDIC also sought comment on the potential costs and 
benefits associated with instituting such requirements. The comment 
period ended on July 27, 2015. The FDIC received 10 comment letters. 
The FDIC also had six meetings or conference calls with banks, trade 
groups, and software providers.
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    \11\ 80 FR 23478 (April 28, 2015).
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Notice of Proposed Rulemaking
    Following the ANPR, the FDIC developed and then published in the 
Federal Register a notice of proposed rulemaking entitled 
``Recordkeeping for Timely Deposit Insurance Determination'' soliciting 
public comment on its proposal to require each IDI with two million or 
more deposit accounts to maintain complete and accurate information 
needed to allow the FDIC to determine promptly the deposit insurance 
coverage for each deposit account, and to have an IT system that is 
capable of calculating the insured and uninsured amounts for all 
deposit accounts in accordance with the FDIC's deposit insurance rules 
set forth in 12 CFR part 330 (the ``NPR'' for the ``proposed 
rule'').\12\ Under the proposed rule, each covered institution's IT 
system would facilitate the FDIC's deposit insurance determination by 
being able to calculate deposit insurance coverage for each deposit 
account and adjust account balances to the insured amount within 24 
hours after the appointment of the FDIC as receiver should the covered 
institution fail. Relief from the proposed rule's requirements would 
have come in the form of: An extension of the implementation deadlines; 
an exception from the information collection requirements for certain 
deposit accounts or types of deposit accounts if conditions for 
exception could be met; exemption from all of the proposed rule's 
requirements if all the deposits a covered institution takes are fully 
insured; or release from all of the proposed rule's requirements when a 
covered institution no longer meets the definition of a covered 
institution. Each covered institution would need to certify compliance 
with the proposed rule annually, with enforcement measures to be taken 
in accordance with Sec.  8 of the FDI Act, if necessary.
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    \12\ 81 FR 10026 (February 26, 2016).
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    The NPR's comment period expired on June 27, 2016. The FDIC 
received 14 comment letters in total from IDIs, industry trade 
associations, financial intermediaries, mortgage servicing companies, 
technology firms, an industry consultant, and an individual. In 
addition, FDIC staff participated in meetings or conference calls with 
industry representatives. The FDIC considered all of the comments it 
received when developing the final rule, and the comments and the 
FDIC's responses are discussed in VI. Discussion of Comments.

III. Description of the Final Rule

A. Summary

    The scope of the final rule is unchanged from the NPR. It applies 
to any IDI that has two million or more deposit accounts, defined as a 
``covered institution.'' As contemplated by the proposed rule, under 
the final rule, each covered institution must configure its IT system 
to be capable of accurately calculating the deposit insurance available 
for each deposit account in accordance with the FDIC's deposit 
insurance rules set forth in 12 CFR part 330 should the covered 
institution fail.

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The FDIC would use the covered institution's IT system to facilitate 
the deposit insurance determinations in the event of the covered 
institution's failure.
    In order for the FDIC to effectively use the covered institution's 
IT system to calculate deposit insurance, the covered institution's 
deposit account records must contain certain information concerning the 
identity of the owner of the funds on deposit and details about the 
right and capacity in which the deposit is held for deposit insurance 
purposes. The proposed rule would have required covered institutions to 
maintain this information in their deposit account records for all 
accounts unless the FDIC granted the covered institution an exception 
from this requirement. In light of comments received in response to the 
NPR, the final rule modifies this approach. Recognizing that insured 
depository institutions do not maintain all information needed for 
deposit insurance determination in their deposit account records for 
every account, along with the significant challenges associated with 
collecting that information, the FDIC has bifurcated the recordkeeping 
requirement.
    Under the final rule's general recordkeeping requirements, a 
covered institution will need to ensure that its deposit account 
records contain the information needed for its IT system to be able to 
calculate deposit insurance coverage for those deposit accounts for 
which it already maintains the necessary information. A covered 
institution should, in the normal course of business, already maintain 
in its deposit account records the information necessary to do this 
for: Single ownership accounts; joint ownership accounts; accounts held 
by a corporation, partnership, or unincorporated association for 
themselves; informal revocable trust (i.e., ``payable-on-death'' or 
``in-trust-for'') accounts; and any account of an irrevocable trust for 
which the covered institution itself is the trustee.
    The final rule recognizes that, under the FDIC's deposit insurance 
rules set forth in 12 CFR part 330, the amount of deposit insurance 
available may not be determinable without reference to information that 
an IDI does not, and is not otherwise required to, maintain in its 
deposit account records under the existing regulatory framework. After 
an IDI fails, this information must be provided to the FDIC so that the 
FDIC can determine the full amount of deposit insurance available. 
Accordingly, under the final rule, a covered institution does not need 
to meet the general recordkeeping requirements described in this 
section, but may instead meet alternative recordkeeping requirements 
with respect to certain types of deposit accounts for which it is not 
required under 12 CFR part 330 to maintain in its deposit account 
records the information that would be needed for the FDIC to determine 
the full amount of deposit insurance coverage. Certain additional 
provisions apply to deposit accounts with transactional features.
    To meet the alternative recordkeeping requirements, the covered 
institution must maintain in its deposit account records certain 
information that will facilitate the FDIC's prompt collection of the 
information needed to determine deposit insurance with respect to those 
deposit accounts after its failure. These alternative recordkeeping 
requirements apply to deposit accounts that would be insured on a 
``pass-through'' basis (such as brokered deposits) because beneficial 
owner information is not maintained by the covered institution, and to 
deposit accounts for which the amount of insurance is dependent on 
additional facts (such as deposit accounts held in connection with a 
trust). The FDIC also recognizes that it may not always be feasible for 
a covered institution to maintain information in its deposit account 
records needed to calculate the deposit insurance with respect to 
official items prior to presentment and, therefore, if the information 
needed for deposit insurance calculation is not available, the covered 
institution will need to maintain in its deposit account records 
certain information that will facilitate the FDIC's deposit insurance 
determination after the failure of a covered institution.
    For deposit accounts with ``transactional features'' for which the 
covered institution maintains its deposit account records in accordance 
with the alternative recordkeeping requirements set forth in Sec.  
370.4(b)(1), a covered institution must certify that the information 
needed to calculate deposit insurance coverage will be submitted to the 
FDIC so that deposit insurance can be determined within 24 hours after 
the appointment of the FDIC as receiver. The FDIC has been concerned 
about timely deposit insurance determinations for accounts with 
transactional features since the inception of this rulemaking process. 
One of the options presented in the ANPR was that ``[f]or a large 
subset of deposits (``closing night deposits''), including those where 
depositors have the greatest need for immediate access to funds (such 
as transaction accounts and money market deposit accounts (``MMDAs''), 
deposit insurance determinations would be made on closing night.'' \13\ 
The FDIC acknowledged that the concept of ``closing night deposits'' 
served as a proxy for those deposit accounts for which depositors would 
expect immediate access to their funds on the next business day. The 
ANPR explained that in order to make deposit insurance determinations 
on closing night, the covered institutions would be required to: 
``Obtain and maintain data on all closing night deposits . . . at the 
end of any business day (since failure can occur on any business 
day).'' \14\ The ANPR solicited comment from the banking industry 
regarding what types of deposits should be considered as ``closing 
night deposits.''
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    \13\ 80 FR 23478, 23480 (April 28, 2015).
    \14\ Id.
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    After reviewing the comments received on the ANPR, the FDIC 
concluded that there really was no consensus among the potentially 
covered institutions regarding what types of deposits could be 
designated as ``closing night deposits.'' As a result, the FDIC adopted 
the approach in the proposed rule that, generally, covered institutions 
would need to collect and maintain the necessary depositor information 
for all deposit accounts unless the conditions for exception could be 
satisfied. Then, the FDIC would have all the depositor information 
necessary to begin the deposit insurance determinations immediately 
upon the covered institution's failure. However, in response to the 
commenters' objections to the proposed rule's approach, the FDIC 
developed the bifurcated approach set forth in the final rule. In this 
way, the final rule is consistent with the recordkeeping standards 
established in Sec. Sec.  330.5 and 330.7; i.e., the deposit records 
for certain types of deposit accounts may be maintained off-site and 
with third parties rather than at the covered institution. 
Nevertheless, the requisite beneficial ownership information for those 
accounts must be made available to the FDIC so that the deposit 
insurance determination can be completed during the closing night 
process. The FDIC believes that requiring covered institutions to 
certify that the information needed to calculate deposit insurance 
coverage for certain deposit accounts with transactional features will 
be submitted to the FDIC by the respective account holder in time for 
the calculation to be performed within 24 hours after the appointment 
of the FDIC as receiver is important to ensure that the FDIC can make 
deposit insurance determinations expeditiously

[[Page 87738]]

after failure of a covered institution to avoid delays in payment 
processing.
    The proposed rule would have provided a two-year timeframe for 
implementation of IT system and recordkeeping requirements. Under the 
final rule, a covered institution has three years after the effective 
date for implementation and can apply to the FDIC for extension of that 
timeframe.

B. Section-by-Section Description of the Final Rule

1. Section 370.1 Purpose and Scope
    The purpose of the final rule is to help the FDIC overcome the 
challenges it faces when fulfilling its statutory mandate to pay 
deposit insurance as soon as possible after the failure of an IDI with 
millions of deposit accounts at the least cost to the DIF. These 
challenges become more pronounced as the number of deposit accounts at 
an IDI rises above two million. Moreover, the number of deposit 
accounts is highly correlated with other attributes that contribute to 
this challenge, such as the complexity of account relationships and the 
use of multiple deposit systems by these institutions. Accordingly, the 
final rule requires IDIs with two million or more deposit accounts to 
configure their IT systems to be capable of calculating the amount of 
deposit insurance coverage available for each deposit account in the 
event of failure.
2. Section 370.2 Definitions
    This section provides definitions of terms that are used in the 
final rule. A covered institution is an IDI which, based on its Reports 
of Condition and Income (``Call Reports'') filed with the appropriate 
Federal banking agency, has two million or more deposit accounts during 
the two consecutive quarters preceding the effective date of the final 
rule or thereafter.
    For purposes of the final rule, account holder is defined as the 
person who has opened a deposit account with a covered institution and 
with whom the covered institution has a direct legal and contractual 
relationship with respect to the deposit. An account holder is often, 
but not always, the person who actually owns deposits in a deposit 
account, and to whom deposit insurance inures under the FDIC's deposit 
insurance rules set forth in 12 CFR part 330. The person who actually 
owns the deposits is commonly referred to as the ``beneficial owner'' 
of a deposit or as the ``principal.'' When the account holder does not 
have ownership rights to deposits, it is typically acting as an agent, 
custodian, or fiduciary on behalf of the beneficial owner of the 
deposit. In these situations, deposit insurance coverage can ``pass 
through'' the account holder to the beneficial owner of the deposit, 
and the deposit would be insured to the beneficial owner based on the 
deposit insurance right and capacity in which those deposits are owned. 
Because the account holder is the party with whom a covered institution 
has a deposit account relationship, it is the account holder who will 
need to provide the information needed for purposes of calculating 
deposit insurance. For that reason, the final rule's recordkeeping 
requirements with respect to certain deposit accounts are framed around 
the relationship between the covered institution and the account 
holder.
    Several terms are defined by reference to their statutory or 
regulatory definitions. Specifically, brokered deposit has the same 
meaning as provided in 12 CFR 337.6(a)(2); deposit has the same meaning 
as provided under section 3(l) of FDI Act (12 U.S.C. 1813(l)); deposit 
account records has the same meaning as provided in 12 CFR 330.1(e); 
and standard maximum deposit insurance amount (or ``SMDIA'') has the 
same meaning as provided pursuant to section 11(a)(1)(E) of the FDI Act 
(12 U.S.C. 1821(a)(1)(E)) and 12 CFR 330.1(o). Ownership rights and 
capacities are set forth in 12 CFR part 330.
    Compliance date means the date that is three years after the later 
of the effective date of this part or the date on which an IDI becomes 
a covered institution. In response to the NPR, commenters had suggested 
that a four-year implementation period be provided. In light of the 
bifurcated approach to recordkeeping taken in the final rule, the FDIC 
believes that a three-year implementation period will be sufficient.
    Payment instrument means a check, draft, warrant, money order, 
traveler's check, electronic instrument, or other instrument, payment 
of funds, or monetary value (other than currency). This definition is 
consistent with Sec.  1002(18) of the Consumer Financial Protection Act 
of 2010 (12 U.S.C. 5481(18)) and common banking usage.
    Transactional features, with respect to a deposit account, means 
that the depositor or account holder can make transfers or withdrawals 
from the deposit account to make payments or transfers to third persons 
or others (including another account of the depositor or account holder 
at the same institution or at a different institution) by means of a 
negotiable or transferable instrument, payment order of withdrawal, 
check, draft, prepaid account access device, debit card, or other 
similar order made by the depositor and payable to third parties, or by 
means of a telephonic (including data transmission) agreement, order or 
instruction, or by means of an instruction made at an automated teller 
machine or similar terminal or unit. For purposes of this definition, 
``telephonic (including data transmission) agreement, order or 
instruction'' includes orders and instructions made by means of 
facsimile, computer, internet, handheld device, or other similar means. 
When interpreting this definition, the FDIC will consider the frequency 
with which a depositor or account holder may make transfers or 
withdrawals with respect to a deposit account, in addition to other 
account features. For example, an account comprised of time deposits 
will not be deemed to have transactional features solely because it 
allows a depositor or account holder who is not the beneficial owner to 
redeem or withdraw the time deposit and transfer the proceeds on a one-
time basis to the beneficial owner.
    Unique identifier means an alpha-numeric code associated with an 
individual or entity that is used by a covered institution to monitor 
its relationship with only that individual or entity. The unique 
identifier may be, but is not required to be, a government-issued 
identification number such as a social security number or tax 
identification number. It could also be a customer identification 
number already in use by the covered institution for other operational 
or regulatory purposes.
3. Section 370.3 Information Technology System Requirements
    As was proposed in the NPR, each covered institution is required to 
configure its IT system to be capable of accurately calculating the 
deposit insurance available to each beneficial owner of funds on 
deposit in accordance with the FDIC's deposit insurance rules set forth 
in 12 CFR part 330. Additionally, the IT system must be able to adjust 
account balances within 24 hours after the appointment of the FDIC as 
receiver. Each covered institution's IT system would need to be capable 
of grouping each beneficial owner's deposits within the applicable 
ownership right and capacity because deposit insurance is available up 
to the SMDIA for each ownership right and capacity in which the 
deposits are held. To do this, a covered institution must maintain in 
its deposit account records certain information, as described in Sec.  
370.4. The covered institution's IT system would also need to be able 
to

[[Page 87739]]

generate a record that reflects the deposit insurance calculation. This 
record would contain, at a minimum, the name and unique identifier of 
the account holder or beneficial owner of a deposit if the account 
holder is not the beneficial owner, the balance of each beneficial 
owner's deposits in each deposit account grouped by ownership right and 
capacity, the aggregated balance of each beneficial owner's deposits 
within each applicable ownership right and capacity, the amount of the 
aggregated balance within each ownership right and capacity that is 
insured, and the amount of the aggregated balance within each ownership 
right and capacity that is uninsured. Appendix B to the final rule 
specifies the data format for the records that the covered 
institution's IT system would need to produce.
    If a covered institution were to fail, its depositors' access to 
their funds would need to be restricted while the FDIC makes deposit 
insurance determinations in order to avoid overpayment. Each covered 
institution's IT system would need to be capable of restricting access 
to some or all of the funds in each deposit account until the FDIC has 
determined the deposit insurance coverage for that account using the 
covered institution's IT system.
    The deposit insurance determinations for most deposit accounts 
would be made within 24 hours after failure and holds on those accounts 
would be removed. Holds would remain in place on deposit accounts for 
which a deposit insurance determination has not been made within that 
time frame and would be removed after the determination has been made.
    The covered institution's IT system would need to adjust the 
balance in each deposit account, if necessary, after the deposit 
insurance determination has been completed so that only insured 
deposits are made available. Specifically, if any of a beneficial 
owner's deposits within a particular ownership right and capacity were 
not insured, then the covered institution's IT system would need to 
debit the respective deposit accounts for the uninsured amount 
associated with each account. To the extent that a beneficial owner of 
deposits is uninsured, it will have a claim against the receivership 
for the failed covered institution that would be paid out of the assets 
of the receivership on equal footing with all other deposit claims, 
including the FDIC's subrogated claim for insured deposits.
    A covered institution's IT system would need to be capable of 
performing these functions for most deposit accounts within 24 hours 
after the FDIC's appointment as receiver should the covered institution 
fail, and within 24 hours after the FDIC receives from the remaining 
account holders the additional information needed to determine deposit 
insurance coverage.
    The FDIC's regulations and resources concerning deposit insurance 
that are available to the public on the FDIC's Web site are useful 
tools that covered institutions can use to develop the capabilities of 
their IT systems to meet the final rule's requirements.\15\ The FDIC 
also intends to offer guidance and outreach to facilitate covered 
institutions' efforts to meet this requirement.
---------------------------------------------------------------------------

    \15\ See FDIC's Financial Institution Employee's Guide to 
Deposit Insurance, 2016 Ed., available at https://www.fdic.gov/deposit/DIGuideBankers/index.html.
---------------------------------------------------------------------------

4. Section 370.4 Recordkeeping Requirements
    In response to commenters' recommendations, the final rule's 
recordkeeping requirements have been modified from those set forth in 
the proposed rule. While the proposed rule would have required covered 
institutions to collect and maintain significantly more information on 
deposit relationships than is currently contemplated under part 330, 
the final rule recognizes that such information may continue to reside 
in records maintained outside the covered institution by either the 
account holder or a party designated by the account holder, as set 
forth in part 330. The final rule contemplates, however, that in many 
instances, a covered institution will already maintain in its deposit 
account records the necessary information for its IT system to 
calculate deposit insurance coverage and therefore the institution will 
be capable of fulfilling the general recordkeeping requirement to 
maintain in its deposit account records for each account the unique 
identifier for the appropriate parties and the applicable ownership 
right and capacity code. Accordingly, Sec.  370.4(a) imposes a general 
recordkeeping requirement whereby the covered institution must assign a 
unique identifier to each account holder, beneficial owner, grantor, 
and beneficiary, as appropriate, and assign the applicable ownership 
right and capacity code listed in Appendix A. A covered institution 
should, in the normal course of business, already have in its deposit 
account records the necessary information to do this for, among others, 
deposit accounts that would be insured as: single ownership accounts; 
joint ownership accounts; accounts owned by a corporation, partnership, 
or unincorporated association; informal revocable trust (i.e., 
``payable-on-death'' or ``in-trust-for'') accounts; and any account 
held in connection with an irrevocable trust for which the covered 
institution itself is the trustee.
    The final rule recognizes, however, that under the FDIC's deposit 
insurance rules, where an IDI's deposit account records disclose the 
existence of a relationship that might provide a basis for additional 
insurance, the details of the relationship must be ascertainable from 
either the IDI's deposit account records or from records maintained by 
the depositor or by a third party that has undertaken to maintain such 
records for the depositor. (See 12 CFR 330.5 concerning recognition of 
deposit ownership and fiduciary relationships; 12 CFR 330.7 concerning 
accounts held by an agent, nominee, guardian, custodian, or 
conservator; 12 CFR 330.10 concerning revocable trust accounts; and 12 
CFR 330.13 concerning irrevocable trust accounts.) Accordingly, under 
Sec.  370.4(b), a covered institution may meet alternative 
recordkeeping requirements with respect to those types of accounts. 
Under the alternative recordkeeping requirements, the covered 
institution must maintain in its deposit account records for each 
deposit account where the basis for additional deposit insurance is 
contained in records maintained by the account holder, or a party 
designated by the account holder, the unique identifier for only the 
account holder. It must also maintain in its deposit account records 
information sufficient to populate the ``pending reason'' field of the 
pending file set forth in Appendix B, which is to be generated by the 
covered institution's IT system pursuant to Sec.  370.3(b) of the final 
rule. For deposit accounts held in connection with formal trusts for 
which the covered institution is not trustee, the covered institution 
will need to maintain in its deposit account records the unique 
identifier of the account holder, and the unique identifier of the 
grantor (if the grantor is not the account holder) if the account has 
transactional features. The unique identifier of the grantor is needed 
in order to begin calculating how much deposit insurance would be 
available, at a minimum, on deposit accounts held in connection with a 
formal trust. The covered institution will also need to maintain in its 
deposit account records information sufficient to populate the 
``pending reason'' field of the pending file set forth in Appendix B, 
which is to be

