Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 7701

C. Paragraph (h) is redesignated as

paragraph (g) and redesignated

paragraph (g) is revised to read as

follows:

§ 1435.513 Allocation of marketing

allotments to processors.

* * * * *

(f) During any fiscal year in which

marketing allotments are in effect and

allocated to processors, the total of the

quantity of sugar and sugar products

marketed by a processor shall not

exceed the quantity of the allocation of

the allotment made to the processor.

(g) Paragraph (f) of this section shall

not apply to any sale of sugar by a

processor to another processor that is

made to enable the purchasing

processor to fulfill the purchasing

processor’s allocation of an allotment.

Such sales shall be reported to CCC

within a week of the date of any such

sale.

7. In § 1435.514, paragraph (a) is

revised to read as follows:

§ 1435.514 Reassignment of deficits.

(a) From time to time in each fiscal

year that marketing allotments are in

effect, CCC will determine whether

processors of sugar beets or sugarcane

will be able to market sugar covered by

the portions of the allotments allocated

to them. These determinations will be

made giving due consideration to

current inventories of sugar, estimated

production of sugar, expected

marketings, and any other pertinent

factors. These determinations will be

made as soon and as frequently as

practicable.

* * * * *

8. In § 1435.520, paragraph (b) is

revised to read as follows:

§ 1435.520 Sharing processors’

allocations with producers.

* * * * *

(b) Whenever allocations of a

marketing allotment are established or

adjusted, every sugar beet processor and

sugarcane processor must provide to

CCC such adequate assurances as are

required to ensure that the processor’s

allocation will be shared among

producers served by the processor in a

fair and equitable manner which

adequately reflects each producer’s

production history.

* * * * *

9. In § 1435.521, paragraph (c) (1) is

revised to read as follows:

§ 1435.521 Proportionate shares for

producers of sugarcane.

* * * * *

(c) * * *

(1) Establish the State’s per-acre yield

goal at a level (not less than the average

per-acre yield in the State for the

preceding 5 years) that will ensure an

adequate net return per pound to

producers in the State, taking into

consideration any available production

research data considered relevant;

* * * * *

10. In § 1435.528, paragraphs (a) and

(b) are revised to read as follows:

§ 1435.528 Penalties and assessments.

(a) In accordance with section

359b(d)(3) of the Agricultural

Adjustment Act of 1938, as amended (7

U.S.C. 1359bb(d)(3)), any sugar beet

processor or sugarcane processor who

knowingly markets sugar or sugar

products in excess of the processor’s

allocation in violation of § 1435.513

shall be liable to CCC for a civil penalty

in an amount equal to 3 times the U.S.

market value, at the time the violation

was committed, of that quantity of sugar

involved in the violation.

(b) In accordance with section

359b(d)(3) of the Agricultural

Adjustment Act of 1938, as amended (7

U.S.C. 1359bb(d)(3)), any manufacturer

of CF who knowingly markets CF in

excess of the manufacturer’s marketing

allotment shall pay to CCC a civil

penalty in an amount equal to 3 times

the U.S. market value, at the time the

violation was committed, of that

quantity of CF involved in the violation.

* * * * *

Signed at Washington, DC, on February 2,

1995.

Grant Buntrock,

Acting Executive Vice President,

Commodity Credit Corporation.

[FR Doc. 95–3288 Filed 2–8–95; 8:45 am]

BILLING CODE 3410–05–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 330

RIN 3064–AB28

Deposit Insurance Coverage

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Final rule.

SUMMARY: The FDIC is amending its

deposit insurance regulations to require

that: Upon request, an insured

depository institution disclose in

writing to depositors of employee

benefit plan funds, its current Prompt

Corrective Action (PCA) capital

category, its capital ratios, and whether

employee benefit plan deposits would

be eligible for ‘‘pass-through’’ insurance

coverage; upon opening an account

comprised of employee benefit plan

funds, an insured depository institution

disclose in writing its PCA capital

category, a description of the

requirements for ‘‘pass-through’’

insurance coverage and whether, in the

institution’s judgment, the deposits are

eligible for ‘‘pass-through’’ deposit

insurance; and when employee benefit

plan deposits placed with an insured

depository institution would no longer

qualify for ‘‘pass-through’’ insurance

coverage, the institution disclose in

writing to all existing employee benefit

plan depositors within 10 business days

the institution’s PCA capital category

and that new, rolled-over or renewed

employee benefit plan deposits will not

be eligible for ‘‘pass-through’’ deposit

insurance coverage.

