41766 Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules 

will make its own determination about 

the confidential status of the 

information and treat it according to its 

determination. 

It is DOE’s policy that all comments 

may be included in the public docket, 

without change and as received, 

including any personal information 

provided in the comments (except 

information deemed to be exempt from 

public disclosure). 

VI. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this supplemental notice 

of proposed rulemaking. 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Incorporation by reference, 

Intergovernmental relations, Small 

businesses. 

Signing Authority 

This document of the Department of 

Energy was signed on July 22, 2021, by 

Kelly Speakes-Backman, Principal 

Deputy Assistant Secretary and Acting 

Assistant Secretary for Energy Efficiency 

and Renewable Energy, pursuant to 

delegated authority from the Secretary 

of Energy. That document with the 

original signature and date is 

maintained by DOE. For administrative 

purposes only, and in compliance with 

requirements of the Office of the Federal 

Register, the undersigned DOE Federal 

Register Liaison Officer has been 

authorized to sign and submit the 

document in electronic format for 

publication, as an official document of 

the Department of Energy. This 

administrative process in no way alters 

the legal effect of this document upon 

publication in the Federal Register. 

Signed in Washington, DC, on July 23, 

2021. 

Treena V. Garrett, 

Federal Register Liaison Officer, U.S. 

Department of Energy. 

For the reasons stated in the 

preamble, DOE is proposing to amend 

part 430 of Chapter II of Title 10, Code 

of Federal Regulations as set forth 

below: 

PART 430—ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

■ 1. The authority citation for part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 

2461 note. 

■ 2. Appendix I to subpart B of part 430 

is amended by: 

■ a. Adding an introductory note; and 

■ b. Revising section 2.1.1; 

The addition and revision read as 

follows: 

Appendix I to Subpart B of Part 430— 

Uniform Test Method for Measuring the 

Energy Consumption of Cooking 

Products 

Note: Prior to [Date 180 days after 

publication of a final rule], representations 

with respect to the energy use or efficiency 

of a microwave oven, including compliance 

certifications, must be based on testing 

conducted in accordance with either this 

appendix as it now appears or appendix I as 

it appeared at 10 CFR part 430, subpart B 

revised as of January 1, 2021. Beginning on 

[Date 180 days after publication of a final 

rule] representations with respect to energy 

use or efficiency of a microwave oven, 

including compliance certifications, must be 

based on testing conducted in accordance 

with this appendix. 

* * * * * 

2.1.1 Microwave ovens, excluding any 

microwave oven component of a combined 

cooking product. Install the microwave oven 

in accordance with the manufacturer’s 

instructions and connect to an electrical 

supply circuit with voltage as specified in 

section 2.2.1 of this appendix. Install the 

microwave oven in accordance with section 

5, paragraph 5.2 of IEC 62301 (Second 

Edition) (incorporated by reference; see 

§ 430.3), disregarding the provisions 

regarding batteries and the determination, 

classification, and testing of relevant modes. 

If the microwave oven can communicate 

through a network (e.g., Bluetooth® or 

internet connection), disable the network 

function, by means provided in the 

manufacturer’s user manual, for the duration 

of testing. If the manufacturer’s user manual 

does not provide a means for disabling the 

network function, test the microwave oven 

with the network function in the factory 

default setting or in the as-shipped condition 

as instructed in Section 5, Paragraph 5.2 of 

IEC 62301 (Second Edition). The clock 

display must be on, regardless of 

manufacturer’s instructions or default setting 

or supplied setting. The clock display must 

remain on during testing, unless the clock 

display powers down automatically with no 

option for the consumer to override this 

function. Install a watt meter in the circuit 

that meets the requirements of section 2.6.1.1 

of this appendix. 

* * * * * 

[FR Doc. 2021–16023 Filed 8–2–21; 8:45 am] 

BILLING CODE 6450–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 330 

RIN 3064–AF27 

Simplification of Deposit Insurance 

Rules 

AGENCY: Federal Deposit Insurance 

Corporation. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Deposit 

Insurance Corporation is seeking 

comment on proposed amendments to 

its regulations governing deposit 

insurance coverage. The proposed rule 

would simplify the deposit insurance 

regulations by establishing a ‘‘trust 

accounts’’ category that would provide 

for coverage of deposits of both 

revocable trusts and irrevocable trusts, 

and provide consistent deposit 

insurance treatment for all mortgage 

servicing account balances held to 

satisfy principal and interest obligations 

to a lender. 

DATES: Comments will be accepted until 

October 4, 2021. 

ADDRESSES: You may submit comments 

on the notice of proposed rulemaking 

using any of the following methods: 

• Agency Website: https://

www.fdic.gov/resources/regulations/ 

federal-register-publications/. Follow 

the instructions for submitting 

comments on the agency website. 

• Email: comments@fdic.gov. Include 

RIN 3064–AF27 on the subject line of 

the message. 

• Mail: James P. Sheesley, Assistant 

Executive Secretary, Attention: 

Comments-RIN 3064–AF27, 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 NW 

building (located on F Street) on 

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

• Public Inspection: All comments 

received, including any personal 

information provided, will be posted 

generally without change to https://

www.fdic.gov/resources/regulations/ 

federal-register-publications/. 

FOR FURTHER INFORMATION CONTACT: 

James Watts, Counsel, Legal Division, 

(202) 898–6678, jwatts@fdic.gov; 

Kathryn Marks, Counsel, Legal Division, 

(202) 898–3896, kmarks@fdic.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Simplification of Deposit Insurance Trust 

Rules 

A. Policy Objectives 


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1Trusts include informal revocable trusts 

(commonly referred to as payable-on-death 

accounts, in-trust-for accounts, or Totten trusts), 

formal revocable trusts, and irrevocable trusts. 

2See 73 FR 56706 (Sep. 30, 2008). 3 In 2008, the FDIC adopted an insurance 

calculation for revocable trusts that have five or 

fewer beneficiaries. Under this rule, 12 CFR 

330.10(a), each trust grantor is insured up to 

$250,000 per beneficiary. 

B. Background 

1. Deposit Insurance and the FDIC’s 

Statutory and Regulatory Authority 

2. Evolution of Insurance Coverage of Trust 

Deposits 

3. Current Rules for Coverage of Trust 

Deposits 

4. Part 370 and Recordkeeping at the 

Largest IDIs 

5. Need for Further Rulemaking 

C. Description of Proposed Rule 

D. Examples Demonstrating Coverage 

Under Current and Proposed Rules 

E. Alternatives Considered 

F. Request for Comment 

II. Amendments to Mortgage Servicing 

Account Rule 

A. Policy Objectives 

B. Background and Need for Rulemaking 

C. Proposed Rule 

D. Request for Comment 

III. Regulatory Analysis 

A. Expected Effects 

1. Simplification of Trust Rules 

2. Amendments to Mortgage Servicing 

Account Rule 

B. Regulatory Flexibility Act 

1. Simplification of Trust Rules 

2. Amendments to Mortgage Servicing 

Account Rule 

C. Paperwork Reduction Act 

D. Riegle Community Development and 

Regulatory Improvement Act 

E. Treasury and General Government 

Appropriations Act, 1999—Assessment 

of Federal Regulations and Policies on 

Families 

F. Plain Language 

I. Simplification of Deposit Insurance 

Trust Rules 

A. Policy Objectives 

The Federal Deposit Insurance 

Corporation (FDIC) is seeking comment 

on proposed amendments to its 

regulations governing deposit insurance 

coverage for deposits held in connection 

with trusts.1 The proposed amendments 

are intended to (1) provide depositors 

and bankers with a rule for trust account 

coverage that is easy to understand and 

(2) to facilitate the prompt payment of 

deposit insurance in accordance with 

the Federal Deposit Insurance Act (FDI 

Act), among other objectives. 

Accomplishing these objectives also 

would further the FDIC’s mission in 

other respects, as discussed in greater 

detail below. 

Clarifying Insurance Coverage for Trust 

Deposits 

The proposed amendments would 

clarify for depositors, bankers, and other 

interested parties the insurance rules 

and limits for trust accounts. The 

proposal both reduces the number of 

rules governing coverage for trust 

accounts and establishes a 

straightforward calculation to determine 

coverage. The deposit insurance trust 

rules have evolved over time and can be 

difficult to apply in some 

circumstances. The proposed 

amendments are intended to alleviate 

some of the confusion that depositors 

and bankers may experience with 

respect to insurance coverage and 

limits. Under the current regulations, 

there are distinct and separate sets of 

rules applicable to deposits of revocable 

trusts and irrevocable trusts. Each set of 

rules has its own criteria for coverage 

and methods by which coverage is 

calculated. Despite the FDIC’s efforts to 

simplify the revocable trust rules in 

2008,2 over the last 13 years FDIC 

deposit insurance specialists have 

responded to approximately 20,000 

complex insurance inquiries per year on 

average. More than 50 percent of 

inquiries pertain to deposit insurance 

coverage for trust accounts (revocable or 

irrevocable). The consistently high 

volume of complex inquiries about trust 

accounts over an extended period of 

time suggests continued confusion 

about insurance limits. To help clarify 

insurance limits, the proposed 

amendments would further simplify 

insurance coverage of trust accounts 

(revocable and irrevocable) by 

harmonizing the coverage criteria for 

certain types of trust accounts and by 

establishing a simplified formula for 

calculating coverage that would apply to 

these deposits. The FDIC proposes using 

the calculation that the FDIC first 

adopted in 2008 for revocable trust 

accounts with five or fewer 

beneficiaries. This formula is 

straightforward and is already generally 

familiar to bankers and depositors.3

Prompt Payment of Deposit Insurance 

The FDI Act requires the FDIC to pay 

depositors ‘‘as soon as possible’’ after a 

bank failure. However, the insurance 

determination and subsequent payment 

for many trust deposits can be delayed 

when FDIC staff must review complex 

trust agreements and apply various rules 

for determining deposit insurance 

coverage. The proposed amendments 

are intended to facilitate more timely 

deposit insurance determinations for 

trust accounts by reducing the amount 

of time needed to review trust 

agreements and determine coverage. 

These amendments should promote the 

FDIC’s ability to pay insurance to 

depositors promptly following the 

failure of an insured depository 

institution (IDI), enabling depositors to 

meet their financial needs and 

obligations. 

Facilitating Resolutions 

The proposed changes will also 

facilitate the resolution of failed IDIs. 

The FDIC is routinely required to make 

deposit insurance determinations in 

connection with IDI failures. In many of 

these instances, however, deposit 

insurance coverage for trust deposits is 

based upon information that is not 

maintained in the failed IDI’s deposit 

account records. As a result, FDIC staff 

work with depositors, trustees, and 

other parties to obtain trust 

documentation following an IDI’s failure 

in order to complete deposit insurance 

determinations. The difficulties 

associated with completing such a 

determination are exacerbated by the 

substantial growth in the use of formal 

trusts in recent decades. The proposed 

amendments could reduce the time 

spent reviewing such information and 

provide greater flexibility to automate 

deposit insurance determinations, 

thereby reducing potential delays in the 

completion of deposit insurance 

determinations and payments. Timely 

payment of deposit insurance also helps 

to avoid reductions in the franchise 

value of failed IDIs, expanding 

resolution options and mitigating losses. 

Effects on the Deposit Insurance Fund 

The FDIC is also mindful of the effect 

that the proposed changes to the deposit 

insurance regulations could have on 

deposit insurance coverage and 

generally on the Deposit Insurance Fund 

(DIF), which is used to pay deposit 

insurance in the event of an IDI’s 

failure. The FDIC manages the DIF 

according to parameters established by 

Congress and continually evaluates the 

adequacy of the DIF to protect insured 

depositors. The FDIC’s general intent is 

that proposed amendments to the trust 

rules be neutral with respect to the DIF. 

B. Background 

1. Deposit Insurance and the FDIC’s 

Statutory and Regulatory Authority 

The FDIC is an independent agency 

that maintains stability and public 

confidence in the nation’s financial 

system by: Insuring deposits; examining 

and supervising IDIs for safety and 

soundness and compliance with 

consumer financial protection laws; and 

resolving IDIs, including large and 

complex financial institutions, and 

managing receiverships. The FDIC has 

helped to maintain public confidence in 


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4See 12 U.S.C. 1821(a)(1)(E). 

5See 12 U.S.C. 1821(a)(1)(C) (deposits 

‘‘maintained by a depositor in the same capacity 

and the same right’’ at the same IDI are aggregated 

for purposes of the deposit insurance limit). 

6 12 U.S.C. 1821(a)(2). 

7See 12 U.S.C. 1817(i), 1821(a). 

8See 12 CFR 330.10, 330.13. 

9See 1934 FDIC Annual Report at 143. 

10See Banking Act of 1935, Public Law 74–305 

(Aug. 23, 1935), section 101 (‘‘Trust funds held by 

an insured bank in a fiduciary capacity whether 

held in its trust or deposited in any other 

department or in another bank shall be insured in 

an amount not to exceed $5,000 for each trust 

estate, and when deposited by the fiduciary bank 

in another insured bank such trust funds shall be 

similarly insured to the fiduciary bank according to 

the trust estates represented.’’). 

11The name ‘‘Totten trust’’ is derived from an 

early New York court decision recognizing this 

form of trust, Matter of Totten, 179 N.Y. 112 (N.Y. 

1904). Many other states have recognized similar 

types of accounts, commonly known as ‘‘payableon-death’’ accounts or tentative trust accounts. 

12Separate Insurability of ‘‘Totten Trust’’ 

Accounts (June 1, 1955), Federal Banking Law 

Reporter ¶ 92,583. 

13 32 FR 10408 (July 14, 1967). 

14 55 FR 20111 (May 15, 1990). 

15 54 FR 52399, 52408 (Dec. 21, 1989) (notice of 

proposed rulemaking). 

16 55 FR 20126 (May 15, 1990). 

times of financial turmoil, including the 

period from 2008 to 2013, when the 

United States experienced a severe 

financial crisis, and more recently in 

2020 during the financial stress 

associated with the COVID–19 

pandemic. During the more than 88 

years since the FDIC was established, no 

depositor has lost a penny of FDICinsured funds. 

The FDI Act establishes the key 

parameters of deposit insurance 

coverage, including the standard 

maximum deposit insurance amount 

(SMDIA), currently $250,000.4 In 

addition to providing deposit insurance 

coverage up to the SMDIA at each IDI 

where a depositor maintains deposits, 

the FDI Act also provides separate 

insurance coverage for deposits that a 

depositor maintains in different rights 

and capacities (also known as insurance 

categories) at the same IDI.5 For 

example, deposits in the single 

ownership category are separately 

insured from deposits in the joint 

ownership category at the same IDI. 

The FDIC’s deposit insurance 

categories have been defined through 

both statute and regulation. Certain 

categories, such as the government 

deposit category, have been expressly 

defined by Congress.6 Other categories, 

such as joint deposits and corporate 

deposits, have been based on statutory 

interpretation and recognized through 

regulations issued in 12 CFR part 330 

pursuant to the FDIC’s rulemaking 

authority. In addition to defining the 

insurance categories, the deposit 

insurance regulations in part 330 

provide the criteria used to determine 

insurance coverage for deposits in each 

category. 

2. Evolution of Insurance Coverage of 

Trust Deposits 

Over the years, deposit insurance 

coverage has evolved to reflect both the 

FDIC’s experience and changes in the 

banking industry. The FDI Act includes 

provisions defining the coverage for 

certain trust deposits,7 while coverage 

for other trust deposits has been defined 

by regulation.8 The following review of 

historical coverage for trust deposits 

provides context for the FDIC’s 

proposed amendments to the trust rules. 

In the FDIC’s earliest years, deposit 

insurance coverage for trust deposits 

depended upon whether the 

beneficiaries of the trust were named in 

the bank’s records. If the beneficiaries 

were named in the bank’s records, the 

trust deposit was insured according to 

the beneficiaries’ respective interests 

because the deposit was held in trust for 

the beneficiaries. If beneficiaries were 

not named in the bank’s records, the 

grantor trustee was treated as the 

depositor instead and insured to the 

applicable limit (then $5,000); however, 

the trust deposit was insured separately 

from the trustee’s other deposits, if any, 

at the same bank.9 If the bank itself was 

designated as trustee of the trust, 

deposits of the trust were insured up to 

the $5,000 limit for each trust estate 

pursuant to statute.10

Over time, some states began 

recognizing the existence of a trust 

based on a designation in the bank’s 

records that a deposit was held in trust 

for another person—even in the absence 

of a written trust agreement. In 1955, the 

FDIC’s then-General Counsel concluded 

that if relevant state law recognized 

these ‘‘Totten trusts’’ 11 and the 

depositor complied with the law in 

establishing the trust, the FDIC would 

insure these deposits separately from 

the depositor’s other deposit accounts.12

This was the first time the FDIC insured 

informal trusts as trust deposits. 

The FDIC further clarified insurance 

coverage for trust deposits in 1967 when 

it issued rules defining the deposit 

insurance categories that the FDIC had 

recognized.13 These rules defined a 

‘‘testamentary accounts’’ category that 

included revocable trust accounts, 

tentative or Totten trust accounts, and 

payable-on-death accounts and similar 

accounts evidencing an intention that 

the funds shall belong to another person 

upon the depositor’s death. 

Testamentary deposits were insured up 

to the applicable limit (which Congress 

had raised to $15,000) for each named 

beneficiary who was the depositor’s 

spouse, child, or grandchild. If the 

named beneficiary did not satisfy this 

kinship requirement, the deposit was 

aggregated with the depositor’s 

individual accounts for purposes of 

deposit insurance coverage. The rules 

also included a separate ‘‘trust 

accounts’’ category for irrevocable trusts 

with coverage of up to $15,000 for each 

beneficiary’s trust interests in deposit 

accounts established by the same 

grantor pursuant to a trust agreement. 