[[Page 87740]]

generated by the covered institution's IT system pursuant to Sec.  
370.3(b) of the final rule.
    Additionally, a covered institution will need to maintain in its 
deposit account records the information needed for its IT system to 
calculate deposit insurance coverage with respect to payment 
instruments drawn on an account of the covered institution (commonly 
referred to as ``official items''), such as a cashier's check, teller's 
check, certified check, personal money order, or foreign draft. The 
FDIC recognizes that it may not always be feasible to identify the 
beneficial owner of such instruments and, therefore, if the necessary 
information is not available, the covered institution will need to 
maintain in its deposit account records for those accounts only the 
``pending reason'' code to indicate that more information is needed 
before deposit insurance can be calculated. This will be used to 
populate the ``pending reason'' field of the pending file set forth in 
Appendix B, which is to be generated by the covered institution's IT 
system pursuant to Sec.  370.3(b) of the final rule.
    To the extent that a covered institution does not meet the 
recordkeeping requirements set forth in Sec.  370.4(a) and instead 
meets the alternative recordkeeping requirements set forth in Sec.  
370.4(b), it must take the additional action set forth in Sec.  370.5 
with respect to those deposit accounts that have transactional 
features.
5. Section 370.5 Actions Required for Certain Deposit Accounts With 
Transactional Features
    The FDIC is concerned that many deposit accounts held in the name 
of someone other than the beneficial owner of the deposit (such as an 
agent, nominee, custodian, fiduciary, or other third party) are relied 
upon for transactions. In the case of a failure of a covered 
institution, with its millions of deposit accounts, any material delay 
in the payment of deposit insurance could undermine public confidence 
in the financial system and be extremely disruptive not only for 
individual depositors but also for the community or region as a whole. 
Widespread or extended delay could even result in systemic 
consequences. Therefore, Sec.  370.5(a) imposes the requirement that, 
with respect to deposit accounts with transactional features that are 
held in the name of a third party for the benefit of others, the 
covered institution certify that all information needed to calculate 
deposit insurance coverage can and will be submitted to the FDIC upon 
failure of the covered institution to minimize any delay in the FDIC's 
efforts to calculate deposit insurance within 24 hours after 
appointment as receiver using the covered institution's IT system. The 
timeframe within which this information must be received will likely 
need to be less than 24 hours because the covered institution's IT 
system will need time to process the information once received. This 
requirement applies not only to traditional demand and checking 
accounts, but also to savings deposit accounts that have transactional 
features, such as MMDAs, and to prepaid accounts that are entitled to 
deposit insurance coverage. The final rule provides, however, that this 
certification requirement does not apply with respect to mortgage 
servicing accounts, lawyers trust accounts, real estate trust accounts, 
or accounts held by employee benefits plans. A covered institution that 
is unable to provide this certification must apply to the FDIC for an 
exception from the certification requirement. In addition, the final 
rule makes clear that a covered institution's failure to provide the 
certification shall be deemed not to constitute a violation of this 
part if the FDIC has granted the covered institution relief from the 
certification requirement.
6. Section 370.6 Implementation
    This section provides that a covered institution must comply with 
the final rule no later than the compliance date, which is three years 
after the later of the effective date of the final rule or the date on 
which the institution becomes a covered institution by reaching the 
threshold of two million deposit accounts. Under Sec.  370.6(b), a 
covered institution may request that the FDIC extend the implementation 
time period. The request must state the amount of additional time 
needed and the reasons therefor. It must also report the total number 
of, and dollar amount in, accounts for which the covered institution's 
IT system could not calculate deposit insurance coverage if the covered 
institution were to fail as of the date of the request.
7. Section 370.7 Accelerated Implementation
    The final rule provides for accelerated implementation on a case-
by-case basis and after notice from the FDIC to a covered institution 
in three scenarios. The first would be when a covered institution has 
received a composite rating of 3, 4, or 5 under the Uniform Financial 
Institution's Rating System (CAMELS rating) in its most recently 
completed Report of Examination. The second scenario would be when a 
covered institution has become undercapitalized, as defined in the 
prompt corrective action provisions of 12 CFR part 325. The third would 
be when the appropriate Federal banking agency or the FDIC, in 
consultation with the appropriate Federal banking agency, has 
determined that a covered institution is experiencing a significant 
deterioration of capital or significant funding difficulties or 
liquidity stress, notwithstanding the composite rating of the covered 
institution by its appropriate Federal banking agency in its most 
recent Report of Examination.
    While the FDIC recognizes concerns about the imposition of an 
accelerated implementation deadline during economic distress, including 
the concern that a covered institution's attention might be diverted to 
solving critical problems that threaten its financial condition, 
providing depositors with immediate access to funds and preserving 
systemic stability is also critical. The ability to accelerate the 
implementation deadline must be balanced against any hardship an 
accelerated implementation period might impose on a covered 
institution. Before accelerating the implementation time period, the 
FDIC would consult with the covered institution's appropriate Federal 
banking agency. The FDIC would also evaluate the complexity of the 
covered institution's deposit systems and operations, the extent of the 
covered institution's asset quality difficulties, the volatility of the 
covered institution's funding sources, the expected near-term changes 
in the covered institution's capital levels, and other relevant factors 
appropriate for the FDIC's consideration as deposit insurer.
8. Section 370.8 Relief
    Under Sec.  370.8(a) of the final rule, a covered institution may 
submit a request to the FDIC for an exemption if it demonstrates that 
it has not and will not take deposits which, when aggregated, would 
exceed the SMDIA (currently $250,000) for any beneficial owner of the 
funds on deposit. In other words, if each owner of deposits were to 
have an amount equal to or less than the SMDIA on deposit at a covered 
institution, then all deposits would be fully insured. Deposit 
insurance determinations at failed covered institutions that meet this 
condition should not be complicated and, therefore, the FDIC does not 
believe that requiring such covered institutions to develop the 
capability to calculate deposit insurance coverage would be necessary.
    Recognizing that circumstances may currently exist, or emerge in 
the future,

[[Page 87741]]

for which a covered institution is unable to comply with the 
recordkeeping requirements set forth in Sec.  370.4 or some particular 
provision therein with respect to an identified deposit account or 
class of deposit accounts, Sec.  370.8(b) allows a covered institution 
to request an exception for those accounts. In its request letter, the 
covered institution must demonstrate the need for an exception, 
describe the impact of an exception on the ability to accurately 
calculate deposit insurance for the related deposit accounts, and state 
the number of, and the dollar value of deposits in, those deposit 
accounts. When reviewing the request, the FDIC would consider the 
implications that a delayed deposit insurance determination would have 
for a particular account holder or the beneficial owners of deposits, 
the nature of the deposit relationship, and the ability of the covered 
institution to obtain the information needed for an accurate 
calculation of deposit insurance.
    A covered institution that no longer meets the criteria for being a 
covered institution may submit a request for release from the final 
rule's requirements. Section 370.8(c) provides that if the number of 
deposit accounts at a covered institution drops below the two million 
deposit account threshold for three consecutive quarters based on 
Schedule RC-O in the Report of Condition and Income, the institution 
may request release. Like any other IDI, an institution released under 
this paragraph would become a covered institution again if it were to 
have two million or more deposit accounts for two consecutive quarters.
    The objectives of the final rule supersede the objectives of 12 CFR 
360.9. Accordingly, if a covered institution reaches full compliance 
with the final rule, the results intended under Sec.  360.9 will be 
largely accomplished. Paragraph (d) permits a covered institution to 
request a release from the requirements set forth in Sec.  360.9 upon 
submission of its first certification of compliance with the final 
rule's requirements.
    This section further provides that the FDIC will consider all 
requests made under relevant provisions of the final rule on a case-by-
case basis in light of the final rule's objectives, and that the FDIC's 
grant of a covered institution's request may be conditional or time-
limited.
9. Section 370.9 Communication With the FDIC
    This section requires that within ten business days after either 
the effective date of the final rule or becoming a covered institution, 
whichever is later, a covered institution notify the FDIC of the 
person(s) responsible for implementing the recordkeeping or IT system 
requirements set forth in this part. Point-of-contact information, 
reports and requests are to be submitted in writing to: Office of the 
Director, Division of Resolutions and Receiverships, Federal Deposit 
Insurance Corporation, 550 17th Street NW., Washington, DC 20429-0002.
10. Section 370.10 Compliance
    The final rule sets forth a two-part approach for compliance. 
First, beginning on or before the compliance date and annually 
thereafter, a covered institution must certify that it has implemented 
and successfully tested its IT system for compliance with the final 
rule's requirements during the preceding calendar year. The 
certification must be signed by the covered institution's chief 
executive officer or chief operating officer. Along with its 
certification of compliance, the covered institution must also submit a 
summary deposit insurance coverage report to the FDIC. The summary 
deposit insurance coverage report would list key metrics for evaluating 
deposit insurance risk to the DIF and coverage available to a covered 
institution's depositors. Those metrics are: The number of account 
holders, the number of deposit accounts, and the dollar amount of 
deposits by ownership right and capacity; the total number of fully-
insured deposit accounts and the dollar amount of deposits in those 
accounts; the total number of deposit accounts with uninsured amounts 
and the total dollar amount of insured and uninsured amounts in those 
accounts; the total number of deposit accounts and the dollar amount of 
deposits in accounts, broken out by account type, for which the covered 
institution's IT system cannot calculate deposit insurance coverage 
because it is permitted to maintain alternative recordkeeping 
requirements as set forth in Sec.  370.4(b); and a description of any 
substantive change to the covered institution's IT system or deposit 
taking operations since the prior annual certification.
    Second, the FDIC will conduct periodic on-site inspections and 
tests of each covered institution's IT system's capability to 
accurately calculate deposit insurance coverage in the event of 
failure. Testing will begin no sooner than the last day of the first 
calendar quarter following the compliance date, and will occur no more 
frequently than on a three-year cycle thereafter, unless there is a 
material change to the covered institution's IT system, deposit-taking 
operations, or financial condition. The FDIC will provide data 
integrity and IT system testing instructions to covered institutions 
through the issuance of procedures or guidelines prior to the final 
rule's effective date and before initiating its compliance testing 
program, and will provide outreach to covered institutions to 
facilitate their implementation efforts. The final rule also requires 
covered institutions to assist the FDIC in resolving any issues that 
arise upon the FDIC's on-site inspection and testing of the IT system's 
capabilities.
    The final rule provides that a covered institution will not be in 
violation of any requirements of the rule for which the institution has 
submitted a request for relief pursuant to Sec.  370.6(b) or Sec.  
370.8(a)-(c) while awaiting the FDIC's response to the request.

IV. Expected Effects

    Using current data, the FDIC estimates that the rule will apply to 
38 institutions, each with two million or more deposit accounts.\16\ 
Together, these institutions hold more than $10 trillion in total 
assets and manage over 400 million deposit accounts.
---------------------------------------------------------------------------

    \16\ All data in this section is calculated using FDIC Call 
Report Data as of June 30, 2016.
---------------------------------------------------------------------------

    The FDIC has evaluated the estimated cost to implement this rule, 
as well as the benefits to the FDIC's resolution process and to the 
millions of account holders who would need immediate access to their 
funds in the event of failure of a covered institution. The main 
determinants of the estimated cost to institutions covered by the final 
rule are the number of deposit accounts they hold and the number of 
deposit IT systems they manage. Benefits of the rule include: Ensuring 
prompt and efficient deposit insurance determinations by the FDIC and 
thus the liquidity of deposit funds; enabling the FDIC to readily 
resolve a failed IDI; reducing the costs of failure of a covered 
institution by increasing the FDIC's resolution options; and promoting 
long term stability in the banking system by reducing moral hazard.
    These benefits are expected to accrue to the public at large. 
However, because there is no market in which the value of these 
expected benefits can be determined, it is not possible to quantify 
these benefits with precision. As the public benefits cannot be 
quantified, the FDIC presents an analytical framework that describes 
the qualitative effects of the proposed rule and the quantitative 
effects where possible, consistent with

[[Page 87742]]

the FDIC Statement of Policy on the Development and Review of FDIC 
Regulations and Policies.

Expected Costs

    The FDIC's initial estimate of the cost of this rule, as described 
in the NPR, was approximately $328 million. The FDIC has updated its 
cost estimate to $478 million, based in part upon comments the FDIC 
received in response to the NPR. The updated estimated cost to covered 
institutions represents $386 million of this total, with the remaining 
estimated costs accruing to depositors and the FDIC. Even with these 
updates, the estimated costs to covered institutions remain small 
relative to their revenues and expenses.
    In estimating the costs of this rule, the FDIC engaged the services 
of an independent consulting firm. Working with the FDIC, the 
consultant used its extensive knowledge and experience with IT systems 
at financial institutions to develop a model to provide cost estimates 
for the following activities:

 Implementing the deposit insurance calculation
 Legacy data clean-up
 Data extraction
 Data aggregation
 Data standardization
 Data quality control and compliance
 Data reporting
 Ongoing operations

    Cost estimates for these activities were derived from a projection 
of the types of workers needed for each task, an estimate of the amount 
of labor hours required, an estimate of the industry average labor cost 
(including benefits) for each worker needed, and an estimate of worker 
productivity. The analysis assumed that manual data clean-up would be 
needed for 5 percent of deposit accounts, 10 accounts per hour would be 
resolved, and internal labor would be used for 60 percent of the clean-
up. This analysis also projected higher costs for institutions based on 
the following factors:

 Higher number of deposit accounts
 Higher number of distinct core servicing platforms
 Higher number of depository legal entities or separate 
organizational units
 Broader geographic dispersal of accounts and customers
 Use of sweep accounts
 Greater degree of complexity in business lines, accounts, and 
operations
    Illustration 1 provides a diagram of the cost model.
    [GRAPHIC] [TIFF OMITTED] TR05DE16.000
    
    Table 1 shows that almost half of the rule's estimated total costs 
are attributable to legacy data clean-up. These legacy data clean-up 
cost estimates are sensitive to both the number of deposit accounts and 
the number of deposit IT systems. More than 90 percent of the legacy 
data clean-up costs are associated with manually collecting account 
information from customers and entering it into the covered 
institution's systems. Data aggregation, which is sensitive to the 
number of deposit IT systems, makes up about 13 percent of the rule's 
estimated costs.

[[Page 87743]]



         Table 1--Estimated Implementation * Costs by Component
------------------------------------------------------------------------
             Components                Component cost   Percent of total
------------------------------------------------------------------------
Legacy Data Cleanup.................      $226,482,333            47.43%
Data Aggregation....................        64,015,373            13.41%
Ongoing Operations **...............        55,175,451            11.55%
Data Standardization................        36,573,894             7.66%
FDIC Costs **.......................        36,001,520             7.54%
Data Extraction.....................        25,397,761             5.32%
Quality Control and Compliance......        18,403,006             3.85%
Insurance Calculation...............         9,500,400             1.99%
Reporting...........................         5,971,800             1.25%
                                     -----------------------------------
    Total Cost......................       477,521,538              100%
------------------------------------------------------------------------
* Estimates of bank implementation costs include both initial and
  ongoing costs associated with this final rule.
** Present value of annual costs using a 3.5 percent discount rate over
  a 30-year time horizon. For example, this discount rate is used in OMB
  Circular No. A-4 and A-94, Appendix C (revised November 2015 for
  calendar year 2016).


     Table 2--Comparison of Bank Implementation * Costs to Expenses
                         [Amounts in thousands]
           [Estimated cost to covered institutions: $385,517]
------------------------------------------------------------------------
                                        2015 Expenses   Implementation *
            Expense item                 for covered     cost as percent
                                        institutions       of expense
------------------------------------------------------------------------
Noninterest Expense.................      $260,857,965             0.15%
Personnel Expense...................       119,069,416             0.32%
Tax Expense.........................        49,262,660             0.78%
Interest Expense....................        26,761,300             1.44%
Fixed Expense: Premises.............        28,446,163             1.36%
------------------------------------------------------------------------
                                                         Cost as Percent
                                                            of Income
                                     -----------------------------------
Pre-Tax Net Income, 2015............      $157,197,668             0.25%
                                     -----------------------------------
                                                        Cost per Deposit
                                                             Account
                                     -----------------------------------
Number of Deposit Accounts, 2Q 2016.       416,149.383             $0.93
                                     -----------------------------------
                                                         Cost as Percent
                                                            of Assets
                                     -----------------------------------
    Total Assets, 2Q 2016...........   $10,558,645,376            0.004%
------------------------------------------------------------------------
* Estimates of bank implementation costs include both initial and
  ongoing costs associated with this final rule.

    These estimates of initial and ongoing costs of implementation are 
higher than those provided in the NPR. The increase in total estimated 
implementation costs is the result of updating the data, reviewing the 
cost methodology, and incorporating comments received on the NPR. Even 
with the revisions, however, the updated cost estimate does not alter 
the FDIC's overall assessment of the expected effects of the final 
rule.
    The estimated total cost of the final rule remains relatively small 
for covered institutions. The estimated costs amount to an average of 
93 cents per deposit account and one-quarter of one percent of pre-tax 
net income, as shown in Table 2. Banks with more serious deficiencies 
in their current systems or with greater complexity in their business 
lines, accounts, and operations are expected to incur above-average 
compliance costs. These estimates may overstate the costs of the final 
rule because some covered institutions are already undertaking efforts 
to improve their data quality to address their own operational concerns 
and to comply with other statutes and regulations.

Expected Benefits

    The recent financial crisis has demonstrated that large financial 
institutions can fail very rapidly. The failure of a covered 
institution would likely involve millions of deposit insurance claims. 
An orderly resolution requires ready access to complete and accurate 
information about the insurance status of depositors. The final rule 
ensures that the FDIC can conduct an orderly resolution of covered 
institutions despite the informational challenges they pose.
    Financial crises are, by their very nature, unpredictable, and 
unique and the likelihood, duration and magnitude of any such crisis 
cannot be predicted with mathematical precision. There are over $9 
trillion in deposits in United States banks and the FDIC insures each 
qualifying account up to a maximum of $250,000, regardless of the 
events that unfold during any particular crisis. During the recent 
financial crisis, the federal government provided trillions of dollars 
of government support to large financial institutions.\17\ Some of the

[[Page 87744]]

institutions covered by this rule received government support that far 
exceeds the anticipated costs of this rule.
---------------------------------------------------------------------------

    \17\ See, e.g., David Luttrell, Tyler Atkinson, & Harvey 
Rosenblum, Assessing the Costs and Consequences of the 2007-09 
Financial Crisis and Its Aftermath, Federal Reserve Bank of Dallas 
Economic Letter (Sept. 2013), available at http://www.dallasfed.org/assets/documents/research/eclett/2013/el1307.pdf; Richard G. 
Anderson & Charles S. Gascon, A Closer Look, Assistance Programs in 
the Wake of Crisis, The Regional Economist, Federal Reserve Bank of 
St. Louis (Jan. 2011), available at https://www.stlouisfed.org/~/
media/Files/PDFs/publications/pub_assets/pdf/re/2011/a/bailouts.pdf; 
U.S. Gov't Accountability Office, GAO-10-100, Regulators' Use of 
Systemic Risk Exception Raises Moral Hazard Concerns and 
Opportunities Exist to Clarify the Provision (2010), available at 
http://www.gao.gov/assets/310/303248.pdf.
---------------------------------------------------------------------------

    The FDIC expects that the benefits of the final rule will accrue 
broadly to the public at large, to bank customers, to IDIs not covered 
by the rule, and to the covered institutions themselves. As discussed 
earlier, the FDIC expects the final rule to provide significant 
benefits, including ensuring prompt and efficient deposit insurance 
determinations by the FDIC and thus the liquidity of deposit funds; 
enabling the FDIC to more readily resolve a failed IDI; reducing the 
costs of failure of a covered institution by increasing the FDIC's 
resolution options; and promoting long term stability in the banking 
system by reducing moral hazard.
    The public at large will be the primary beneficiaries of the final 
rule. An effective failed bank resolution maintains liquidity in the 
economy by providing timely access to insured funds, promotes financial 
stability by ensuring an orderly, least costly resolution, and reduces 
moral hazard by recognizing deposit insurance limits (since uninsured 
depositors could be subject to losses even at the largest banks). 
Making accurate deposit insurance determinations for all insured 
institutions is a key component in carrying out the FDIC's mission of 
maintaining confidence in the banking system and minimizing costs to 
the DIF.
    Broadly, the final rule facilitates the consideration of resolution 
methods that might otherwise be unavailable, enabling the FDIC to 
resolve a failing covered institution in the least costly manner. With 
more resolution options, the FDIC may be less likely to resolve a 
failing large institution by having another large institution absorb 
it; absorption by another large institution would further increase 
concentration among the largest banks and raise concerns about longer 
term financial stability. This final rule reduces the likelihood of 
invoking a systemic risk exception, the cost of assistance provided as 
the result of a failure and receivership for which the systemic risk 
exception has been invoked, and the associated long-term risk of 
increased moral hazard and damaged market discipline.\18\
---------------------------------------------------------------------------

    \18\ As mandated by the Dodd-Frank Act, future payments pursuant 
to the systemic risk exception can only be made with respect to an 
institution in receivership, removing the possibility of open bank 
assistance. See Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 1106, 124 Stat. 1376 (2010). 
This change increases the likelihood that the failure of a covered 
institution will involve millions of deposit insurance claims.
---------------------------------------------------------------------------

    Bank customers will also benefit from the final rule. Timely 
deposit insurance determinations will give bank customers expeditious 
access to insured funds to meet their transaction needs and financial 
obligations. Moreover, any current deficiencies in IT systems and data 
gathering that prevent covered institutions from identifying 
relationships between deposit accounts are likely to also prevent them 
from having the ability to quickly inform customers whether or not 
their deposits are insured, if asked.
    IDIs not covered by the final rule will benefit because the prompt 
payment of deposit insurance at the largest IDIs should promote public 
confidence in the banking system as a whole. The provisions of the 
final rule will help to level the competitive playing field between 
large banks with two million or more deposit accounts and community 
banks, which typically maintain far fewer deposit accounts. The 
requirements of the final rule will reduce the perception that 
uninsured depositors at large banks are less likely to incur losses in 
the event of failure than their counterparts at smaller institutions.
    The enhancements to data accuracy and completeness supported by the 
final rule should benefit covered institutions as well. Improvements to 
data on depositors and information systems as a result of adopting the 
final rule may lead to efficiencies in managing customer data. 
Accordingly, the upgrades in depositor information required under this 
rule are likely to benefit covered institutions by improving their 
ability to serve their customers and increasing their depositors' 
confidence that deposit insurance can be paid promptly by the FDIC in 
the event of failure. Moreover, the processing of daily bank 
transactions may be less prone to data errors.