The FDIC is also making a number of

technical amendments to its insurance

regulations concerning commingled

accounts of bankruptcy trustees, joint

accounts, accounts for which an insured

depository institution is acting in a

fiduciary capacity, and accounts for

which an insured depository institution

is acting as the trustee of an irrevocable

trust.

The intended effect of the final rule is

to provide employee benefit plan

depositors important information, not

otherwise available, on ‘‘pass-through’’

deposit insurance which may be needed

to prudently manage their funds. The

technical amendments clarify the

insurance rules involving commingled

accounts of bankruptcy trustees, joint

accounts, accounts for which an insured

depository institution is acting in a

fiduciary capacity, and accounts for

which an insured depository institution

is acting as the trustee of an irrevocable

trust.

EFFECTIVE DATES: The amendments to 12

CFR 330.12 are effective on July 1, 1995.

The amendments to 12 CFR 330.6,

330.7, 330.10 and 330.11 are effective

on March 13, 1995.

FOR FURTHER INFORMATION CONTACT:

Daniel M. Gautsch, Examination

Specialist, Division of Supervision (202/

898–6912) or Joseph A. DiNuzzo,

Counsel, Legal Division (202/898–7349),

Federal Deposit Insurance Corporation,

550 17th Street, NW, Washington, D.C.

20429.

SUPPLEMENTARY INFORMATION:

Background

In May 1993, the FDIC Board of

Directors (Board) revised § 330.12 of the

FDIC’s regulations (12 CFR 330.12) (58

FR 29952 (May 25, 1993)) to reflect the

new limitations imposed by section 311

of the Federal Deposit Insurance

Corporation Improvement Act of 1991
7702 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

1The recordkeeping requirements of § 330.4 of

the FDIC’s regulations also would have to be

satisfied. 12 CFR 330.12(a) & 330.4.

2 ‘‘Well capitalized’’ insured institutions can, in

certain circumstances, avoid a lapse in eligibility

for ‘‘pass-through’’ insurance of employee benefit

plan deposits, should the institution’s PCA capital

category be reduced to ‘‘adequately capitalized’’, by

obtaining a broker deposit waiver from the FDIC.

(Pub. L. 102–242, 105 Stat. 2236)

(FDICIA) on the ‘‘pass-through’’ deposit

insurance provided for employee benefit

accounts. (‘‘Pass-through’’ insurance

means that the insurance coverage

passes through to each owner/

beneficiary of the applicable deposit.)

As required by section 311 of FDICIA,

under the revised rules, whether an

employee benefit plan deposit is

entitled to ‘‘pass-through’’ deposit

insurance coverage is based, in part,

upon the capital status of an insured

depository institution at the time the

deposit is accepted.

Under §§ 330.12 (a) and (b), ‘‘passthrough’’ insurance shall not be

provided if, at the time an employee

benefit plan deposit is accepted, the

institution may not accept brokered

deposits pursuant to section 29 of the

FDI Act (12 U.S.C. 1831f(a)) unless, at

the time the deposit is accepted: (1) The

institution meets each applicable capital

standard; and (2) the depositor receives

a written statement from the institution

indicating that such deposits are eligible

for insurance coverage on a ‘‘passthrough’’ basis.1 The written statement

required under this exception must be

provided each time a deposit is made or

additional employee benefit plan funds

are placed with the insured institution.

58 FR 29957 (May 25, 1993).

Section 29 of the FDI Act prohibits

insured depository institutions that are

‘‘adequately capitalized’’ but have not

obtained a broker deposit waiver from

the FDIC and ‘‘undercapitalized’’

institutions (or institutions in lower

capital categories) from accepting

brokered deposits.2 A brokered deposit

is defined in § 337.6 of the FDIC’s

regulations (12 CFR 337.6) as any

deposit that is obtained, directly or

indirectly, from or through the

mediation or assistance of a deposit

broker.