Irrevocable trust accounts were insured 

separately from other deposit accounts 

of the trustee, grantor, or beneficiary, 

including testamentary accounts. 

In 1989, Congress transferred 

responsibility for insuring deposits of 

savings associations from the Federal 

Savings and Loan Insurance Corporation 

(FSLIC) to the FDIC. As part of this 

transition, the FDIC issued uniform 

deposit insurance rules for the deposits 

of banks and savings associations, 

reconciling the differences between the 

FDIC and FSLIC insurance rules.14

These uniform rules redesignated the 

‘‘testamentary accounts’’ category as 

‘‘revocable trust accounts,’’ and 

continued to require beneficiaries for 

revocable trust deposits to be named, 

but added the requirement that these 

beneficiaries be named in the failed 

IDI’s deposit account records in order 

for per-beneficiary coverage to apply. In 

the notice of proposed rulemaking 

discussing this change, the FDIC 

explained that the change was expected 

to simplify the deposit insurance 

determination process for revocable 

trust deposits and expedite the payment 

of deposit insurance.15 These rules also 

redesignated the ‘‘trust accounts’’ 

category as ‘‘irrevocable trust accounts’’ 

and introduced a distinction between 

contingent interests and non-contingent 

interests in irrevocable trusts that would 

affect deposit insurance coverage. Noncontingent interests were each insured 

up to the applicable limit (then 

$100,000), while contingent interests 

were aggregated and insured up to 

$100,000 in total.16

As revocable trusts increased in 

popularity during the late 1980s and 

early 1990s as an estate planning tool, 

the FDIC began receiving more inquiries 

about the revocable trust rules. Many of 

these inquiries were prompted by 

complex trust agreements that included 

numerous conditions prescribing 

whether, when, or how a named 

beneficiary would receive trust assets. 

FDIC staff generally interpreted the 

revocable trust rules to require 


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17See, e.g., Advisory Opinion 94–32, Guidelines 

for Insurance Coverage of Revocable Trust Accounts 

(Including ‘‘Living Trust’’ Accounts), (May 18, 

1994). While the vested interest requirement 

applied to both formal and informal trusts, interests 

in informal trusts were generally considered to be 

vested because they automatically passed to the 

designated beneficiaries upon the death of the last 

grantor. 

18 61 FR 25596 (May 22, 1996). 

19 63 FR 25750 (May 11, 1998). 

20 64 FR 15653 (Apr. 1, 1999). 

21 68 FR 38645 (June 30, 2003). 

22 69 FR 2825 (Jan. 21, 2004). 

23 69 FR 2825, 2828 (Jan. 21, 2004). 

24 73 FR 56706 (Sep. 30, 2008). 

25 12 CFR 330.10(a). 

26 12 CFR 330.10(c). 

27 12 CFR 330.10(d). 

28 12 CFR 330.10(b)(1). 

beneficiaries’ interests in formal and 

informal revocable trusts to be vested in 

order to qualify for separate insurance 

coverage, meaning that, after a grantor’s 

death, there was no condition attached 

to the beneficiary’s interest that would 

make the interest contingent (referred to 

as a ‘‘defeating contingency’’).17 Staff 

reasoned that only a vested trust interest 

could establish a reasonable expectation 

that the revocable trust deposit ‘‘shall 

belong to’’ the beneficiary, as the 

regulation required. 

In 1996, the FDIC sought public 

comment on potential simplification of 

the deposit insurance rules, noting that 

its experience with bank and savings 

association failures and a steady volume 

of inquiries on deposit insurance 

coverage suggested that simplification 

could be beneficial.18 Among other 

changes, the FDIC proposed specific 

amendments to the rules for revocable 

trust deposits. Certain of these changes 

were finalized in 1998, when a 

provision was added to the rules 

defining the conditions that would 

constitute a defeating contingency.19

Soon afterward, the FDIC expanded the 

list of beneficiaries that would qualify 

for per-beneficiary coverage to include 

siblings and parents, noting that some 

depositors had lost money in bank 

failures because they had named nonqualifying beneficiaries.20

In 2003, the FDIC proposed amending 

the revocable trust rules, pointing to 

continued confusion about the coverage 

for revocable trust deposits.21

Specifically, the FDIC proposed to 

eliminate the defeating contingency 

provisions of the rules, with the result 

that coverage would be based on the 

interests of qualifying beneficiaries, 

irrespective of any defeating 

contingencies in the trust agreement. 

The FDIC subsequently adopted this 

change, noting that it more closely 

aligned coverage for living trust 

accounts with payable-on-death 

accounts.22 Defeating contingency 

provisions were not eliminated for 

irrevocable trusts. At the same time, the 

FDIC also eliminated the requirement to 

name the beneficiaries of a formal 

revocable trust in the IDI’s deposit 

account records.23 Because the FDIC 

had to obtain and review trust 

agreements from depositors following 

an IDI’s failure to determine the 

eligibility of the beneficiaries and 

allocation of funds to each beneficiary, 

eliminating this requirement was based 

on the conclusion that also requiring 

IDIs to maintain records of trust 

beneficiaries, or requiring grantors to 

inform IDIs of changes in their trust 

agreements, was unnecessary and 

burdensome. Though the additional 

information might expedite deposit 

insurance payments, the FDIC 

determined that removing this 

recordkeeping requirement would 

support ongoing efforts under the 

Economic Growth and Regulatory 

Paperwork Reduction Act to eliminate 

unnecessary regulatory requirements. 

The FDIC’s experience with making 

deposit insurance determinations 

during the early stages of the most 

recent financial crisis suggested that 

further changes to the trust rules were 

necessary. In 2008, the FDIC simplified 

the rules in several respects.24 First, it 

eliminated the kinship requirement for 

revocable trust beneficiaries, instead 

allowing any natural person, charitable 

organization, or non-profit, to qualify for 

per-beneficiary coverage. Second, a 

simplified calculation was established if 

a revocable trust named five or fewer 

beneficiaries; coverage would be 

determined without regard to the 

allocation of interests among the 

beneficiaries. This eliminated the need 

to discern and consider beneficial 

interests in many cases. 

A different insurance calculation 

applied to revocable trusts with more 

than five beneficiaries. Specifically, at 

that time, the SMDIA was $100,000 and 

thus if more than five beneficiaries were 

named in a revocable trust, coverage 

would be the greater of: (1) $500,000; or 

(2) the aggregate amount of all 

beneficiaries’ interests in the trust(s), 

limited to $100,000 per beneficiary. 

When the SMDIA was increased to 

$250,000, a similar adjustment was 

made from $100,000 to $250,000 for the 

calculation of per beneficiary coverage. 

3. Current Rules for Coverage of Trust 

Deposits 

The FDIC currently recognizes three 

different insurance categories for 

deposits held in connection with trusts: 

(1) Revocable trusts; (2) irrevocable 

trusts; and (3) irrevocable trusts with an 

IDI as trustee. The current rules for 

determining insurance coverage for 

deposits in each of these categories are 

described below. 

Revocable Trust Deposits 

The revocable trust category applies 

to deposits for which the depositor has 

evidenced an intention that the deposit 

shall belong to one or more beneficiaries 

upon his or her death. This category 

includes deposits held in connection 

with formal revocable trusts—that is, 

revocable trusts established through a 

written trust agreement. It also includes 

deposits that are not subject to a formal 

trust agreement, where the IDI makes 

payment to the beneficiaries identified 

in the IDI’s records upon the depositor’s 

death based on account titling and 

applicable state law. The FDIC refers to 

these types of deposits, including Totten 

trust accounts, payable-on-death 

accounts, and similar accounts, as 

‘‘informal revocable trusts.’’ Deposits 

associated with formal and informal 

revocable trusts are aggregated for 

purposes of the deposit insurance rules; 

thus, deposits that will pass from the 

same grantor to beneficiaries are 

aggregated and insured up to the 

SMDIA, currently $250,000, per 

beneficiary, regardless of whether the 

transfer would be accomplished through 

a written revocable trust or an informal 

revocable trust.25

Under the current revocable trust 

rules, beneficiaries include natural 

persons, charitable organizations, and 

non-profit entities recognized as such 

under the Internal Revenue Code of 

1986.26 If a named beneficiary does not 

satisfy this requirement, funds held in 

trust for that beneficiary are treated as 

single ownership funds of the grantor 

and aggregated with any other single 

ownership accounts that the grantor 

maintains at the same IDI.27

Certain requirements also must be 

satisfied for a deposit to be insured in 

the revocable trust category. The 

required intention that the funds shall 

belong to the beneficiaries upon the 

depositor’s death must be manifested in 

the ‘‘title’’ of the account using 

commonly accepted terms such as ‘‘in 

trust for,’’ ‘‘as trustee for,’’ ‘‘payable-ondeath to,’’ or any acronym for these 

terms. For purposes of this requirement, 

‘‘title’’ includes the IDI’s electronic 

deposit account records. For example, 

an IDI’s electronic deposit account 

records could identify the account as a 

revocable trust account through coding 

or a similar mechanism.28 In addition, 


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29 12 CFR 330.10(b)(2). 

30 12 CFR 330.10(a). 

31 12 CFR 330.10(e). 

32 12 CFR 330.10(g). For example, if a revocable 

trust provides a life estate for the depositor’s spouse 

and remainder interests for six other beneficiaries, 

the spouse’s life estate interest would be valued at 

$250,000 for purposes of the deposit insurance 

calculation. 

33 12 CFR 330.10(f)(1). 

34 12 CFR 330.10(f)(2). 

35 12 CFR 330.10(h). 

36The revocable trust rules tend to provide 

greater coverage than the irrevocable trust rules 

because contingencies are not considered for 

revocable trusts. In addition, where five or fewer 

beneficiaries are named by a revocable trust, 

specific allocations to beneficiaries also are not 

considered. 

37 12 CFR 330.1(m). For example, a life estate 

interest is generally non-contingent, as it may be 

valued using the life expectancy tables. However, 

where a trustee has discretion to divert funds from 

one beneficiary to another to provide for the second 

beneficiary’s medical needs, the first beneficiary’s 

interest is contingent upon the trustee’s discretion. 

38 12 CFR 330.13(a). 

39 12 CFR 330.13(b). 

40See 12 CFR 330.1(r) (definition of ‘‘trust 

interest’’ does not include any interest retained by 

the settlor). 

41 12 U.S.C. 1817(i). 

42Part 330 defines ‘‘trust funds’’ as ‘‘funds held 

by an insured depository institution as trustee 

pursuant to any irrevocable trust established 

pursuant to any statute or written trust agreement.’’ 

12 CFR 330.1(q). 

43 12 CFR 330.12(a). 

44 81 FR 87734 (Dec. 5, 2016). 

the beneficiaries of informal trusts (i.e., 

payable-on-death accounts) must be 

named in the IDI’s deposit account 

records.29 Since 2004, the requirement 

to name beneficiaries in the IDI’s 

deposit account records has not applied 

to formal revocable trusts; the FDIC 

generally obtains information on 

beneficiaries of such trusts from 

depositors following an IDI’s failure. 

Therefore, if a formal revocable trust 

deposit exceeds $250,000 and the 

depositor’s IDI were to fail, this will 

likely result in a hold being placed on 

the deposit until the FDIC can review 

the trust agreement and verify that the 

beneficiary rules are satisfied, thereby 

delaying insurance determinations and 

payments to insured depositors. 

The calculation of deposit insurance 

coverage for revocable trust deposits 

depends upon the number of unique 

beneficiaries named by a depositor. If 

five or fewer beneficiaries have been 

named, the depositor is insured in an 

amount up to the total number of named 

beneficiaries multiplied by the SMDIA, 

and the specific allocation of interests 

among the beneficiaries is not 

considered.30 If more than five 

beneficiaries have been named, the 

depositor is insured up to the greater of: 

(1) Five times the SMDIA; or (2) the 

total of the interests of each beneficiary, 

with each such interest limited to the 

SMDIA.31 For purposes of this 

calculation, a life estate interest is 

valued at the SMDIA.32

Where a revocable trust deposit is 

jointly owned by multiple co-owners, 

the interests of each account owner are 

separately insured up to the SMDIA per 

beneficiary.33 However, if the co-owners 

are the only beneficiaries of the trust, 

the account is instead insured under the 

FDIC’s joint account rule.34

The current revocable trust rule also 

contains a provision that was intended 

to reduce confusion and the potential 

for a decrease in deposit insurance 

coverage in the case of the death of a 

grantor. Specifically, if a revocable trust 

becomes irrevocable due to the death of 

the grantor, the trust’s deposit may 

continue to be insured under the 

revocable trust rules.35 Absent this 

provision, the irrevocable trust rules 

would apply following the grantor’s 

death, as the revocable trust becomes 

irrevocable at that time, which could 

result in a reduction in coverage.36

Irrevocable Trust Deposits 

Deposits held by an irrevocable trust 

that has been established either by 

written agreement or by statute are 

insured in the irrevocable trust deposit 

insurance category. Calculating coverage 

for deposits insured in this category 

requires a determination of whether 

beneficiaries’ interests in the trust are 

contingent or non-contingent. Noncontingent interests are interests that 

may be determined without evaluation 

of any contingencies, except for those 

covered by the present worth and life 

expectancy tables and the rules for their 

use set forth in the IRS Federal Estate 

Tax Regulations.37 Funds held for noncontingent trust interests are insured up 

to the SMDIA for each such 

beneficiary.38 Funds held for contingent 

trust interests are aggregated and 

insured up to the SMDIA in total.39

The irrevocable trust rules do not 

apply to deposits held for a grantor’s 

retained interest in an irrevocable 

trust.40 Such deposits are aggregated 

with the grantor’s other single 

ownership deposits for purposes of 

applying the deposit insurance limit. 

Deposits Held by an IDI as Trustee of an 

Irrevocable Trust 

For deposits held by an IDI in its 

capacity as trustee of an irrevocable 

trust, deposit insurance coverage is 

governed by section 7(i) of the FDI Act, 

a provision rooted in the Banking Act of 

1935. Section 7(i) provides that ‘‘trust 

funds held on deposit by an insured 

depository institution in a fiduciary 

capacity as trustee pursuant to any 

irrevocable trust established pursuant to 

any statute or written trust agreement 

shall be insured in an amount not to 

exceed the standard maximum deposit 

insurance amount . . . for each trust 

estate.’’ 41

The FDIC’s regulations governing 

coverage for deposits held by an IDI in 

its capacity as trustee of an irrevocable 

trust are found in § 330.12. The rule 

provides that ‘‘trust funds’’ held by an 

IDI in its capacity as trustee of an 

irrevocable trust, whether held in the 

IDI’s trust department or another 

department, or deposited by the 

fiduciary institution in another IDI, are 

insured up to the SMDIA for each owner 

or beneficiary represented.42 This 

coverage is separate from the coverage 

provided for other deposits of the 

owners or the beneficiaries,43 and 

deposits held for a grantor’s retained 

interest are not aggregated with the 

grantor’s single ownership deposits. 

Given the statutory basis for coverage, 

the FDIC is not proposing any changes 

to § 330.12. 

4. Part 370 and Recordkeeping at the 

Largest IDIs 

Simplification of the deposit 

insurance rules would make deposit 

insurance coverage easier to understand 

and improve the FDIC’s ability to 

resolve insurance claims in a timely 

manner, broadly benefiting the public 

and IDIs, and it would have particular 

significance for the large IDIs that are 

subject to part 370 of the FDIC’s 

regulations. Part 370 was adopted in 

2016 to promote the timely payment of 

deposit insurance in the event of the 

failure of a large IDI.44 Its development 

was prompted by the FDIC’s goal of 

ensuring a timely insurance 

determination in the event a large IDI 

with a high volume of deposit accounts 

fails. Part 370 requires ‘‘covered 

institutions,’’ which generally include 

IDIs with two million or more deposit 

accounts, to maintain complete and 

accurate depositor information and to 

configure their information technology 

systems so as to permit the FDIC to 

calculate deposit insurance coverage 


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45See Crisis and Response: An FDIC History, 

2008–2013 at 197, FN 48, Federal Deposit Insurance 

Corporation 2017. 

promptly in the event of the IDI’s 

failure. To implement part 370, covered 

institutions are updating their deposit 

account records and developing systems 

capable of applying the deposit 

insurance rules in an automated 

manner. 

In addition to broadly benefiting the 

public and all IDIs, simplification of the 

deposit insurance rules complements 

part 370 in that it would further 

promote the timely payment of deposit 

insurance for depositors of the largest 

IDIs. For instance, neither part 370 nor 

any other rule requires covered 

institutions to maintain certain records 

necessary to make an insurance 

determination for formal trust deposits, 

meaning that the FDIC would need to 

obtain and review revocable and 

irrevocable trust agreements following a 

covered institution’s failure. Analysis of 

data from part 370 covered institutions 

suggest the number of revocable trusts is 

significant and, if a covered institution 

were to fail, processing of deposit 

insurance for formal revocable trusts 

would likely extend well beyond 

normal FDIC payment timeframes. 

Simplification of the deposit insurance 

rules would streamline insurance 

determinations for trust accounts. The 

FDIC expects that capabilities 

developed in accordance with part 370 

will be helpful in addressing many of 

the challenges involved in making 

deposit insurance determinations in 

connection with a very large IDI’s 

failure. Simplification of the deposit 

insurance rules would provide 

additional benefits by reducing the 

amount of time needed to collect and 

process trust information after failure in 

order to make use of a covered 

institution’s part 370 deposit insurance 

calculation capabilities. With less time 

needed to calculate insurance coverage, 

the FDIC would be able to make more 

timely insurance payments to insured 

depositors. 

