9522 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Rules and Regulations 

1This extension of the TLGP is supported by the 

rationale for establishing the existing TLGP and is 

consistent with the determination of systemic risk 

made on October 14, 2008, pursuant to 12 U.S.C. 

section 1823(c)(4)(G), by the Secretary of the 

Treasury (after consultation with the President) 

following receipt of the written recommendation 

dated October 13, 2008, of the FDIC’s Board of 

Directors (Board) and the similar written 

recommendation of the Federal Reserve. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 370 

RIN 3064–AD37 

Modification of Temporary Liquidity 

Guarantee Program 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Interim rule with request for 

comments. 

SUMMARY: The FDIC is issuing this 

Interim Rule to make a minor 

modification to the Temporary Liquidity 

Guarantee Program (TLGP) to include 

certain issuances of mandatory 

convertible debt (MCD) under the TLGP 

debt guarantee program. 

DATES: The Interim Rule becomes 

effective February 27, 2009. Comments 

on the Interim Rule must be received by 

March 19, 2009. 

ADDRESSES: You may submit comments 

on the Interim Rule, by any of the 

following methods: 

• Agency Web Site: http:// 

www.FDIC.gov/regulations/laws/ 

federal/notices.html. Follow 

instructions for submitting comments 

on the Agency Web site. 

• E-mail: Comments@FDIC.gov. 

Include RIN # 3064–AD37 on the 

subject line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street) on business days 

between 7 a.m. and 5 p.m. 

Instructions: All comments received 

will be posted generally without change 

to http://www.fdic.gov/regulations/laws/ 

federal/propose.html, including any 

personal information provided. 

FOR FURTHER INFORMATION CONTACT: 

Munsell St. Clair, Chief, Bank and 

Regulatory Policy Section, Division of 

Insurance and Research, (202) 898–8967 

or mstclair@fdic.gov; Robert C. Fick, 

Counsel, Legal Division, (202) 898–8962 

or rfick@fdic.gov; A. Ann Johnson, 

Counsel, Legal Division (202) 898–3573 

or aajohnson@fdic.gov; Mark L. 

Handzlik, Attorney, Legal Division, 

(202) 898–3990 or mhandzlik@fdic.gov; 

Gail Patelunas, Deputy Director, 

Division of Resolutions and 

Receiverships, (202) 898–6779 or 

gpatelunas@fdic.gov; (for questions or 

comments related to MCD applications): 

Lisa D. Arquette, Associate Director, 

Division of Supervision and Consumer 

Protection, (202) 898–8633 or 

larquette@fdic.gov or Donna Saulnier, 

Manager, Assessment Policy Section, 

Division of Finance, (703) 562–6167 or 

dsaulnier@fdic.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

In October 2008 the FDIC adopted the 

TLGP as part of a coordinated effort by 

the FDIC, the U.S. Department of the 

Treasury, and the Board of Governors of 

the Federal Reserve System (Federal 

Reserve) to address unprecedented 

disruptions in credit markets and the 

resultant effects on the ability of 

financial institutions to fund themselves 

and to make loans to creditworthy 

borrowers. The TLGP and other 

programs have had favorable effects, but 

experience has indicated that further 

improvements to the TLGP can be made. 

In this Interim Rule, the FDIC is making 

a very narrow targeted improvement to 

the TLGP. 

By extending its guarantee to certain 

new issues of mandatory convertible 

debt, the FDIC will offer more flexibility 

for entities currently participating in the 

debt guarantee program. Specifically, 

the FDIC’s guarantee of certain 

mandatory convertible debt will give 

issuing entities more flexibility to obtain 

funding from investors that may have a 

longer-term investment horizon. At the 

same time, including certain mandatory 

convertible debt under the TLGP 

program will reduce the amount of 

FDIC-guaranteed debt likely to require 

rollover in mid-2012 by providing a 

built-in ‘‘exit strategy’’ of having the 

debt convert to common stock rather 

than being rolled over.1

II. The Interim Rule 

Amendment To Allow FDIC Guarantees 

of Mandatory Convertible Debt 

As currently written, the TLGP 

regulation, at Section 370.2(e)(5), 

precludes an FDIC guarantee for any 

‘‘convertible debt.’’ The FDIC has 

decided to amend the regulation to 

allow eligible entities to apply to have 

the FDIC guarantee newly issued senior 

unsecured debt with a feature that 

mandates conversion of the debt into 

common shares of the issuing entity at 

a specified date no later than the 

expiration date of the FDIC’s guarantee. 