On December 8, 1993, the FDIC

published in the Federal Register a

proposed rule (58 FR 64521) to impose

several specific disclosure requirements

upon insured depository institutions

regarding the availability of ‘‘passthrough’’ insurance coverage for

employee benefit plan deposits. In

summary, the proposed rule would have

required that: (1) Upon request (within

two business days after receipt of such

request), an insured depository

institution provide written notice to any

existing or prospective depositor of

employee benefit plan funds of the

institution’s leverage ratio, Tier 1

risked-based capital ratio, total riskbased capital ratio, PCA capital category

and whether or not, in the opinion of

the institution, employee benefit plan

deposits made with the institution

would be entitled to ‘‘pass-through’’

insurance coverage; (2) upon the

opening of any account comprised of

employee benefit plan funds, an insured

depository institution provide written

notice to the depositor of the

institution’s PCA capital category and

whether or not such deposits are eligible

for ‘‘pass-through’’ insurance coverage;

(3) within two business days after an

insured depository institution’s PCA

capital category changes from ‘‘well

capitalized’’ to ‘‘adequately

capitalized’’, the institution provide

written notice to all depositors of

employee benefit plan funds of the

institution’s new PCA capital category

and whether or not new, rolled-over or

renewed employee benefit plan deposits

would be eligible for ‘‘pass-through’’

insurance coverage; and (4) within two

business days after an insured

depository institution’s PCA capital

category changes to a category below

‘‘adequately capitalized’’, the institution

provide written notice to all depositors

of employee benefit plan funds

indicating that new, rolled-over or

renewed deposits of employee benefit

plan funds made on or after the date the

institution’s PCA capital category

changed to a category below adequately

capitalized will not be eligible for ‘‘passthrough’’ insurance coverage.

The FDIC issued the proposed rule, in

part, because of numerous comments it

received from various sources on the

difficulty of obtaining public

information concerning an insured

institution’s capital levels and on its

current PCA capital category—

information necessary to determine

whether employee benefit plan deposits

would be eligible for ‘‘pass-through’’

insurance coverage.

Discussion of the Final Rule and

Comments on the Proposed Rule

The FDIC received 67 comment letters

on the proposed rule. Thirty-seven were

from banks and savings associations,

seventeen from bank or thrift holding

companies, seven from trade

associations, and six from other

interested parties. Numerous

suggestions and recommendations were

made to revise the proposal.

Only three commenters expressed

support for all aspects of the proposed

rule. The majority of comments

recommended various revisions to make

the proposal less burdensome. Many

commenters noted that most institutions

presently do not have a system for

identifying employee benefit plan

accounts and that more time was

needed to provide the required

disclosures to affected depositors. They

also expressed concern about the

administrative cost of complying with

all aspects of the proposal. Others

commented that the proposed rule

might create a potential liability for

insured institutions and promote bank

‘‘runs.’’ Most commenters suggested that

the FDIC include optional sample

disclosures in the regulation.

In issuing the proposed rule for

comment the FDIC was cognizant of the

attendant regulatory burden that would

be imposed upon insured depository

institutions. Thus, the FDIC attempted

to balance the undesirability of

imposing additional regulatory

requirements on insured depository

institutions with the importance of

providing timely notice to existing and

prospective employee benefit plan

depositors of the extent of ‘‘passthrough’’ insurance coverage available

for their deposits—information which is

important to them and not otherwise

generally available. In response to the

public comments, the FDIC has

modified the requirements of the

proposed rule so that the final rule has

fewer and less burdensome disclosure

requirements than those proposed. The

remaining requirements are believed to

be essential, however, to ensure that the

necessary deposit insurance information

is provided to employee benefit plan

depositors.

In FDICIA Congress for the first time

linked deposit insurance coverage to the

capital level of the insured depository

institution. This relationship between

the scope of deposit insurance and an

institution’s capital applies only to

employee benefit plan deposits. This

special category of deposit insurance

coverage, therefore, requires special

disclosure rules; otherwise, employee

benefit plan depositors may be

inappropriately disadvantaged. Given

the nature of the statutory requirements

for ‘‘pass-through’’ insurance coverage

for employee benefit plan accounts, the

Board believes the disclosure

requirements are essential to safeguard

the interests of employee benefit plan

depositors and ultimately plan

participants. As indicated below,

however, the Board acknowledges that

the disclosure requirements do not fully

safeguard the interests of the owners of

employee benefit plan deposits and

believes that amendments to the

insurance provisions of the FDI Act are
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 7703

needed to remedy the continuing

potential exposure of those owners.