5. Need for Further Rulemaking 

The rules governing deposit insurance 

coverage for trust deposits have been 

simplified on several occasions, but are 

still frequently misunderstood, and can 

present some implementation 

challenges. For example, the current 

trust rules often require detailed, timeconsuming, and resource-intensive 

review of trust documentation to obtain 

the information that is necessary to 

calculate deposit insurance coverage. 

This information is often not found in 

an IDI’s records and must be obtained 

from depositors after an IDI’s failure. 

For example, the FDIC’s deposit 

insurance determinations for depositors 

of IndyMac Bank, F.S.B. (IndyMac) 

following its failure in 2008 were 

challenging in part because IndyMac 

had a large number of trust accounts for 

which deposit insurance coverage was 

governed by complex deposit insurance 

rules.45 FDIC claims personnel 

contacted more than 10,500 IndyMac 

depositors to obtain the trust 

documentation necessary to complete 

deposit insurance determinations for 

their revocable trust and irrevocable 

trust deposits. In some cases, this 

process took several months. Revision of 

the deposit insurance coverage rules for 

trust deposits along the lines proposed 

would reduce the amount of 

information that must be provided by 

trust depositors, as well as the 

complexity of the FDIC’s review. This 

revision should enable the FDIC to 

complete deposit insurance 

determinations more rapidly if another 

IDI with a large number of trust 

accounts were to fail in the future. 

Delays in the payment of deposit 

insurance can be consequential, as 

revocable trust deposits in particular are 

often used by depositors to satisfy their 

daily financial obligations, and the 

proposal would help to mitigate those 

delays. 

Several factors contribute to the 

challenges of making insurance 

determinations for trust deposits. First, 

there are three different sets of rules 

governing deposit insurance coverage 

for trust deposits. Understanding the 

coverage for a particular deposit 

requires a threshold inquiry to 

determine which set of rules to apply— 

the revocable trust rules, the irrevocable 

trust rules, or the rules for deposits held 

by an IDI as trustee of an irrevocable 

trust. This requires review of the trust 

agreement to determine the type of trust 

(revocable or irrevocable), and the 

inquiry may be complicated by 

innovations in state trust law that are 

intended to increase the flexibility and 

utility of trusts. In some cases, this 

threshold inquiry is also complicated by 

the provision of the revocable trust rules 

that allows for continued coverage 

under those rules where a trust becomes 

irrevocable upon the grantor’s death. 

The result of an irrevocable trust deposit 

being insured under the revocable trust 

rules has proven confusing for both 

depositors and bankers. 

Second, even after determining which 

set of rules applies to a particular 

deposit, it may be challenging to apply 

the rules. For example, the revocable 

trust rules include unique titling 

requirements and beneficiary 

requirements. These rules also provide 

for two separate calculations to 

determine insurance coverage, 

depending in part upon whether there 

are five or fewer trust beneficiaries or at 

least six beneficiaries. In addition, for 

revocable trusts that provide benefits to 

multiple generations of potential 

beneficiaries, the FDIC needs to evaluate 

the trust agreement to determine 

whether a beneficiary is a primary 

beneficiary (immediately entitled to 

funds when a grantor dies), contingent 

beneficiary, or remainder beneficiary. 

Only ‘‘eligible’’ primary beneficiaries 

and remainder beneficiaries are 

considered in calculating FDIC deposit 

insurance coverage. The irrevocable 

trust rules may require detailed review 

of trust agreements to determine 

whether beneficiaries’ interests are 

contingent and may also require 

actuarial or present value calculations. 

These types of requirements complicate 

the determination of insurance coverage 

for trust deposits, have proven 

confusing for depositors, and extend the 

amount of time needed to complete a 

deposit insurance determination and 

insurance payment. 

Third, the complexity and variety of 

depositors’ trust arrangements adds to 

the difficulty of determining deposit 

insurance coverage. For example, trust 

interests are sometimes defined through 

numerous conditions and formulas, and 

a careful analysis of these provisions 

may be necessary in order to calculate 

deposit insurance coverage under the 

current rules. Arrangements involving 

multiple trusts where the same 

beneficiaries are named by the same 

grantor(s) in different trusts add to the 

difficulty of applying the trust rules. 

The FDIC believes that simplification 

of the deposit insurance rules also 

presents an opportunity to more closely 

align the coverage provided for different 

types of trust deposits. For example, the 

revocable trust rules generally provide 

for a greater amount of coverage than 

the irrevocable trust rules. This outcome 

occurs because contingent interests for 

irrevocable trusts are aggregated and 

insured up to the SMDIA rather than 

being insured up to the SMDIA per 

beneficiary, while contingencies are not 

considered and therefore do not limit 

coverage in the same manner for 

revocable trusts. 

C. Description of Proposed Rule 

The FDIC is proposing to amend the 

rules governing deposit insurance 

coverage for trust deposits. Generally, 

the proposed amendments would: 

Merge the revocable and irrevocable 

trust categories into one category; apply 

a simpler, common calculation method 


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46For example, the FDIC currently aggregates 

deposits in payable-on-death accounts and deposits 

of written revocable trusts for purposes of deposit 

insurance coverage, despite their separate and 

distinct legal mechanisms. Also, where the coowners of a revocable trust are also that trust’s sole 

beneficiaries, the FDIC instead insures the trust’s 

deposits as joint deposits, reflecting the 

arrangement’s substance rather than its legal form. 

47As noted above, if a revocable trust becomes 

irrevocable due to the death of the grantor, the 

trust’s deposit continues to be insured under the 

revocable trust rules. 12 CFR 330.10(h). 

48The death of an account owner can affect 

deposit insurance coverage, often reducing the 

amount of coverage that applies to a family’s 

accounts. To ensure that families dealing with the 

death of a family member have adequate time to 

review and restructure accounts if necessary, the 

FDIC insures a deceased owner’s accounts as if he 

or she were still alive for a period of six months 

after his or her death. 12 CFR 330.3(j). 

49For example, two co-grantors that designate 

five beneficiaries are insured for up to $2,500,000 

(2 × 5 × $250,000). 

to determine insurance coverage for 

deposits held by revocable and 

irrevocable trusts; and eliminate certain 

requirements found in the current rules 

for revocable and irrevocable trusts. 

Merger of Revocable and Irrevocable 

Trust Categories 

As discussed above, the FDIC 

historically has insured revocable trust 

deposits and irrevocable trust deposits 

under two separate insurance categories. 

Staff’s experience has been that this 

bifurcation often confuses depositors 

and bankers, as it requires a threshold 

inquiry to determine which set of rules 

to apply to a trust deposit. Moreover, 

each trust deposit must be categorized 

before the aggregation of trust deposits 

within each category can be completed. 

The FDIC believes that trust deposits 

held in connection with revocable and 

irrevocable trusts are sufficiently 

similar, for purposes of deposit 

insurance coverage, to warrant the 

merger of these two categories into one 

category. Under the FDIC’s current 

rules, deposit insurance coverage is 

provided because the trustee maintains 

the deposit for the benefit of the 

beneficiaries. This is true regardless of 

whether the trust is revocable or 

irrevocable. Merger of the revocable and 

irrevocable trust categories would better 

conform deposit insurance coverage to 

the substance—rather than the legal 

form—of the trust arrangement. This 

underlying principle of the deposit 

insurance rules is particularly important 

in the context of trusts, as state law 

often provides flexibility to structure 

arrangements in different ways to 

accomplish a given purpose.46

Depositors may have a variety of reasons 

for selecting a particular legal 

arrangement, but that decision should 

not significantly affect deposit 

insurance coverage. Importantly, the 

proposed merger of the revocable trust 

and irrevocable trust categories into one 

category for deposit insurance purposes 

would not affect the application or 

operation of state trust law; this only 

would affect the determination of 

deposit insurance coverage for these 

types of trust deposits in the event of an 

IDI’s failure. 

Accordingly, the FDIC is proposing to 

amend § 330.10 of its regulations, which 

currently applies only to revocable trust 

deposits, to establish a new ‘‘trust 

accounts’’ category that would include 

both revocable and irrevocable trust 

deposits. The proposed rule defines the 

deposits that would be included in this 

category: (1) Informal revocable trust 

deposits, such as payable-on-death 

accounts, in-trust-for accounts, and 

Totten trust accounts; (2) formal 

revocable trust deposits, defined to 

mean deposits held pursuant to a 

written revocable trust agreement under 

which a deposit passes to one or more 

beneficiaries upon the grantor’s death; 

and (3) irrevocable trust deposits, 

meaning deposits held pursuant to an 

irrevocable trust established by written 

agreement or by statute. Section 330.10 

would not apply to deposits maintained 

by an IDI in its capacity as trustee of an 

irrevocable trust; these deposits would 

continue to be insured separately 

pursuant to section 7(i) of the FDI Act 

and § 330.12 of the deposit insurance 

regulations. 

In addition, the merger of the 

revocable trust and irrevocable trust 

categories eliminates the need for 

§ 330.10(h)–(i) of the current revocable 

trust rules, which provides that the 

revocable trust rules may continue to 

apply to a deposit where a revocable 

trust becomes irrevocable due to the 

death of one or more of the trust’s 

grantors. These provisions were 

intended to benefit depositors, who 

sometimes were unaware that a trust 

owner’s death could also trigger a 

significant decrease in insurance 

coverage as a revocable trust becomes 

irrevocable. However, in the FDIC’s 

experience, this rule has proven 

complex in part because it results in 

some irrevocable trusts being insured 

per the revocable trust rules, while other 

irrevocable trusts are insured under the 

irrevocable trust rules.47 As a result, a 

depositor could know a trust was 

irrevocable but not know which deposit 

insurance rules to apply. The proposed 

rule would insure deposits of revocable 

trusts and irrevocable trusts according 

to a common set of rules, eliminating 

the need for these provisions 

(§ 330.10(h)–(i)) and simplifying 

coverage for depositors. Accordingly, 

the death of a revocable trust owner 

would not result in a decrease in 

deposit insurance coverage for the trust. 

Coverage for irrevocable and revocable 

trusts would fall under the same 

category and deposit insurance coverage 

would remain the same, even after the 

expiration of the six-month grace period 

following the death of a deposit 

owner.48

Calculation of Coverage 

The FDIC is proposing to use one 

streamlined calculation to determine the 

amount of deposit insurance coverage 

for deposits of revocable and irrevocable 

trusts. This method is already utilized 

by the FDIC to calculate coverage for 

revocable trusts that have five or fewer 

beneficiaries and it is an aspect of the 

rules that is generally well-understood 

by bankers and trust depositors. 

The proposed rule would provide that 

a grantor’s trust deposits are insured in 

an amount up to the SMDIA (currently 

$250,000) multiplied by the number of 

trust beneficiaries, not to exceed five 

beneficiaries. The FDIC would presume 

that, for deposit insurance purposes, the 

trust provides for equal treatment of 

beneficiaries such that specific 

allocation of the funds to the respective 

beneficiaries will not be relevant, 

consistent with the FDIC’s current 

treatment of revocable trusts with five or 

fewer beneficiaries. This would, in 

effect, limit coverage for a grantor’s trust 

deposits at each IDI to a total of 

$1,250,000; in other words, maximum 

coverage would be equivalent to 

$250,000 per beneficiary up to five 

beneficiaries. In determining deposit 

insurance coverage, the FDIC would 

continue to only consider beneficiaries 

that are expected to receive the deposit 

held by the trust in the IDI; the FDIC 

would not consider beneficiaries who 

are expected to receive only non-deposit 

assets of the trust. 

The FDIC is proposing to calculate 

coverage in this manner based on its 

experience with the revocable trust 

rules after the most recent modifications 

to these rules in 2008. The FDIC has 

found that the deposit insurance 

calculation method for revocable trusts 

with five or fewer beneficiaries has been 

the most straightforward and is easy for 

bankers and the public to understand. 

This calculation provides for insurance 

in an amount up to the total number of 

unique grantor-beneficiary trust 

relationships (i.e., the number of 

grantors, multiplied by the total number 

of beneficiaries, multiplied by the 

SMDIA).49 In addition to being simpler, 


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50 Data from 2,550,001 depositors, including 

249,257 trust account depositors, at 246 failed 

banks from September 17, 2010–April 3, 2020. A 

total of 212 out of 249,257 (.085 percent) trust 

account depositors had more than $1.25 million in 

deposits across all of their trust accounts. Of these 

depositors, only 24 had more than five beneficiaries 

named in the bank’s records. However, not all trust 

accounts in the sample maintained beneficiary 

records at the bank, so this likely underestimates 

the number of affected depositors. 

51See 12 CFR 330.10(a) (‘‘all funds that a 

depositor holds in both living trust accounts and 

payable-on-death accounts, at the same FDICinsured institution and naming the same 

beneficiaries, are aggregated for insurance 

purposes’’). 

52For example, if a grantor maintained both an 

informal revocable trust account with three 

beneficiaries and a formal revocable trust account 

with three separate and unique beneficiaries, the 

two accounts would be aggregated and the 

maximum deposit insurance available would be 

$1.25 million (1 grantor × SMDIA × number of 

unique beneficiaries, limited to 5). However, if the 

same three people were the beneficiaries of both 

accounts, the maximum deposit insurance available 

would be $750,000 (1 grantor × SMDIA × 3 unique 

beneficiaries). 

53 12 CFR 330.10(c). 54See FDIC Financial Institution Employee’s 

Guide to Deposit Insurance at 51 (‘‘Sometimes the 

trust agreement will provide that if a primary 

beneficiary predeceases the owner, the deceased 

beneficiary’s share will pass to an alternative or 

contingent beneficiary. Regardless of such language, 

if the primary beneficiary is alive at the time of an 

IDI’s failure, only the primary beneficiary, and not 

the alternative or contingent beneficiary, is taken 

into account in calculating deposit insurance 

coverage.’’). Including only unique beneficiaries 

means that when an owner names the same 

beneficiary on multiple trust accounts, the 

beneficiary will only be counted once in calculating 

trust coverage. For example, if a grantor has two 

trust deposit accounts and names the same 

beneficiary in both trust documents, the total 

deposit insurance coverage associated with that 

beneficiary is limited to $250,000 in total. 

this calculation has proven beneficial in 

resolutions, as it leads to more prompt 

deposit insurance determinations and 

quicker access to insured deposits for 

depositors. Accordingly, the FDIC 

proposes to calculate deposit insurance 

coverage for trust deposits based on the 

simpler calculation currently used for 

revocable trusts with five or fewer 

beneficiaries. 

The streamlined calculation that 

would be used to determine coverage for 

revocable trust deposits and irrevocable 

trust deposits includes a limit on the 

total amount of deposit insurance 

coverage for all of a depositor’s funds in 

the trust category at the same IDI. The 

proposed rule would provide coverage 

for trust deposits at each IDI up to a total 

of $1,250,000 per grantor; in other 

words, each grantor’s insurance limit 

would be $250,000 per beneficiary up to 

a maximum of five beneficiaries. The 

level of five beneficiaries is an 

important threshold in the current 

revocable trust rules, as it defines 

whether a grantor’s coverage is 

determined using the simpler 

calculation of the number of 

beneficiaries multiplied by the SMDIA, 

rather than the more complex 

calculation involving the consideration 

of the amount of each beneficiary’s 

specific interest (which applies when 

there are six or more beneficiaries). The 

trust rules currently limit coverage by 

tying coverage to the specific interests of 

each beneficiary of an irrevocable trust 

or of each beneficiary of a revocable 

trust with more than five beneficiaries. 

The proposed rule’s $1,250,000 pergrantor, per-IDI limit is more 

straightforward and balances the 

objectives of simplifying the trust rules, 

promoting timely payment of deposit 

insurance, facilitating resolutions, 

ensuring consistency with the FDI Act, 

and limiting risk to the DIF. 

The FDIC anticipates that limiting 

coverage to $1,250,000 per grantor, per 

IDI, for trust deposits would affect very 

few depositors, as most trust deposits in 

past IDI failures have had balances well 

below this level. For example, data 

obtained from a sample of IDI failures 

from 2010–2020 suggests that only 

about 0.085 percent of depositors 

maintaining trust deposits might be 

affected by the proposed $1,250,000 

limit.50 The FDIC does not possess 

sufficient information, however, to 

enable it to project the effects of the 

proposed limit on current depositors, 

and requests that commenters provide 

information that might be helpful in this 

regard. 

Under the proposed rule, to determine 

the level of insurance coverage that 

would apply to trust deposits, 

depositors would still need to identify 

the grantors and the eligible 

beneficiaries of the trust. The level of 

coverage that applies to trust deposits 

would no longer be affected by the 

specific allocation of trust funds to each 

of the beneficiaries of the trust or by 

contingencies outlined in the trust 

agreement. Instead, the proposed rule 

would provide that a grantor’s trust 

deposits are insured up to a total of 

$1,250,000 per grantor, or an amount up 

to the SMDIA multiplied by the number 

of eligible beneficiaries, with a limit of 

no more than five beneficiaries. 

Aggregation 

The proposed rule also provides for 

the aggregation of revocable and 

irrevocable trust deposits for purposes 

of applying the deposit insurance limit. 