No FDIC-guaranteed mandatory 

convertible debt may be issued without 

the FDIC’s prior written approval. 

The intent of the mandatory 

convertible debt amendment to the 

TLGP is to give eligible entities 

additional flexibility to obtain funding 

from investors with longer-term 

investment horizons. Further, MCD 

issuances could reduce the 

concentration of FDIC-guaranteed debt 

maturing in mid-2012, which debt 

might otherwise have to be rolled into 

new debt. 

To be eligible for the FDIC’s 

guarantee, MCD must meet the 

definition of senior unsecured debt in 

Section 370.2(e) of the final rule; must 

be newly issued on or after February 27, 

2009; and must provide in the debt 

instrument for the mandatory 

conversion of the debt into common 

shares of the issuing entity on a 

specified date that is on or before June 

30, 2012 (unless the issuing entity fails 

to timely make any payment required 

under the debt instrument, or merges or 

consolidates with any other entity and 

is not the surviving or resulting entity.) 

In addition, the proposed Interim Rule 

provides for a number of disclosures 

relative to the MCD aspect of the TLGP. 

This amendment will not result in a 

change to an eligible entity’s existing 

debt guarantee cap. 

The Interim Rule requires a 

participating entity to file a written 

application with the FDIC and its 

appropriate Federal banking agency, 

and to obtain the FDIC’s prior written 

approval, before issuing MCD. 

Like other applications described in 

the TLGP, an eligible entity that wishes 

to issue MCD must include the details 

of the request, a summary of the 

applicant’s strategic operating plan, and 

a description of the proposed use of the 

debt proceeds. In addition, an 

application to issue FDIC-guaranteed 

MCD must include the proposed date of 

issuance, the amount of MCD to be 

issued, the mandatory conversion date, 

and the conversion rate (as described in 

Section 370.3(h)). Finally, since the 

issuance of debt that will convert into 

stock could raise control issues, an 

applicant seeking to issue FDICguaranteed MCD must provide 

confirmation that the applicant has 

submitted to its appropriate Federal 

banking agency all applications and all 

notices required under the Bank 

Holding Company Act of 1956, as 

amended, the Home Owners’ Loan Act, 

as amended, or the Change in Bank 

Control Act, as amended in order to 

issue the debt. 

The amount of the assessment fee for 

the FDIC’s guarantee of MCD will be 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Rules and Regulations 9523 

2 12 U.S.C. 4802. 

based on the time period from issuance 

of the MCD until its mandatory 

conversion date. 

III. Request for Comments 

The FDIC invites comments on all 

aspects of the MCD feature of the TLGP 

as described in the Interim Rule and 

seeks suggestions for its 

implementation. 

IV. Regulatory Analysis and Procedure 

A. Administrative Procedure Act 

The process of amending Part 370 by 

means of this Interim Rule is governed 

by the Administrative Procedure Act 

(APA). Pursuant to Section 553(b)(B) of 

the APA, general notice and opportunity 

for public comment are not required 

with respect to a rule making when an 

agency for good cause finds that ‘‘notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest.’’ Similarly, 

Section 553(d)(3) of the APA provides 

that the publication of a rule shall be 

made not less than 30 days before its 

effective date, except ‘‘* * * (3) as 

otherwise provided by the agency for 

good cause found and published with 

the rule.’’ 

Consistent with Section 553(b)(B) of 

the APA, the FDIC finds that good cause 

exists for a finding that general notice 

and opportunity for public comment are 

impracticable and contrary to the public 

interest. The TLGP was announced by 

the FDIC on October 14, 2008 as an 

initiative to counter the system-wide 

crisis in the nation’s financial sector, 

and was preceded by a determination of 

systemic risk by the Secretary of the 

Treasury after consultation with the 

President. The systemic risk 

determination allowed the FDIC to take 

certain actions to avoid or mitigate 

serious adverse effects on economic 

conditions and financial stability. The 

purpose of the TLGP is to promote 

financial stability by preserving 

confidence in the banking system and 

encouraging liquidity in order to ease 

lending to creditworthy businesses and 

consumers, favorably impacting both 

the availability and cost of credit. This 

Interim Rule is a modification of the 

TLGP and permits the FDIC to guarantee 

senior debt that converts into common 

stock. Immediate issuance of this 

Interim Rule furthers the public interest 

by addressing unprecedented disruption 

in credit markets. For these same 

reasons, the FDIC finds good cause to 

publish this Interim Rule with an 

immediate effective date. See 5 U.S.C. 