V. Alternatives Considered

    A number of alternatives were considered in developing the final 
rule. The major alternatives include (1) adjusting thresholds above or 
below the proposed two million accounts, (2) imposing recordkeeping 
requirements on all account types, (3) maintaining the FDIC's current 
approach to deposit insurance determinations (status quo), (4) 
developing an internal IT system and transfer processes within the FDIC 
capable of subsuming the deposit system of any large covered IDI in 
order to perform deposit insurance determinations, and (5) simplifying 
deposit insurance coverage rules. The FDIC considers the final rule to 
be the most effective approach among the alternatives in terms of cost 
to the industry, the speed and accuracy of deposit insurance 
determinations, access to funds, and reduction of systemic and 
information security risks. Development of the final rule was based on 
a careful evaluation of expected effects, public comments, and the 
FDIC's experience in resolving failed banks.
    In deciding which institutions would be subject to the final rule, 
the FDIC considered thresholds above and below two million deposit 
accounts. Raising the threshold would decrease the costs of the final 
rule to the industry because fewer institutions would be covered, but 
would also increase the risk that the FDIC would be unable to make 
timely and accurate deposit insurance determinations for large 
institutions and limit the FDIC's resolution options, thereby 
potentially increasing the costs of resolution.
    Making a correct and timely deposit insurance determination 
requires that the FDIC have access to accurate data on deposit accounts 
as well as on any relationships among those accounts. The FDIC has 
learned from prior experience that it is possible to manage data 
quality problems at small institutions without delaying or materially 
altering the outcome of the deposit insurance determination. However, 
the ability of the FDIC to promptly manage data quality problems at 
large institutions declines rapidly with the number and complexity of 
deposit accounts. Therefore, resolving data quality problems at 
institutions with the largest number of accounts and most complex 
deposit account systems prior to failure, as required by this final 
rule, should substantially lower the risk of inaccuracy or delay in 
making determinations.
    As described in IV. Expected Effects, the FDIC estimates that the 
costs associated with the two million account threshold for these large 
IDIs will be relatively modest compared to their net income and other 
costs of doing business. Decreasing the threshold below two million 
accounts would impose higher costs on the industry as a whole, and the 
marginal benefits of

[[Page 87745]]

the rule would decline since smaller institutions present less risk to 
prompt deposit insurance determinations.
    In determining the scope of the final rule, the FDIC considered 
requiring covered institutions to maintain complete and accurate 
records for all accounts as originally proposed. However, the FDIC 
recognizes that covered institutions may not maintain in their deposit 
account records, and may not be able to obtain, for all accounts the 
information needed for deposit insurance purposes. The FDIC's 
regulation that sets forth the standards for deposit insurance 
coverage, 12 CFR part 330, permits records to reside outside of an IDI 
with respect to certain types of deposit accounts, as long as certain 
requirements are satisfied, without adverse consequences for the 
insurability of deposits. Similarly, the final rule recognizes that 
covered institutions will not have and therefore do not need to keep 
complete records for deposit insurance purposes for those types of 
deposit accounts.
    Additionally, costs associated with developing the ability to 
collect data, produce key account holder information in a timely 
manner, and perform a deposit insurance calculation are estimated to be 
relatively high for some account types. For example, for covered 
institutions the costs associated with collecting key information 
regarding beneficial ownership of deposits held by a prepaid account 
program manager on behalf of program participants is likely to be 
higher than for other account types for which beneficial ownership can 
be readily determined. For trust accounts, the identity and number of 
beneficiaries can often change, making the costs associated with 
collecting key information from the account holder, trustee, or other 
interested parties relatively high.
    Another alternative is to maintain the status quo established by 12 
CFR 360.9. However, that rule does not adequately address an important 
problem that arises in the resolution of the largest and most complex 
institutions. Deposit insurance determinations under Sec.  360.9 
necessitate a secure bulk download of depositor data that introduces 
additional delays in making determinations. The FDIC's experience in 
resolving large institutions shows that the amount of time for data to 
download can vary widely based on the file size, complexity of the 
data, and the number of deposit systems, among other things. Given the 
limited time available to the FDIC to make determinations, these delays 
pose the risk of creating financial hardships for depositors and 
disrupting financial markets.
    Another alternative considered was to establish a system to rapidly 
transmit all deposit data from a failed IDI's IT system to the FDIC for 
processing in order to calculate and make deposit insurance 
determinations. Although this alternative utilizes a common deposit 
insurance calculation IT system, absorbing the deposit system or 
systems of a large, complex institution quickly enough to make a prompt 
insurance determination is infeasible as a practical matter. Unlike 
typical small and mid-sized IDIs, covered institutions have large 
amounts of data and often use multiple deposit account IT systems which 
are programmed to meet institution-specific needs. FDIC staff, working 
with staff from each large institution, would have to develop an 
individualized solution for each institution tailored to its IT systems 
and third-party applications. Extensive initial and ongoing testing 
would be required to establish that the data transmission would allow a 
prompt and accurate insurance determination. Additionally, covered 
institutions would still bear the cost of legacy data cleanup and data 
aggregation, which are the two largest cost components in the cost 
model.
    The alternative of the FDIC establishing an IT system to rapidly 
transfer all deposit data from a failed IDI would also likely impose 
large ongoing costs for covered institutions because any significant 
change to the deposit system of a large IDI would necessitate further 
testing and validation. Further, the large IT development, testing, and 
recertification costs borne by the FDIC under this alternative would 
ultimately be paid by insured depository institutions through ongoing 
deposit insurance assessments. In contrast, the final rule requires 
that a covered institution's IT system have the ability to calculate 
deposit insurance coverage for all deposit accounts in the event of a 
failure. It would use the data that the covered institution has on hand 
at the time of failure as well as data collected by the FDIC from 
depositors shortly after failure. Under the final rule, IT costs would 
be absorbed by covered institutions rather than by the entire banking 
industry.
    Another alternative the FDIC considered was to simplify deposit 
insurance coverage rules. Currently, deposit insurance is provided 
under different ownership rights and capacities, some of which involve 
complex types of deposit accounts. Reducing the number of rights and 
capacities or simplifying the coverage rules would reduce the costs 
associated with covered institutions' development of the capability to 
calculate deposit insurance coverage. However, efforts to simplify the 
deposit insurance coverage rules could effectively reduce coverage to 
depositors at all FDIC insured institutions, an approach that would 
impose a cost on a wider range of institutions and bank customers. 
Further, these complex account types present problems when the FDIC 
must analyze a significant number of these accounts at the same time. 
The FDIC's established methods for dealing with these more complex 
accounts in smaller and mid-sized resolutions include manual 
processing, an approach that could take too long in a larger resolution 
involving a significant number of these accounts. Consequently, the 
FDIC is not pursuing simplification of the deposit insurance coverage 
rules.

VI. Discussion of Comments

    Generally, the issues raised by the commenters may be categorized 
under the following topics: The need for regulation, expected effects 
of the proposed rule, possible alternatives to the proposed rule, 
problems with the proposed rule's requirements, and possible adverse 
consequences.

A. Comments Concerning the Need for Regulation

    The commenters generally agree that it is important for depositors 
to have prompt access to their insured deposits in the event of the 
failure of a large and complex IDI. However, some commenters contended 
that the proposed rule is unnecessary because covered institutions are 
unlikely to fail. One commenter remarked that the likelihood of failure 
is ``essentially zero.'' This commenter maintained that it is more 
likely that market forces and the FDIC's enforcement powers and 
supervisory authority would solve the problems of a large institution 
before failure. This commenter also asserted that, even if failure did 
occur, a transaction in which all deposits are assumed by another 
institution would be the least costly resolution, thereby avoiding the 
need for a deposit insurance determination. The payment of all 
uninsured deposits would preserve the failed bank's franchise value, 
this commenter argued, while adherence to deposit insurance limits 
could cause runs at other financial institutions and be systemically 
disruptive. Another commenter suggested that it would be ``unlikely'' 
that the FDIC would use a straight deposit payoff, an insured deposit 
transfer, or a deposit insurance national bank to resolve a large bank. 
Similarly, other commenters posited that, if a

[[Page 87746]]

covered institution were to fail, then an all-deposit purchase and 
assumption transaction would be the least costly resolution, thereby 
avoiding the need for a deposit insurance determination.
    While the likelihood of any particular covered institution's 
failure may be low at a given point in time, history suggests that the 
financial condition of institutions that are perceived to be in good 
health can deteriorate quickly and with little notice. In 2008 and 
2009, several large insured depository institutions failed, including 
IndyMac Bank and Washington Mutual Bank. In general, very large IDIs 
rely on credit-sensitive funding more than smaller IDIs do, which makes 
them more likely to suffer a rapid liquidity-induced failure.
    The contention that warning signs will give the FDIC sufficient 
notice to plan for resolution of a covered institution and the related 
argument by another commenter that the ``FDIC has provided absolutely 
no evidence that a large bank . . . has ever failed with little prior 
warning'' are also controverted by the events of the recent banking and 
financial crisis. The financial condition of several large and complex 
financial institutions deteriorated very rapidly in 2008. Numerous 
academic studies, articles, reports to Congress, other government 
reports, and Congressional testimony (including testimony from FDIC 
officials) have documented that short term funding challenges rapidly 
caused distress at banks during the last financial crisis (resulting in 
either bank failure or government intervention to prevent failure, as 
in the case of Wachovia Bank and Citibank).\19\ This dynamic, present 
in the failure of Washington Mutual, for example, increases the risk 
that the FDIC will have little lead time to prepare for the failure of 
a covered institution.
---------------------------------------------------------------------------

    \19\ See, e.g., Testimony of Scott G. Alvarez, General Counsel, 
Board of Governors of the Federal Reserve System, The Acquisition of 
Wachovia Corporation by Wells Fargo & Company Before the Financial 
Crisis Inquiry Commission, Before the Financial Crisis Inquiry 
Commission (Sept. 1, 2010); Testimony of Sheila C. Bair, Chairwoman 
of the FDIC, Causes and Current State of the Financial Crisis Before 
the Financial Crisis Inquiry Commission, Before the Financial Crisis 
Inquiry Commission (Jan. 14, 2010); Financial Crisis Inquiry 
Commission, ``The Financial Crisis Inquiry Report: Final Report of 
the National Commission on the Causes of the Financial and Economic 
Crisis in the United States'' (U.S. Government Printing Office, 
2011); Philip Strahan, Liquidity Risk and Credit in the Financial 
Crisis, Federal Reserve Bank of San Francisco Economic Letter (May 
14, 2012); U.S. Gov't Accountability Office, GAO-10-100, Federal 
Deposit Insurance Act: Regulators Use of Systemic Risk Exception 
Raises Moral Hazard Concerns and Opportunities Exist to Clarify the 
Provision (April 2010).
---------------------------------------------------------------------------

    While certain post-crisis reforms have resulted in a more resilient 
banking system with stronger liquidity and capital, the effect of these 
reforms has not been tested in a crisis. These post-crisis reforms 
mitigate but do not eliminate the risk of failure. Other post-crisis 
reforms have limited the FDIC's authorities. For example, during the 
most recent crisis the FDIC was able to provide debt guarantees through 
the Temporary Liquidity Guarantee Program under then-existing statutory 
authority to bolster liquidity in the financial system. Under current 
law, such a program would require Congressional approval.
    The contentions that, even if a large bank did fail, a transaction 
in which all deposits are assumed by another institution or in which 
all assets are purchased and deposit liabilities assumed would be the 
least costly resolution (thus avoiding the need for a deposit insurance 
determination), or that it would be ``unlikely'' that the FDIC would 
use a straight deposit payoff, an insured deposit transfer, or a 
deposit insurance national bank to resolve a large bank are again 
controverted by the facts. Since 2008, the FDIC has conducted 36 
resolutions where an all-deposit assumption transaction could not be 
arranged. Moreover, the sheer size of many covered institutions limits 
the number of institutions that could even consider purchasing all 
assets and assuming all deposits (or simply assuming all deposits), 
increasing the chances that a deposit insurance payout or a bridge bank 
will be the least costly alternative.\20\ To use these resolution 
methods, the FDIC must be able to make a deposit insurance 
determination.
---------------------------------------------------------------------------

    \20\ The least cost test does not consider indirect or 
speculative costs, such as costs to other entities in the economy 
that result from a bank's failure. Thus, absent a systemic risk 
determination, the FDIC cannot consider these costs as a reason to 
implement a more costly alternative.
---------------------------------------------------------------------------

    Moreover, a former Chairman of the FDIC publicly shared his 
reaction to a commenter's suggestion that the FDIC would never need to 
determine deposit insurance for the largest banks, stating that the 
suggestion was ``in effect, proposing 100% deposit insurance at banks, 
which would sound the death knell for any pretense of market discipline 
and a private sector banking system.'' He stated that, historically, 
the FDIC ``had no ability to deal with large bank failures in any way 
other than by recapitalizing them or merging them into even larger 
banks if [the FDIC] couldn't quickly segregate the uninsured deposits 
from the insured. Without this information, the FDIC might as well 
throw in the towel on instilling private sector discipline in the 
banking system.'' \21\ The possibility of failure must exist to 
maintain market discipline and avoid moral hazard.
---------------------------------------------------------------------------

    \21\ Bill Isaac (former FDIC Chairman), online response to Bert 
Ely, FDIC's Sudden Concern with Insurance Limit Makes No Sense, 
American Banker (May 18, 2016), available at http://www.americanbanker.com/bankthink/fdics-sudden-concern-with-insurance-limit-makes-no-sense-1081055-1.html.
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    Some commenters assert that additional regulation is unnecessary 
because the FDIC's informational needs for a deposit insurance 
determination are already addressed in its current regulation at 12 CFR 
360.9. The current approach under Sec.  360.9 is not adequate and 
additional regulation is necessary for two reasons. First, as discussed 
in II. Need for Further Rulemaking, the informational and provisional 
hold aspects of Sec.  360.9 are inadequate for the largest depository 
institutions. The institutions covered by Sec.  360.9 are permitted to 
populate the data fields by using only data elements currently 
maintained in-house. If the institution does not maintain the 
information to complete a particular data field, then a null value can 
be used in that field. As a result of this discretionary approach, 
these institutions' standard data files are frequently incomplete. The 
provisional hold capability falls short because Sec.  360.9 requires 
these institutions to maintain the technological capability to 
automatically place and release holds on deposit accounts if an 
insurance determination could not be made by the FDIC by the next 
business day after failure. Although provisional holds allow 
depositors' access to a portion of their total deposit while the 
insurance determination is being finalized, the hold does not 
facilitate a faster or more efficient insurance determination.
    Second, because deposit data files must be transmitted to the FDIC, 
standardized by FDIC staff, and then processed on the FDIC's IT system, 
a deposit insurance determination is still a very time consuming and 
manually intensive endeavor. While Sec.  360.9 would assist the FDIC in 
fulfilling its legal mandates regarding the resolution of failed 
institutions subject to that rule, the FDIC believes that if one of the 
largest IDIs were to fail with little prior warning, additional 
measures would be needed to ensure the prompt and accurate payment of 
deposit insurance to all depositors.
    Beyond the constraints apparent in Sec.  360.9, significant 
resources are needed to collect and standardize the information needed 
to process the high volume of accounts a covered institution has in a 
manner that will

[[Page 87747]]

avoid significant disruption to depositors and the payment system. 
Processing deposit accounts after gathering needed information can take 
significant time after failure as well. As the amount of time needed to 
gather information from a depositor increases, the speed of insurance 
payment to that depositor decreases. Delays in processing deposit 
insurance determinations at banks with millions of deposit accounts 
would likely be more significant than the delays imposed during past 
resolutions of smaller banks. For example, in the wake of IndyMac's 
failure, it took FDIC staff significant time and resources to complete 
deposit insurance determinations for many formal revocable trust and 
irrevocable trust accounts. Given the level of public anxiety after the 
failure of IndyMac Bank, it is not unreasonable to be concerned that 
the fear of loss on deposits could be even greater in the event of the 
failure of a covered institution. The reporting required under the 
final rule will help the FDIC prepare to make deposit insurance 
determinations after the failure of a covered institution.
    Several commenters assert that there is no need for covered 
institutions to maintain account information that duplicates or 
overlaps with information already maintained outside the institution by 
account holders who can provide the information expeditiously in the 
event of the institution's failure. These commenters believe that a 
two-pronged approach by which prompt payment is made to most depositors 
and later payment is made to certain other depositors once the required 
information has been received has had no negative effect on public 
confidence in deposit insurance and the banking system. To a large 
extent, the final rule accommodates this concern by limiting the 
recordkeeping requirements for certain types of deposit accounts for 
which covered institutions do not already maintain the information 
needed for deposit insurance determination.
    The evolution of deposit products and relationships has rendered 
current regulatory standards less effective in facilitating rapid 
deposit insurance determination. Account features and customer use and 
expectations have changed. Immediate and continuous access to deposit 
accounts is more common now than in the past. Deposit accounts are 
increasingly used by beneficial owners of deposits who are not the 
named account holder (e.g., MMDAs associated with brokered sweep 
accounts and prepaid account programs administered by a third party 
that places deposits at an IDI on behalf of the cardholders). Also, 
demand deposit accounts held in connection with revocable trusts are 
used more commonly. Because these accounts are transactional, those 
depositors expect to have immediate access without regard for the 
respective institution's failure. Checks outstanding at the time of 
failure need to be processed and either paid or returned in a timely 
manner, often no more than a few business days, in order to avoid 
cascading consequences across the payments system. However, it could 
take time after failure for the FDIC to gather the information needed 
to make a deposit insurance determination for the deposit accounts that 
those checks are drawn upon. The final rule seeks to minimize the 
amount of time needed to make deposits in those accounts accessible so 
that the impact on depositors and the payments system in general is 
minimized.
    Some of the commenters maintain that the FDIC should develop its 
own IT system capabilities to handle deposit insurance determinations 
at an institution of any size. One advocated for the development and 
use of a single insurance calculation system to be deployed at every 
covered institution, while another discussed the use of a custodial 
facility to reconcile depositor data transmitted by the institution 
with data transmitted by financial intermediaries. As described in V. 
Alternatives Considered, the FDIC considered developing a system to 
rapidly transfer all deposit data from a failed IDI's IT system to the 
FDIC for processing in order to calculate and make deposit insurance 
determinations but determined that absorbing the deposit system or 
systems of a large, complex institution quickly enough to make a prompt 
insurance determination is practically infeasible.

B. Comments Concerning the Expected Effects of the Rule

    Several commenters challenged the conclusions and methodology of 
the FDIC's analysis of the proposed rule's expected effects. One 
commenter remarked that the ``proposed rule would impose unnecessary 
costs without delivering any benefit'' and that the FDIC ``almost 
certainly has grossly underestimated the cost to the affected banks of 
implementing and maintaining deposit-account aggregation as specified 
in the NPR.'' Commenters criticized different cost components of the 
analysis, including whether the model was up-to-date, captured the 
impact of the rule on all market participants, and the assumptions and 
robustness of the model. The FDIC has considered these comments in 
development of the final rule.
Expected Costs
    FDIC costs: One commenter noted that the NPR did not include costs 
to the FDIC. The FDIC estimates that this rule may require as many as 
15 full-time equivalent employees to assist with implementation of the 
regulation.\22\ The present value of these costs at a 3.5 percent 
discount rate for 30 years increases the estimated cost of the rule by 
approximately $36 million.\23\ The costs of these employees include 
wages, benefits, and taxes, and are adjusted for inflation. The FDIC 
believes this is a conservative estimate as it anticipates that 
administration of the rule will require less effort over time.
---------------------------------------------------------------------------

    \22\ Costs for full-time equivalent employees should be 
considered opportunity costs (that is, hours worked on the 
implementation of the final rule rather than on other work 
assignments).
    \23\ For example, this discount rate is used in OMB Circular A-4 
and A-94, Appendix C (revised November 2015 for calendar year 2016).
---------------------------------------------------------------------------

    Costs to depositors: Commenters noted that the NPR did not include 
the costs that depositors will incur updating or providing account 
information to covered institutions. The FDIC believes that the number 
of accounts where depositors will be asked to provide account 
information is significantly reduced from the NPR given the alternative 
recordkeeping requirements provided for in the final rule. Even so, the 
FDIC estimates that the cost to depositors will be approximately $56 
million. In calculating this estimate, the FDIC assumes a 100 percent 
response rate by depositors with a level of effort (LOE) for depositors 
equal to the LOE of the covered institutions and the average national 
wage rate of $27 per hour.\24\ Depositors are not required to provide 
account information, however, and the FDIC expects that some depositors 
will not provide it. A depositor who provides the account information 
reveals that he or she perceives that the benefit of providing the 
information justifies the cost of doing so.
---------------------------------------------------------------------------

    \24\ Bureau of Labor Statistics, Establishment Data, Table B-3.
---------------------------------------------------------------------------

    Costs to intermediaries: Some commenters criticized the FDIC's cost 
estimate because it did not include the potential impact on other 
market participants, including administrators, custodians, and sub-
custodians. In response to comments discussed elsewhere in this 
preamble, the final rule provides alternative recordkeeping

[[Page 87748]]

requirements for certain deposit accounts. The FDIC expects that the 
cost to intermediaries will be mitigated by the final rule's 
alternative recordkeeping requirements.
    Number of deposit accounts: Several commenters criticized the 
FDIC's analysis on the grounds that it was based on outdated 
information, and it included some banks that would not be covered by 
the NPR and excluded some banks that would be covered. Based upon 
comments received on the NPR and taking into consideration the banks 
that amended their Call Reports to reflect a deposit account total 
under the two million threshold, the FDIC updated its model using June 
30, 2016 Call Report data, adding banks that will be subject to the 
final rule and removing banks that are no longer expected to be subject 
to the final rule. The number of covered institutions increased from 36 
to 38, and the number of deposit accounts rose by 4.7 percent. This 
update, by itself, added approximately $6.4 million to the estimated 
cost of the rule.
    Ongoing costs: The FDIC's cost estimate was also criticized as not 
addressing the ongoing costs of compliance or considering anti-
competitive effects. Some commenters argued that the FDIC failed to 
take into consideration ongoing costs; other commenters argued that the 
FDIC's estimate of these costs was too low. The FDIC did not receive 
any evidence that its estimate for one year of ongoing costs was too 
high; however, it did update its estimate to include costs incurred in 
later years. The FDIC extended the horizon for annual ongoing costs by 
calculating the present value of these costs over a 30-year horizon at 
a 3.5 percent discount rate.\25\ This re-calculation raises the 
estimated cost of ongoing operations from $2.9 million to approximately 
$55 million.
---------------------------------------------------------------------------

    \25\ For example, this discount rate is used in OMB Circular A-4 
and A-94, Appendix C (revised November 2015 for calendar year 2016).
---------------------------------------------------------------------------