Under the current rules, deposits of 

informal revocable trusts and formal 

revocable trusts are aggregated for this 

purpose.51 The proposed rule would 

aggregate a grantor’s informal and 

formal revocable trust deposits, as well 

as irrevocable trust deposits. For 

example, all informal revocable trusts, 

formal revocable trusts and irrevocable 

trusts held for the same grantor, at the 

same IDI would be aggregated and the 

grantor’s insurance limit would be 

determined by how many eligible and 

unique beneficiaries were identified 

between all of their trust accounts.52

The deposit insurance coverage 

provided in the ‘‘trust accounts’’ 

category would continue to remain 

separate from the coverage provided for 

other deposits held in a different right 

and capacity at the same IDI. However, 

a small number of depositors that 

currently maintain both revocable trust 

and irrevocable trust deposits at the 

same IDI may have deposits in excess of 

the insurance limit if these separate 

categories are combined. The FDIC does 

not have data on depositors’ trust 

arrangements that would allow it to 

estimate the number of depositors that 

might be affected in this manner, and 

requests that commenters provide 

information that might be helpful in this 

regard. 

Eligible Beneficiaries 

Currently, the revocable trust rules 

provide that beneficiaries include 

natural persons, charitable 

organizations, and non-profit entities 

recognized as such under the Internal 

Revenue Code of 1986,53 while the 

irrevocable trust rules do not establish 

criteria for beneficiaries. The FDIC 

believes that a single definition should 

be used to determine whether an entity 

is an ‘‘eligible’’ beneficiary for all trust 

deposits, and proposes to use the 

current revocable trust rule’s definition. 

The FDIC believes that this will result 

in a change in deposit insurance 

coverage only in very rare cases. 

The proposed rule also would exclude 

from the calculation of deposit 

insurance coverage beneficiaries that 

only would obtain an interest in a trust 

if one or more named beneficiaries are 

deceased (often referred to as contingent 

beneficiaries). In this respect, the 

proposed rule would codify existing 

practice to include only primary, unique 

beneficiaries in the deposit insurance 

calculation.54 This would not represent 

a substantive change in coverage. 

Consistent with treatment under the 

current trust rules, naming a chain of 

contingent beneficiaries that would 

obtain trust interests only in event of a 

beneficiary’s death would not increase 

deposit insurance coverage. 

Finally, the proposed rule would 

codify a longstanding interpretation of 

the trust rules where an informal 


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55See FDIC Financial Institution Employee’s 

Guide to Deposit Insurance at 71. 

56See 12 CFR 330.1(r); see also FDIC Financial 

Institution Employee’s Guide to Deposit Insurance 

at 87. 

57 12 CFR 330.10(d). 

58 In the unlikely event a trust does not name any 

eligible beneficiaries, the FDIC would treat the 

trust’s deposits as single ownership deposits. Such 

deposits would be aggregated with any other single 

ownership deposits that the grantor maintains at the 

same IDI and insured up to the SMDIA of $250,000. 

59See FDIC Financial Institution Employee’s 

Guide to Deposit Insurance at 74. 

60See 12 CFR 330.10(b)(2). 

61See 12 CFR 330.10(f). 

revocable trust designates the 

depositor’s formal trust as its 

beneficiary. A formal trust generally 

does not meet the definition of an 

eligible beneficiary for deposit 

insurance purposes, but the FDIC has 

treated such accounts as revocable trust 

accounts under the trust rules, insuring 

the account as if it were titled in the 

name of the formal trust.55

Retained Interests and Ineligible 

Beneficiaries’ Interests 

The current trust rules provide that in 

some instances, funds corresponding to 

specific beneficiaries are aggregated 

with a grantor’s single ownership 

deposits at the same IDI for purposes of 

the deposit insurance calculation. These 

instances include a grantor’s retained 

interest in an irrevocable trust 56 and 

interests of beneficiaries that do not 

satisfy the definition of ‘‘beneficiary.’’ 57

This adds complexity to the deposit 

insurance calculation, as detailed 

review of a trust agreement may be 

required to value such interests in order 

to aggregate them with a grantor’s other 

funds. In order to implement the 

streamlined calculation for trust 

deposits, the FDIC is proposing to 

eliminate these provisions. Under the 

proposed rules, the grantor and other 

beneficiaries that do not satisfy the 

definition of ‘‘eligible beneficiary’’ 

would not be included for purposes of 

the deposit insurance calculation.58

Importantly, this would not in any way 

limit a grantor’s ability to establish such 

trust interests under State law. These 

interests simply would not factor into 

the calculation of deposit insurance 

coverage. 

Future Trusts Named as Beneficiaries 

Trusts often contain provisions for the 

establishment of one or more new trusts 

upon the grantor’s death, and the 

proposed rule also would clarify deposit 

insurance coverage in these situations. 

Specifically, if a trust agreement 

provides that trust funds will pass into 

one or more new trusts upon the death 

of the grantor (or grantors), the future 

trust (or trusts) would not be treated as 

beneficiaries for purposes of the 

calculation. The future trust(s) instead 

would be considered mechanisms for 

distributing trust funds, and the natural 

persons or organizations that receive the 

trust funds through the future trusts 

would be considered the beneficiaries 

for purposes of the deposit insurance 

calculation. This clarification is 

consistent with published guidance and 

would not represent a substantive 

change in deposit insurance coverage.59

Naming of Beneficiaries in Deposit 

Account Records 

Consistent with the current revocable 

trust rules, the proposed rule would 

continue to require the beneficiaries of 

an informal revocable trust to be 

specifically named in the deposit 

account records of the IDI.60 The FDIC 

does not believe this requirement 

imposes a burden on IDIs, as informal 

revocable trusts by their nature require 

the IDI to be able to identify the 

individuals or entities to which a 

deposit would be paid upon the 

depositor’s death. 

Presumption of Ownership 

The proposed rule also would state 

that, unless otherwise specified in an 

IDI’s deposit account records, a deposit 

of a trust established by multiple 

grantors is presumed to be owned in 

equal shares. This presumption is 

consistent with the current revocable 

trust rules.61

Bankruptcy Trustee Deposits 

The proposed rule would continue 

the current treatment of deposits placed 

at an IDI by a bankruptcy trustee. If 

funds of multiple bankruptcy estates 

were commingled in a single account at 

the IDI, each estate would be separately 

insured up to the SMDIA. 

Deposits Covered Under Other Rules 

The proposed rule would exclude 

from coverage under § 330.10 certain 

trust deposits that are covered by other 

sections of the deposit insurance 

regulations. For example, employee 

benefit plan deposits are insured 

pursuant to § 330.14, and investment 

company deposits are insured as 

corporate deposits pursuant to § 330.11. 

Deposits held by an insured depository 

institution in its capacity as trustee of 

an irrevocable trust are insured 

pursuant to § 330.12. In addition, if the 

co-owners of an informal or formal 

revocable trust are the trust’s sole 

beneficiaries, deposits held in 

connection with the trust would be 

treated as joint deposits under § 330.9. 

In each of these cases, the FDIC is not 

proposing to change the current rule. 

Conforming Changes 

The proposed simplification of the 

calculation for insurance coverage for 

trust deposits also would permit the 

elimination of certain definitions from 

§ 330.1 of the regulations. Specifically, 

§ 330.1 defines ‘‘trust interest’’ and 

‘‘non-contingent trust interest,’’ terms 

that are used in connection with the 

current irrevocable trust rules. Because 

the proposed rule would eliminate the 

evaluation of contingencies in 

determining coverage for trust deposits, 

the FDIC is proposing to remove these 

definitions from the regulation. 

Enhancements to Claims Processes 

The FDIC is also considering 

enhancements to its claims processes to 

further promote prompt insurance 

determinations for trust deposits. For 

example, the FDIC may be able to 

establish enhanced processes and 

systems for reaching out to depositors 

and obtaining trust documentation 

following an IDI’s failure. The claims 

process enhancements adopted by the 

FDIC will likely depend upon the 

amendments to the deposit insurance 

rules, if any, that are adopted through 

this rulemaking. 

D. Examples Demonstrating Coverage 

Under Current and Proposed Rules 

To assist commenters, the FDIC is 

providing examples demonstrating how 

the proposed rule would apply to 

determine deposit insurance coverage 

for trust deposits. These examples are 

not intended to be all-inclusive; they 

merely address a few possible scenarios 

involving trust deposits. The FDIC 

expects that for the vast majority of 

depositors, insurance coverage would 

not change under the proposed rule. 

The examples here specifically highlight 

a few instances where coverage could be 

reduced to ensure that commenters are 

aware of them. In addition, in any 

instances where a trust is established, 

the examples assume that the trustee is 

not an IDI. 

Example 1: Payable-on-Death Account 

Depositor A establishes a payable-ondeath account at an FDIC-insured bank. 

A has designated three beneficiaries for 

this deposit—B, C, and D—who will 

receive the funds upon her death, and 

listed all three on a form provided to the 

bank. The only other deposit account 

that A maintains at the same bank is a 

checking account with no designated 

beneficiaries. What is the maximum 

amount of deposit insurance coverage 

for A’s deposits at the bank? 


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Under the proposed rule, Depositor 

A’s payable-on-death account represents 

an informal revocable trust and would 

be insured in the trust accounts 

category. The maximum coverage for 

this deposit would be equal to the 

SMDIA (currently $250,000) multiplied 

by the number of grantors (in this case, 

one because A established the account 

herself) multiplied by the number of 

beneficiaries, up to a maximum of five 

(here three, the number of beneficiaries, 

is less than five). A’s payable-on-death 

account would be insured for up to: 

($250,000) × (1) × (3) = $750,000. 

The coverage for A’s payable-on-death 

account is separate from the coverage 

provided for A’s checking account, 

which would be insured in the single 

ownership category because she has not 

named any beneficiaries for that 

account. The single ownership checking 

account would be insured up to the 

SMDIA, $250,000. A’s total insurance 

coverage for her deposits at the bank 

would be: $750,000 + $250,000 = 

$1,000,000. Notably, this level of 

coverage is the same as that provided by 

the current deposit insurance rules. 

Example 2: Formal Revocable Trust and 

Informal Revocable Trust 

Depositors E and F jointly establish a 

payable-on-death account at an FDICinsured bank. E and F have designated 

three beneficiaries for this deposit—G, 

H and I—who will receive the funds 

after both E and F are deceased. They 

list these beneficiaries on a form 

provided to the bank. E and F also 

jointly establish an account titled in the 

name of the ‘‘E and F Living Trust’’ at 

the same bank. E and F are the grantors 

of the living trust, a formal revocable 

trust that includes the same three 

beneficiaries, G, H, and I. The grantors, 

E and F, do not maintain any other 

deposit accounts at this same bank. 

What is the maximum amount of 

deposit insurance coverage for E and F’s 

deposits? 

Under the proposed rule, E and F’s 

payable-on-death account represents an 

informal revocable trust and would be 

insured in the trust accounts category. E 

and F’s living trust account constitutes 

a formal revocable trust and also would 

be insured in the trust accounts 

category. To the extent these deposits 

would pass from the same grantor (E or 

F) to beneficiaries (G, H, and I), they 

would be aggregated for purposes of 

applying the deposit insurance limit. As 

under the current rules, it would be 

irrelevant that the grantors’ deposits are 

divided between the payable-on-death 

account and the living trust account. 

The maximum coverage for E and F’s 

deposits would be equal to the SMDIA 

($250,000) multiplied by the number of 

grantors (two, because E and F are the 

grantors with respect to both deposits) 

multiplied by the number of unique 

beneficiaries, up to a maximum of five 

(here three, the number of beneficiaries, 

is less than five). Therefore, the 

coverage for E and F’s trust deposits 

would be: ($250,000) × (2) × (3) = 

$1,500,000. This level of coverage is the 

same as that provided by the current 

deposit insurance rules. 

Example 3: Two-Owner Trust and a 

One-Owner Trust 

Depositors J and K jointly establish a 

payable-on-death account at an FDICinsured bank. J and K have designated 

three beneficiaries for this deposit—L, 

M and N—who will receive the funds 

after both J and K are deceased. They 

list these beneficiaries on a form 

provided to the bank. At the same FDICinsured bank, J establishes a payable-ondeath account and designates K as the 

beneficiary upon J’s death. What is the 

maximum amount of coverage for J and 

K’s deposits? 

Under the proposed rule, both 

accounts would be insured under the 

trust account category. To the extent 

these deposits would pass from the 

same grantor (J or K) to beneficiaries 

(such as L, M, and N), they would be 

aggregated for purposes of applying the 

deposit insurance limit. For example, K 

identified three beneficiaries (L, M and 

N), and therefore, K’s insurance limit is 

$750,000 (or 1 × 3 × SMDIA). K would 

be fully insured as long as one-half 

interest of the co-owned trust account 

was $750,000 or less, which is the same 

level of coverage provided under 

current rules. 

In this example, J’s situation differs 

from K because J has a second trust 

account, but the insurance calculation 

remains the same. Specifically, J has 

two trust accounts and identified four 

unique beneficiaries (L, M, N, and K); 

therefore, J’s insurance limit is 

$1,000,000 (or 1 × 4 × SMDIA). J would 

remain fully insured as long as J’s trust 

deposits—equal to one-half of the coowned trust account plus J’s personal 

trust account—total no more than 

$1,000,000. This methodology and level 

of coverage is the same as that provided 

by the current deposit insurance rules. 

Example 4: Revocable and Irrevocable 

Trusts 

Depositor O establishes a deposit 

account at an FDIC-insured bank titled 

the ‘‘O Living Trust’’. O is the grantor 

of this living trust, a formal revocable 

trust that includes three beneficiaries— 

P, Q, and R. The grantor, O, also 

establishes an irrevocable trust for the 

benefit of the same three beneficiaries. 

The trustee of the irrevocable trust 

maintains a deposit account at the same 

bank as the living trust account, titled 

in the name of the irrevocable trust. 

Neither O nor the trustee maintains 

other deposit accounts at the same bank. 

What is the insurance coverage for these 

deposits? 

Under the proposed rule, the living 

trust account is a deposit of a formal 

revocable trust and would be insured in 

the trust accounts category. The deposit 

of the irrevocable trust also would be 

insured in the trust accounts category. 

To the extent these deposits would pass 

from the same grantor (O) to 

beneficiaries (P, Q, or R), they would be 

aggregated for purposes of applying the 

deposit insurance limit. It would be 

irrelevant that the deposits are divided 

between the living trust account and the 

irrevocable trust account. The maximum 

coverage for these deposits would be 

equal to the SMDIA ($250,000) 

multiplied by the number of grantors 

(one, because O is the grantor with 

respect to both deposits) multiplied by 

the number of beneficiaries, up to a 

maximum of five (here three, the 

number of beneficiaries, is less than 

five). Therefore, the maximum coverage 

for the trust deposits would be: 

($250,000) × (1) × (3) = $750,000. 

This is one of the isolated instances 

where the proposed rule may provide a 

reduced amount of coverage as a result 

of the aggregation of revocable and 

irrevocable trust deposits, depending on 

the structure of the trust agreement. 

Under the current rules, O would be 

insured for up to $750,000 for revocable 

trust deposits and separately insured for 

up to $750,000 for irrevocable trust 

deposits (assuming non-contingent 

beneficial interests), resulting in 

$1,500,000 in total coverage. If that were 

the case, current coverage would exceed 

that provided by the proposed rule. 

However, the terms of irrevocable trusts 

sometimes lead to less coverage than 

depositors might expect. FDIC staff’s 

experience is that irrevocable trust 

deposits are often insured only up to 

$250,000 under the current rules due to 

contingencies in the trust agreement, 

but determining this with certainty 

often requires careful consideration of 

the trust agreement’s contingency 

provisions. Under the current rule, if 

contingencies existed, current coverage 

would exceed that provided by the 

proposed rule, as O would be insured 

up to $1,000,000; $750,000 for his 

revocable trust and $250,000 for his 

irrevocable trust. In the FDIC’s view, 

one of the key benefits of the proposed 

rule versus the current rule would be 

greater clarity and predictability in 


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62For example, if all of the beneficiaries’ interests 

were equal, coverage would be: $250,000 × (7 

beneficiaries) = $1,750,000. This is the maximum 

coverage possible under the current rule. 

Conversely, if a few beneficiaries had a large 

interest in the trust, the total of all beneficiaries’ 

interests (limited to the SMDIA per beneficiary) 

could be less than $1,250,000, in which case the 

current rule would provide a minimum of 

$1,250,000 in coverage. Depending upon the precise 

allocation of interests, the amount of coverage 

provided would fall somewhere within this range. 

deposit insurance coverage because 

whether contingencies exist would no 

longer be a factor that could affect 

deposit insurance. 

Example 5: Many Beneficiaries Named 

Depositor S establishes a deposit 

account at an FDIC-insured bank titled 

in the name of the ‘‘S Living Trust’’. 

This trust is a revocable trust naming 

seven beneficiaries—T, U, V, W, X, Y, 

and Z. The grantor, S, does not maintain 

any other deposits at the same bank. 

What is the coverage for this deposit? 

Under the proposed rule, the living 

trust account is a deposit of a formal 

revocable trust and would be insured in 

the trust accounts category. The 

maximum coverage for this deposit 

would be equal to the SMDIA 

($250,000) multiplied by the number of 

grantors (one, because S is the sole 

grantor) multiplied by the number of 

beneficiaries, up to a maximum of five. 

Here the number of named beneficiaries 

(seven) exceeds the maximum (five) so 

insurance is calculated using the 

maximum (five). Coverage for the 

deposit would be: ($250,000) × (1) × (5) 

= $1,250,000. 

This is another limited instance 

where the proposed rule may provide 

for less coverage than the current rule. 