553(d)(3). 

Although general notice and 

opportunity for public comment are not 

required prior to the effective date, the 

FDIC invites comments on all aspects of 

the Interim Rule, which the FDIC may 

revise if necessary or appropriate in 

light of the comments received. 

B. Riegle Community Development and 

Regulatory Improvement Act 

The Riegle Community Development 

and Regulatory Improvement Act 

(RCDRIA) provides that any new 

regulations or amendments to 

regulations prescribed by a Federal 

banking agency that impose additional 

reporting, disclosures, or other new 

requirements on insured depository 

institutions 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, 

unless the agency determines, for good 

cause published with the rule, that the 

rule should become effective before 

such time.2 For the same reasons 

discussed above, the FDIC finds that 

good cause exists for an immediate 

effective date for the Interim Rule. 

C. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

has previously determined that the 

Interim Rule is not a ‘‘major rule’’ 

within the meaning of the relevant 

sections of the Small Business 

Regulatory Enforcement Act of 1996 

(SBREFA), 5 U.S.C. 801 et seq. As 

required by SBREFA, the FDIC will file 

the appropriate reports with Congress 

and the Government Accountability 

Office so that the Interim Rule may be 

reviewed. 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act (Pub. 

L. 96–354, Sept. 19, 1980) (RFA) applies 

only to rules for which an agency 

publishes a general notice of proposed 

rule making pursuant to 5 U.S.C. 553(b). 

As discussed above, consistent with 

Section 553(b)(B) of the APA, the FDIC 

has determined for good cause that 

general notice and opportunity for 

public comment would be impracticable 

and contrary to the public interest. 

Therefore, the RFA, pursuant to 5 U.S.C. 

601(2), does not apply. 

E. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.), an agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

Office of Management and Budget 

(OMB) control number. This Interim 

Rule establishes an application 

requirement for institutions wishing to 

issue FDIC-guaranteed mandatory 

convertible debt. This new collection of 

information would modify the FDIC’s 

existing collection of information 

entitled, ‘‘Temporary Liquidity 

Guarantee Program’’ (OMB Control No. 

3064–0166). Specifically, sections 

370.3(h)(1)(v) and 370.3(h)(2) contain 

the new collection of information that 

was submitted to OMB under 

emergency clearance procedures, with a 

request for clearance by February 27, 

2009. The use of emergency clearance 

procedures is necessary because of the 

sudden, unanticipated systemic risks 

posed to the nation’s financial system 

by recent economic conditions and 

because public harm is reasonably likely 

to result if liquidity is not restored to 

financial markets. This new collection 

of information is necessary for 

implementation of the FDIC guarantee 

of mandatory convertible debt under the 

Debt Guarantee component of the TLG 

program. 

The proposed burden estimate for the 

application to issue FDIC-guaranteed 

mandatory convertible debt is as 

follows: 

Title: Temporary Liquidity Guarantee 

Program. 

OMB Number: 3064–0166. 

Frequency of Response: 5. 

Estimated Number of Respondents: 

25. 

Average Time for Response: 1 hour. 

Estimated Annual Burden: 125 hours 

Previous Annual Burden: 2,201,500 

hours 

Total New Burden: 2,201,625 hours 

If the FDIC obtains OMB approval of 

its emergency clearance request, it will 

be followed by a request for clearance 

under normal procedures in accordance 

with the provisions of OMB regulation 

5 CFR 1320.10. In accordance with 

normal clearance procedures, public 

comment will be invited for an initial 

60-day comment period and a 

subsequent 30-day comment period on: 

(1) Whether this collection of 

information is necessary for the proper 

performance of the FDIC’s functions, 

including whether the information has 

practical utility; (2) the accuracy of the 

estimates of the burden of the 

information collection, including the 

validity of the methodologies and 

assumptions used; (3) ways to enhance 

the quality, utility, and clarity of the 

information to be collected; and (4) 

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; and (5) 

estimates of capital or start up costs, and 

9524 Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Rules and Regulations 

1This recognizes that certain instruments have 

stated maturities of ‘‘one month,’’ but have a term 

of up to 35 days because of weekends, holidays, and 

calendar issues. 

costs of operation, maintenance and 

purchase of services to provide the 

information. In the interim, interested 

parties are invited to submit written 

comments by any of the following 

methods. 