    Costs and risks of data breaches: Several commenters stated that 
the additional information maintained by banks as a result of this 
final rule would increase the risk and cost of data breaches. As stated 
in the NPR, covered institutions already maintain significant amounts 
of personally identifiable information (PII) on their depositors. 
However, the final rule has been modified in a way that should largely 
address this issue. It does not require covered institutions to bring 
records in-house that currently are permitted to reside outside the 
institution with the account holder or other designated third party.
    Foreign deposits: One commenter stated that the rule should not 
cover foreign deposits. The rule does not cover foreign deposits and 
the cost calculations take into account only domestic deposit accounts.
    Misinterpretation of rule requirements: Several commenters stated 
the costs of the final rule would be orders of magnitude higher than 
the FDIC's estimate as they believed the rule would require them to 
collect or report changes to beneficial ownership and account balances 
on a daily basis. The proposed rule did not contain any such 
requirement. Similarly, the final rule does not require daily 
collection or reporting but rather periodic demonstrations that covered 
institutions can promptly provide deposit account information to the 
FDIC. In any event, the final rule sets forth alternative recordkeeping 
requirements that can be met to satisfy the rule with respect to 
accounts insured on a pass-through basis and certain deposit accounts 
held in connection with formal trusts.
    Model robustness to changes in assumptions: One commenter stated 
that the costs in the model are sensitive to the assumptions used by 
the FDIC. The FDIC did not receive any information that would indicate 
that its assumptions are inappropriate. Further, this comment ignored 
the effect that changing assumptions has on the benefits of the rule, 
which also rise with the banks' difficulty in obtaining accurate 
account information. For example, assuming that the percentage of 
accounts with insufficient deposit records will be higher would raise 
the costs of the rule, but it would also increase the benefits of the 
rule because, absent the final rule, a higher percentage of accounts 
with missing or incorrect information would likely further delay an 
insurance determination.
    Reliability of cost estimate: The NPR noted that even if actual 
compliance costs turned out to be twice the projected cost, such costs 
would still be relatively small in the context of the size, annual 
income, and expenses of covered institutions. Referring to this 
statement, one commenter stated that the ``margin of error in the 
estimate could be as much as 100 percent.'' The FDIC recognizes that no 
model will perfectly capture all of the costs associated with this 
rule. Doubling the estimated costs merely demonstrates the robustness 
of the FDIC's cost estimate. Moreover, none of the commenters proposed 
an alternative model or provided their own compliance cost data. The 
FDIC invited the submission of such information when it issued the ANPR 
and the NPR.
    Relative costs for smaller institutions: Another commenter states 
that the FDIC's compliance cost estimates do not accurately reflect the 
burden the proposed rule would place on covered institutions and that 
compliance burdens would fall disproportionately on smaller 
institutions, which do not have the economies of scale to absorb the 
costs. This commenter suggests that the FDIC provide a cost calculation 
that stratifies the financial impact of the proposal by total deposits, 
so that the actual costs relative to size, other expenses, and earnings 
can be accurately assessed. One commenter noted that, while the costs 
of the rule relative to revenue and expenses are very small for covered 
institutions as a whole, this is because of the outsized influence of 
large banks on aggregate revenue and expenses. While the FDIC 
recognizes that the cost of the rule per account and as a percentage of 
assets, revenue, and expenses will be higher for relatively smaller 
covered institutions and, while it considered these costs when 
determining whether to adopt the final rule, the FDIC concluded that 
incomplete deposit account information at institutions with two million 
or more deposit accounts poses an unacceptable risk to the DIF and 
depositors. However, institutions can submit a request to the FDIC for 
an exemption from the final rule if their deposit-taking business model 
does not pose a significant risk to the DIF or depositors because all 
deposits they accept are fully insured. Moreover, the primary 
determinant of the costs of the rule per institution is not likely to 
be the size of the institution, but rather the quality of its current 
IT system for deposit record-keeping. Those institutions with more 
robust and accurate record-keeping systems will incur fewer costs. 
Those with less robust and less accurate record-keeping systems will 
incur greater compliance costs.
Expected Benefits
    Multiple commenters argued that the FDIC should quantify the 
expected benefits of the final rule. None of the commenters provided 
their view on the quantitative benefits of the rule. Because there is 
no market in which the value of these public benefits can be 
determined, it is not possible to quantify or estimate these benefits 
with precision.
    Some commenters questioned the benefits that the rule would 
provide. One individual argued that the rule would not deliver any 
benefit. One group of trade associations described the expected 
benefits as ``marginal,'' and

[[Page 87749]]

another individual described the rule as providing little benefit. The 
commenters offered minimal explanation of their positions on the 
expected benefits apart from speculating that the failure of one of 
these large institutions was unlikely, notwithstanding the events of 
the recent financial crisis. In the FDIC's view, the final rule 
provides many benefits, as explained in II. Background and IV. Expected 
Effects.

C. Comments Concerning Possible Alternatives to the Proposed Rule

    As described in V. Alternatives Considered, the FDIC considered a 
number of alternatives in developing the proposed and final rule, 
including: (i) Adjusting thresholds above or below the proposed two 
million accounts; (ii) excluding certain account types; (iii) 
maintaining the FDIC's current approach to deposit insurance 
determinations (status quo); (iv) developing an internal FDIC IT system 
and transfer processes capable of subsuming the deposit system of any 
large covered IDI in order to perform deposit insurance determinations; 
and (v) simplifying deposit insurance coverage rules. The FDIC received 
comments on these alternatives.
    In deciding which institutions would be subject to the final rule, 
the FDIC considered thresholds above and below two million deposit 
accounts. The FDIC received one comment on this alternative. The 
commenter suggested that the threshold should include both the number 
of accounts and total dollar amount of deposits and suggested that the 
threshold for the number of accounts should be higher--10 million 
accounts. Raising the threshold would decrease the costs of the rule on 
the industry because fewer institutions would be covered, but would 
also increase the risk that the information would not be available for 
the FDIC to make timely and accurate deposit insurance determinations 
for large institutions and limit the FDIC's resolution options, thereby 
potentially increasing its loss.
    Several commenters argued that it would be too costly to impose 
additional recordkeeping requirements for certain types of deposit 
accounts. The FDIC recognizes that under current generally applicable 
deposit insurance rules for certain types of deposit accounts, 
information needed for deposit insurance purposes may reside outside an 
IDI's deposit account records, and the final rule does not require that 
covered institutions collect the additional information needed from 
account holders for these types of deposit accounts.
    Some commenters supported maintaining the status quo and considered 
existing regulatory standards (specifically Sec.  360.9) to be 
adequate. Adoption of Sec.  360.9 was an important step toward 
resolving a large depository institution in an efficient and orderly 
manner. However, while Sec.  360.9 would assist the FDIC in fulfilling 
its legal mandates regarding the resolution of a failed institution 
that is subject to that rule, the FDIC believes that if the largest of 
depository institutions were to fail with little prior warning, 
additional measures would be needed to ensure the prompt and accurate 
payment of deposit insurance to all depositors.
    The FDIC received a comment supporting the alternative in which the 
FDIC creates a software solution to calculate and make deposit 
insurance determinations to be deployed at all covered institutions. 
The FDIC finds that alternative is not feasible, given the challenge of 
creating one program to accommodate the different and bespoke deposit 
systems of all covered institutions.

D. Comments Concerning the Proposed Rule's Requirements

1. Problems Associated With Beneficial Ownership Information
    One commenter stated that requiring a large amount of beneficial 
owner data to be collected on a daily basis would be superfluous 
because the FDIC would only need to use the data for deposit insurance 
determinations if and when a covered institution failed. Moreover, 
requiring daily updates on beneficial customer data would result in 
high costs and risk customer dissatisfaction. Generally speaking, 
beneficial ownership of deposits placed in covered institutions relies 
upon the principles of agency law or fiduciary relationships to provide 
``pass-through'' deposit insurance coverage to the beneficial owners of 
those accounts. In most circumstances, the agents, fiduciaries, 
custodians, or other accountholders maintain the requisite beneficial 
ownership data in their own records, and presumably, those 
accountholders update their records as necessary, including on a daily 
basis, as ownership of the underlying deposits changes. While the final 
rule requires a covered institution's IT system to be capable of 
accepting and processing beneficial ownership data for all accounts on 
any given day, i.e., the day of the covered institution's failure, the 
beneficial ownership information will not be required to be transferred 
and maintained on a daily basis at the covered institution provided 
that 12 CFR part 330 permits the recordkeeping associated with those 
deposit accounts to be maintained by an entity other than the covered 
institution. See, 12 CFR 330.5 and 330.7.
    Some commenters remarked that having to submit requests for 
exceptions for individual account holders would be ``senselessly 
cumbersome and grossly inefficient--including for the FDIC itself--
considering that all or most covered banks would be expected to seek 
exceptions for certain classes or accounts.'' The FDIC has considered 
the comments regarding the inefficiency as well as the burden to both 
the covered institutions and the FDIC of having to submit and process, 
respectively, requests for exceptions from the final rule's 
requirements for each individual account holder for whom it would not 
be possible to obtain the requisite information. The FDIC has revised 
its proposal to address this concern. As more fully described in III. 
Description of the Final Rule, the final rule adopts a bifurcated 
approach to deposit account recordkeeping requirements based upon the 
recordkeeping procedures permitted by 12 CFR part 330. Under this 
approach, covered institutions will not be required to collect and 
maintain information for certain deposit accounts provided that 12 CFR 
part 330 allows the requisite information to be maintained by the 
account holder or some other third party. Consequently, it will not be 
necessary for covered institutions to request exceptions for individual 
deposit accounts or for certain ``classes'' of deposit accounts 
provided that the relevant deposit account ownership information for 
those accounts is maintained in accordance with 12 CFR part 330.
    Certain commenters claimed that the proposed rule would be unduly 
costly, burdensome, and impracticable in the case of particular account 
holders, such as banks needing to obtain ownership and balance 
information from agents and other custodians who service payment cards 
issued by large corporations as checking and debit substitutes. One 
commenter expected that information for retirement plan participants 
would not be forthcoming from sponsors, fiduciaries and others involved 
in plan administration because participants' interests change daily, 
there are multiple intermediaries from whom information would need to 
be collected, and because plan sponsors and fiduciaries won't disclose 
participant information for fear of violating participants' privacy and 
breaching fiduciary duties under the Employee Retirement Income 
Security

[[Page 87750]]

Act of 1974.\26\ Another commenter contended that a lawyer's disclosure 
of clients' identities and interests in client trust accounts conflicts 
with ethical rules protecting confidential client information.
---------------------------------------------------------------------------

    \26\ 29 U.S.C. 1002.
---------------------------------------------------------------------------

    After balancing the goals of the final rule and the concerns of the 
commenters, the FDIC decided to align the deposit account recordkeeping 
requirements of this final rule with the recordkeeping requirements set 
forth in 12 CFR 330.5 and 12 CFR 330.7. These two sections of the 
FDIC's regulations address deposit account ownership (and 
recordkeeping) in the context of fiduciary relationships (as described 
in Sec.  330.5) and which includes agents, nominees, guardians and 
custodians. Compliance with these recordkeeping requirements is 
necessary to ensure the availability of pass-through deposit insurance 
to the underlying beneficial owners of the deposits. The commenters 
presented various arguments for different types of pass-through 
deposits to support their request for ``class'' exceptions.
    Retirement and other employee benefit plan accounts. For the 
reasons discussed, the FDIC will consider these accounts to be subject 
to the alternative recordkeeping requirements of final part 370. 
Nevertheless, the covered institutions will be required to assign a 
unique identifier to the account holder. Covered institutions will also 
be required to maintain a ``pending reason'' code in their deposit 
account records for each account to comply with Sec.  370.4(b)(1)(ii) 
of the final rule. The covered institutions should have procedures in 
place to obtain the necessary plan participant information as soon as 
possible after failure. Any delay in the receipt of the requisite 
information post-failure will adversely impact the FDIC's ability to 
complete its deposit insurance determinations and disburse deposit 
insurance payments to the plan administrators.
    Interest on Lawyer Trust Accounts and Real Estate Trust Accounts. 
Several commenters described the problems facing lawyers attempting to 
maintain current and accurate information regarding their clients' 
identities and transactions associated with their Interest on Lawyer 
Trust Accounts (``IOLTA'') accounts. The commenters asserted that 
frequent, if not daily, deposits and withdrawals are made on behalf of 
various clients. Therefore, requiring the lawyers to provide up-to-date 
information on a daily basis would be ``administratively difficult and 
costly'' for the lawyers who are the account holders. As the American 
Bar Association Model Rule 1.15 requires lawyers to keep adequate 
records on IOLTAs for up to five years, the lawyer or law firm (as the 
account holder) should be able to provide the necessary information 
regarding their clients, who are the beneficial owners of the deposit 
in the IOLTA account, in a timely fashion. The commenters also pointed 
out that lawyers have a fiduciary duty to maintain the confidentiality 
of their clients' sensitive or personal information and raised concerns 
that this duty could be compromised by routinely disclosing such 
information to a covered institution. The FDIC recognizes that FinCEN 
recently excepted IOLTAs and other lawyer escrow accounts from its 
customer due diligence final rule; it appears that FinCEN relied upon 
many of the same considerations discussed here.\27\ It is important to 
note, however, that FinCEN and the FDIC are addressing different 
problems through their respective rulemakings; i.e., the prevention of 
money laundering and timely deposit insurance determinations, 
respectively. Ultimately, the safeguards provided by the lawyers' rules 
of professional responsibility to properly manage their IOLTA accounts 
coupled with the off-site recordkeeping allowed pursuant to Sec.  
330.5(b)(1)-(3) for fiduciary relationships justify the reduced deposit 
account recordkeeping requirements for IOLTA accounts.
---------------------------------------------------------------------------

    \27\ 81 FR 29398, 29416 (May 11, 2016).
---------------------------------------------------------------------------

    The same commenters asserted that Real Estate Trust Accounts 
(``RETAs'') are very similar in structure and concept to IOLTAs and, 
therefore, should also be excepted as a class of deposits from the 
recordkeeping requirements of final part 370. RETAs represent another 
type of pooled, custodial account in which a title/escrow agent 
deposits funds from multiple clients; the funds are usually held for a 
short period of time until the clients' real estate transactions are 
completed. Deposit account recordkeeping for RETAs is also subject to 
the off-site recordkeeping requirements of Sec.  330.5(b)(1)-(3) for 
fiduciary relationships. Therefore, covered institutions will only be 
required to assign a unique identifier to the account holder and 
maintain a ``pending reason'' code in its deposit account records in 
accordance with Sec.  370.4(b)(1)(ii).
    Mortgage servicing accounts. The FDIC received several comments 
requesting that the recordkeeping requirements of the proposed rule be 
revised to allow relevant information regarding mortgagors whose 
payments are placed in a mortgage servicing account (``MSA'') to 
continue to be maintained with the mortgage servicing company rather 
than at the covered institution. Commenters from the mortgage servicing 
industry provided a description of the typical transactions which occur 
in a mortgage servicing account, explaining that there are safeguards 
which would make the need to access the funds in such an account on the 
first business day after a covered institution's failure a low priority 
for the servicer. For example, payments of principal and interest are 
made in advance; mortgage servicing contracts require the servicer to 
maintain back-up liquidity sources; and while the transaction volume in 
these accounts is usually high, the deposit amounts allocated to 
individual beneficial owners are typically far less than the SMDIA. In 
addition, mortgage servicing deposit accounts are expressly included in 
Sec.  330.7(d) and are usually held by a mortgage servicing company in 
a custodial or fiduciary capacity. The FDIC has considered these 
comments and, based on these considerations, the FDIC has concluded 
that MSAs maintained by a third party mortgage servicer must only 
comply with the recordkeeping requirements set forth in 12 CFR 
370.4(b)(1). On the other hand, MSAs for which the covered institution 
serves as the mortgage servicer must comply with the recordkeeping 
requirements set forth in Sec.  370.4(a).
    Brokered deposits and sweep accounts. Several commenters raised 
concerns about the impact of the proposed rule on brokered deposits. 
One proposed revising the exemption provision to apply to deposits 
received through a deposit allocation or sweep service in amounts that 
do not exceed the SMDIA, expressly permitting a custodian or sub-
custodian, as account holder, to refuse to provide beneficial owner 
data for all deposits placed through a deposit placement network or 
cash sweep program, and granting an exception based on such refusal 
without requiring a particularized showing for each of the custodian's 
customers. Another commenter recommended excepting deposits placed in a 
covered institution by a non-covered institution through a deposit 
placement network.
    Another commenter provided data concerning the scope and 
composition of brokered deposits and sweep programs as a subset of the 
entire banking industry's deposit base. According to this commenter, as 
of March 31, 2016, there were $813 billion of brokered deposits 
reported on bank Call Reports; of this amount,

[[Page 87751]]

approximately $350 billion were brokered CDs. This commenter also 
estimated that $350 billion of the $813 billion reported brokered 
deposits are in sweep programs and noted that deposits in some sweep 
programs are not categorized as ``brokered deposits'' and are therefore 
not reported as such on the Call Reports of those banks in which they 
are deposited. According to this commenter, almost 13 percent of 
domestic deposits are held on a pass-through basis through broker-
dealers or other banks through these various deposit programs, and 
average sweep deposit balances and purchases of brokered CDs are 
substantially below the SMDIA.
    Brokered deposits--for example, those that are part of a deposit 
placement network or as brokered CDs offered by or sweep programs 
sponsored by a broker-dealer--represent another type of deposit account 
where a fiduciary or other agent or custodian is the account holder on 
behalf of beneficial owners. In recognition of the recordkeeping 
requirements set forth in Sec.  330.5, the final rule provides for 
``alternative recordkeeping'' for those deposit accounts. The covered 
institutions are authorized to maintain their account records for 
brokered deposit accounts in accordance with the off-site and multi-
tiered relationship methods set forth in Sec.  330.5(b). The covered 
institutions will be required to assign a unique identifier to the 
account holder which will be the entity placing the deposit(s) in the 
covered institution. The covered institutions will not be able to 
designate the appropriate right and capacity code because they will not 
have access to the requisite underlying information regarding the 
beneficial owners; consequently, they will need to maintain in their 
deposit account records information sufficient to populate the pending 
reason field in the pending file that would be generated by the IT 
system as required under Sec.  370.4(b)(1) and Appendix B of the final 
rule and, if appropriate, comply with the certification requirement set 
forth in Sec.  370.5.
    Prepaid accounts. One commenter argued for a class exemption for 
closed-loop and non-reloadable cards because funds paid in exchange for 
many of these types of cards are not FDIC-insured on a pass-through 
basis, bank collection of information on the owners of the cards is 
limited at best, and the cards are often easily transferrable (e.g., 
given to friends or relatives). As discussed in the preamble to the NPR 
(and acknowledged by the commenter), the funds paid to a merchant for a 
closed-loop (or merchant) card are not insured on a pass-through basis 
by the FDIC because ``the funds are not placed into a custodial deposit 
account at an insured depository institution.'' \28\ The FDIC's General 
Counsel's Opinion No. 8 (``GC Opinion'') affirms this principle by 
stating that the GC Opinion ``does not address merchant cards because 
such cards do not involve the placement of funds at insured depository 
institutions.'' \29\ The guidance provided in the GC Opinion ``is 
limited to bank cards and other nontraditional access mechanisms, such 
as computers, that provide access to funds at insured depository 
institutions.'' \30\
---------------------------------------------------------------------------

    \28\ 81 FR 10026, 10035 (February 26, 2016).
    \29\ FDIC General Counsel's Opinion No. 8--Insurability of Funds 
Underlying Stored Value Cards and Other Nontraditional Access 
Mechanisms, 74 FR 67155 (November 13, 2008), available at https://www.fdic.gov/regulations/laws/rules/5500-500.html.
    \30\ Id.
---------------------------------------------------------------------------

    This commenter also advocated for a class exemption for open-loop 
cards. The commenter noted that there are practical limitations to 
obtaining beneficiary-level information given customers' very real 
concern for data security and privacy. It emphasized that employers and 
government agencies are very sensitive to daily transmittal of PII and 
would prefer to maintain the information in their own systems. In 
addition, this commenter believed that it is highly unlikely that any 
individual would receive benefits on an open-loop payroll card or 
government benefits card in excess of $250,000. Finally, it pointed out 
that other Federal agencies (the Consumer Financial Protection Bureau, 
FinCEN) have issued regulations on prepaid accounts (or imposed 
additional customer identification requirements) that may or may not 
complement the proposed rule's requirements.
    Covered institutions that issue and administer their own prepaid 
account programs will need to meet the general recordkeeping 
requirements set forth in Sec.  370.4(a) because they maintain in their 
deposit account records the information needed to determine deposit 
insurance coverage. On the other hand, if an account holder (such as a 
third party program manager, for example) administers a prepaid account 
program and the covered institution does not maintain the information 
needed to determine deposit insurance coverage in its deposit account 
records, then those deposits would be eligible for pass-through deposit 
insurance coverage in accordance with Sec. Sec.  330.5 and 330.7 if 
specified conditions are met. Consequently, the alternative 
recordkeeping requirements set forth in Sec.  370.4(b)(1) would be 
applicable instead.
    One comment stated that for a subset of prepaid accounts, the 
covered institutions have represented that they will modify their 
deposit systems (in addition to other IT systems enhancements required 
by the final rule) to be able to receive ``sensitive [PII] from 
employers and government agencies at the specific point in time of a 
bank resolution.'' According to the commenter, this additional 
modification would allow employers or governments to maintain the 
accuracy and integrity of employee/beneficiary data on their own 
systems. Industry-driven technological innovations also may facilitate 
the covered institutions' ability to comply with this critical timing 
requirement.
    Under the final rule, the covered institutions will be permitted to 
rely on the alternative recordkeeping requirements set forth in Sec.  
370.4(b)(1) for any type of deposit account that meets the criteria set 
forth therein, i.e., the covered institution's deposit account records 
disclose the existence of a relationship which might provide a basis 
for additional deposit insurance in accordance with 12 CFR 330.5 or 
330.7 (a ``Sec.  370.4(b)(1) account''). Consistent with the goals of 
preserving public confidence, an additional condition applies to 
accounts with transactional features. The covered institution must 
certify that the respective account holder(s) will be able to provide 
the necessary depositor/beneficial owner information to the FDIC upon 
failure of the covered institution so that the FDIC will be able to 
determine the deposit insurance coverage within 24 hours after the 
FDIC's appointment as receiver to help ensure that the FDIC will be 
able to complete the deposit insurance determination over closing 
weekend. The requisite depositor information for these Sec.  
370.4(b)(1) accounts must be received by the FDIC so that they will be 
part of the initial deposit insurance determination process. Examples 
of such deposit accounts include, but are not limited to: Deposits 
placed by third parties with associated sweep accounts, whether or not 
those sweep accounts are categorized as brokered deposits, and prepaid 
accounts. If these deposit accounts are not part of the initial deposit 
insurance determination, then the FDIC would be required to place holds 
on the funds in those accounts until the necessary information is 
received and processed. As a result, the beneficial owners of these 
Sec.  370.4(b)(1) accounts would not have access to their funds on the 
next business day after the covered institution's failure. It is 
possible that for some depositors, this