Under the current rule, because more 

than five beneficiaries are named, the 

deposit is insured up to the greater of: 

(1) Five times the SMDIA; or (2) the 

total of the interests of each beneficiary, 

with each such interest limited to the 

SMDIA. Determining coverage requires 

review of the trust agreement to 

ascertain each beneficiary’s interest. 

Each such insurable interest is limited 

to the SMDIA, and the total of all of 

these interests is compared with 

$1,250,000 (five times the SMDIA). The 

current rule provides coverage in the 

greater of these two amounts. The result 

would fall into a range from $1,250,000 

to $1,750,000, depending on the precise 

allocation of trust interests among the 

beneficiaries.62 In the FDIC’s view, one 

of the key benefits of the proposed rule 

versus the current rule would be greater 

clarity and predictability in deposit 

insurance coverage because a single 

formula would be used to determine 

maximum coverage, and this formula 

would not depend upon the specific 

allocation of funds among beneficiaries. 

E. Alternatives Considered 

The FDIC has considered a number of 

alternatives to the proposed rule that 

could meet its objectives in this 

rulemaking. Some of these alternatives 

are described below. 

Insuring Revocable Trust Deposits up to 

$250,000 per Grantor and Irrevocable 

Trust Deposits up to $250,000 per Trust 

The FDIC considered limiting the 

total amount of deposit insurance 

coverage for revocable trust deposits to 

the SMDIA (currently $250,000) for each 

grantor and irrevocable trust deposits up 

to $250,000 per trust. This would 

dramatically simplify the trust rules 

because the determination of coverage 

would no longer require the review of 

trust agreements or the consideration of 

beneficiaries’ interests. This alternative 

would therefore provide significant 

benefits in terms of supporting the 

timely payment of deposit insurance. 

However, this would substantially 

reduce deposit insurance coverage for 

many trust deposits that currently 

exceed $250,000. The FDIC therefore 

declined to pursue this proposal. 

Provide Per-Beneficiary Coverage Where 

Beneficiary Information Is Maintained at 

the IDI 

The FDIC considered changing the 

trust rules to provide coverage of 

$250,000 per beneficiary for trust 

deposits only where the trust 

documentation necessary to determine 

insurance coverage is maintained in an 

IDI’s deposit account records. This 

would promote the timely payment of 

deposit insurance and simplify 

insurance determinations, as the 

information required to calculate 

coverage would be immediately 

available to the FDIC following the 

failure of an IDI. However, such a 

requirement could prove burdensome 

and difficult to comply with for IDIs and 

depositors. Furthermore, even if 

depositors were to provide the 

necessary documentation to IDIs, they 

could be unaware as to whether the IDIs 

are maintaining that information in their 

records. Accordingly, the FDIC believes 

that this alternative may not promote 

depositor confidence in the level of 

coverage for their deposits. 

Retain Separate Trust Categories, 

Harmonize Rules 

The FDIC also considered 

harmonizing the rules for calculating 

coverage for revocable and irrevocable 

trusts while maintaining these two 

categories as separate for deposit 

insurance purposes. The use of common 

rules would reduce complexity to some 

extent. However, so long as these 

categories remain separate, determining 

the level of coverage for a trust deposit 

would require the threshold inquiry as 

to whether the trust is revocable or 

irrevocable. This is because the deposits 

in each category would still be 

aggregated within each deposit 

insurance category for purposes of 

applying the insurance limit. The FDIC 

believes that the proposed rule provides 

greater benefits than this alternative. 

Status Quo 

The FDIC is proposing amendments to 

the trust rules to advance the objectives 

discussed above, including making the 

rules more understandable for the 

public and depositors, promoting the 

timely payment of deposit insurance, 

and facilitating the administration of 

resolutions. The FDIC considered the 

status quo alternative to not amend the 

existing trust rules and not propose the 

amendments. However, for reasons 

previously stated in Section I.B entitled 

‘‘Background,’’ the FDIC considers the 

proposed rule to be a more appropriate 

alternative. 

F. Request for Comment 

The FDIC is requesting comment on 

all aspects of the proposed rule, 

including the alternatives presented. 

Comment is specifically invited with 

respect to the following questions: 

• Would the proposed amendments 

to the deposit insurance rules make 

insurance coverage for trust deposits 

easier to understand for bankers and the 

public? 

• The FDIC believes that depositors 

generally would have the information 

necessary to readily calculate deposit 

insurance coverage for their trust 

deposits under the proposed rule, 

allowing them to better understand 

insurance coverage for their trust 

deposits. Are there instances where a 

depositor would not likely have the 

necessary information? 

• Are there any other types of trusts 

not described in this proposal whose 

deposits would be affected by the 

proposed rule if adopted? What types of 

trusts are those and how would they be 

impacted? 

• While the FDIC has substantial 

experience regarding trust 

arrangements, the FDIC does not possess 

sufficiently detailed information on 

depositors’ existing trust arrangements 

to allow the FDIC to project the 

proposed rule’s effects on current 

depositors. Are there any other sources 

of empirical information that the FDIC 

should consider that may be helpful in 


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63See 73 FR 61658, 61658–59 (Oct. 17, 2008). 

64 In order to fulfill their contractual obligations 

with investors, covered institutions maintain 

mortgage principal and interest balances at a pool 

level and remittances, advances, advance 

reimbursement and excess funds applications that 

affect pool-level balances are not allocated back to 

individual borrowers. 

understanding the effects of the 

proposed rule? The FDIC also 

encourages commenters to provide such 

information, if possible. 

• Grandfathering of the deposit 

insurance rules would result in 

significantly greater complexity for the 

period of time during which two sets of 

rules could apply to deposits— 

especially in conducting resolutions. 

Therefore, the FDIC is not inclined to 

consider allowing grandfathering, but 

rather rely on a delayed implementation 

date to allow stakeholders to make 

necessary adjustments as a result of the 

new rules. However, the FDIC 

recognizes there are instances, such as 

trusts holding time deposits or other 

deposit relationships, which may not be 

easily restructured without adverse 

consequences to the depositor. Are there 

fact patterns where grandfathering the 

current rules may be appropriate? 

Would grandfathering be appropriate 

with respect to the proposed rule’s 

coverage limit of $1,250,000 per IDI for 

a depositor’s trust deposits? 

• Are the examples provided clear 

and understandable? Are there other 

common trust deposit scenarios that 

would benefit from an example being 

provided? 

• Would any of the alternatives 

described above better meet the FDIC’s 

objectives in connection with this 

rulemaking? Are there any other 

alternatives that would better meet 

those objectives? Are there any other 

amendments to the deposit insurance 

rules applicable to trusts that the FDIC 

should consider? 

• For the covered institutions subject 

to part 370, what cost and time frame 

might be required to update information 

technology systems and deposit account 

records to be capable of calculating 

insurance coverage under the proposed 

rule? The FDIC also seeks any 

supporting information that commenters 

might be able to provide on this topic. 

II. Amendments to Mortgage Servicing 

Account Rule 

A. Policy Objectives 

The FDIC’s regulations governing 

deposit insurance coverage include 

specific rules on deposits maintained at 

IDIs by mortgage servicers. These rules 

are intended to be easy to understand 

and apply in determining the amount of 

deposit insurance coverage for a 

mortgage servicer’s deposits. The FDIC 

also seeks to avoid uncertainty 

concerning the extent of deposit 

insurance coverage for such deposits, as 

deposits in mortgage servicing accounts 

(MSAs) provide a source of funding for 

IDIs. 

The FDIC is proposing an amendment 

to its rules governing insurance 

coverage for deposits maintained at IDIs 

by mortgage servicers that consist of 

mortgagors’ principal and interest 

payments. The proposed rule is 

intended to address a servicing 

arrangement that is not specifically 

addressed in the current rules. 

Specifically, some servicing 

arrangements may permit or require 

servicers to advance their own funds to 

the lenders when mortgagors are 

delinquent in making principal and 

interest payments, and servicers might 

commingle such advances in the MSA 

with principal and interest payments 

collected directly from mortgagors. This 

may be required, for example, under 

certain mortgage securitizations. The 

FDIC believes that the factors that 

motivated the FDIC to establish its 

current rules for mortgage servicing 

accounts, described below, argue for 

treating funds advanced by a mortgage 

servicer in order to satisfy mortgagors’ 

principal and interest obligations to the 

lender as if such funds were collected 

directly from borrowers. 

B. Background and Need for 

Rulemaking 

The FDIC’s rules governing coverage 

for mortgage servicing accounts were 

adopted in 1990 following the transfer 

of responsibility for insuring deposits of 

savings associations from the FSLIC to 

the FDIC. Under the rules adopted in 

1990, funds representing payments of 

principal and interest were insured on 

a pass-through basis to mortgagees, 

investors, or security holders. In 

adopting this rule, the FDIC focused on 

the fact that principal and interest funds 

were generally owned by investors, on 

whose behalf the servicer, as agent, 

accepted principal and interest 

payments. By contrast, payments of 

taxes and insurance were insured to the 

mortgagors or borrowers on a passthrough basis because the borrower 

owns such funds until tax and 

insurance bills are paid by the servicer. 

In 2008, however, the FDIC 

recognized that securitization methods 

and vehicles for mortgages had become 

more complex, exacerbating the 

difficulty of determining the ownership 

of deposits consisting of principal and 

interest payments by mortgagors and 

extending the time required to make a 

deposit insurance determination for 

deposits of a mortgage servicer in the 

event of an IDI’s failure.63 The FDIC 

expressed concern that a lengthy 

insurance determination could lead to 

continuous withdrawal of deposits of 

principal and interest payments from 

IDIs and unnecessarily reduce a funding 

source for such institutions. The FDIC 

therefore amended its rules to provide 

coverage to lenders based on each 

mortgagor’s payments of principal and 

interest into the mortgage servicing 

account, up to the SMDIA (currently 

$250,000) per mortgagor. The FDIC did 

not amend the rule for coverage of tax 

and insurance payments, which 

continued to be insured to each 

mortgagor on a pass-through basis and 

aggregated with any other deposits 

maintained by each mortgagor at the 

same IDI in the same right and capacity. 

The 2008 amendments to the rules for 

mortgage servicing accounts did not 

provide for the fact that servicers may 

be required to advance their own funds 

to make payments of principal and 

interest on behalf of delinquent 

borrowers to the lenders. However, this 

is required of mortgage servicers in 

some instances. For example, insured 

depository institutions covered by 12 

CFR part 370, the FDIC’s rule requiring 

recordkeeping and information 

technology capabilities for deposit 

insurance purposes (covered 

institutions), identified challenges to 

implementing certain recordkeeping 

requirements with respect to MSA 

deposit balances as a result of the way 

in which servicer advances are 

administered and accounted.64

The current rule provides coverage for 

principal and interest funds only to the 

extent ‘‘paid into the account by the 

mortgagors’’; it does not provide 

coverage for funds paid into the account 

from other sources, such as the 

servicer’s own operating funds, even if 

those funds satisfy mortgagors’ principal 

and interest payments. As a result, 

advances are not provided the same 

level of coverage as other deposits in a 

mortgage servicing account consisting of 

principal and interest payments directly 

from the borrower, which are insured 

up to the SMDIA for each borrower. 

Instead, the advances are aggregated and 

insured to the servicer as corporate 

funds for a total of $250,000. The FDIC 

is concerned that this inconsistent 

treatment of principal and interest 

amounts could result in financial 

instability during times of stress, and 

could further complicate the insurance 

determination process, a result that is 

inconsistent with the FDIC’s policy 

objective. 


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65Servicers’ advances may have been insured 

under the rule that applied to mortgage servicing 

account deposits prior to 2008. Prior to 2008, 

mortgage servicing deposits were insured on a passthrough basis. Under the pass-through insurance 

rules, the identity of the party that pays funds into 

a deposit account does not generally factor into 

insurance coverage. In this sense, the proposed rule 

can be viewed as restoring coverage to the previous 

level. 

66The count of institutions includes FDICinsured U.S. branches of institutions headquartered 

in foreign countries. 

67FDIC Call Report data, March 31, 2021. 

68 Data on failed banks comes from the FDIC’s 

Claims Administration System, which contains data 

on depositors’ funds from every failed IDI since 

September 2010. 

C. Proposed Rule 

The FDIC is proposing to amend the 

rules governing coverage for deposits in 

mortgage servicing accounts to provide 

consistent deposit insurance treatment 

for all MSA deposit balances held to 

satisfy principal and interest obligations 

to a lender, regardless of whether those 

funds are paid into the account by 

borrowers, or paid into the account by 

another party (such as the servicer) in 

order to satisfy a periodic obligation to 

remit principal and interest due to the 

lender. Under the proposed rule, 

accounts maintained by a mortgage 

servicer in an agency, custodial, or 

fiduciary capacity, which consist of 

payments of principal and interest, 

would be insured for the cumulative 

balance paid into the account in order 

to satisfy principal and interest 

obligations to the lender, whether paid 

directly by the borrower or by another 

party, up to the limit of the SMDIA per 

mortgagor. Mortgage servicers’ advances 

of principal and interest funds on behalf 

of delinquent borrowers would therefore 

be insured up to the SMDIA per 

mortgagor, consistent with the coverage 

rules for payments of principal and 

interest collected directly from 

borrowers.65

The composition of an MSA 

attributable to principal and interest 

payments would also include 

collections by a servicer, such as 

foreclosure proceeds, that are used to 

satisfy a borrower’s principal and 

interest obligation to the lender. In some 

cases, foreclosure proceeds may not be 

paid directly by a mortgagor. The 

current rule does not address whether 

foreclosure collections represent 

payments of principal and interest by a 

mortgagor. Under the proposed rule, 

foreclosure proceeds used to satisfy a 

borrower’s principal and interest 

obligation would be insured up to the 

limit of the SMDIA per mortgagor. 

The proposed rule would make no 

change to the deposit insurance 

coverage provided for mortgage 

servicing accounts comprised of 

payments from mortgagors of taxes and 

insurance premiums. Such aggregate 

escrow accounts are held separately 

from the principal and interest MSAs 

and the deposits therein are held in 

trust for the mortgagors until such time 

as tax and insurance payments are 

disbursed by the servicer on the 

borrower’s behalf. Under the proposed 

rule, such deposits would continue to 

be insured based on the ownership 

interest of each mortgagor in the 

account and aggregated with other 

deposits maintained by the mortgagor at 

the same IDI in the same capacity and 

right. 

D. Request for Comment 

The FDIC is requesting comment on 

all aspects of the proposed rule. 

Comment is specifically invited with 

respect to the following questions: 

• Would the proposed amendments 

to the rules governing coverage for 

mortgage servicing accounts adequately 

address servicers’ practices with respect 

to these accounts, as described above? 

Are there any other funds representing 

principal and interest that are 

commingled with borrowers’ payments 

that the FDIC should take into account 

in the deposit insurance calculation, 

consistent with its policy objectives? 

• Would deposit insurance coverage 

of servicer principal and interest 

advances help to promote financial 

stability in the financial system? If the 

FDIC does not amend the rule as 

proposed, how would mortgage 

servicers react if their insured 

depository institution, or the banking 

industry as a whole, appears stressed? If 

so, how would funding arrangements or 

deposit relationships change? 

• Does the proposed rule reduce the 

compliance burden for part 370 covered 

institutions? 

• Are there any alternatives to the 

proposed rule that would better achieve 

the FDIC’s policy objectives in 

connection with this rulemaking? Are 

there any other amendments to the 

deposit insurance rules applicable to 

MSAs that the FDIC should consider? 

III. Regulatory Analysis 

A. Expected Effects 

1. Simplification of Trust Rules 

Generally, the proposed 

simplification of the trust rules is 

expected to have benefits including 

clarifying depositors’ and bankers’ 

understanding of the insurance rules, 

promoting the timely payment of 

deposit insurance following an IDI’s 

failure, facilitating the transfer of 

deposit relationships to failed bank 

acquirers (thereby potentially reducing 

the FDIC’s resolution costs), and 

addressing differences in the treatment 

of revocable trust deposits and 

irrevocable trust deposits contained in 

the current rules. The proposed 

amendments would directly affect the 

level of deposit insurance coverage 

provided to some depositors with trust 

deposits. In some cases, which the FDIC 

expects are rare, the proposed 

amendments could reduce deposit 

insurance coverage; for the vast majority 

of depositors, the FDIC expects the 

coverage level to be unchanged. The 

FDIC has also considered the impact of 

any changes in the deposit insurance 

rules on the DIF and on the covered 

institutions that are subject to part 370. 

Finally, the FDIC describes other 

potential effects of the proposal, such as 

the effects on information technology 

(IT) service providers to the institutions 

that could be affected by the proposed 

rule. These effects are discussed in 

greater detail below. 

Effects on Deposit Insurance Coverage 

The proposed rule would affect 

deposit insurance coverage for deposits 

held in connection with trusts. 

According to the March 31, 2021 Call 

Report data, the FDIC insures 4,987 

depository institutions 66 that report 

holding approximately 641 million 

deposit accounts. Additionally, 1,573 

IDIs have powers granted by a state or 

national regulatory authority to 

administer accounts in a fiduciary 

capacity (i.e., trust powers) and 1,167 

exercise those powers, comprising 31.5 

percent and 23.4 percent, respectively, 

of all IDIs.67 However, individual 

depositors may establish a trust account 

at an IDI even if that IDI does not itself 

have or exercise trust powers, and in 

fact, as discussed below, 99 percent of 

a sample of failed banks had trust 

accounts. Therefore, the FDIC estimates 

that the proposed rule, if adopted, could 

affect between 1,167 and 4,987 IDIs. 