All comments should refer to the 

name and number of the collection: 

• http://www.FDIC.gov/regulations/ 

laws/federal/propose.html. 

• E-mail: comments@fdic.gov. 

Include the name and number of the 

collection in the subject line of the 

message. 

• Mail: Leneta Gregorie (202–898– 

3719), Counsel, Federal Deposit 

Insurance Corporation, 550 17th Street, 

NW., Washington, DC 20429. 

• Hand Delivery: Comments may be 

hand-delivered to the guard station at 

the rear of the 550 17th Street Building 

(located on F Street), on business days 

between 7 a.m. and 5 p.m. 

A copy of the comment may also be 

submitted to the OMB Desk Officer for 

the FDIC, Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, New 

Executive Office Building, Room 3208, 

Washington, DC 20503. 

List of Subjects in 12 CFR Part 370 

Banks, Banking, Bank deposit 

insurance, Holding companies, National 

banks, Reporting and recordkeeping 

requirements, Savings associations. 

■ For the reasons stated in the preamble, 

the Federal Deposit Insurance 

Corporation amends part 370 of chapter 

III of Title 12 of the Code of Federal 

Regulations to read as follows: 

PART 370—TEMPORARY LIQUIDITY 

GUARANTEE PROGRAM 

■ 1. The authority citation for part 370 

shall continue to read as follows: 

Authority: 12 U.S.C. 1813(l), 1813(m), 

1817(i), 1818, 1819(a)(Tenth), 1820(f), 

1821(a), 1821(c), 1821(d), 1823(c)(4). 

■ 2. In part 370, amend § 370.2 as 

follows: 

■ a. Add a new paragraph (e)(1)(iii); 

■ b. Revise the first sentence of 

paragraph (e)(3) and the first sentence of 

paragraph (e)(5); and 

■ c. Add new paragraph (m), as follows: 

§ 370.2 Definitions. 

* * * * * 

(e) * * * 

(1) * * * 

(iii) After February 27, 2009, 

unsecured borrowing that satisfies the 

criteria listed in paragraphs (e)(1)(i)(A) 

through (e)(1)(i)(D) of this section, that 

has a stated maturity of more than 30 

days, and that includes, without 

limitation, mandatory convertible debt. 

* * * * * 

(3) Senior unsecured debt may 

include, for example, the following 

debt, provided it meets the requirements 

of paragraph (e)(1) of this section: 

mandatory convertible debt as described 

in paragraph (m) of this section, federal 

funds purchased, promissory notes, 

commercial paper, unsubordinated 

unsecured notes, including zero-coupon 

bonds, U.S. dollar denominated 

certificates of deposit owed to an 

insured depository institution, an 

insured credit union as defined in the 

Federal Credit Union Act, or a foreign 

bank, U.S. dollar denominated deposits 

in an international banking facility (IBF) 

of an insured depository institution 

owed to an insured depository 

institution or a foreign bank, and U.S. 

dollar denominated deposits on the 

books and records of foreign branches of 

U.S. insured depository institutions that 

are owed to an insured depository 

institution or a foreign bank. * * 

* * * * * 

(5) Senior unsecured debt excludes, 

for example, any obligation that has a 

stated maturity of ‘‘one month’’ 1

obligations from guarantees or other 

contingent liabilities, derivatives, 

derivative-linked products, debts that 

are paired or bundled with other 

securities, convertible debt other than 

mandatory convertible debt described in 

paragraph (m) of this section, capital 

notes, the unsecured portion of 

otherwise secured debt, negotiable 

certificates of deposit, deposits 

denominated in a foreign currency or 

other foreign deposits (except as 

allowed under paragraph (e)(3) of this 

section), revolving credit agreements, 

structured notes, instruments that are 

used for trade credit, retail debt 

securities, and any funds regardless of 

form that are swept from individual, 

partnership, or corporate accounts held 

at depository institutions. 

* * * 

* * * * * 

(m) Mandatory convertible debt. The 

term ‘‘mandatory convertible debt’’ 

means senior unsecured debt that is 

required by the terms of the debt 

instrument to convert into common 

shares of the issuing entity on a fixed 

and specified date, on or before June 30, 

2012, unless the issuing entity 

(1) Fails to timely make any payment 

required under the debt instrument, or 

(2) Merges or consolidates with any 

other entity and is not the surviving or 

resulting entity. 