[[Page 87752]]

delay would create a hardship; the inability to access their funds 
could result in returned checks and an inability to handle their day-
to-day financial obligations. In the event that a covered institution 
is unable to certify that that the account holder will be able to 
provide the required information regarding the Sec.  370.4(b)(1) 
accounts to the FDIC upon failure of the covered institution so that 
the FDIC will be able to use the covered institution's IT system to 
determine deposit insurance coverage within 24 hours after its 
appointment as receiver, then the covered institution will have to 
request an exception from the FDIC.
2. Trust Accounts
    Although deposit insurance coverage for trust accounts is not 
dependent upon the principle of pass-through insurance, issues 
concerning the identification of the beneficiaries of a trust and their 
respective interests create a similar problem for covered institutions, 
and ultimately for the FDIC, when faced with making such deposit 
insurance determinations. Several commenters contended that covered 
institutions, regardless of client base, would satisfy at least one, if 
not all three, of the criteria identified as warranting an exception 
under Sec.  370.4(c) of the proposed rule for these types of accounts; 
i.e., the covered institution does not maintain information identifying 
the beneficial owner(s) and the account holder has refused to provide 
such information, disclosure of such information is protected by law or 
by contract, and information concerning the beneficiaries changes 
frequently and updating the information is neither cost effective nor 
technologically practicable. They stated that trustees are bound by 
common law and statutory fiduciary duties to keep certain information 
confidential, including PII such as the names and Social Security 
Numbers (``SSNs'') of the trust beneficiaries. The fiduciary duties of 
loyalty and confidentiality are the basis for allowing a Certification 
of Trust (under Sec.  1013 of the Uniform Trust Code), ``to protect the 
privacy of a trust instrument by discouraging requests from persons 
other than beneficiaries for complete copies of the instrument in order 
to verify a trustee's authority.'' These commenters further believed 
(based upon anecdotal information) that individual trustees would open 
accounts at other institutions not subject to the proposed rule's 
requirements to avoid having to respond to the unwanted inquiry from a 
covered institution. The commenters identified a number of different 
trust arrangements which should be included within the trust deposit 
exception: trusts administered by third-party individual or 
institutional trustees, collective investment funds (including common 
trust funds), corporate trustees for bond indentures, and fiduciary 
self-deposits made by covered institutions.
    The FDIC has considered all of the arguments advanced by the 
commenters as described above. Rather than adopt the exception process 
as described in the proposed rule, the FDIC has decided to require 
recordkeeping for certain types of trust accounts based upon the 
covered institution's knowledge about the trustee or grantor (the 
account holder), as well as information regarding the beneficiaries of 
the trust which should be maintained by the covered institution. The 
FDIC has developed this approach based upon the comment letters. 
Moreover, the FDIC has considered the deposit account ownership 
analysis provided in 12 CFR part 330 in the context of the various 
types of trust accounts. For example, the FDIC recognizes that such 
factors as the common law and statutory duties of confidentiality and 
loyalty imposed upon trustees would make it difficult or impossible for 
them to disclose the necessary information regarding the beneficiaries 
of certain trust accounts. Therefore, the FDIC has determined that all 
deposit accounts established pursuant to a formal trust agreement--
either formal revocable or irrevocable (when the trustee of the 
irrevocable trust is not the covered institution) must comply with the 
alternative recordkeeping requirements set forth in Sec.  370.4(b)(2). 
This alternative recordkeeping method should include all formal 
revocable trust accounts which are commonly referred to as ``living 
trusts'' or ``family trusts'' \31\ and all irrevocable trust accounts 
when established by another person or entity as trustee.\32\ A covered 
institution would only be required to satisfy the more limited 
recordkeeping requirements set forth in Sec.  370.4(b)(2) of the final 
rule for those deposit accounts governed by a formal trust agreement. 
One requirement of that paragraph, however, provides that the covered 
institution maintain a unique identifier for the grantor of a formal 
trust account if the trust account has transactional features. The FDIC 
recognizes that many consumers now open formal trust accounts and use 
them to handle their daily financial transactions. Compliance with this 
requirement regarding the grantor will permit the FDIC to begin the 
deposit insurance determination process and, during that delay, allow 
access to some portion of that deposit account and process outstanding 
checks.
---------------------------------------------------------------------------

    \31\ See 12 CFR 330.10(a).
    \32\ 12 CFR 330.13.
---------------------------------------------------------------------------

    In contrast, any deposit account held in a covered institution 
established pursuant to an informal testamentary trust will be required 
to comply with all of the recordkeeping requirements set forth in Sec.  
370.4(a) of the final regulation. ``Such informal trusts are commonly 
referred to as payable-on-death accounts, in-trust-for accounts, or 
Totten Trust accounts'' (``PODs'').\33\ To comply with the FDIC's 
current regulations regarding deposit insurance coverage for informal 
revocable trust accounts, any IDI is already required to specifically 
name the beneficiaries in the deposit account records of the IDI.\34\ 
Finally, covered institutions which act as the trustee for certain 
irrevocable trust accounts would also be required to maintain trust 
account information in accordance with Sec.  370.4(a) of the final 
regulation.
---------------------------------------------------------------------------

    \33\ 12 CFR 330.10(a).
    \34\ 12 CFR 330.10(b)(2).
---------------------------------------------------------------------------

    As with other classes of deposits for which the FDIC will not have 
the requisite information at the time of a covered institution's 
failure, deposit insurance determinations on the various types of 
formal trust accounts will not be possible until the account holder 
provides the FDIC with the necessary trust documentation after closing 
weekend. Therefore, based upon how quickly the trust documentation and/
or information about beneficiaries is provided as well as the number of 
trust accounts to be determined, account holders may experience a delay 
in receiving the insured deposits placed in their trust accounts. This 
is the deposit insurance determination process currently employed by 
the FDIC; however, the volume of trust accounts at a covered 
institution could prolong the deposit insurance determination period.
3. Security Risks of Collecting Depositors' PII
    An area of particular concern for many commenters was the 
proposal's requirement that a covered institution obtain PII from third 
parties such as financial intermediaries, trustees, escrow companies, 
benefit plan administrators, and government entities who have opened 
deposit accounts on behalf of other entities. A commenter remarked that 
the requirement to obtain and store PII and other sensitive information 
regarding covered institutions' financial intermediary customers and 
their beneficial owners

[[Page 87753]]

``would cause substantial disruption in the deposit markets and 
increase the risk of breaches of security of depositors' [PII]''. The 
commenters expressed particular concern regarding the added security 
risk for both the financial intermediaries and the covered institutions 
if they are required to collect depositors' PII for deposit accounts 
opened by various third parties on behalf of numerous beneficial 
owners.
    The FDIC has addressed this concern. Because the recordkeeping 
requirements for all types of pass-through deposit accounts will be 
based upon the existing recordkeeping requirements for deposit 
insurance purposes set forth in Sec. Sec.  330.5 and 330.7, the covered 
institutions will not be required to request, collect, and maintain PII 
on the beneficial owners of the deposits placed by certain financial 
intermediaries. In addition, the covered institutions will not be 
required to request and maintain information regarding the 
beneficiaries (which are required to perform a deposit insurance 
determination) of trust accounts that are governed by a formal trust 
agreement pursuant to Sec. Sec.  330.10 and 330.13.
4. Official Items
    The statutory definition of deposit includes, but is not limited 
to, certified checks, traveler's checks, cashier's checks and money 
orders.\35\ Informally, these types of deposit instruments are known as 
``official items.'' Part 330 of the FDIC's regulations does not adopt 
this popular convention and contains no definition of official items. 
Nevertheless, the FDIC's Financial Institution Employee's Guide to 
Deposit Insurance utilizes the term and includes the following 
examples: Money orders, expense checks, interest checks, official 
checks/cashier's checks, travelers' checks, and loan disbursement 
checks.\36\ Two commenters stated that cashier's checks, teller's 
checks, certified checks, and personal money orders (all commonly known 
as ``official items'') would be particularly problematic because the 
covered institution does not typically have tax identification numbers 
(``TINs'') for non-customer purchasers, payees, or holders of any of 
these instruments. Consequently, both commenters requested that these 
deposit instruments be exempted as a class from the proposed 
recordkeeping requirements in the final rule. Moreover, commenters from 
the banking industry and potentially covered institutions explained the 
practical difficulties with obtaining and maintaining the necessary 
depositor information regarding these deposit instruments. To address 
these issues, the FDIC adopted the following approach in the final 
rule: Covered institutions will not be required to modify their 
recordkeeping practices with respect to these types of deposits. While 
the FDIC believes that covered institutions do generally maintain 
records concerning the number of deposit instruments issued and for 
which they are primarily liable, they routinely will not have a SSN or 
TIN for the payee. Therefore, pursuant to Sec.  370.4(c) of the final 
rule, covered institutions will not be required to assign a unique 
identifier to the payee or designate the appropriate right and capacity 
code. Nevertheless, the covered institution must maintain in its 
deposit account records a ``pending reason'' code in data field 2 of 
the pending file format set forth in Appendix B for all of its official 
items.
---------------------------------------------------------------------------

    \35\ 12 U.S.C. 1813(l)(1) and -(4).
    \36\ See FDIC's Financial Institution Employee's Guide to 
Deposit Insurance, 2016 Ed., available at https://www.fdic.gov/deposit/DIGuideBankers/index.html.
---------------------------------------------------------------------------

5. Assigning Right and Capacity Codes
    One commenter submitted that the proposed rule's requirement to 
assign the appropriate ownership right and capacity code to each of the 
covered institution's deposit accounts presents practical and 
administrative challenges for both the covered institution and its 
deposit customers. Other commenters pointed out that covered 
institutions will be required to review all of their current account 
records in order to accurately identify and code their deposit accounts 
in accordance with the FDIC's deposit insurance categories. In 
addition, many accounts on legacy systems would have to be reviewed and 
missing data and documentation obtained in order to comply with certain 
part 330 requirements. According to one commenter, this would be ``a 
momentous undertaking'' imposing significant burden.
    Covered institutions would also have to develop new procedures when 
opening accounts and re-train employees to classify accounts 
appropriately. Also, in many cases, the covered institutions' employees 
do not have the subject matter expertise to accurately designate some 
types of accounts such as trust accounts. Other types of deposit 
accounts potentially difficult to identify and/or designate include 
joint accounts and accounts for corporations, partnerships, and 
unincorporated associations. The problems with assigning the correct 
right and capacity code to joint accounts, as described by the 
commenters, will be discussed separately, infra. One commenter also 
believed that this requirement effectively transfers the FDIC's 
responsibility to interpret and apply part 330 to the covered 
institutions. It asserted that ``[n]on-covered institutions would not 
take on this additional responsibility.''
    The commenters offered the following recommendations regarding the 
proposed requirement that covered institutions assign the correct right 
and capacity code to each deposit account. It appears the first choice 
would be for the FDIC to amend 12 CFR part 330 prior to finalizing 
proposed part 370--presumably by eliminating certain criteria which the 
FDIC uses to define or characterize various categories of deposit 
accounts. Another suggestion would be to allow the covered institutions 
to rely on their internal coding to assign the requisite codes rather 
than requiring them to align their designations with the FDIC's rights 
and capacities codes. Some commenters seem to assume that in the 
context of bank failures and the concomitant deposit insurance 
determination, the FDIC disregards part 330's requirements. The 
commenters requested that the final rule permit ``covered banks to 
classify accounts for FDIC insurance determination as recorded on their 
internal systems, in line with FDIC's current practice in bank 
failures.'' The commenters asked that the FDIC make deposit insurance 
determinations in the same manner (based upon the same criteria) for 
covered institutions as it would in the case of a smaller bank failure.
    As discussed previously in the preamble to the NPR, the FDIC will 
not be amending 12 CFR part 330 prior to or in conjunction with the 
issuance of 12 CFR part 370 as a final rule.\37\ While both regulations 
concern deposit insurance, they serve independent purposes. The purpose 
of part 330 is, among other things, to ``provide rules for the 
recognition of deposit ownership in various circumstances.'' \38\ The 
FDIC follows part 330 when making deposit insurance determinations at 
the time of failure. Aside from governing the application of deposit 
insurance, the rules in part 330 are intended to assist both IDIs and 
their deposit customers to structure deposit accounts so that their 
accounts will conform with the rules for various account types. In that 
way, a depositor could be confident that his or her funds will be fully 
insured by the FDIC in the event of the IDI's failure. On the other 
hand, final part 370 requires

[[Page 87754]]

the largest IDIs, the covered institutions, to develop IT systems 
capable of performing the deposit insurance calculations in the event 
of failure and to maintain their deposit account records in accordance 
with the information requirements set forth in the final rule. When 12 
CFR part 370 is fully implemented, the FDIC will be in a better 
position to complete the deposit insurance determination ``as soon as 
possible'' rather than waiting for deposit account information to be 
provided after a covered institution's failure which might result in an 
unacceptable delay.
---------------------------------------------------------------------------

    \37\ 81 FR 10026, 10032 (February 26, 2016).
    \38\ 12 CFR 330.2.
---------------------------------------------------------------------------

    The covered institutions requested that they be allowed to rely on 
the internal coding of their deposit accounts. The FDIC presumes that 
for many accounts, the covered institutions' internal coding will, in 
fact, align with the appropriate FDIC right and capacity code, e.g., 
individual, joint, business, and PODs. In certain circumstances, 
however, it may be necessary for the covered institutions to refer to 
the appropriate section of part 330 and/or the FDIC's Financial 
Institution Employee's Guide to Deposit Insurance (or perhaps call the 
FDIC Call Center) in order to make an accurate assignment of the FDIC 
right and capacity code. All of the deposits held by a depositor in the 
same right and capacity must be aggregated before the deposit insurance 
determination can be performed. Assigning the correct right and 
capacity code is necessary so that the FDIC would be able to complete 
the deposit insurance determination promptly. If the codes assigned by 
the covered institutions do not align with FDIC codes, then the FDIC 
could not rely on the covered institution's records for deposit 
insurance determination purposes. In the context of a bank failure, the 
FDIC typically will look behind the titling and will examine the failed 
bank's records if there is a question or concern regarding the proper 
deposit insurance coverage.
    The FDIC does not anticipate handling deposit insurance 
determinations at a covered institution in a different manner than it 
has done historically with smaller IDIs. Smaller IDIs have not 
generally had numerous deposit accounts that are not readily assigned 
to the most common FDIC rights and capacities codes; therefore, this 
has not created a problem for either the smaller institutions or the 
FDIC at failure. The FDIC has recognized, however, that for certain 
types of deposit accounts, e.g., those based upon pass-through deposit 
insurance and certain types of trust accounts, the covered institutions 
will not have sufficient information regarding the beneficial owners or 
the beneficiaries, respectively, to assign the correct FDIC right and 
capacity code. For those types of accounts, Sec.  370.4(b)(1) and 
(b)(2) permit the covered institution to maintain a ``pending reason'' 
code in the pending file (as set forth in Appendix B) of its deposit 
account records in lieu of the correct right and capacity code.
    Finally, the commenters asserted that this requirement, in effect, 
transfers the FDIC's responsibility to interpret and apply part 330 to 
the covered institutions. IDIs play an important role in maintaining a 
functioning deposit insurance system, which benefits them, their 
customers and the public in general. Prompt payment of deposit 
insurance is only possible when IDIs maintain sufficient records to 
enable the FDIC to perform its deposit insurance determination function 
consistent with FDI Act requirements and authority. The FDIC provides a 
number of different resources to the banking industry as well as the 
public to assist in the interpretation and application of the part 330 
rules. For example, the FDIC conducts live Deposit Insurance Coverage 
Seminars for bank officers and employees throughout the year. Moreover, 
videos of these seminars are available on YouTube. The FDIC also 
provides guidance to IDIs and the public through the operation of a 
call center. FDIC staff receives calls from bank customer service 
representatives seeking assistance in real time to structure new 
deposit accounts for their customers properly. A new edition of the 
FDIC's Financial Institution Employee's Guide to Deposit Insurance was 
recently published, and finally, the Electronic Deposit Insurance 
Estimator (also known as ``EDIE'') is located on the FDIC's Web site. 
All of these FDIC resources are available for the use of IDIs 
(including the covered institutions) as well as the public. Presumably 
this information is instructive in opening and structuring deposit 
accounts so that they are (and remain) in compliance with the criteria 
set forth in part 330.
6. Joint Accounts and Signature Cards
    Both in response to the ANPR and the NPR, certain commenters have 
expressed their concern with the challenges they would face trying to 
comply with Sec.  330.9(c)(1)(ii) of the FDIC's regulations. That 
particular paragraph requires that ``each co-owner has personally 
signed a deposit account signature card'' in order to be a ``qualifying 
joint account'' for purposes of deposit insurance under part 330.\39\ 
Some commenters stated that covered institutions would have to go 
through all of their deposit accounts (in this particular case, those 
accounts styled as joint accounts) to verify that those accounts 
satisfied the part 330 requirements. They have characterized this 
process as a ``momentous undertaking.'' Moreover, the covered 
institutions expect that keeping these records accurate and up-to-date 
``would be a continuing and likely insurmountable challenge.'' They 
noted that frequently an individual opening a joint account will take 
the signature card for a co-owner to sign but never return the 
completed signature card to the bank establishing the account. Finally, 
the commenters asserted that ``there is no current requirement for 
banks to (1) ensure that all signature cards are complete and on file 
for joint accounts, or (2) record in deposit recordkeeping systems 
which joint accounts have complete signature cards.''
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    \39\ The other criteria which must be satisfied in order to be 
recognized as a ``qualifying joint account'' are: The co-owners of 
the funds in the account are ``natural persons'' as defined in Sec.  
330.1(l) and each co-owner possesses withdrawal rights on the same 
basis. 12 CFR 330.9(c)(i) and -(iii).
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    Regulations requiring that each co-owner of a joint account must 
personally sign a signature card or the account would not be treated as 
a joint account for deposit insurance determinations have been in 
existence since 1967.\40\ Most recently, the FDIC addressed the 
commenters' concerns regarding Sec.  330.9(c) in the preamble of the 
NPR.\41\ Briefly, the FDIC's justifications for maintaining the joint 
ownership signature card requirement are as follows: (i) The FDIC's 
signature card requirement simply reflects safe and sound banking 
practice; (ii) the signature card represents the contractual 
relationship between the IDI and the depositor (or depositors), and 
signature cards are a reliable indicator of deposit ownership; and 
(iii) elimination of the signature card requirement for joint accounts 
could enable some depositors to ``disguise'' single accounts as joint 
accounts in order to be eligible for an additional $250,000 of deposit 
insurance coverage. Finally, the FDIC believes that the three year 
implementation time frame should provide the covered institutions with 
adequate time both to review their

[[Page 87755]]

current and legacy account records and to develop procedures to 
maintain the accuracy of these records going forward. As discussed 
previously, the FDIC will not be amending provisions of 12 CFR part 330 
as part of the adoption of part 370 as a final rule.
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    \40\ 12 CFR 330.9; see FDIC, Final Rule, 32 FR 10408, 10409 
(July 14, 1967); 12 CFR 564.9(b) (repealed); see FHLBB Final Rule, 
32 FR 10415, 10416 (July 14, 1967). Certain types of accounts have 
been exempted from this requirement.
    \41\ 81 FR 10026, 10032 (February 26, 2016).
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7. Community Banks
    Several commenters noted that requiring account holders of deposits 
eligible for pass-through insurance to provide beneficial owner data 
would force community banks to share confidential data on their most 
vital asset, i.e., their large-dollar depositors. One commenter 
believed that community banks would incur steep costs and potential 
customer dissatisfaction if forced to comply with the covered 
institutions' requests for the beneficial ownership information. 
However, financial intermediaries, which may include community banks, 
may not be willing to disclose sensitive and proprietary information 
regarding their customers to the covered institutions.
    One of the commenters raised another concern that the proposed rule 
would adversely affect community banks that participate in deposit 
placement networks. According to this commenter, thousands of community 
banks participate in deposit placement networks and the commenter 
believes that deposit allocation services are a vital tool for 
community banks. Those banks would be required to furnish competing 
banks with confidential information about some of their largest 
depository customers any business day that a community bank placed 
customer funds at a covered institution. Two commenters recommended 
that an exception from the requirements of the proposed rule should 
automatically apply to the class of deposits (rather than an account by 
account exception) placed by community banks in a covered institution 
through a deposit placement network. According to the commenter, this 
type of exception would assure community banks that they would not be 
penalized if they participated in a deposit placement network.
    The requirements of the final rule have addressed these potential 
concerns. As discussed above, the final rule provides for ``alternative 
recordkeeping'' for deposits placed by agents, custodians or some other 
fiduciary on behalf of others as set forth in Sec. Sec.  330.5 and 
330.7 of the FDIC's deposit insurance rules. Therefore, community banks 
will not be required to provide covered institutions with proprietary 
information concerning their large-dollar customers in the event a 
community bank places deposits with a covered institution. As currently 
permitted pursuant to the applicable provisions of part 330, community 
banks will be allowed to retain the beneficial ownership information on 
these customers rather than provide it to the covered institution. 
Likewise, the recordkeeping requirements applicable to deposit 
placement networks will not be affected by the issuance of the final 
rule. Nevertheless, if deposits placed by community banks with covered 
institutions serve as transaction accounts for the beneficial owners 
thereof, then the underlying ownership information (i.e., the identity 
of each beneficial owner and their respective interest in the accounts) 
must be provided to the FDIC upon the covered institution's failure so 
that the FDIC will be able to use the covered institution's IT system 
to determine deposit insurance coverage for those deposit accounts 
within 24 hours after the FDIC's appointment as receiver.
8. Foreign Deposits
    Two commenters recommended that foreign deposits, i.e., those 
deposits placed in the foreign branches of U.S. banks, should not be 
within the scope of the final rule. Both commenters asserted that the 
FDIC does not need depositor information concerning these foreign 
deposits; foreign deposits are not ``insured'' deposits, and therefore, 
the FDIC does not require that type of information in order to complete 
its deposit insurance determination. One of the commenters added that 
the FDIC already has access to information concerning foreign deposits 
because that information is required pursuant to Sec.  360.9 of the 
FDIC's regulations.
    In accordance with 12 U.S.C. 1813(l)(5)(A), a foreign deposit is 
not a ``deposit'' unless it is dually payable in a U.S. branch and a 
foreign branch of a U.S. bank. If dually payable, however, it would be 
an uninsured deposit for purposes of the FDIC's deposit insurance 
determination and would be recognized as a general unsecured claim (a 
priority two claim) against the failed bank's receivership. 
Consequently, foreign deposits, by definition, are beyond the scope of 
the final rule. Therefore, no recordkeeping requirements will be 
imposed on the covered institutions with respect to foreign deposits. 
It is worth noting, however, that the FDIC will no longer have access 
to information regarding foreign deposits pursuant to Sec.  360.9 once 
covered institutions are compliant with part 370 and are released from 
the Sec.  360.9 requirements.
9. Exceptions Process
    A commenter argued that providing the FDIC with the authority to 
approve or disapprove a covered institution's request ``in its sole 
discretion'' would confer unlimited power on the FDIC to discourage or 
prohibit lawful acceptance by well-capitalized covered institutions of 
brokered deposits and other deposits placed on a pass-through insurance 
basis through deposit allocation sweep services. This commenter cited 
as a source of concern recent regulatory actions by the FDIC and other 
Federal banking agencies and asked the FDIC to avoid the misperception 
that it will discourage lawful deposit brokerage relationships by 
making them too costly or burdensome for covered institutions.
    The commenter's concern that the FDIC will exercise ``virtually 
unlimited power to use the Proposed Rule . . . to discourage or 
prohibit well-capitalized covered institutions from accepting brokered 
and other pass-through deposits'' is unfounded. The particular concern 
that the FDIC would discourage lawful brokerage relationships under 
this final rule is addressed by the adoption of alternate recordkeeping 
requirements permitted for brokered deposits. It is not intended to 
otherwise affect brokered deposits.
    Several commenters asserted that obtaining the information from 
account holders that is needed for deposit insurance calculations would 
be a significant challenge; one of these commenters remarked that full 
compliance with the proposed rule for certain account types would be 
``extremely difficult if not practically impossible.'' These commenters 
argued that the volume of information on financial intermediaries and 
their beneficial owners, the frequency of changes to the information, 
and certain legal impediments to disclosure would pose significant 
operational and cost issues. In addition to requesting exceptions for 
classes of deposits, some of the commenters believed that the final 
rule should also include a process for requesting exceptions for other 
``idiosyncratic accounts'' for which obtaining the requisite depositor 
information would be impossible or cost-prohibitive.
    The FDIC believes that the modifications to the recordkeeping 
requirements as described in the final rule should address the concerns 
of covered institutions and the concerns raised about community banks. 
As a result of the concerns raised by commenters, the FDIC has decided 
that the deposit account recordkeeping