The FDIC does not have detailed data 

on depositors’ trust arrangements that 

would allow the FDIC to precisely 

estimate the number of trust accounts 

that are currently held by FDIC-insured 

institutions. However, the FDIC 

estimated the number of trust accounts 

and trust account depositors utilizing 

data from failed banks. Based on data 

from 249 failed banks 68 between 2010 

and 2020, 335,657 deposit accounts— 

owned by 250,139 distinct depositors— 

were trust accounts (revocable or 

irrevocable), out of a total of 3,013,575 

deposit accounts. Thus, about 11.14 

percent of the deposit accounts at the 

249 failed banks were trust accounts. Of 


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69There were approximately 641 million deposit 

accounts reported by FDIC-insured institutions as of 

March 31, 2021, based on Call Report data. 

Assuming that 11.14 percent of accounts are trust 

accounts, then there are an estimated 71.4 million 

trust accounts as of March 31, 2021. 

70Using the data from failed banks, 250,139 

distinct depositors held 335,657 revocable or 

irrevocable trust accounts, or there were 0.745 trust 

account depositors per trust account (250,139 

divided by 335,657). The estimated number of trust 

depositors at FDIC-insured institutions (53.2 

million) is obtained by multiplying the estimated 

number of trust accounts by the number of trust 

account depositors per trust account (71.4 million 

multiplied by 0.745). 

71As discussed above, the provisions relating to 

contingent interests may not apply when a trust has 

become irrevocable due to the death of one or more 

grantors. In such instances, the revocable trust rules 

continue to apply. 

72As discussed above, deposits maintained by an 

IDI as trustee of an irrevocable trust would not be 

included in this aggregation, and would remain 

separately insured pursuant to section 7(i) of the 

FDI Act and 12 CFR 330.12. 

73 Data obtained in connection with IDI failures 

during the recent financial crisis suggests that 

irrevocable trust deposits comprise less than one 

percent of trust deposits. However, as discussed 

above, the FDIC does not possess sufficient 

information to enable it to estimate the effects of the 

proposed rule on trust account depositors at all 

IDIs. 

74 In the data obtained in connection with IDI 

failures during the recent financial crisis, only 51 

out of 250,139 depositors with trust accounts had 

both revocable and irrevocable types. Of these 51 

depositors, nine had total trust account balances 

greater than $250,000, and only one had a total trust 

balance of more than $1.25 million. 

75To estimate the numbers of trust account 

depositors and trust accounts affected, the FDIC 

performed the following calculation. First, based on 

data from 249 failed banks between 2010 and 2020, 

the FDIC determined that there were 335,657 trust 

accounts out of 3,013,575 deposit accounts (trust 

account share). Second, the FDIC determined the 

number of trust accounts per trust depositor 

(335,657/250,139). The FDIC then estimated the 

number of trust accounts by multiplying the trust 

account share (335,657/3,013,575) by the number of 

deposit accounts across all IDIs (640,918,226) 

according to March 31, 2021, Call Report data. This 

step yielded an estimate of 71,386,539 trust 

accounts. Based on the estimated number of trust 

accounts per trust depositor from the failed bank 

data, the FDIC estimated the total number of trust 

depositors to be 53,198,823. Using failed bank data, 

100 out of 250,139 trust depositors had balances in 

excess of $1.25 million in their trust accounts. 

Thus, the FDIC estimated that, of the approximately 

53.2 million trust depositors, (100/250,139) of 

them—approximately 21,268—had balances in 

excess of $1.25 million in their trust accounts, and 

therefore could be directly affected by the proposal. 

These estimated 21,268 trust depositors are 

associated with an estimated 28,539 trust accounts, 

based on the observed number of trust accounts per 

trust depositor from the data from 249 failed banks 

between 2010 and 2020. 

the 249 institutions, 247 (99 percent) 

reported having trust accounts at time of 

failure. Of the 247 failed banks that 

reported trust accounts, 212 reported 

not having trust powers as of their last 

Call Report. Assuming the percentage of 

trust accounts at failed banks is 

representative of the percentage of trust 

accounts among all FDIC-insured 

institutions, the FDIC estimates, for 

purposes of this analysis, that there are 

approximately 71.4 million trust 

accounts in existence at FDIC-insured 

institutions.69 Additionally, based on 

the observed number of trust account 

depositors per trust account in the 

population of 249 failed banks, the FDIC 

estimates, for purposes of this analysis, 

that there are approximately 53.2 

million trust depositors.70 These 

estimates are subject to considerable 

uncertainty, since the percentage of 

deposit accounts that are trust accounts 

and the number of depositors per trust 

account for all FDIC insured institutions 

may differ from what was observed at 

the 249 failed banks. The FDIC does not 

have information that would shed light 

on whether or how the numbers of trust 

accounts and trust depositors at failed 

banks differs from the corresponding 

numbers for other FDIC-insured 

institutions. 

The FDIC also does not have detailed 

data on depositors’ trust arrangements 

that would allow the FDIC to precisely 

estimate the quantitative effects of the 

proposed rule on deposit insurance 

coverage. Thus, the effects of the 

proposed changes to the insurance rules 

are outlined qualitatively below. The 

FDIC expects that most depositors 

would experience no change in the 

coverage for their deposits under the 

proposed rule. However, some 

depositors that maintain trust deposits 

would experience a change in their 

insurance coverage under the proposed 

rule. 

The FDIC anticipates that deposit 

insurance coverage for some irrevocable 

trust deposits would increase under the 

proposed rule. The FDIC’s experience 

suggests that the provisions of the 

current irrevocable trust rules that 

require the identification and 

aggregation of contingent interests often 

apply due to the inclusion of 

contingencies in such trusts.71 Thus, 

even where an irrevocable trust names 

multiple beneficiaries, the current trust 

rules often provide a total of only 

$250,000 in deposit insurance coverage. 

The proposed rule would not consider 

such contingencies in the calculation of 

coverage, and per-beneficiary coverage 

would apply. 

In limited instances, the proposed 

merger of the revocable trust and 

irrevocable trust categories may 

decrease coverage for depositors. 

Deposits of revocable trusts and 

deposits of irrevocable trusts are 

currently insured separately. The 

proposed rule would require aggregation 

for purposes of applying the deposit 

insurance limit, thereby increasing the 

likelihood of the combined trust 

account balances exceeding the 

insurance limit.72 However, the FDIC’s 

experience is that irrevocable trust 

deposits comprise a relatively small 

share of the average IDI’s deposit base,73

and that it is rare for IDIs to hold 

deposits in connection with irrevocable 

and revocable trusts established by the 

same grantor(s).74 Individual grantors’ 

trust deposits held for the benefit of up 

to five different beneficiaries would 

continue to be separately insured. 

With respect to revocable and 

irrevocable trusts, depositors who have 

designated more than five beneficiaries 

and structured their trust accounts in a 

manner that provides for more than 

$1,250,000 in coverage per grantor, per 

IDI under the current rules would 

experience a reduction in coverage. The 

FDIC’s experience suggests that the 

$1,250,000 maximum coverage amount 

per grantor, per IDI would not affect the 

vast majority of trust depositors, as most 

trusts have either five or fewer 

beneficiaries, less than $1,250,000 per 

grantor on deposit at the same IDI, or are 

structured in a manner that results in 

only $1,250,000 in coverage under the 

current rules. The FDIC estimates that 

approximately 21,268 trust account 

depositors and approximately 28,539 

trust accounts could be directly affected 

by this aspect of the proposed rule, 

representing about 0.04 percent of both 

the estimated number of trust account 

depositors and the estimated number of 

trust accounts.75 The actual number of 

trust depositors and trust accounts 

impacted will likely differ, as the 

estimates rely on data from failed banks, 

and failed banks may differ from other 

institutions in their percentages of trust 

depositors or trust accounts. It is also 

possible depositors may restructure 

their deposits in response to changes to 

the rule, thus mitigating the potential 

effects on deposit insurance coverage. 

Clarification of Insurance Rules 

The proposed merger of certain 

revocable and irrevocable trust 

categories is intended to clarify deposit 

insurance coverage for trust accounts. 

Specifically, the merger of these 

categories would mostly eliminate the 

need to distinguish revocable and 

irrevocable trusts currently required to 

determine coverage for a particular trust 

deposit. The benefit of the common set 

of rules would likely be particularly 

significant for depositors that have 

established arrangements involving 

multiple trusts, as they would no longer 

need to apply two different sets of rules 

to determine the level of deposit 

insurance coverage that would apply to 

their deposits. For example, the 


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41780 Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules 

76See 12 CFR 370.10(d). 

proposed rule would eliminate the need 

to consider the specific allocation of 

interests among the beneficiaries of 

revocable trusts with six or more 

beneficiaries, as well as contingencies 

established in irrevocable trusts. The 

merger of the categories also would 

eliminate the need for current 

§ 330.10(h) and (i), which allows for the 

continued application of the revocable 

trust rules to the account of a revocable 

trust that becomes irrevocable due to the 

death of the trust’s owner. As previously 

discussed, these provisions of the 

current trust rules have proven 

confusing as illustrated by the 

numerous inquiries that are consistently 

submitted to the FDIC on these topics. 

FDIC-insured depository institutions 

will incur some regulatory costs 

associated with making necessary 

changes to internal processes and 

systems and bank personnel training in 

order to accommodate the proposed 

rule’s definition of ‘‘trust accounts’’ and 

attendant deposit insurance coverage 

terms, if adopted. There also may be 

some initial cost for institutions to 

become familiar with the proposed 

changes to the trust insurance coverage 

rules in order to be able to explain them 

to potential trust customers, 

counterbalanced to some extent by the 

fact that the proposed rules should be 

simpler for institutions to understand 

and explain going forward. As the 

business impacts and costs associated 

with operationalizing the proposed 

changes to the trust rules may vary 

significantly across IDIs, the FDIC 

would welcome industry comments in 

this regard. 

Prompt Payment of Deposit Insurance 

The FDIC also expects that 

simplification of the trust rules would 

promote the timely payment of deposit 

insurance in the event of an IDI’s 

failure. The FDIC’s experience has been 

that the current trust rules often require 

detailed, time-consuming, and resourceintensive review of trust documentation 

to obtain the information that is 

necessary to calculate deposit insurance 

coverage. This information is often not 

found in an IDI’s records and must be 

obtained from depositors after the IDI’s 

failure. The proposed rule would 

ameliorate the operational challenge of 

calculating deposit insurance coverage, 

which could be particularly acute in the 

case of a failure of a large IDI with a 

large number of trust accounts. The 

proposed rule would streamline the 

review of trust documents required to 

make a deposit insurance 

determination, promoting more prompt 

payment of deposit insurance. Timely 

payment of deposit insurance also can 

help to facilitate the transfer of 

depositor relationships to a failed bank’s 

acquirer, potentially expand resolution 

options, potentially reduce the FDIC’s 

resolution costs, and support greater 

confidence in the banking system. 

Deposit Insurance Fund Impact 

As discussed above, the proposed rule 

is expected to have mixed effects on the 

level of insurance coverage provided for 

trust deposits. Coverage for some 

irrevocable trust deposits would be 

expected to increase, but in the FDIC’s 

experience, irrevocable trust deposits 

are not nearly as common as revocable 

trust deposits. The level of coverage for 

some trust deposits would be expected 

to decrease due to the proposed rule’s 

simplified calculation of coverage and 

its aggregation of revocable and 

irrevocable trust deposits. As noted 

above, the FDIC does not have detailed 

data on depositors’ trust arrangements 

to allow it to precisely project the 

quantitative effects of the proposed rule 

on deposit insurance coverage. 

Indirect Effects 

A change in the level of deposit 

insurance coverage does not necessarily 

result in a direct economic impact, as 

deposit insurance is only paid to 

depositors in the event of an IDI’s 

failure. However, changes in deposit 

insurance coverage may prompt 

depositors to take actions with respect 

to their deposits. In response to changes 

in the level of coverage under the 

proposed rules, trust depositors could 

maximize coverage relative to the 

coverage under the current rule by 

transferring some of their trust deposits 

to other types of accounts that provide 

similar or higher amounts of coverage or 

by amending the terms of their trusts. 

Parties affected could include IDIs, 

depositors, and other firms in the 

financial services marketplace (e.g., 

deposit brokers). Any costs borne by the 

depositor in moving a portion of the 

funds to a different IDI to stay under the 

insurance limit would be accompanied 

by benefits, such as more prompt 

deposit insurance determinations, and 

quicker access to insured deposits for 

depositors during the resolution 

process. The FDIC cannot estimate these 

effects because it does not have 

information on the individual costs of 

each action that confronts each 

depositor, their ability to amend their 

trust structure or move funds, and their 

subjective risk preference with respect 

to holding insured and uninsured 

deposits. 

Part 370 Covered Institutions 

As discussed previously, institutions 

covered by part 370 must maintain 

deposit account records and systems 

capable of applying the deposit 

insurance rules in an automated 

manner. The proposed rule would 

change certain aspects of how coverage 

is determined for trust deposits. This 

could require covered institutions to 

reprogram certain systems to ensure that 

they continue to be capable of applying 

the deposit insurance rules as part 370 

requires. A covered institution is not 

considered to be in violation of part 370 

as a result of a change in law that alters 

the availability or calculation of deposit 

insurance for such period as specified 

by the FDIC following the effective date 

of such change.76

The FDIC expects that the proposed 

rule would make the deposit insurance 

status of a trust account generally 

clearer. Moreover, since part 370 

requires covered institutions to develop 

and maintain the capacity to calculate 

deposit insurance for its deposits, the 

proposed rule could make compliance 

with part 370 relatively less 

burdensome. This is because the 

underlying rules that would be applied 

to most trust deposits would be 

simplified. In particular, the proposed 

rule would require the aggregation of 

revocable and irrevocable trust deposits, 

categories that are currently separated 

for purposes of part 370’s recordkeeping 

provisions. The FDIC does not expect 

that the proposed rule would require 

significant changes with respect to 

covered institutions’ treatment of 

informal revocable trust deposits. 

Moreover, many deposits of formal 

revocable trusts and irrevocable trusts 

currently fall within the scope of part 

370’s alternative recordkeeping 

provisions, meaning that covered 

institutions are not required to maintain 

all of the records necessary to calculate 

the maximum amount of deposit 

insurance coverage available for these 

deposits. These factors may diminish 

the impact of the proposed rule on the 

part 370 covered institutions, but the 

FDIC does not have sufficient 

information on covered institutions’ 

systems and records to quantify this. 

Although the FDIC does not have 

sufficient information to determine the 

time that might be required to 

reprogram systems, it believes that a 

two-year period of time may be 

reasonable. The FDIC requests comment 

on this proposal, including any 

information that commenters may be 

able to provide to support their views 


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77The count of institutions includes FDICinsured U.S. branches of institutions headquartered 

in foreign countries. 

78 5 U.S.C. 601 et seq. 

79The SBA defines a small banking organization 

as having $600 million or less in assets, where ‘‘a 

financial institution’s assets are determined by 

averaging the assets reported on its four quarterly 

financial statements for the preceding year.’’ See 13 

CFR 121.201 (as amended by 84 FR 34261, effective 

August 19, 2019). ‘‘SBA counts the receipts, 

employees, or other measure of size of the concern 

whose size is at issue and all of its domestic and 

foreign affiliates.’’ See 13 CFR 121.103. Following 

these regulations, the FDIC uses a covered entity’s 

affiliated and acquired assets, averaged over the 

preceding four quarters, to determine whether the 

FDIC-supervised institution is ‘‘small’’ for the 

purposes of RFA. 

on the time necessary to attain 

compliance with part 370 if the 

proposed rule is adopted. 

Other Potential Effects 

Although the FDIC expects that 

coverage for most trust depositors 

would be unchanged under the 

proposal, and that the proposed changes 

simplify the FDIC’s insurance rules for 

trust accounts, the proposal may have 

other potential effects. For example, the 

institutions affected by the proposal 

may rely on third-party IT service 

providers to perform insurance coverage 

estimates for their trust depositors. The 

proposal may lead such IT service 

providers to revise their systems to 

account for the proposal’s changes. 

2. Amendments to Mortgage Servicing 

Account Rule 

The proposed rule would affect the 

deposit insurance coverage for certain 

principal and interest payments within 

MSA deposits maintained at IDIs by 

mortgage servicers. According to the 

March 31, 2021 Call Report data, the 

FDIC insures 4,987 IDIs.77 Of the 4,987 

IDIs, 1,167 IDIs (23.4 percent) report 

holding mortgage servicing assets, 

which indicates that they service 

mortgage loans and could thus be 

affected by the proposed rule. In 

addition, mortgage servicing accounts 

may be maintained at IDIs that do not 

themselves service mortgage loans. The 

FDIC does not know how many IDIs are 

recipients of mortgage servicing account 

deposits, but believes that most IDIs are 

not. Therefore, the FDIC estimates that 

the number of IDIs potentially affected 

by the proposed rule, if adopted, would 

be greater than 1,167 and substantially 

less than 4,987. 

The FDIC does not have detailed data 

on MSAs that would allow the FDIC to 

reliably estimate the number of MSAs 

maintained at IDIs that would be 

affected by the proposed rule, or any 

potential change in the total amount of 

insured deposits. Thus, the potential 

effects of the proposed amendments 

regarding governing deposit insurance 

coverage for MSAs are outlined 

qualitatively below. 

The proposed rule would directly 

affect the level of deposit insurance 

coverage provided for some MSAs. 