■ 3. In part 370, amend § 370.3 as 

follows: 

■ a. Revise paragraph (b)(1) and (d); 

■ b. In paragraph (h): 

■ i. Revise the heading for paragraph (h) 

■ ii. Add new paragraph (h)(1)(v), 

■ iv. Revise paragraph (h)(2); 

■ v. Revise the first sentence of 

paragraph (h)(3); and 

■ vi. Add a new sentence at the end of 

paragraph (h)(4); as follows: 

§ 370.3 Debt Guarantee Program. 

* * * * * 

(b) * * * 

(1) Except as provided in paragraphs 

(b)(2) through (b)(6) of this section, the 

maximum amount of outstanding debt 

that is guaranteed under the debt 

guarantee program for each participating 

entity at any time is limited to 125 

percent of the par value of the 

participating entity’s senior unsecured 

debt, as that term is defined in 

§ 370.2(e)(1)(i) (excluding mandatory 

convertible debt), that was outstanding 

as of the close of business September 30, 

2008 and that was scheduled to mature 

on or before June 30, 2009. 

* * * * * 

(d) Duration of Guarantee. 

For guaranteed debt issued on or 

before June 30, 2009, the guarantee 

expires on the earliest of the date of the 

entity’s opt-out, if any, the mandatory 

conversion date for mandatory 

convertible debt, the maturity of the 

debt, or June 30, 2012. 

* * * * * 

(h) Applications for exceptions, 

eligibility, and issuance of certain debt. 

(1) * * * 

(v) A request by a participating entity 

to issue FDIC-guaranteed mandatory 

convertible debt. 

(2) Each letter application must 

describe the details of the request, 

provide a summary of the applicant’s 

strategic operating plan, describe the 

proposed use of the debt proceeds, and 

in the case of an application for 

approval of the issuance of 

(i) Mandatory convertible debt, must 

also include: 

(A) the proposed date of issuance; 

(B) the total amount of the mandatory 

convertible debt to be issued; 

(C) the mandatory conversion date, 

(D) the conversion rate (i.e., the total 

number of shares of common stock that 

will result from the conversion divided 

by the total dollar amount of the 

mandatory convertible debt to be 

issued), 

(E) confirmation that all applications 

and all notices required under the Bank 

Federal Register / Vol. 74, No. 41 / Wednesday, March 4, 2009 / Rules and Regulations 9525 

1Federal Deposit Insurance Reform Act of 2005, 

Public Law 109–171, 120 Stat. 9; Federal Deposit 

Insurance Conforming Amendments Act of 2005, 

Public Law 109–173, 119 Stat. 3601. 

2After a year long review of the deposit insurance 

system, the FDIC made several recommendations to 

Congress to reform the deposit insurance system. 

See http://www.fdic.gov/deposit/insurance/ 

initiative/direcommendations.html for details. 

3Section 2109(a)(5) of the Reform Act. Section 

7(b) of the Federal Deposit Insurance Act (12 U.S.C. 

1817(b)). 

4 12 Section 7(b)(1)(C) of the Federal Deposit 

Insurance Act (12 U.S.C. 1817(b)(1)(C)). The Reform 

Act merged the former Bank Insurance Fund and 

Savings Association Insurance Fund into the 

Deposit Insurance Fund. 

Holding Company Act of 1956, as 

amended, the Home Owners’ Loan Act, 

as amended, or the Change in Bank 

Control Act, as amended, have been 

submitted to the applicant’s appropriate 

Federal banking agency in connection 

with the proposed issuance; and 

(F) any other relevant information that 

the FDIC deems appropriate. 

(3) The factors to be considered by the 

FDIC in evaluating applications filed 

pursuant to paragraphs (h)(1)(i) through 

(h)(1)(iii) and (h)(1)(v) of this section 

include: the financial condition and 

supervisory history of the eligible/ 

surviving entity. * * * 

(4) * * * Applications made pursuant 

to paragraph (h)(1)(v) of this section 

must be filed with the FDIC no later 

than June 30, 2009. 

* * * * * 

■ 4. In part 370, amend § 370.5 as 

follows: 

■ a. At the end of paragraph (h)(2), 

remove the last italicized sentence and 

add in its place two new sentences; and 

■ b. Add new paragraph (j) as follows: 

§ 370.5 Participation. 