[[Page 87756]]

requirements of part 370 should align with the existing deposit 
insurance recordkeeping requirements provided in Sec.  330.5 and Sec.  
330.7. These two sections of 12 CFR part 330 allow an IDI to maintain 
the deposit account records for various types of pass-through deposit 
accounts off-site and with third parties. Nevertheless, in the event 
that a covered institution identifies other ``idiosyncratic accounts'' 
which would not be covered by the recordkeeping methods described in 
Sec. Sec.  330.5 and 330.7, the final rule includes a procedure for 
requesting an exception from the recordkeeping requirements set forth 
in Sec.  370.4. The covered institution would be required to submit a 
request to the FDIC for the exception in the form of a letter and 
explain the circumstances that would make it impracticable or overly 
burdensome to meet the applicable recordkeeping requirements. 
Additionally, the request must provide the number and dollar value of 
the deposit accounts that would be subject to the exception. When 
reviewing the request, the FDIC would consider primarily the 
implications that a delay in deposit insurance determination would have 
for a particular account holder or the beneficial owner of the 
deposits, the related effect on public confidence, the nature of the 
deposit relationship, and the ability of the covered institution to 
obtain the information necessary for the FDIC to make an accurate 
deposit insurance determination.
    Several commenters believed a more detailed exception process than 
that provided for in the proposed rule is needed, and they posed a 
number of questions regarding the process. For example, there were 
several questions concerning how a covered institution would 
demonstrate that an entire class of deposit accounts would meet one or 
more of the three criteria for an exception. The commenters also asked 
whether a covered institution would be required to continue to gather 
depositor information on accounts subject to an exception request 
during the pendency of the FDIC's consideration of that request. They 
wanted assurances both that the FDIC would respond expeditiously to 
requests for exceptions and that in the event that a request was 
denied, the FDIC would not require immediate compliance. The commenters 
were concerned that a covered institution be allowed a reasonable time 
to achieve compliance should an exception request be denied.
    As discussed, supra, the final rule does not provide for classes of 
deposits to be ``excepted'' from the requirements of part 370. Instead, 
covered institutions will continue to be allowed to maintain the 
beneficial ownership information for deposit accounts that are 
currently subject to the off-site recordkeeping provisions of 
Sec. Sec.  330.5 and 330.7 with the appropriate custodian, agent, or 
other fiduciary as set forth in those sections of the FDIC's 
regulations. Therefore, there is no need for a process to request 
exceptions for classes of deposits. Further, the FDIC has addressed the 
commenters' concerns regarding the covered institutions' compliance 
during the pendency of an exception request, as the final rule provides 
that a covered institution will not be in violation of any requirements 
of the rule for which the institution has submitted a request for 
relief pursuant to Sec.  370.6(b) or Sec.  370.8(a)-(c) while awaiting 
the FDIC's response to the request. Finally, a covered institution will 
be given a reasonable amount of time to comply with recordkeeping 
requirements for certain deposit accounts in the event that the covered 
institution's request for an exception is denied.
    The commenters asked whether there would be a general sunset time 
frame for approved exceptions, and if so, whether there would be a 
flexible process to renew those exceptions. The final rule does not 
impose a general sunset time frame for approved exceptions. Depending 
on the circumstances, approvals could be tailored to be time-limited or 
open-ended. Section 370.8(e) allows the FDIC to grant its approval of a 
covered institution's request for an exception subject to certain 
conditions that would have to be met or to limit its approval to a 
particular time frame.
    The commenters also wanted to know what type of process there would 
be to appeal the FDIC's adverse ruling on a petition for an exception. 
They recommended that the FDIC provide public notice of all exceptions 
granted or denied on a timely and ongoing basis--without naming the 
petitioners or specific deposit account holders--with explanations of 
the bases for those rulings. These commenters also believed that 
because the exception process ``is so critical that input from covered 
institutions would be needed to assure a workable scheme,'' the 
exception process should be further clarified and re-proposed for 
public notice and comment.
    The FDIC believes that the modifications to the recordkeeping 
requirements as described in the final rule should provide much of the 
requested relief. Given the alternative recordkeeping allowed for 
certain described deposit accounts, the FDIC does not anticipate that 
many covered institutions will need to request exceptions from the 
final rule's requirements. With respect to Sec.  370.4(b)(1) accounts 
that have transactional features, if a covered institution will not be 
able to provide the certification required pursuant to Sec.  370.5(a), 
then the covered institution must submit a request for an exception 
from that certification requirement as provided for in Sec.  370.8(b).
10. Comments Concerning the Implementation Period
    The proposed rule provided for an implementation period of two 
years, and several commenters proposed that four years would be an 
appropriate time-frame for implementation. The FDIC has considered the 
commenters' discussion of impediments that would exist for a two-year 
implementation period and believes that the modifications made in the 
final rule to harmonize it with the recordkeeping permitted under 12 
CFR part 330 make a three-year implementation period reasonable and 
feasible.

E. Comments Concerning Possible Adverse Consequences

    Several commenters expressed concern over possible adverse 
consequences for covered institutions, related entities, and the 
financial system generally if the proposed rule was adopted as 
proposed. One commenter specifically noted that the rule could result 
in treating some depositors at covered institutions differently than 
the same kind of depositors at non-covered institutions because the 
covered institution would be applying a more stringent standard to its 
deposits for insurance purposes, and deposit insurance determinations 
should not depend on the size or complexity of the depository 
institution. As discussed, supra, 12 CFR part 330 of the FDIC's 
regulations which govern the criteria for ownership of deposits by 
right and capacity has not been amended in connection with the adoption 
of final part 370. Specifically, the FDIC has not imposed ``more 
stringent standards'' on covered institutions with respect to 
``qualifying joint accounts,'' for example, than on any other IDI. As 
discussed in I. Policy Objectives, the final rule ensures that 
customers of both large and small failed banks will receive the same 
prompt access to their funds and that deposit insurance limits are 
recognized equally at both large and small banks.
    One commenter objected to the proposed rule's requirement that, if 
a covered institution is granted an exception, it must then notify 
account

[[Page 87757]]

holders that delays in the payment of deposit insurance are possible 
due to the absence of required information. According to this 
commenter, such a notification could raise concerns on the part of 
depositors, lead them to rethink their account relationships, drive 
deposits away from excepted accounts, create competitive disadvantages, 
and be categorically unfair. The final rule imposes no requirement that 
covered institutions notify depositors of a possible delay in payment 
of deposit insurance. Therefore, the commenter's concerns should be 
alleviated.
    The FDIC has adopted the suggestion of another commenter, however, 
who argued that disclosures regarding a delay in payment should not be 
required whenever the custodian, administrator or other fiduciary will 
provide the current beneficial owner data to the FDIC before midnight 
on the day of the covered institution's failure. Section 370.5(a) 
requires a covered institution to certify to the FDIC that the 
information needed to calculate deposit insurance for Sec.  370.4(b)(1) 
accounts with transactional features will be available to the FDIC upon 
failure of the covered institution so that the FDIC will be able to use 
the covered institution's IT system to determine deposit insurance 
coverage within 24 hours of its appointment as receiver. In view of 
this requirement, there is no need for covered institutions to provide 
notification of a possible delay in deposit insurance payments because 
the FDIC will have the requisite information in time to complete the 
deposit insurance determination on these time-sensitive accounts during 
the closing weekend.
    One commenter asserted that certain account holders likely would be 
motivated to seek out alternative banking relationships rather than 
provide the information requested by the covered institutions. This 
would result in disruption to these account holders and to other 
aspects of their banking relationship, as well as to the deposit 
markets. One commenter argued that the proposed rule could discourage 
smaller and mid-sized retail-focused institutions from actively seeking 
small deposit accounts in order to avoid being covered by the proposed 
rule. This in turn could encourage such institutions to consider 
riskier and more volatile funding sources. The FDIC believes that these 
concerns have been addressed and mitigated by the alternative 
recordkeeping requirements found in Sec.  370.4(b) of the final rule.
    These commenters also asserted that ``end-to-end'' testing for 
compliance on an annual basis would involve an excessive commitment of 
time and personnel. The requirement for end-to-end testing has been 
deleted from the final rule. Finally, they contended that it is not 
necessary and not in accordance with corporate governance principles 
for a covered institution's board of directors to certify or attest to 
the covered institution's compliance with the proposed rule's 
requirements. This additional board responsibility would be an undue 
burden on the board and should remain within the purview of the covered 
institution's management. The FDIC considered this comment and revised 
the corporate governance requirement accordingly. In the final rule, 
Sec.  370.10(a)(1)(ii), the annual certification must be signed by the 
covered institution's chief executive officer or its chief operating 
officer.

VII. Regulatory Analysis and Procedure

A. Paperwork Reduction Act

    The FDIC has determined that this final rule involves a collection 
of information pursuant to the provisions of the Paperwork Reduction 
Act of 1995 (the ``PRA'') (44 U.S.C. 3501 et seq.). In accordance with 
the PRA, the FDIC may not conduct or sponsor, and an organization is 
not required to respond to, this information collection unless the 
information collection displays a currently valid OMB control number. 
OMB has assigned an OMB control number.
    OMB Control Number: 3064-0202.
    Frequency of Response: On occasion.
    Affected Public: Insured depository institutions having two million 
or more deposit accounts and their depositors.\42\
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    \42\ Covered institutions will, as necessary, contact their 
depositors to obtain accurate and complete account information for 
deposit insurance determinations. For the purposes of this analysis, 
the FDIC assumes that every depositor will voluntarily respond.
---------------------------------------------------------------------------

    Implementation Burden: \43\
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    \43\ Implementation costs and hours are spread over a three-year 
period.
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    Estimated number of respondents: 38 covered institutions and their 
depositors.
    Estimated time per response: \44\ 137,014 hours (average).
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    \44\ For PRA purposes, covered institutions are presented in 
roughly equal-sized low, medium and high complexity tranches ranked 
by their PRA implementation hours.
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    Low complexity: 29,158-35,072 hours.
    Medium complexity: 38,404-59,588 hours.
    High complexity: 69,908-911,016 hours.
    Estimated total implementation burden: 5.21 million hours.
    Ongoing Burden:
    Estimated number of respondents: 38 covered institutions and their 
depositors.
    Estimated time per response: 526 hours (average) per year.
    Low complexity: 481-529 hours.
    Medium complexity: 458-577 hours.
    High complexity: 507-666 hours.
    Estimated total ongoing annual burden: 20,000 hours per year.
Description of Collection
    The final rule would require a covered institution to (1) maintain 
complete and accurate data on each depositor's ownership interest by 
right and capacity for all of the institution's deposit accounts, 
except as provided, and (2) configure its IT system to be capable of 
calculating the insured and uninsured amount in each deposit account by 
ownership right and capacity, which would be used by the FDIC to make 
deposit insurance determinations in the event of the institution's 
failure.
    These requirements also must be supported by policies and 
procedures and will involve ongoing burden for testing, reporting to 
the FDIC, and general maintenance of recordkeeping and IT systems 
functionality. Estimates of both initial implementation and ongoing 
burden are provided.
    Compliance with this proposed rule would involve certain reporting 
requirements:
     Not later than ten business days after the effective date 
of the final rule or after becoming a covered institution, a covered 
institution shall designate a point of contact responsible for 
implementing the requirements of this rulemaking.
     Covered institutions would be required to certify annually 
that their IT systems can calculate deposit insurance coverage 
accurately and completely within the 24 hour time frame set forth in 
the final rule. If a covered institution experiences a significant 
change in its deposit taking operations, it may be required to 
demonstrate more frequently than annually that its IT system can 
calculate deposit insurance coverage accurately and completely.
     In connection with the certification, covered institutions 
shall complete a deposit insurance coverage summary report (as detailed 
in VI. The Proposed Rule).
     Covered institutions may seek relief from any specific 
aspect of the final rule's requirements if circumstances exist that 
would make it impracticable or overly burdensome to meet those 
requirements. When doing so, they must demonstrate the need for 
exception, describe the impact of an exception on

[[Page 87758]]

the ability to quickly and accurately calculate deposit insurance for 
the related deposit accounts, and state the number of, and the dollar 
value of deposits in, the related deposit accounts.
Estimated Costs
    Comments submitted in response to the NPR did not estimate with 
particularity the implementation and ongoing costs for covered 
institutions to comply with the proposed rule. The FDIC has, however, 
estimated the costs to covered institutions based on, among other 
things, information gathered in connection with Sec.  360.9 compliance 
visitations, the cost model developed by an outside consultant for the 
purpose of developing the ANPR, and estimated costs associated with 
burdens that were identified by commenters in response to the NPR. The 
total projected cost of the final rule for covered institutions amounts 
to $386 million and approximately 5.2 million total labor hours over 
three years. The cost components of the estimate include (1) 
implementing the deposit insurance calculation, (2) legacy data 
cleanup, (3) data extraction, (4) data aggregation, (5) data 
standardization, (6) data quality control and compliance, (7) data 
reporting, and (8) ongoing operations. Estimates of total costs and 
labor hours for each component are calculated by assuming a standard 
mix of skilled labor tasks, industry standard hourly compensation 
estimates, and labor productivity. It is assumed that a combination of 
in-house and external services is used for legacy data clean up in 
proportions of 40 and 60 percent respectively. Finally, the estimated 
costs for each institution are adjusted according to the complexity of 
their operations and systems.
Implementation Costs
    Implementation costs are expected to vary widely among the covered 
institutions. There are considerable differences in the complexity and 
scope of the deposit operations across covered institutions. Some 
covered institutions only slightly exceed the two million deposit 
account threshold while others greatly exceed that number. In addition, 
some covered institutions--most notably the largest--have proprietary 
deposit systems likely requiring an in-house, custom solution for the 
proposed requirements while others may purchase deposit software from a 
vendor or use a servicer for deposit processing. Deposit software 
vendors and servicers are expected to incorporate the proposed 
requirements into their products or services to be available for their 
clients.
    The implementation costs for all covered institutions are estimated 
to total $330 million and require approximately 5.2 million labor 
hours. The implementation costs cover (1) making the deposit insurance 
calculation, (2) legacy data cleanup,\45\ (3) data extraction, (4) data 
aggregation, (5) data standardization, (6) data quality control and 
compliance, and (7) data reporting. The estimated PRA burden for 
individual covered institutions will range from $2.3 million to $100 
million, and require between 29,158 and 911,016 hours.
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    \45\ Including costs to depositors.
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Ongoing Reporting Costs
    The estimated burden on individual covered institutions for ongoing 
costs for reporting, testing, maintenance, and other periodic items is 
estimated to range between $68,676 and $99,865 annually and require 
between 458 and 666 labor hours.
Comments
    The FDIC has a continuing interest in comments on paperwork burden. 
Comments are invited on (a) whether the collection of information is 
necessary for the proper performance of the FDIC's functions, including 
whether the information has practical utility; (b) the accuracy of the 
estimates of the burden of the information collection, including the 
validity of the methodology and assumptions used; (c) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (d) ways to minimize the burden of the information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) (``RFA'') 
requires each federal agency to prepare a final regulatory flexibility 
analysis in connection with the promulgation of a final rule, or 
certify that the final rule will not have a significant economic impact 
on a substantial number of small entities.\46\ For purposes of the RFA, 
``small entities'' is currently defined to include depository 
institutions with assets of $550 million or less. The requirements of 
the final rule are not expected to apply to any depository institutions 
with assets of $550 million or less. Pursuant to section 605(b) of the 
RFA, the FDIC certifies that the final rule will not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \46\ See 5 U.S.C. 603, 604 and 605.
---------------------------------------------------------------------------

C. Small Business Regulatory Enforcement Act

    The Office of Management and Budget has determined that this final 
rule is a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801, et seq.) 
(``SBREFA''). As required by the SBREFA, the FDIC will file the 
appropriate reports with Congress and the Government Accountability 
Office so that the final rule may be reviewed.

D. Riegle Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
requires that the FDIC, in determining the effective date and 
administrative compliance requirements of new regulations that impose 
additional reporting, disclosure, or other requirements on IDIs, 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the 
benefits of such regulations.\47\ Subject to certain exceptions, new 
regulations and amendments to regulations prescribed by a Federal 
banking agency which impose additional reporting, disclosures, or other 
new requirements on IDIs shall take effect on the first day of a 
calendar quarter which begins on or after the date on which the 
regulations are published in final form.\48\
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 4802(a).
    \48\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

    In accordance with these provisions, the FDIC has considered the 
final rule's benefits and any administrative burdens that the final 
rule would place on covered institutions and their customers in 
determining the effective date and administrative compliance 
requirements of the final rule. IV. Expected Effects details the 
expected benefits of the final rule and the administrative burdens that 
the final rule would place on depository institutions and their 
customers. The final rule imposes additional reporting and other 
requirements IDIs, and accordingly, shall take effect no earlier than 
the first day of the calendar quarter that begins on or after the date 
on which the final rule is published.

E. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 
Stat.1338, 1471) requires the Federal

[[Page 87759]]

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.

List of Subjects in 12 CFR Part 370

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

Authority and Issuance

0
For the reasons stated in the preamble, the Board of Directors of the 
Federal Deposit Insurance Corporation adds part 370 to title 12 of the 
Code of Federal Regulations to read as follows:

PART 370--RECORDKEEPING FOR TIMELY DEPOSIT INSURANCE DETERMINATION

Sec.
370.1 Purpose and scope.
370.2 Definitions.
370.3 Information technology system requirements.
370.4 Recordkeeping requirements.
370.5 Actions required for certain deposit accounts with 
transactional features.
370.6 Implementation.
370.7 Accelerated implementation.
370.8 Relief.
370.9 Communication with the FDIC.
370.10 Compliance.
Appendix A to Part 370--Ownership Right and Capacity Codes
Appendix B to Part 370--Output Files Structure

    Authority: 12 U.S.C. 1817(a)(9), 1819 (Tenth), 1821(f)(1), 
1822(c), 1823(c)(4).


Sec.  370.1  Purpose and scope.

    Unless otherwise provided in this part, each ``covered 
institution'' (defined in Sec.  370.2(a)) is required to implement the 
information technology system and recordkeeping capabilities needed to 
calculate the amount of deposit insurance coverage available for each 
deposit account in the event of its failure. Doing so will improve the 
FDIC's ability to fulfill its statutory mandates to pay deposit 
insurance as soon as possible after a covered institution's failure and 
to resolve a covered institution at the least cost to the Deposit 
Insurance Fund.


Sec.  370.2  Definitions.

    For purposes of this part:
    (a) Account holder means the person or entity who has opened a 
deposit account with a covered institution and with whom the covered 
institution has a direct legal and contractual relationship with 
respect to the deposit.
    (b) Brokered deposit has the same meaning as provided in 12 CFR 
337.6(a)(2).
    (c) Covered institution means an insured depository institution 
which, based on its Reports of Condition and Income filed with the 
appropriate federal banking agency, has 2 million or more deposit 
accounts during the two consecutive quarters preceding the effective 
date of this part or thereafter.
    (d) Compliance date means the date that is three years after the 
later of the effective date of this part or the date on which an 
insured depository institution becomes a covered institution.
    (e) Deposit has the same meaning as provided under section 3(l) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(l)).
    (f) Deposit account records has the same meaning as provided in 12 
CFR 330.1(e).
    (g) Ownership rights and capacities are set forth in 12 CFR part 
330.
    (h) Payment instrument means a check, draft, warrant, money order, 
traveler's check, electronic instrument, or other instrument, payment 
of funds, or monetary value (other than currency).
    (i) Standard maximum deposit insurance amount (or ``SMDIA'') has 
the same meaning as provided pursuant to section 11(a)(1)(E) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)(E)) and 12 CFR 
330.1(o).
    (j) Transactional features with respect to a deposit account means 
that the depositor or account holder can make transfers or withdrawals 
from the deposit account to make payments or transfers to third persons 
or others (including another account of the depositor or account holder 
at the same institution or at a different institution) by means of a 
negotiable or transferable instrument, payment order of withdrawal, 
check, draft, prepaid account access device, debit card, or other 
similar order made by the depositor and payable to third parties, or by 
means of a telephonic (including data transmission) agreement, order or 
instruction, or by means of an instruction made at an automated teller 
machine or similar terminal or unit. For purposes of this definition, 
``telephonic (including data transmission) agreement, order or 
instruction'' includes orders and instructions made by means of 
facsimile, computer, internet, handheld device, or other similar means.
    (k) Unique identifier means an alpha-numeric code associated with 
an individual or entity that is used consistently and continuously by a 
covered institution to monitor the covered institution's relationship 
with that individual or entity.