Under the proposed rule, the 

composition of an MSA attributable to 

mortgage servicers’ advances of 

principal and interest funds on behalf of 

delinquent borrowers and collections 

such as foreclosure proceeds would be 

insured up to the SMDIA per mortgagor, 

consistent with the coverage for 

payments of principal and interest 

collected directly from borrowers. 

Under the current rules, principal and 

interest funds advanced by a servicer to 

cover delinquencies, and foreclosure 

proceeds collected by servicers, are not 

be insured under the rules for MSA 

deposits, but instead are insured to the 

servicer as corporate funds up to the 

SMDIA. Therefore, the proposed rule 

would expand deposit insurance 

coverage in instances where an account 

maintained by a mortgage servicer 

contains principal and interest funds 

advanced by the servicer in order to 

satisfy the obligations of delinquent 

borrowers to the lender, or foreclosure 

proceeds collected by the servicers; and 

where the funds in such instances 

exceed the mortgage servicer’s SMDIA. 

If enacted, the proposed rule is likely 

to benefit a servicer compelled by the 

terms of a pooling and servicing 

agreement to advance principal and 

interest funds to note holders when a 

borrower is delinquent, and therefore 

the servicer has not received such funds 

from the borrower. In the event that the 

IDI hosting the MSA for the servicer 

fails, the proposal reduces the 

likelihood that the funds advanced by 

the servicer are uninsured, and thereby 

facilitates access to, and helps avoids 

losses of, those funds. As previously 

discussed, the FDIC does not have 

detailed data on MSAs held at IDIs, 

pooling and servicing agreements for 

outstanding mortgage loans, or servicer 

payments into MSAs that would allow 

the FDIC to reliably estimate the number 

of, and volume of funds within, MSAs 

maintained at IDIs that would be 

affected by the proposed rule. 

Further, the proposed rule is likely to 

benefit an IDI who is hosting an MSA 

for a servicer that is compelled by the 

terms of a pooling and servicing 

agreement to advance principal and 

interest funds to note holders on behalf 

of delinquent borrowers by increasing 

the volume of insured funds. In the 

event that the IDI enters into a troubled 

condition, the proposed rule could 

marginally increase the stability of MSA 

deposits from such servicers, thereby 

increasing the general stability of 

funding. 

Finally, the FDIC believes that the 

proposed rule, if enacted, would pose 

general benefits to parties that provide 

or utilize financial services related to 

mortgage products by amending an 

inconsistency in the deposit insurance 

treatment for principal and interest 

payments made by the borrower and 

such payments made by the servicer on 

behalf of the borrower. 

Effects on Part 370 Covered Institutions 

Institutions subject to the enhanced 

requirements of part 370 may bear some 

costs in recognizing the expanded 

coverage for servicer advances and 

foreclosure proceeds. However, 

institutions subject to the requirements 

of part 370 already are responsible for 

determining coverage for MSA accounts 

based on each borrower’s payments. 

Therefore, the FDIC does not believe the 

impact of the proposal on part 370 

covered IDIs will be significant. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

requires that, in connection with a 

notice of proposed rulemaking, an 

agency prepare and make available for 

public comment an initial regulatory 

flexibility analysis that describes the 

impact of the proposed rule on small 

entities.78 However, a regulatory 

flexibility analysis is not required if the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities 

and publishes its certification and a 

short explanatory statement in the 

Federal Register together with the rule. 

The Small Business Administration 

(SBA) has defined ‘‘small entities’’ to 

include banking organizations with total 

assets of less than or equal to $600 

million.79 Generally, the FDIC considers 

a significant effect to be a quantified 

effect in excess of 5 percent of total 

annual salaries and benefits per 

institution, or 2.5 percent of total 

noninterest expenses. The FDIC believes 

that effects in excess of these thresholds 

typically represent significant effects for 

small entities. The FDIC does not 

believe that the proposed rule, if 

adopted, will have a significant 

economic effect on a substantial number 

of small entities. However, some 

expected effects of the proposed rule are 

difficult to assess or accurately quantify 

given current information, therefore the 

FDIC has included an Initial Regulatory 

Flexibility Act Analysis in this section. 


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80See 73 FR 56706 (Sep. 30, 2008). 81 12 U.S.C. 1821(a)(2). 

82The count of institutions includes FDICinsured U.S. branches of institutions headquartered 

in foreign countries. 

83FDIC Call Report data, March 31, 2021. 

84 Id. 

1. Simplification of Trust Rules 

Reasons Why This Action Is Being 

Considered 

As previously discussed, the rules 

governing deposit insurance coverage 

for trust deposits have been amended on 

several occasions, but still frequently 

cause confusion for depositors. Under 

the current regulations, there are 

distinct and separate sets of rules 

applicable to deposits of revocable 

trusts and irrevocable trusts. Each set of 

rules has its own criteria for coverage 

and methods by which coverage is 

calculated. Despite the FDIC’s efforts to 

simplify the revocable trust rules in 

2008,80 over the last 10 years, FDIC 

deposit insurance specialists have 

responded to approximately 20,000 

complex insurance inquiries per year on 

average. More than 50 percent pertain to 

deposit insurance coverage for trust 

accounts (revocable or irrevocable). The 

consistently high volume of complex 

inquiries about trust accounts over an 

extended period of time suggests 

continued confusion about insurance 

limits. 

The FDI Act requires the FDIC to pay 

depositors ‘‘as soon as possible’’ after a 

bank failure. However, the insurance 

determination and subsequent payment 

for many trust deposits can be delayed 

while FDIC staff reviews complex trust 

agreements and apply the rules for 

determining deposit insurance coverage. 

Moreover, in many of these instances, 

deposit insurance coverage for trust 

deposits is based upon information that 

is not maintained in the failed IDI’s 

deposit account records. This requires 

FDIC staff to work with depositors, 

trustees, and other parties to obtain trust 

documentation following an IDI’s failure 

in order to complete deposit insurance 

determinations. The difficulties 

associated with this are exacerbated by 

the substantial growth in the use of 

formal trusts in recent decades. For 

example, following the 2008 failure of 

IndyMac Federal Bank, FSB (IndyMac), 

FDIC claims personnel contacted more 

than 10,500 IndyMac depositors to 

obtain the trust documentation 

necessary to complete deposit insurance 

determinations for their revocable trust 

and irrevocable trust deposits. As noted 

previously, delays in the payment of 

deposit insurance could be 

consequential, as revocable trust 

deposits in particular can be used by 

depositors to satisfy their daily financial 

obligations. 

Policy Objectives 

As discussed previously, the 

proposed amendments are intended to 

provide depositors and bankers with a 

rule for trust account coverage that is 

easy to understand, and also to facilitate 

the prompt payment of deposit 

insurance in accordance with the FDI 

Act. The FDIC believes that 

accomplishing these objectives also 

would further the agency’s mission in 

other respects. Specifically, the 

proposed amendments would promote 

depositor confidence and further the 

FDIC’s mission to maintain stability and 

promote public confidence in the U.S. 

financial system by assisting depositors 

to more readily and accurately 

determine their insurance limits. The 

proposed changes will also facilitate the 

resolution of failed IDIs in a least costly 

manner. The proposed amendments 

could reduce the FDIC’s reliance on 

trust documentation (which could be 

difficult to obtain in a timely manner 

during resolutions of IDI failures) and 

provide greater flexibility to automate 

deposit insurance determinations, 

thereby reducing potential delays in the 

completion of deposit insurance 

determinations and payments. Finally, 

in proposing amendments to the trust 

rules, the FDIC’s intent is that the 

changes would generally be neutral with 

respect to the DIF. 

Legal Basis 

The FDIC’s deposit insurance 

categories have been defined through 

both statute and regulation. Certain 

categories, such as the government 

deposit category, have been expressly 

defined by Congress.81 Other categories, 

such as joint deposits and corporate 

deposits, have been based on statutory 

interpretation and recognized through 

regulations issued in 12 CFR part 330 

pursuant to the FDIC’s rulemaking 

authority. In addition to defining the 

insurance categories, the deposit 

insurance regulations in part 330 

provide the criteria used to determine 

insurance coverage for deposits in each 

category. The FDIC proposes to amend 

§ 330.10 of its regulations, which 

currently applies only to revocable trust 

deposits, to establish a new ‘‘trust 

accounts’’ category that would include 

both revocable and irrevocable trust 

deposits. For a more detailed discussion 

of the proposal’s legal basis please refer 

to Section I.C entitled ‘‘Description of 

Proposed Rule.’’ 

The Proposed Rule 

The FDIC is proposing to amend the 

rules governing deposit insurance 

coverage for trust deposits. Generally, 

the proposed amendments would: 

Merge the revocable and irrevocable 

trust categories into one category; apply 

a simpler, common calculation method 

to determine insurance coverage for 

deposits held by revocable and 

irrevocable trusts; eliminate certain 

requirements found in the current rules 

for revocable and irrevocable trusts; and 

amend certain recordkeeping 

requirements for trust accounts. For a 

more detailed discussion of the 

proposed rule please refer to Section I.C 

entitled ‘‘Description of Proposed Rule.’’ 

Small Entities Affected 

Based on the March 31, 2021 Call 

Report data, the FDIC insures 4,987 

depository institutions,82 of which 

3,431 are considered small entities for 

the purposes of RFA.83 Of the 3,431 

small IDIs, 826 have powers granted by 

a state or national regulatory authority 

to administer accounts in a fiduciary 

capacity and 567 exercise those powers, 

comprising 24.1 percent and 16.5 

percent, respectively, of small IDIs.84

However, individuals may establish 

trust accounts at an IDI even if that IDI 

does not itself have or exercise authority 

to administer accounts in a fiduciary 

capacity, and in fact, as noted earlier, 99 

percent of a sample of failed banks had 

trust accounts. Therefore, the FDIC 

estimates that the proposed rule, if 

adopted, could affect between 567 and 

3,431 small, FDIC-insured institutions. 

As noted in the Aggregation subsection of Section I.C ‘‘Description of 

Proposed Rule,’’ the FDIC does not have 

detailed data on depositors’ trust 

arrangements for trust accounts held at 

small FDIC-insured institutions. 

Therefore, it is difficult to accurately 

estimate the number of small IDIs that 

would be potentially affected by the 

proposed rule. However, the FDIC 

believes that the number of small IDIs 

that will be directly affected by the 

proposal is likely to be small, given that 

in the agency’s resolution experience 

only a small number of trust accounts 

have balances above the proposed 

coverage limit of $1,250,000 per grantor, 

per IDI for trust deposits. For example, 

data obtained from a sample of 249 IDIs 

that failed between 2010 and 2020 show 

that only 100 depositors out of 250,139 

(or 0.04 percent) had trust account 

balances greater than $1.25 million; at 

small IDIs, 18 out of 34,304 depositors 

(or 0.05 percent) had trust account 


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85Whether a failed IDI is considered small is 

based on data from its four quarterly Call Reports 

prior to failure. 

86The FDIC has also considered the impact of any 

changes in the deposit insurance rules on the 

covered institutions that are subject to part 370. As 

described previously, part 370 affects IDIs with two 

million or more deposit accounts. Based on Call 

Report data as of March 31, 2021, the FDIC does not 

insure any institutions with two million or more 

deposit accounts that are also considered small 

entities. 

balances greater than $1.25 million.85

The data from failed banks suggest small 

IDIs could be affected by the proposal 

roughly in proportion to the share of 

trust depositors with account balances 

greater than $1.25 million at IDIs of all 

sizes which failed between 2010 and 

2020. 

Expected Effects 

The proposed simplification of the 

deposit insurance rules for trust 

deposits is expected to have a variety of 

effects. The proposed amendments 

would directly affect the level of deposit 

insurance coverage provided to some 

depositors with trust deposits. In 

addition, simplification of the rules is 

expected to have benefits in terms of 

promoting the timely payment of 

deposit insurance following a small 

IDI’s failure, facilitating the transfer of 

deposit relationships to failed bank 

acquirers with consequent potential 

reductions to the FDIC’s resolution 

costs, and addressing differences in the 

treatment of revocable trust deposits 

and irrevocable trust deposits contained 

in the current rules. The FDIC has also 

considered the impact of any changes in 

the deposit insurance rules on the DIF 

and other potential effects.86 These 

effects are discussed in greater detail in 

Section III.A entitled ‘‘Expected 

Effects.’’ 

Overall, due to the fact that the FDIC 

expects most small IDIs to have only a 

small number of trust accounts with 

balances above the proposed coverage 

limit of $1,250,000 per grantor, per IDI 

for trust deposits, effects on the deposit 

insurance coverage of small entities’ 

customers are likely to be small. There 

also may be some initial cost for small 

entities to become familiar with the 

proposed changes to the trust insurance 

coverage rules in order to be able to 

explain them to potential trust 

customers, counterbalanced to some 

extent by the fact that the proposed 

rules should be simpler to understand 

and explain going forward. As the 

business impacts and costs associated 

with operationalizing the proposed 

changes to the trust rules may vary 

significantly across IDIs, the FDIC 

would welcome industry comments in 

this regard. 

Alternatives Considered 

The FDIC has considered a number of 

alternatives to the proposed rule that 

could meet its objectives in this 

rulemaking. However, for reasons 

previously stated in Section I.E 

‘‘Alternatives Considered,’’ the FDIC 

considers the proposed rule to be a more 

appropriate alternative. 

The FDIC also considered the status 

quo alternative to not amend the 

existing trust rules. However, for 

reasons previously stated in Section I.E 

‘‘Alternatives Considered,’’ the FDIC 

considers the proposed rule to be a more 

appropriate alternative. 

Other Statutes and Federal Rules 

The FDIC has not identified any likely 

duplication, overlap, and/or potential 

conflict between this proposal and any 

other federal rule. 

The FDIC invites comments on all 

aspects of the supporting information 

provided in this RFA section. In 

particular, would the proposal have any 

significant effects on small entities that 

the FDIC has not identified? 

2. Amendments to Mortgage Servicing 

Account Rule 

Reasons Why This Action Is Being 

Considered 

As previously discussed, the FDIC 

provides coverage, up to the SMDIA for 

each borrower, for principal and interest 

funds in MSAs only to the extent ‘‘paid 

into the account by the mortgagors,’’ 

and does not provide coverage for funds 

paid into the account from other 

sources, such as the servicer’s own 

operating funds, even if those funds 

satisfy mortgagors’ principal and 

interest payments under the current 

rules. The advances are aggregated and 

insured to the servicer as corporate 

funds for a total of $250,000. Under 

some servicing arrangements, however, 

mortgage servicers may be required to 

advance their own funds to make 

payments of principal and interest on 

behalf of delinquent borrowers to the 

lenders in certain circumstances. Thus, 

under the current rules, such advances 

are not provided the same level of 

coverage as other deposits in a mortgage 

servicing account comprised of 

principal and interest payments directly 

from the borrower. This could result in 

delayed access to certain funds in an 

MSA, or to the extent that aggregated 

advances insured to the servicer exceed 

the insurance limit, loss of such funds, 

in the event of an IDI’s failure. The FDIC 

is therefore proposing to amend its rules 

governing coverage for deposits in 

mortgage servicing accounts to address 

this inconsistency. 

Policy Objectives 

As discussed previously, the FDIC’s 

regulations governing deposit insurance 

coverage include specific rules on 

deposits maintained at IDIs by mortgage 

servicers. With the proposed 

amendments, the FDIC seeks to address 

an inconsistency concerning the extent 

of deposit insurance coverage for such 

deposits, as in the event of an IDI’s 

failure the current rules could result in 

delayed access to certain funds in a 

mortgage servicing account (MSA) that 

have been aggregated and insured to a 

mortgage servicer, or to the extent that 

aggregated funds insured to a servicer 

exceed the insurance limit, loss of such 

funds. 

The proposed rule is intended to 

address a servicing arrangement that is 

not specifically addressed in the current 

rules. Specifically, some servicing 

arrangements may permit or require 

servicers to advance their own funds to 

the lenders when mortgagors are 

delinquent in making principal and 

interest payments, and servicers might 

commingle such advances in the MSA 

with principal and interest payments 

collected directly from mortgagors. This 

may be required, for example, under 

certain mortgage securitizations. The 

FDIC believes that the factors that 

motivated the FDIC to establish its 

current rules for MSAs, described 

previously, argue for treating funds 

advanced by a mortgage servicer in 

order to satisfy mortgagors’ principal 

and interest obligations to the lender as 

if such funds were collected directly 

from borrowers. 

Legal Basis 

The FDIC’s deposit insurance 

categories have been defined through 

both statute and regulation. Certain 

categories, such as the government 

deposit category, have been expressly 

defined by Congress. Other categories, 

such as joint deposits and corporate 

deposits, have been based on statutory 

interpretation and recognized through 

regulations issued in 12 CFR part 330 

pursuant to the FDIC’s rulemaking 

authority. In addition to defining the 

insurance categories, the deposit 

insurance regulations in part 330 

provide the criteria used to determine 

insurance coverage for deposits in each 

category. The FDIC proposes to amend 

§ 330.7(d) of its regulations, which 

currently applies only to cumulative 

balance paid by the mortgagors into an 

MSA maintained by a mortgage servicer, 

to include balances paid in to the 

account to satisfy mortgagors’ principal 

or interest obligations to the lender. For 

a more detailed discussion of the 


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87According to the U.S. Census Bureau within 

the ‘‘Other Activities Related to Credit 

Intermediation’’ (NAICS 522390) national industry 

where mortgage servicers are captured there were 

3,595 firms in 2018, relative to the 37,627 firms in 

the Credit Intermediation and Related Activities 

subsector (NAICS 522). 88 12 U.S.C. 4802(a). 

proposal’s legal basis please refer to 

Section II.C, entitled ‘‘Proposed Rule.’’ 