* * * * * 

(h) * * * 

(2) * * * [If the debt being issued is 

mandatory convertible debt, add: The 

expiration date of the FDIC’s guarantee 

is the earlier of the mandatory 

conversion date or June 30, 2012]. [If the 

debt being issued is any other senior 

unsecured debt, add: The expiration 

date of the FDIC’s guarantee is the 

earlier of the maturity date of the debt 

or June 30, 2012.] 

* * * * * 

(j) No mandatory convertible debt 

may be issued without obtaining the 

FDIC’s prior written approval. 

■ 5. In part 370, amend § 370.6 as 

follows: 

■ a. Revise paragraphs (d)(1). 

■ b. Revise the first sentence of (d)(3). 

■ c. Revise (d)(5) as follows: 

§ 370.6 Assessments under the Debt 

Guarantee Program. 

* * * * * 

(d) * * * 

(1) Calculation of assessment. Except 

as provided in paragraph (d)(3) of this 

section, the amount of assessment will 

be determined by multiplying the 

amount of FDIC-guaranteed debt times 

the term of the debt or, in the case of 

mandatory convertible debt, the time 

period from issuance to the mandatory 

conversion date, times an annualized 

assessment rate determined in 

accordance with the following table. 

For debt with a maturity or 

time period to conversion 

date of— 

The 

annualized 

assessment 

rate (in basis 

points) is— 

180 days or less (excluding 

overnight debt) .................. 50 

181–364 days ....................... 75 

365 days or greater .............. 100 

* * * * * 

(3) The amount of assessment for an 

eligible entity, other than an insured 

depository institution, that controls, 

directly or indirectly, or is otherwise 

affiliated with, at least one insured 

depository institution will be 

determined by multiplying the amount 

of FDIC-guaranteed debt times the term 

of the debt or, in the case of mandatory 

convertible debt, the time period from 

issuance to the mandatory conversion 

date, times an annualized assessment 

rate determined in accordance with the 

rates set forth in the table in paragraph 

(d)(1) of this section, except that each 

such rate shall be increased by 10 basis 

points, if the combined assets of all 

insured depository institutions affiliated 

with such entity constitute less than 50 

percent of consolidated holding 

company assets. * * * 

* * * * * 

(5) No assessment reduction for early 

retirement of guaranteed debt. A 

participating entity’s assessment shall 

not be reduced if guaranteed debt is 

retired prior to its scheduled maturity 

date or conversion date. 

* * * * * 

■ 6. In part 370, amend § 370.12 to add 

a new sentence immediately after the 

first sentence in paragraph (b)(2); as 

follows: 

§ 370.12 Payment on the guarantee. 

* * * * * 

(b) * * * 

(2) * * * For purposes of mandatory 

convertible debt, principal payment 

shall be limited to amounts paid by 

holders under the issuance. * * * 

* * * * * 

[FR Doc. E9–4586 Filed 2–27–09; 4:15 pm] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AD35 

Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is amending our 

regulation to alter the way in which it 

differentiates for risk in the risk-based 

assessment system; revise deposit 

insurance assessment rates, including 

base assessment rates; and make 

technical and other changes to the rules 

governing the risk-based assessment 

system. 

DATES: Effective Date: April 1, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Chief, Banking and 

Regulatory Policy Section, Division of 

Insurance and Research, (202) 898– 

8967; and Christopher Bellotto, Counsel, 

Legal Division, (202) 898–3801. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Reform Act 

On February 8, 2006, the President 

signed the Federal Deposit Insurance 

Reform Act of 2005 into law; on 

February 15, 2006, he signed the Federal 

Deposit Insurance Reform Conforming 

Amendments Act of 2005 (collectively, 

the Reform Act).1 The Reform Act 

enacted the bulk of the reform 

recommendations made by the FDIC in 

2001.2 The Reform Act, among other 

things, required that the FDIC, 

‘‘prescribe final regulations, after notice 

and opportunity for comment * * * 

providing for assessments under section 

7(b) of the Federal Deposit Insurance 

Act, as amended * * *,’’ thus giving the 

FDIC, through its rulemaking authority, 

the opportunity to better price deposit 

insurance for risk.3

The Federal Deposit Insurance Act, as 

amended by the Reform Act, continues 

to require that the assessment system be 

risk-based and allows the FDIC to define 

risk broadly. It defines a risk-based 

system as one based on an institution’s 

probability of causing a loss to the 

deposit insurance fund due to the 

composition and concentration of the 

institution’s assets and liabilities, the 

amount of loss given failure, and 

revenue needs of the Deposit Insurance 

Fund (the fund or DIF).4