Sec.  370.3  Information technology system requirements.

    (a) A covered institution must configure its information technology 
system to be capable of performing the functions set forth in paragraph 
(b) of this section within 24 hours after the appointment of the FDIC 
as receiver. To the extent that a covered institution does not maintain 
its deposit account records in the manner prescribed under Sec.  
370.4(a) but instead in the manner prescribed under Sec.  370.4(b) or 
(c), the covered institution's information technology system must be 
able to perform the functions set forth in paragraph (b) of this 
section upon input by the FDIC of additional information collected from 
account holders after failure of the covered institution.
    (b) Each covered institution's information technology system must 
be capable of:
    (1) Accurately calculating the deposit insurance coverage for each 
deposit account in accordance with 12 CFR part 330;
    (2) Generating and retaining output records in the data format and 
layout specified in Appendix B;
    (3) Restricting access to some or all of the deposits in a deposit 
account until the FDIC has made its deposit insurance determination for 
that deposit account using the covered institution's information 
technology system; and
    (4) Debiting from each deposit account the amount that is uninsured 
as calculated pursuant to paragraph (b)(1) of this section.


Sec.  370.4  Recordkeeping requirements.

    (a) General recordkeeping requirements. Except as otherwise 
provided in paragraphs (b) and (c) of this section, a covered 
institution must maintain in its deposit account records for each 
account the information necessary for its information technology system 
to meet the requirements set forth in Sec.  370.3. The information must 
include:
    (1) The unique identifier of each
    (i) Account holder;
    (ii) Beneficial owner of a deposit, if the account holder is not 
the beneficial owner;
    (iii) Grantor and each beneficiary, if the deposit account is held 
in connection with an informal revocable trust that is insured pursuant 
to 12 CFR 330.10 (e.g., payable-on-death accounts, in-trust-for 
accounts, and Totten Trust accounts); and
    (iv) Grantor and each beneficiary, if the deposit account is held 
by the covered institution as the trustee of an irrevocable trust that 
is insured pursuant to 12 CFR 330.12.

[[Page 87760]]

    (2) The applicable ownership right and capacity code listed and 
described in Appendix A to this part.
    (b) Alternative recordkeeping requirements. As permitted under this 
paragraph, a covered institution may maintain in its deposit account 
records less information than is required under paragraph (a) of this 
section.
    (1) For each deposit account for which a covered institution's 
deposit account records disclose the existence of a relationship which 
might provide a basis for additional deposit insurance in accordance 
with 12 CFR 330.5 or 330.7 and for which the covered institution does 
not maintain information that would be needed for its information 
technology system to meet the requirements set forth in Sec.  370.3, 
the covered institution must maintain, at a minimum, the following in 
its deposit account records:
    (i) The unique identifier of the account holder; and
    (ii) The corresponding ``pending reason'' code in data field 2 of 
the pending file format set forth in Appendix B (and need not maintain 
a ``right and capacity'' code).
    (2) For each formal revocable trust account that is insured as 
described in 12 CFR 330.10 and for each irrevocable trust account that 
is insured as described in 12 CFR 330.13, and for which the covered 
institution does not maintain the information that would be needed for 
its information technology system to meet the requirements set forth in 
Sec.  370.3, the covered institution must, at a minimum, maintain in 
its deposit account records:
    (i) The unique identifier of the account holder;
    (ii) The unique identifier of the grantor if the deposit account 
has transactional features; and
    (iii) The corresponding ``pending reason'' code in data field 2 of 
the pending file format set forth in Appendix B (and need not maintain 
a ``right and capacity'' code).
    (c) Recordkeeping requirements for official items. A covered 
institution must maintain in its deposit account records the 
information needed for its information technology system to meet the 
requirements set forth in Sec.  370.3 with respect to accounts held in 
the name of the covered institution from which withdrawals are made to 
honor a payment instrument issued by the covered institution, such as a 
certified check, loan disbursement check, interest check, traveler's 
check, expense check, official check, cashier's check, money order, or 
any similar payment instrument that the FDIC identifies in guidance 
issued to covered institutions in connection with this part. To the 
extent that the covered institution does not have such information, it 
need only maintain in its deposit account records for those accounts 
the corresponding ``pending reason'' code in data field 2 of the 
pending file format set forth in Appendix B (and need not maintain 
``right and capacity'' codes).


Sec.  370.5  Actions required for certain deposit accounts with 
transactional features.

    (a) For each deposit account with transactional features for which 
the covered institution maintains its deposit account records in 
accordance with Sec.  370.4(b)(1), a covered institution must certify 
to the FDIC that the account holder will provide to the FDIC the 
information needed for the covered institution's information technology 
system to calculate deposit insurance coverage as set forth in Sec.  
370.3(b) within 24 hours after the appointment of the FDIC as receiver. 
Such certification may be part of the annual certification of 
compliance required pursuant to Sec.  370.10(a)(1).
    (b) Notwithstanding paragraph (a) of this section, a covered 
institution need not provide such certification with respect to:
    (1) Accounts maintained by a mortgage servicer, in a custodial or 
other fiduciary capacity, which are comprised of payments by mortgagors 
of principal, interest, taxes and insurance;
    (2) Accounts maintained by real estate brokers, real estate agents, 
or title companies in which funds from multiple clients are deposited 
and held for a short period of time in connection with a real estate 
transaction;
    (3) Accounts established by an attorney or law firm on behalf of 
clients, commonly known as an Interest on Lawyers Trust Accounts, or 
functionally equivalent accounts; and
    (4) Accounts held in connection with an employee benefit plan (as 
defined in 12 CFR 330.15(f)(2)).
    (c) The covered institution's failure to provide the certification 
required under paragraph (a) of this section shall be deemed not to 
constitute a violation of this part if the FDIC has granted the covered 
institution relief from that certification requirement.


Sec.  370.6  Implementation.

    (a) A covered institution must satisfy the information technology 
system and recordkeeping requirements set forth in this part before the 
compliance date.
    (b) A covered institution may submit a request to the FDIC for an 
extension of its compliance date. The request shall state the amount of 
additional time needed to meet the requirements of this part, the 
reason(s) for which such additional time is needed, and the total 
number and dollar value of accounts for which deposit insurance 
coverage could not be calculated using the covered institution's 
information technology system were the covered institution to fail as 
of the date of the request. The FDIC's grant of a covered institution's 
request for extension may be conditional or time-limited.


Sec.  370.7  Accelerated implementation.

    (a) On a case-by-case basis, the FDIC may accelerate, upon notice, 
the implementation time frame for all or part of the requirements of 
this part for a covered institution that:
    (1) Has a composite rating of 3, 4, or 5 under the Uniform 
Financial Institution's Rating System (CAMELS rating), or in the case 
of an insured branch of a foreign bank, an equivalent rating;
    (2) Is undercapitalized, as defined under the prompt corrective 
action provisions of 12 CFR part 325; or
    (3) Is determined by the appropriate federal banking agency or the 
FDIC in consultation with the appropriate federal banking agency to be 
experiencing a significant deterioration of capital or significant 
funding difficulties or liquidity stress, notwithstanding the composite 
rating of the covered institution by its appropriate federal banking 
agency in its most recent report of examination.
    (b) In implementing this section, the FDIC must consult with the 
covered institution's appropriate federal banking agency and consider 
the complexity of the covered institution's deposit system and 
operations, extent of the covered institution's asset quality 
difficulties, volatility of the institution's funding sources, expected 
near-term changes in the covered institution's capital levels, and 
other relevant factors appropriate for the FDIC to consider in its role 
as insurer of the covered institution.


Sec.  370.8  Relief.

    (a) Exemption. A covered institution may submit a request in the 
form of a letter to the FDIC for an exemption from this part if it 
demonstrates that it does not take deposits from any account holder 
which, when aggregated, would exceed the SMDIA for any owner of the 
funds on deposit and will not in the future.
    (b) Exception. A covered institution may submit a request in the 
form of a letter to the FDIC for exception from any specific aspect of 
the information technology system requirements, recordkeeping 
requirements,

[[Page 87761]]

certification requirements, or reporting requirements set forth in this 
part if circumstances exist that would make it impracticable or overly 
burdensome to meet those requirements. In its request letter, the 
covered institution must demonstrate the need for exception, describe 
the impact of an exception on the ability to quickly and accurately 
calculate deposit insurance for the related deposit accounts, and state 
the number of, and the dollar value of deposits in, the related deposit 
accounts.
    (c) Release from this part. A covered institution may submit a 
request in the form of a letter to the FDIC for release from this part 
if, based on its Reports of Condition and Income filed with the 
appropriate federal banking agency, it has less than two million 
deposit accounts during any three consecutive quarters after becoming a 
covered institution.
    (d) Release from 12 CFR 360.9 requirements. A covered institution 
is released from the provisional hold and standard data format 
requirements of 12 CFR 360.9 upon submitting to the FDIC the compliance 
certification required under Sec.  370.10(a).
    (e) FDIC approval of a request. The FDIC will consider all requests 
submitted in writing by a covered institution on a case-by-case basis 
in light of the objectives of this part, and the FDIC's grant of any 
request made by a covered institution pursuant to this section may be 
conditional or time-limited.


Sec.  370.9  Communication with the FDIC.

    (a) Point of contact. Not later than ten business days after either 
the effective date of this part or becoming a covered institution, a 
covered institution must notify the FDIC of the person(s) responsible 
for implementing the recordkeeping and information technology system 
capabilities required by this part.
    (b) Address. Point-of-contact information, reports and requests 
made under this part shall be submitted in writing to: Office of the 
Director, Division of Resolutions and Receiverships, Federal Deposit 
Insurance Corporation, 550 17th Street NW., Washington, DC 20429-0002.


Sec.  370.10  Compliance.

    (a) Certification and report. A covered institution shall submit to 
the FDIC a certification of compliance and a deposit insurance coverage 
summary report on or before the compliance date and annually 
thereafter.
    (1) The certification must:
    (i) Confirm that the covered institution has implemented and 
successfully tested its information technology system for compliance 
with this part during the preceding calendar year; and
    (ii) Be signed by the covered institution's chief executive officer 
or chief operating officer.
    (2) The deposit insurance coverage summary report must include:
    (i) A description of any material change to the covered 
institution's information technology system or deposit taking 
operations since the prior annual certification;
    (ii) The number of deposit accounts, number of different account 
holders, and dollar amount of deposits by ownership right and capacity 
code (as listed and described in Appendix A);
    (iii) The total number of fully-insured deposit accounts and the 
total dollar amount of deposits in all such accounts;
    (iv) The total number of deposit accounts with uninsured deposits 
and the total dollar amount of uninsured amounts in all of those 
accounts; and
    (v) By deposit account type, the total number of, and dollar amount 
of deposits in, deposit accounts for which the covered institution's 
information technology system cannot calculate deposit insurance 
coverage using information currently maintained in the covered 
institution's deposit account records.
    (3) If a covered institution experiences a significant change in 
its deposit taking operations, the FDIC may require that it submit a 
certification of compliance and a deposit insurance coverage summary 
report more frequently than annually.
    (b) FDIC Testing. (1) The FDIC will conduct periodic tests of a 
covered institution's compliance with this part. These tests will begin 
no sooner than the last day of the first calendar quarter following the 
compliance date and would occur no more frequently than on a three-year 
cycle thereafter, unless there is a material change to the covered 
institution's information technology system, deposit-taking operations, 
or financial condition.
    (2) A covered institution shall provide the appropriate assistance 
to the FDIC as the FDIC tests the covered institution's ability to 
satisfy the requirements set forth in this part.
    (c) Effect of pending requests. A covered institution that has 
submitted a request pursuant to Sec.  370.6(b) or Sec.  370.8(a) 
through (c) will not be considered to be in violation of this part as 
to the requirements that are the subject of the request while awaiting 
the FDIC's response to such request.

Appendix A to Part 370--Ownership Right and Capacity Codes

    A covered institution must use the codes defined below when 
assigning ownership right and capacity codes.

------------------------------------------------------------------------
                   Code                       Illustrative description
------------------------------------------------------------------------
SGL.......................................  Single Account (12 CFR
                                             330.6): An account owned by
                                             one person with no
                                             testamentary or ``payable-
                                             on-death'' beneficiaries.
                                             It includes individual
                                             accounts, sole
                                             proprietorship accounts,
                                             single-name accounts
                                             containing community
                                             property funds, and
                                             accounts of a decedent and
                                             accounts held by executors
                                             or administrators of a
                                             decedent's estate.
JNT.......................................  Joint Account (12 CFR
                                             330.9): An account owned by
                                             two or more persons with no
                                             testamentary or ``payable-
                                             on-death'' beneficiaries
                                             (other than surviving co-
                                             owners). An account does
                                             not qualify as a joint
                                             account unless: (1) All co-
                                             owners are living persons;
                                             (2) each co-owner has
                                             personally signed a deposit
                                             account signature card
                                             (except that the signature
                                             requirement does not apply
                                             to certificates of deposit,
                                             to any deposit obligation
                                             evidenced by a negotiable
                                             instrument, or to any
                                             account maintained on
                                             behalf of the co-owners by
                                             an agent or custodian); and
                                             (3) each co-owner possesses
                                             withdrawal rights on the
                                             same basis.
REV.......................................  Revocable Trust Account (12
                                             CFR 330.10): An account
                                             owned by one or more
                                             persons that evidences an
                                             intention that, upon the
                                             death of the owner(s), the
                                             funds shall belong to one
                                             or more beneficiaries.
                                             There are two types of
                                             revocable trust accounts:
                                            (1) Payable-on-Death Account
                                             (Informal Revocable Trust
                                             Account): An account owned
                                             by one or more persons with
                                             one or more testamentary or
                                             ``payable-on-death''
                                             beneficiaries.
                                            (2) Revocable Living Trust
                                             Account (Formal Revocable
                                             Trust Account): An account
                                             in the name of a formal
                                             revocable ``living trust''
                                             with one or more grantors
                                             and one or more
                                             testamentary beneficiaries.
IRR.......................................  Irrevocable Trust Account
                                             (12 CFR 330.13): An account
                                             in the name of an
                                             irrevocable trust (unless
                                             the trustee is an insured
                                             depository institution, in
                                             which case the applicable
                                             code is DIT.

[[Page 87762]]

 
CRA.......................................  Certain Other Retirement
                                             Accounts (12 CFR 330.14 (b)-
                                             (c)) to the extent that
                                             participants under such
                                             plan have the right to
                                             direct the investment of
                                             assets held in individual
                                             accounts maintained on
                                             their behalf by the plan,
                                             including an individual
                                             retirement account
                                             described in section 408(a)
                                             of the Internal Revenue
                                             Code (26 U.S.C. 408(a)), an
                                             account of a deferred
                                             compensation plan described
                                             in section 457 of the
                                             Internal Revenue Code (26
                                             U.S.C. 457), an account of
                                             an individual account plan
                                             as defined in section 3(34)
                                             of the Employee Retirement
                                             Income Security Act (29
                                             U.S.C. 1002), a plan
                                             described in section 401(d)
                                             of the Internal Revenue
                                             Code (26 U.S.C. 401(d)).
EBP.......................................  Employee Benefit Plan
                                             Account (12 CFR 330.14): An
                                             account of an employee
                                             benefit plan as defined in
                                             section 3(3) of the
                                             Employee Retirement Income
                                             Security Act (29 U.S.C.
                                             1002), including any plan
                                             described in section 401(d)
                                             of the Internal Revenue
                                             Code (26 U.S.C. 401(d)),
                                             but not including any
                                             account classified as a
                                             Certain Retirement Account.
BUS.......................................  Business/Organization
                                             Account (12 CFR 330.11): An
                                             account of an organization
                                             engaged in an `independent
                                             activity' (as defined in
                                             Sec.   330.1(g)), but not
                                             an account of a sole
                                             proprietorship.
                                            This category includes:
                                            a. Corporation Account: An
                                             account owned by a
                                             corporation.
                                            b. Partnership Account: An
                                             account owned by a
                                             partnership.
                                            c. Unincorporated
                                             Association Account: An
                                             account owned by an
                                             unincorporated association
                                             (i.e., an account owned by
                                             an association of two or
                                             more persons formed for
                                             some religious,
                                             educational, charitable,
                                             social, or other
                                             noncommercial purpose).
GOV1-GOV2-GOV3............................  Government Account (12 CFR
                                             330.15): An account of a
                                             governmental entity.
    GOV1..................................     All time and savings
                                                deposit accounts of the
                                                United States and all
                                                time and savings deposit
                                                accounts of a state,
                                                county, municipality, or
                                                political subdivision
                                                depositing funds in an
                                                insured depository
                                                institution in the state
                                                comprising the public
                                                unit or wherein the
                                                public unit is located
                                                (including any insured
                                                depository institution
                                                having a branch in said
                                                state).
    GOV2..................................     All demand deposit
                                                accounts of the United
                                                States and all demand
                                                deposit accounts of a
                                                state, county,
                                                municipality, or
                                                political subdivision
                                                depositing funds in an
                                                insured depository
                                                institution in the state
                                                comprising the public
                                                unit or wherein the
                                                public unit is located
                                                (including any insured
                                                depository institution
                                                having a branch in said
                                                state).
    GOV3..................................     All deposits, regardless
                                                of whether they are
                                                time, savings or demand
                                                deposit accounts of a
                                                state, county,
                                                municipality or
                                                political subdivision
                                                depositing funds in an
                                                insured depository
                                                institution outside of
                                                the state comprising the
                                                public unit or wherein
                                                the public unit is
                                                located.
MSA.......................................  Mortgage Servicing Account
                                             (12 CFR 330.7(d)): An
                                             account held by a mortgage
                                             servicer, funded by
                                             payments by mortgagors of
                                             principal and interest.
PBA.......................................  Public Bond Accounts (12 CFR
                                             330.15(c)): An account
                                             consisting of funds held by
                                             an officer, agent or
                                             employee of a public unit
                                             for the purpose of
                                             discharging a debt owed to
                                             the holders of notes or
                                             bonds issued by the public
                                             unit.
DIT.......................................  IDI as trustee of
                                             irrevocable trust accounts
                                             (12 CFR 330.12): ``Trust
                                             funds'' (as defined in Sec.
                                               330.1(q)) account held by
                                             an insured depository
                                             institution as trustee of
                                             an irrevocable trust.
ANC.......................................  Annuity Contract Accounts
                                             (12 CFR 330.8): Funds held
                                             by an insurance company or
                                             other corporation in a
                                             deposit account for the
                                             sole purpose of funding
                                             life insurance or annuity
                                             contracts and any benefits
                                             incidental to such
                                             contracts.
BIA.......................................  Custodian accounts for
                                             American Indians (12 CFR
                                             330.7(e)): Funds deposited
                                             by the Bureau of Indian
                                             Affairs of the United
                                             States Department of the
                                             Interior (the ``BIA'') on
                                             behalf of American Indians
                                             pursuant to 25 U.S.C.
                                             162(a), or by any other
                                             disbursing agent of the
                                             United States on behalf of
                                             American Indians pursuant
                                             to similar authority, in an
                                             insured depository
                                             institution.
DOE.......................................  IDI Accounts under
                                             Department of Energy
                                             Program: Funds deposited by
                                             an insured depository
                                             institution pursuant to the
                                             Bank Deposit Financial
                                             Assistance Program of the
                                             Department of Energy.
------------------------------------------------------------------------

Appendix B to Part 370--Output Files Structure

    The output files will include the data necessary for the FDIC to 
determine the deposit insurance coverage in a resolution. A covered 
institution must have the capability to prepare and maintain the 
files detailed below. These files must be prepared in successive 
iterations as the covered institution receives additional data from 
external sources necessary to complete any pending deposit insurance 
calculations. The unique identifier is required in all four files to 
link the customer information. All files are pipe delimited. Do not 
pad leading and trailing spacing or zeros for the data fields.
[GRAPHIC] [TIFF OMITTED] TR05DE16.001

    Customer File. Customer File will be used by the FDIC to 
identify the customers. One record represents one unique customer.
    The data elements will include:

[[Page 87763]]