The Proposed Rule 

The FDIC is proposing to amend the 

rules governing deposit insurance 

coverage for deposits maintained at IDIs 

by mortgage servicers. Generally, the 

proposed amendment would provide 

consistent deposit insurance treatment 

for all MSA deposit balances held to 

satisfy principal and interest obligations 

to a lender, regardless of whether those 

funds are paid into the account by 

borrowers, or paid into the account by 

another party (such as the servicer) in 

order to satisfy a periodic obligation to 

remit principal and interest due to the 

lender. The composition of an MSA 

attributable to principal and interest 

payments would include mortgage 

servicers’ advances of principal and 

interest funds on behalf of delinquent 

borrowers, and collections by a servicer 

such as foreclosure proceeds. The 

proposed rule would make no change to 

the deposit insurance coverage provided 

for mortgage servicing accounts 

comprised of payments from mortgagors 

of taxes and insurance premiums. For a 

more detailed discussion of the 

proposed rule please refer to Section 

II.C, entitled ‘‘Proposed Rule.’’ 

Small Entities Affected 

Based on the March 31, 2021 Call 

Report data, the FDIC insures 4,987 

depository institutions, of which 3,431 

are considered small entities for the 

purposes of RFA. Of the 3,431 small 

IDIs, 491 IDIs (14.3 percent) report 

holding mortgage servicing assets, 

which indicates that they service 

mortgage loans and could thus be 

affected by the proposed rule. However, 

mortgage servicing accounts may be 

maintained at small IDIs that do not 

themselves service mortgage loans. The 

FDIC does not know how many IDIs that 

are small entities are recipients of 

mortgage servicing account deposits, but 

believes that most such entities are not 

because there are relatively few 

mortgage servicers.87 Therefore, the 

FDIC estimates that the number of small 

IDIs potentially affected by the proposed 

rule, if adopted, would be between 491 

and 3,431, but believes that the number 

is close to the lower end of the range. 

As noted in Section III.A, titled 

‘‘Expected Effects,’’ the FDIC does not 

have detailed data on MSAs that would 

allow the FDIC to reliably estimate the 

number of MSAs maintained at IDIs that 

would be affected by the proposed rule, 

or any potential change in the total 

amount of insured deposits. Therefore, 

it is difficult to accurately estimate the 

number of small IDIs that would be 

potentially affected by the proposed 

rule. 

Expected Effects 

The proposed rule would directly 

affect the level of deposit insurance 

coverage for certain funds within MSAs. 

If enacted, the proposed rule is likely to 

benefit a servicer compelled by the 

terms of a pooling and servicing 

agreement to advance principal and 

interest funds to note holders when a 

borrower is delinquent, and therefore 

the servicer has not received such funds 

from the borrower. In the event that the 

IDI hosting the MSA for the servicer 

fails, the proposal reduces the 

likelihood that the funds advanced by 

the servicer are uninsured, and thereby 

facilitates access to, and helps avoids 

losses of, those funds. As previously 

discussed, the FDIC does not have 

detailed data on MSAs held at IDIs, 

pooling and servicing agreements for 

outstanding mortgage loans, or servicer 

payments into MSAs that would allow 

the FDIC to reliably estimate the number 

of, and volume of funds within, MSAs 

maintained at IDIs that would be 

affected by the proposed rule. 

Further, the proposed rule is likely to 

benefit a small IDI who is hosting an 

MSA for a servicer that is compelled by 

the terms of a pooling and servicing 

agreement to advance principal and 

interest funds to note holders on behalf 

of delinquent borrowers by increasing 

the volume of insured funds. In the 

event that the small IDI enters into a 

troubled condition, the proposed rule 

could marginally increase the stability 

of MSA deposits from such servicers, 

thereby increasing the general stability 

of funding. 

Based on the preceding information 

the FDIC believes that the proposed 

rule, if enacted, is unlikely to have a 

significant economic effect on a 

substantial number of small entities. 

Alternatives Considered 

The FDIC is proposing revisions to the 

deposit insurance rules for MSAs to 

advance the objectives discussed above. 

The FDIC considered the status quo 

alternative to not revise the existing 

rules for MSAs and not propose the 

revisions. However, for reasons 

previously stated in Section II.B, 

entitled ‘‘Background and Need for 

Rulemaking,’’ the FDIC considers the 

proposed rule to be a more appropriate 

alternative. Were the FDIC to not 

propose the revisions, then in the event 

of an IDI’s failure the current rules 

could result in delayed access to certain 

funds in an MSA that have been 

aggregated and insured to a mortgage 

servicer, or to the extent that aggregated 

funds insured to a servicer exceed the 

insurance limit, loss of such funds. 

Other Statutes and Federal Rules 

The FDIC has not identified any likely 

duplication, overlap, and/or potential 

conflict between this proposal and any 

other federal rule. 

The FDIC invites comments on all 

aspects of the supporting information 

provided in this RFA section. In 

particular, would the proposal have any 

significant effects on small entities that 

the FDIC has not identified? 

C. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3521) states that no 

agency may conduct or sponsor, nor is 

the respondent required to respond to, 

an information collection unless it 

displays a currently valid Office of 

Management and Budget (OMB) control 

number. The FDIC has determined that 

this proposed rule does not create any 

new, or revise any existing, collections 

of information under section 3504(h) of 

the Paperwork Reduction Act (PRA). 

Consequently, no information collection 

request will be submitted to the OMB 

for review. The FDIC invites comment 

on its PRA determination. 

D. Riegle Community Development and 

Regulatory Improvement Act 

Section 302 of the Riegle Community 

Development and Regulatory 

Improvement Act of 1994 (RCDRIA) 

requires that the Federal banking 

agencies, including the FDIC, in 

determining the effective date and 

administrative compliance requirements 

of new regulations that impose 

additional reporting, disclosure, or other 

requirements on insured depository 

institutions, 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.88 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 insured depository institutions shall 


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89 12 U.S.C. 4802(b). 

90Public Law 105–277, 112 Stat. 2681 (Oct. 21, 

1998). 

91Public Law 106–102, 113 Stat. 1338, 1471 (Nov. 

12, 1999). 

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.89

The proposed rule would not impose 

additional reporting or disclosure 

requirements on insured depository 

institutions, including small depository 

institutions, or on the customers of 

depository institutions. Accordingly, 

section 302 of RCDRIA does not apply. 

Nevertheless, the requirements of 

RCDRIA will be considered as part of 

the overall rulemaking process, and the 

FDIC invites comments that will further 

inform its consideration of RCDRIA. 

E. Treasury and General Government 

Appropriations Act, 1999—Assessment 

of Federal Regulations and Policies on 

Families 

The FDIC has determined that the 

proposed rule will not affect family 

well-being within the meaning of 

section 654 of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999.90

F. Plain Language 

Section 722 of the Gramm-LeachBliley Act 91 requires the Federal 

banking agencies to use plain language 

in all proposed and final rulemakings 

published in the Federal Register after 

January 1, 2000. The FDIC invites your 

comments on how to make this proposal 

easier to understand. For example: 

• Has the FDIC organized the material 

to suit your needs? If not, how could the 

material be better organized? 

• Are the requirements in the 

proposed regulation clearly stated? If 

not, how could the regulation be stated 

more clearly? 

• Does the proposed regulation 

contain language or jargon that is 

unclear? If so, which language requires 

clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the regulation 

easier to understand? 

List of Subjects in 12 CFR Part 330 

Bank deposit insurance, Reporting 

and recordkeeping requirements, 

Savings associations. 

Authority and Issuance 

For the reasons stated above, the 

Federal Deposit Insurance Corporation 

proposes to amend part 330 of title 12 

of the Code of Federal Regulations as 

follows: 

PART 330—DEPOSIT INSURANCE 

COVERAGE 

■ 1. The authority citation for part 330 

continues to read as follows: 

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

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

1820(g), 1821(a), 1821(d), 1822(c). 

§ 330.1 [Amended] 

■ 2. Amend § 330.1 by removing and 

reserving paragraphs (m) and (r). 

■ 3. Revise § 330.7(d) to read as follows: 

§ 330.7 Accounts held by an agent, 

nominee, guardian, custodian or 

conservator. 

* * * * * 

(d) Mortgage servicing accounts. 

Accounts maintained by a mortgage 

servicer, in a custodial or other 

fiduciary capacity, which are comprised 

of payments of principal and interest, 

shall be insured for the cumulative 

balance paid into the account by 

mortgagors, or in order to satisfy 

mortgagors’ principal or interest 

obligations to the lender, up to the limit 

of the SMDIA per mortgagor. Accounts 

maintained by a mortgage servicer, in a 

custodial or other fiduciary capacity, 

which are comprised of payments by 

mortgagors of taxes and insurance 

premiums shall be added together and 

insured in accordance with paragraph 

(a) of this section for the ownership 

interest of each mortgagor in such 

accounts. 

* * * * * 

■ 4. Revise § 330.10 to read as follows: 

§ 330.10 Trust accounts. 

(a) Scope and definitions. This section 

governs coverage for deposits held in 

connection with informal revocable 

trusts, formal revocable trusts, and 

irrevocable trusts not covered by 

§ 330.12 (‘‘trust accounts’’). For 

purposes of this section: 

(1) Informal revocable trust means a 

trust under which a deposit passes 

directly to one or more beneficiaries 

upon the depositor’s death without a 

written trust agreement, commonly 

referred to as a payable-on-death 

account, in-trust-for account, or Totten 

trust account. 

(2) Formal revocable trust means a 

revocable trust established by a written 

trust agreement under which a deposit 

passes to one or more beneficiaries upon 

the grantor’s death. 

(3) Irrevocable trust means an 

irrevocable trust established by statute 

or a written trust agreement and not 

otherwise insured as described in 

§ 330.12. 

(b) Calculation of coverage—(1) 

General calculation. Each grantor’s trust 

deposits are insured in an amount up to 

the SMDIA multiplied by the total 

number of beneficiaries identified by 

the grantor, up to a maximum of 5 

beneficiaries. 

(2) Aggregation for purposes of 

insurance limit. Trust deposits that pass 

from the same grantor to beneficiaries 

are aggregated for purposes of 

determining coverage under this 

section, regardless of whether those 

deposits are held in connection with an 

informal revocable trust, formal 

revocable trust, or irrevocable trust. 

(3) Separate insurance coverage. The 

deposit insurance coverage provided 

under this section is separate from 

coverage provided for other deposits at 

the same insured depository institution. 

(4) Equal allocation presumed. Unless 

otherwise specified in the deposit 

account records of the insured 

depository institution, a deposit held in 

connection with a trust established by 

multiple grantors is presumed to have 

been owned or funded by the grantors 

in equal shares. 

(c) Number of beneficiaries. For 

purposes only of determining the total 

number of beneficiaries for a trust 

deposit under paragraph (b) of this 

section: 

(1) Eligible beneficiaries. Subject to 

paragraph (c)(2) of this section, 

beneficiaries include natural persons, as 

well as charitable organizations and 

other non-profit entities recognized as 

such under the Internal Revenue Code 

of 1986, as amended. 

(2) Ineligible beneficiaries. 

Beneficiaries do not include: 

(i) The grantor of a trust; or 

(ii) A person or entity that would only 

obtain an interest in the deposit if one 

or more named beneficiaries are 

deceased. 

(3) Future trust(s) named as 

beneficiaries. If a trust agreement 

provides that trust funds will pass into 

one or more new trusts upon the death 

of the grantor(s), the future trust(s) are 

not treated as beneficiaries of the trust; 

rather, the future trust(s) are viewed as 

mechanisms for distributing trust funds, 

and the beneficiaries are the natural 

persons or organizations that shall 

receive the trust funds through the 

future trusts. 

(4) Informal trust account payable to 

depositor’s formal trust. If an informal 

revocable trust designates the 

depositor’s formal trust as its 

beneficiary, the informal revocable trust 

account will be treated as if titled in the 

name of the formal trust. 


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(d) Deposit account records—(1) 

Informal revocable trusts. The 

beneficiaries of an informal revocable 

trust must be specifically named in the 

deposit account records of the insured 

depository institution. 

(2) Formal revocable trusts. The title 

of a formal trust account must include 

terminology sufficient to identify the 

account as a trust account, such as 

‘‘family trust’’ or ‘‘living trust,’’ or must 

otherwise be identified as a 

testamentary trust in the account 

records of the insured depository 

institution. If eligible beneficiaries of 

such formal revocable trust are 

specifically named in the deposit 

account records of the insured 

depository institution, the FDIC shall 

presume the continued validity of the 

named beneficiary’s interest in the trust 

consistent with § 330.5(a). 

(e) Commingled deposits of 

bankruptcy trustees. If a bankruptcy 

trustee appointed under title 11 of the 

United States Code commingles the 

funds of various bankruptcy estates in 

the same account at an insured 

depository institution, the funds of each 

title 11 bankruptcy estate will be added 

together and insured up to the SMDIA, 

separately from the funds of any other 

such estate. 

(f) Deposits excluded from coverage 

under this section—(1) Revocable trust 

co-owners that are sole beneficiaries of 

a trust. If the co-owners of an informal 

or formal revocable trust are the trust’s 

sole beneficiaries, deposits held in 

connection with the trust are treated as 

joint ownership deposits under § 330.9. 

(2) Employee benefit plan deposits. 

Deposits of employee benefit plans, 

even if held in connection with a trust, 

are treated as employee benefit plan 

deposits under § 330.14. 

(3) Investment company deposits. 

This section shall not apply to deposits 

of trust funds belonging to a trust 

classified as a corporation under 

§ 330.11(a)(2). 

(4) Insured depository institution as 

trustee of an irrevocable trust. Deposits 

held by an insured depository 

institution in its capacity as trustee of 

an irrevocable trust are insured as 

provided in § 330.12. 

§ 330.13 [Removed and Reserved] 

■ 5. Remove and reserve § 330.13. 

Federal Deposit Insurance Corporation. 

By order of the Board of Directors. 

Dated at Washington, DC, on July 20, 2021. 

James P. Sheesley, 

Assistant Executive Secretary. 

[FR Doc. 2021–15732 Filed 8–2–21; 8:45 am] 

BILLING CODE 6714–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2021–0602; Project 

Identifier 2019–CE–022–AD] 

RIN 2120–AA64 

Airworthiness Directives; Diamond 

Aircraft Industries GmbH Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for all 

Diamond Aircraft Industries GmbH 

Models DA 42, DA 42 NG, and DA 42 

M–NG airplanes. This proposed AD was 

prompted by mandatory continuing 

airworthiness information (MCAI) 

originated by an aviation authority of 

another country to identify and correct 

an unsafe condition on an aviation 

product. The MCAI describes the unsafe 

condition as failure of the nose landing 

gear (NLG) actuator attachment lever 

and detachment from the NLG leg. This 

proposed AD would require repetitively 

inspecting the NLG actuator attachment 

lever for cracks and damage and taking 

any necessary corrective actions. The 

FAA is proposing this AD to address the 

unsafe condition on these products. 

DATES: The FAA must receive comments 

on this NPRM by September 17, 2021. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this AD, contact Diamond Aircraft 

Industries GmbH, N.A. Otto-Stra+e 5, 

A–2700 Wiener Neustadt, Austria; 

phone: +43 2622 26700; fax: +43 2622 

26780; email: office@diamond-air.at; 

website: https://

www.diamondaircraft.com. You may 

view this service information at the 

FAA, Airworthiness Products Section, 

Operational Safety Branch, 901 Locust 

St, Kansas City, MO 64106. For 

information on the availability of this 

material at the FAA, call (816) 329– 

4148. 

Examining the AD Docket 

You may examine the AD docket at 

https://www.regulations.gov by 

searching for and locating Docket No. 

FAA–2021–0602; or in person at Docket 

Operations between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The AD docket contains this 

NPRM, the MCAI, any comments 

received, and other information. The 

street address for Docket Operations is 

listed above. 

FOR FURTHER INFORMATION CONTACT: 

Penelope Trease, Aviation Safety 

Engineer, General Aviation & Rotorcraft 

Section, International Validation 

Branch, FAA, 26805 E. 68th Avenue, 

Denver, CO 80249; phone: (303) 342– 

1094; email: penelope.trease@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

The FAA invites you to send any 

written relevant data, views, or 

arguments about this proposal. Send 

your comments to an address listed 

under ADDRESSES. Include ‘‘Docket No. 

FAA–2021–0602; Project Identifier 

2019–CE–022–AD’’ at the beginning of 

your comments. The most helpful 

comments reference a specific portion of 

the proposal, explain the reason for any 

recommended change, and include 

supporting data. The FAA will consider 

all comments received by the closing 

date and may amend this proposal 

because of those comments. 

Except for Confidential Business 

Information (CBI) as described in the 

following paragraph, and other 

information as described in 14 CFR 

11.35, the FAA will post all comments 

received, without change, to https://

www.regulations.gov, including any 

personal information you provide. The 

agency will also post a report 

summarizing each substantive verbal 

contact received about this NPRM. 

Confidential Business Information 

CBI is commercial or financial 

information that is both customarily and 

actually treated as private by its owner. 

Under the Freedom of Information Act 

(FOIA) (5 U.S.C. 552), CBI is exempt 

from public disclosure. If your 

comments responsive to this NPRM 

contain commercial or financial 

information that is customarily treated 

as private, that you actually treat as 

private, and that is relevant or 

responsive to this NPRM, it is important 

that you clearly designate the submitted 

comments as CBI. Please mark each 

page of your submission containing CBI 


jbell on DSKJLSW7X2PROD with PROPOSALS