----------------------------------------------------------------------------------------------------------------
               Field name                          Description                            Format
----------------------------------------------------------------------------------------------------------------
1. CS_Unique_ID........................  This field is the unique         Variable Character.
                                          identifier that is the primary
                                          key for the depositor data
                                          record. It will be generated
                                          by the covered institution and
                                          there shall not be duplicates.
2. CS_Govt_ID..........................  This field shall contain the ID  Variable Character.
                                          number that identifies the
                                          entity based on a government
                                          issued ID or corporate
                                          filling. Populate as follows:.
                                         --For a United States
                                          individual--Legal
                                          identification number (e.g.,
                                          SSN, TIN, Driver's License, or
                                          Passport Number).
                                         --For a foreign national
                                          individual--where a SSN or TIN
                                          does not exist, a foreign
                                          passport or other legal
                                          identification number (e.g.,
                                          Alien Card).
                                         --For a Non-Individual--the Tax
                                          identification Number (TIN),
                                          or other register entity
                                          number.
3. CS_Govt_ID_Type.....................  The valid customer               Character (3).
                                          identification types, are
                                          noted below:.
                                         --SSN--Social Security Number..
                                         --TIN--Tax Identification
                                          Number.
                                         --DL--Driver's License, issued
                                          by a State or Territory of the
                                          United States.
                                         --ML--Military ID..............
                                         --PPT--Valid Passport..........
                                         --AID--Alien Identification
                                          Card.
                                         --OTH--Other...................
4. CS_Type.............................  The customer type field          Character (3).
                                          indicates the type of entity
                                          the customer is at the covered
                                          institution. The valid values
                                          are:.
                                         --IND--Individual..............
                                         --BUS--Business................
                                         --TRT--Trust...................
                                         --NFP--Non-Profit..............
                                         --GOV--Government..............
                                         --OTH--Other...................
5. CS_First_Name.......................  Customer first name. Use only    Variable Character.
                                          for the name of individuals
                                          and the primary contact for
                                          entity.
6. CS_Middle_Name......................  Customer middle name. Use only   Variable Character.
                                          for the name of individuals
                                          and the primary contact for
                                          entity.
7. CS_Last_Name........................  Customer last name. Use only     Variable Character.
                                          for the name of individuals
                                          and the primary contact for
                                          entity.
8. CS_Name_Suffix......................  Customer suffix................  Variable Character.
9. CS_Entity_Name......................  The registered name of the       Variable Character.
                                          entity. Do not use this field
                                          if the customer is an
                                          individual.
10. CS_Street_Add_Ln1..................  Street address line 1. The       Variable Character.
                                          current account statement
                                          mailing address of record.
11. CS_Street_Add_Ln2..................  Street address line 2. If        Variable Character.
                                          available, the second address
                                          line.
12. CS_Street_Add_Ln3..................  Street address line 3. If        Variable Character.
                                          available, the third address
                                          line.
13. CS_City............................  The city associated with the     Variable Character.
                                          permanent legal address.
14. CS_State...........................  The state for United States      Variable Character.
                                          addresses or state/province/
                                          county for international
                                          addresses.
                                         --For United States addresses
                                          use a two-character state code
                                          (official United States Postal
                                          Service abbreviations)
                                          associated with the permanent
                                          legal address.
                                         --For international address
                                          follow that country state code.
15. CS_ZIP.............................  The Zip/Postal Code associated   Variable Character.
                                          with the customers' permanent
                                          legal address.
                                         --For United States zip codes,
                                          use the United States Postal
                                          Service ZIP+4 standard.
                                         --For international zip codes
                                          follow that standard format of
                                          that country.
16. CS_Country.........................  The country associated with the  Variable Character.
                                          permanent legal address.
                                          Provide the country name or
                                          the standard International
                                          Organization for
                                          Standardization (ISO) country
                                          code.
17. CS_Telephone.......................  Customer telephone number. The   Variable Character.
                                          telephone number on record for
                                          the customer, including the
                                          country code if not within the
                                          United States.
18. CS_Email...........................  The email address on record for  Variable Character.
                                          the customer.
19. CS_Outstanding_Debt_Flag...........  This field indicates whether     Character (1).
                                          the customer has outstanding
                                          debt with covered institution.
                                          This field may be used by the
                                          FDIC to determine offsets.
                                          Enter ``Y'' if customer has
                                          outstanding debt with covered
                                          institutions, enter ``N''
                                          otherwise.
20. CS_Security_Pledge_Flag............  This field shall only be used    Character (1).
                                          for Government customers. This
                                          field indicates whether the
                                          covered institution has
                                          pledged securities to the
                                          government entity, to cover
                                          any shortfall in deposit
                                          insurance. Enter ``Y'' if the
                                          government entity has
                                          outstanding security pledge
                                          with covered institutions,
                                          enter ``N'' otherwise.
----------------------------------------------------------------------------------------------------------------

    Account File. The Account File contains the deposit ownership 
rights and capacities information, allocated balances, insured 
amounts, and uninsured amounts. The balances are in U.S. dollars. 
The Account file is linked to the Customer File by the CS_Unique_ID.
    The data elements will include:

----------------------------------------------------------------------------------------------------------------
               Field name                          Description                            Format
----------------------------------------------------------------------------------------------------------------
1. CS_Unique_ID........................  This field is the unique         Variable Character.
                                          identifier that is the primary
                                          key for the depositor data
                                          record. It will be generated
                                          by the covered institution and
                                          there cannot be duplicates.
2. DP_Acct_Identifier..................  Deposit account identifier. The  Variable Character.
                                          primary field used to identify
                                          a deposit account.
                                         The account identifier may be
                                          composed of more than one
                                          physical data element to
                                          uniquely identify a deposit
                                          account..
3. DP_Right_Capacity...................  Account ownership categories...  Character (4).
                                         --SGL--Single accounts.........
                                         --JNT--Joint accounts..........
                                         --REV--Revocable trust accounts
                                         --RR--Irrevocable trust
                                          accounts.
                                         --CRA--Certain retirement
                                          accounts.

[[Page 87764]]

 
                                         --EBP--Employee benefit plan
                                          accounts.
                                         --BUS--Business/Organization
                                          accounts.
                                         --GOV1, GOV2, GOV3--Government
                                          accounts (public unit
                                          accounts).
                                         --MSA--Mortgage servicing
                                          accounts for principal and
                                          interest payments.
                                         --DIT--Accounts held by a
                                          depository institution as the
                                          trustee of an irrevocable
                                          trust.
                                         --ANC--Annuity contract
                                          accounts.
                                         --PBA--Public bond accounts....
                                         --BIA--Custodian accounts for
                                          American Indians.
                                         --DOE--Accounts of an IDI
                                          pursuant to the Bank Deposit
                                          Financial Assistance Program
                                          of the Department of Energy.
4. DP_Prod_Cat.........................  Product category or              Character (3).
                                          classification.
                                         --DDA--Demand Deposit Accounts.
                                         --NOW--Negotiable Order of
                                          Withdrawal.
                                         --MMA--Money Market Deposit
                                          Accounts.
                                         --SAV--Other savings accounts..
                                         --CDS--Time Deposit accounts
                                          and Certificate of Deposit
                                          accounts, including any
                                          accounts with specified
                                          maturity dates that may or may
                                          not be renewable..
5. DP_Allocated_Amt....................  The current balance in the       Decimal (14,2).
                                          account at the end of business
                                          on the effective date of the
                                          file, allocated to a specific
                                          owner in that insurance
                                          category.
                                         For JNT accounts, this is a
                                          calculated field that
                                          represents the allocated
                                          amount to each owner in JNT
                                          category..
                                         For REV accounts, this is a
                                          calculated field that
                                          represents the allocated
                                          amount to each owner-
                                          beneficiary in REV category..
                                         For other accounts with only
                                          one owner, this is the account
                                          current balance..
                                         This balance shall not be
                                          reduced by float or holds. For
                                          CDs and time deposits, the
                                          balance shall reflect the
                                          principal balance plus any
                                          interest paid and available
                                          for withdrawal not already
                                          included in the principal (do
                                          not include accrued interest).
6. DP_Acc_Int..........................  Accrued interest allocated       Decimal (14,2).
                                          similarly as data field #5
                                          DP_Allocated_Amt.
                                         The amount of interest that has
                                          been earned but not yet paid
                                          to the account as of the date
                                          of the file..
7. DP_Total_PI.........................  Total amount adding #5           Decimal (14,2).
                                          DP_Allocated_Amt and #6
                                          DP_Acc_Int.
8. DP_Hold_Amount......................  Hold amount on the account.....  Decimal (14,2).
                                         The available balance of the
                                          account is reduced by the hold
                                          amount. It has no effect on
                                          current balance (ledger
                                          balance).
9. DP_Insured_Amount...................  The insured amount of the        Decimal (14,2).
                                          account.
10. DP_Uninsured_Amount................  The uninsured amount of the      Decimal (14,2).
                                          account.
11. DP_Prepaid_Account_Flag............  This field indicates a prepaid   Character (1).
                                          account with covered
                                          institution. Enter ``Y'' if
                                          account is a prepaid account
                                          with covered institutions,
                                          enter ``N'' otherwise.
12. DP_PT_Account_Flag.................  This field indicates a pass-     Character (1).
                                          through account with covered
                                          institution. Enter ``Y'' if
                                          account is a pass-through with
                                          covered institutions, enter
                                          ``N'' otherwise.
13. DP_PT_Trans_Flag...................  This field indicates whether     Character (1).
                                          the fiduciary account has sub-
                                          accounts that have
                                          transactional features. Enter
                                          ``Y'' if account has
                                          transactional features, enter
                                          ``N'' otherwise.
----------------------------------------------------------------------------------------------------------------

    Account Participant File. The Account Participant File will be 
used by the FDIC to identify account participants, to include the 
official custodian, beneficiary, bond holder, mortgagor, or employee 
benefit plan participant, for each account and account holder. One 
record represents one unique account participant. The Account 
Participant File is linked to the Account File by CS_Unique_ID and 
DP_Acct_Identifier.
    The data elements will include:

----------------------------------------------------------------------------------------------------------------
               Field name                            Description                           Format
----------------------------------------------------------------------------------------------------------------
1. CS_Unique_ID.........................  This field is the unique          Variable Character.
                                           identifier that is the primary
                                           key for the depositor data
                                           record. It will be generated by
                                           the covered institution and
                                           there shall not be duplicates.
2. DP_Acct_Identifier...................  Deposit account identifier. The   Variable Character.
                                           primary field used to identify
                                           a deposit account..
                                          The account identifier may be
                                           composed of more than one
                                           physical data element to
                                           uniquely identify a deposit
                                           account.
3. DP_Right_Capacity....................  Account ownership categories....  Character (4).
                                          --SGL--Single accounts..........
                                          --JNT--Joint accounts...........
                                          --REV--Revocable trust accounts.
                                          --IRR--Irrevocable trust
                                           accounts.
                                          --CRA--Certain retirement
                                           accounts.
                                          --EBP--Employee benefit plan
                                           accounts.
                                          --BUS--Business/Organization
                                           accounts.
                                          --GOV1, GOV2, GOV3--Government
                                           accounts (public unit accounts).
                                          --MSA--Mortgage servicing
                                           accounts for principal and
                                           interest payments.
                                          --DIT--Accounts held by a
                                           depository institution as the
                                           trustee of an irrevocable trust.
                                          --ANC--Annuity contract accounts
                                          --PBA--Public bond accounts.....
                                          --BIA--Custodian accounts for
                                           American Indians.
                                          --DOE--Accounts of an IDI
                                           pursuant to the Bank Deposit
                                           Financial Assistance Program of
                                           the Department of Energy.

[[Page 87765]]

 
4. DP_Prod_Category.....................  Product category or               Character (3).
                                           classification.
                                          --DDA--Demand Deposit Accounts..
                                          --NOW--Negotiable Order of
                                           Withdrawal.
                                          --MMA--Money Market Deposit
                                           Accounts.
                                          --SAV--Other savings accounts...
                                          --CDS--Time Deposit accounts and
                                           Certificate of Deposit
                                           accounts, including any
                                           accounts with specified
                                           maturity dates that may or may
                                           not be renewable.
5. AP_Allocated_Amount..................  Amount of funds attributable to   Decimal (14,2).
                                           the account participant as an
                                           account holder (e.g., Public
                                           account holder of a public bond
                                           account) or the amount of funds
                                           entitled to the beneficiary for
                                           the purpose of insurance
                                           determination (e.g., Revocable
                                           Trust).
6. AP_Participant_ID....................  This field is the unique          Variable Character.
                                           identifier for the Account
                                           Participant. It will be
                                           generated by the covered
                                           institution and there shall not
                                           be duplicates. If the account
                                           participant is an existing bank
                                           customer this field is the same
                                           as CS_Unique_ID field.
7. AP_Govt_ID...........................  This field shall contain the ID   Variable Character.
                                           number that identifies the
                                           entity based on a government
                                           issued ID or corporate filling.
                                           Populate as follows:
                                          --For a United States
                                           individual--Legal
                                           identification number (e.g.,
                                           SSN, TIN, Driver's License, or
                                           Passport Number).
                                          --For a foreign national
                                           individual--where a SSN or TIN
                                           does not exist, a foreign
                                           passport or other legal
                                           identification number (e.g.,
                                           Alien Card).
                                          --For a Non-Individual--the Tax
                                           identification Number (TIN), or
                                           other register entity number.
8. AP_Govt_ID_Type......................  The valid customer                Character (3).
                                           identification types, are:.
                                          --SSN--Social Security Number...
                                          --TIN--Tax Identification Number
                                          --DL--Driver's License, issued
                                           by a State or Territory of the
                                           United States.
                                          --ML--Military ID...............
                                          --PPT--Valid Passport...........
                                          --AID--Alien Identification Card
                                          --OTH--Other....................
9. AP_First_Name........................  Customer first name. Use only     Variable Character.
                                           for the name of individuals and
                                           the primary contact for entity.
10. AP_Middle_Name......................  Customer middle name. Use only    Variable Character.
                                           for the name of individuals and
                                           the primary contact for entity.
11. AP_Last_Name........................  Customer last name. Use only for  Variable Character.
                                           the name of individuals and the
                                           primary contact for entity.
12. AP_Entity_Name......................  The registered name of the        Variable Character.
                                           entity. Do not use this field
                                           if the participant is an
                                           individual.
13. AP_Participant_Type.................  This field is used as the         Character (3).
                                           participant type identifier.
                                           The field will list the
                                           ``beneficial owner'' type:
                                          --OC--Official Custodian........
                                          --BEN--Beneficiary..............
                                          --BHR--Bond Holder..............
                                          --MOR--Mortgagor................
                                          --EPP--Employee Benefit Plan
                                           Participant.
----------------------------------------------------------------------------------------------------------------

    Pending File. The Pending File contains the information needed 
for the FDIC to contact the owner or agent requesting additional 
information to complete the deposit insurance calculation. Each 
record represents a deposit account.
    The data elements will include:

----------------------------------------------------------------------------------------------------------------
               Field name                            Description                           Format
----------------------------------------------------------------------------------------------------------------
1. CS_Unique_ID.........................  This field is the unique          Variable Character.
                                           identifier that is the primary
                                           key for the depositor data
                                           record. It will be generated by
                                           the covered institution and
                                           there cannot be duplicates.
2. Pending_Reason.......................  Reason code for the account to    Character (5).
                                           be included in Pending file.
                                          For deposit account records
                                           maintained by the bank, use the
                                           following codes.
                                          --A--agency or custodian........
                                          --B--beneficiary................
                                          --OI--official item.............
                                          --RAC--right and capacity code..
                                          For alternative recordkeeping
                                           requirements, use the following
                                           codes.
                                          --ARB--direct obligation
                                           brokered deposit.
                                          --ARBN--non-direct obligation
                                           brokered deposit.
                                          --ARCRA--certain retirement
                                           accounts.
                                          --AREBP--employee benefit plan
                                           accounts.
                                          --ARM--mortgage servicing for
                                           principal and interest payments.
                                          --ARO--other deposits...........
                                          --ARTR--trust accounts..........
                                          The FDIC needs these codes to
                                           initiate the collection of
                                           needed information.
3. DP_Acct_Identifier...................  Deposit account identifier. The   Variable Character.
                                           primary field used to identify
                                           a deposit account.
                                          The account identifier may be
                                           composed of more than one
                                           physical data element to
                                           uniquely identify a deposit
                                           account.
4. DP_Right_Capacity....................  Account ownership categories....  Character (4).
                                          --SGL--Single accounts..........
                                          --JNT--Joint accounts...........
                                          --REV--Revocable trust accounts.
                                          --IRR--Irrevocable trust
                                           accounts.
                                          --CRA--Certain retirement
                                           accounts.

[[Page 87766]]

 
                                          --EBP--Employee benefit plan
                                           accounts.
                                          --BUS--Business/Organization
                                           accounts.
                                          --GOV1, GOV2, GOV3--Government
                                           accounts (public unit accounts).
                                          --MSA--Mortgage servicing
                                           accounts for principal and
                                           interest payments.
                                          --DIT--Accounts held by a
                                           depository institution as the
                                           trustee of an irrevocable trust.
                                          --ANC--Annuity contract accounts
                                          --PBA--Public bond accounts.....
                                          --BIA--Custodian accounts for
                                           American Indians.
                                          --DOE--Accounts of an IDI
                                           pursuant to the Bank Deposit
                                           Financial Assistance Program of
                                           the Department of Energy.
5. DP_Prod_Category.....................  Product category or               Character (3).
                                           classification.
                                          --DDA--Demand Deposit Accounts..
                                          --NOW--Negotiable Order of
                                           Withdrawal.
                                          --MMA--Money Market Deposit
                                           Accounts.
                                          --SAV--Other savings accounts...
                                          --CDS--Time Deposit accounts and
                                           Certificate of Deposit
                                           accounts, including any
                                           accounts with specified
                                           maturity dates that may or may
                                           not be renewable.
6. DP_Cur_Bal...........................  Current balance.................  Decimal (14,2).
                                          The current balance in the
                                           account at the end of business
                                           on the effective date of the
                                           file.
                                          This balance shall not be
                                           reduced by float or holds. For
                                           CDs and time deposits, the
                                           balance shall reflect the
                                           principal balance plus any
                                           interest paid and available for
                                           withdrawal not already included
                                           in the principal (do not
                                           include accrued interest).
7. DP_Acc_Int...........................  Accrued interest................  Decimal (14,2).
                                          The amount of interest that has
                                           been earned but not yet paid to
                                           the account as of the date of
                                           the file.
8. DP_Total_PI..........................  Total of principal and accrued    Decimal (14,2).
                                           interest.
9. DP_Hold_Amount.......................  Hold amount on the account......  Decimal (14,2).
                                          The available balance of the
                                           account is reduced by the hold
                                           amount. It has no impact on
                                           current balance (ledger
                                           balance).
10. DP_Prepaid_Account_Flag.............  This field indicates a prepaid    Character (1).
                                           account with covered
                                           institution. Enter ``Y'' if
                                           account is a prepaid account,
                                           enter ``N'' otherwise.
11. CS_Govt_ID..........................  This field shall contain the ID   Variable Character.
                                           number that identifies the
                                           entity based on a government
                                           issued ID or corporate filling.
                                           Populate as follows:.
                                          --For a United States
                                           individual--Legal
                                           identification number (e.g.,
                                           SSN, TIN, Driver's License or
                                           Passport Number).
                                          --For a foreign national
                                           individual--where a SSN or TIN
                                           does not exist, a foreign
                                           passport or other legal
                                           identification number (e.g.,
                                           Alien Card).
                                          --For a Non-Individual--the Tax
                                           identification Number (TIN), or
                                           other register entity number.
12. CS_Govt_ID_Type.....................  The valid customer                Character (3).
                                           identification types:.
                                          --SSN--Social Security Number...
                                          --TIN--Tax Identification Number
                                          --DL--Driver's License, issued
                                           by a State or Territory of the
                                           United States.
                                          --ML--Military ID...............
                                          --PPT--Valid Passport...........
                                          --AID--Alien Identification Card
                                          --OTH--Other....................
13. CS_First_Name.......................  Customer first name. Use only     Variable Character.
                                           for the name of individuals and
                                           the primary contact for entity.
14. CS_Middle_Name......................  Customer middle name. Use only    Variable Character.
                                           for the name of individuals and
                                           the primary contact for entity.
15. CS_Last_Name........................  Customer last name. Use only for  Variable Character.
                                           the name of individuals and the
                                           primary contact for entity.
16. CS_Name_Suffix......................  Customer suffix.................  Variable Character.
17. CS_Entity_Name......................  The registered name of the        Variable Character.
                                           entity. Do not use this field
                                           if the customer is an
                                           individual.
18. CS_Street_Add_Ln1...................  Street address line 1...........  Variable Character.
                                          The current account statement
                                           mailing address of record.
19. CS_Street_Add_Ln2...................  Street address line 2...........  Variable Character.
                                          If available, the second address
                                           line.
20. CS_Street_Add_Ln3...................  Street address line 3...........  Variable Character.
                                          If available, the third address
                                           line.
21. CS_City.............................  The city associated with the      Variable Character.
                                           permanent legal address.
22. CS_State............................  The state for United States       Variable Character.
                                           addresses or state/province/
                                           county for international
                                           addresses.
                                          --For United States addresses
                                           use a two-character state code
                                           (official United States Postal
                                           Service abbreviations)
                                           associated with the permanent
                                           legal address.
                                          --For international address
                                           follow that country state code.
23. CS_ZIP..............................  The Zip/Postal Code associated    Variable Character.
                                           with the customers' permanent
                                           legal address.
                                          --For United States zip codes,
                                           use the United States Postal
                                           Service ZIP+4 standard.
                                          --For international zip codes
                                           follow the standard format of
                                           that country.
24. CS_Country..........................  The country associated with the   Variable Character.
                                           permanent legal address.
                                           Provide the country name or the
                                           standard International
                                           Organization for
                                           Standardization (ISO) country
                                           code.
25. CS_Telephone........................  Customer telephone number. The    Variable Character.
                                           telephone number on record for
                                           the customer, including the
                                           country code if not within the
                                           United States.
26. CS_Email............................  The email address on record for   Variable Character.
                                           the customer.
27. CS_Outstanding_Debt_Flag............  This field indicates whether the  Character (1).
                                           customer has outstanding debt
                                           with covered institution. This
                                           field may be used to determine
                                           offsets. Enter ``Y'' if
                                           customer has outstanding debt
                                           with covered institutions,
                                           enter ``N'' otherwise.

[[Page 87767]]

 
28. CS_Security_Pledge_Flag.............  This field indicates whether the  Character (1).
                                           CI has pledged securities to
                                           the government entity, to cover
                                           any shortfall in deposit
                                           insurance. Enter ``Y'' if the
                                           government entity has
                                           outstanding security pledge
                                           with covered institutions,
                                           enter ``N'' otherwise. This
                                           field shall only be used for
                                           Government customers.
29. DP_PT_Account_Flag..................  This field indicates a pass-      Character (1).
                                           through account with covered
                                           institution. Enter ``Y'' if
                                           account is a pass-through with
                                           covered institutions, enter
                                           ``N'' otherwise.
30. PT_Parent_Customer_ID...............  This field contains the unique    Variable Character.
                                           identifier of the parent
                                           customer ID who has the
                                           fiduciary responsibility at the
                                           covered institution.
31. DP_PT_Trans_Flag....................  This field indicates whether the  Character (1).
                                           fiduciary account has sub-
                                           accounts that have
                                           transactional features. Enter
                                           ``Y'' if account has
                                           transactional features, enter
                                           ``N'' otherwise.
----------------------------------------------------------------------------------------------------------------


    Dated at Washington, DC, this 15th day of November, 2016.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2016-28396 Filed 12-2-16; 8:45 am]
 BILLING CODE 6714-01-P