The following is a discussion of the

comments received on the various

aspects of the proposed rule including

comments received on the specific

issues raised in the proposed

rulemaking:

A. Disclosures Upon Request

The proposed rule would have

required that, upon request ( within two

business days after receipt of such

request), an insured depository

institution provide written notice to any

existing or prospective depositor of

employee benefit plan funds of the

institution’s leverage ratio, Tier 1

risked-based capital ratio, total riskbased capital ratio, PCA capital category

and whether, in the opinion of the

institution, employee benefit plan

deposits placed with the institution

would be eligible for ‘‘pass-through’’

insurance coverage. A majority of the

commenters that specifically addressed

this issue favored this provision. They

cited the need for depositors to be able

to obtain adequate information in order

to make an informed decision about

where to invest their funds. Those

opposed to such a requirement cited the

regulatory burden of developing policies

and procedures, automation systems,

training of customer service personnel

and maintaining current capital-related

information to ensure compliance with

the requirement. Other commenters

questioned the need to disclose this

capital information because, in their

view, the information would confuse

most individuals.

A number of commenters also

questioned the requirement that

institutions make disclosures to

prospective employee benefit plan

depositors upon request. They indicated

that individuals are free to take their

business elsewhere if they are not

satisfied with the information received.

They suggested that market forces can

address this issue and recommended

that this requirement be deleted from

the regulation.

The FDIC agrees that prospective

customers are free to take their business

elsewhere if they do not get the desired

information. Existing customers,

however, may have several reasons why

they cannot easily move their accounts.

Therefore, the final rule has been

changed to require disclosures when

requested by employee benefit plan

customers that already have accounts at

an insured institution.

The FDIC believes that the regulatory

burden placed on institutions can be

mitigated if adequate time is given to

establish policies and procedures.

Accordingly, the final rule contains a

delayed effective date of July 1, 1995. In

addition, the capital information to be

disclosed is based on the most recently

available data and need not be as of the

date of the deposit. The FDIC believes

that insured institutions should not

have to develop any new, specific

procedures to develop the capital

information required by this portion of

the rule. For example, institutions that

are clearly ‘‘well capitalized’’ and have

experienced only minor variations in

their capital ratios since the filing of

their last quarterly Consolidated Report

of Condition and Income (Call Report)

may use the capital ratios calculated at

that time.

An institution’s capital category and

the availability of ‘‘pass-through’’

insurance are, in almost all cases,

believed to be derived from financial

information currently available. Further,

only a very few insured depository

institutions are not eligible for employee

benefit plan ‘‘pass-through’’ deposit

insurance coverage. (Based on

September 30, 1994 regulatory reporting

data only 279 of 12,774 insured

depository institutions were less than

‘‘well capitalized’’.) Therefore, it is

estimated that the regulatory impact of

this portion of the rule will be

insignificant.

Some commenters recommended that

depositor requests be in writing and be

mailed to a central location. The FDIC

believes that once procedures are

developed it should be no more

burdensome to honor an oral request

than a written one. In addition,

imposing restrictions on existing

depositors that request this information

would hamper the purpose of providing

timely information. Therefore, the FDIC

has decided that depositor requests can

be made orally or in writing to

designated bank employees.

B. Disclosure Upon Opening an Account

The proposed rule also would have

required that, upon the opening of any

employee benefit plan account, the

insured depository institution provide a

written notice to the depositor of the

institution’s PCA capital category and

whether or not such deposits are eligible

for ‘‘pass-through’’ insurance coverage.

Commenters generally expressed

support for this provision. Some,

however, questioned whether disclosing

capital information was meaningful to

an employee benefit plan depositor.

The FDIC continues to believe that it

is essential that an employee plan

depositor be notified about whether

‘‘pass-through’’ coverage is available for

deposits placed with a depository

institution. Moreover, based on the

comments received on this and related

issues, the FDIC also believes that when

opening an employee benefit plan

account depositors should be informed

(or reminded of) the basic requirements

of the law and regulations regarding the

availability of ‘‘pass-through’’ insurance

coverage for employee benefit plan

deposits. Thus, the FDIC has revised

this provision of the final rule to require

that the written notice provided to an

employee benefit plan depositor include

an accurate explanation of the

requirements for ‘‘pass-through’’ deposit

insurance coverage. (A sample

disclosure of this information is

provided below.) Therefore, the final

rule retains the requirement that the

written disclosure statement indicate

the institution’s PCA capital category

and whether, in the institution’s

judgment, the funds being deposited are

eligible for deposit insurance coverage.

The sample disclosure also contains

language informing employee benefit

plan depositors that additional

information on the institution’s capital

condition may be requested.

C. Timing of Disclosures

The proposed rule would have

required that certain information be

provided within two business days to

current or prospective employee plan

depositors in three different situations:

(1) When an institution received a

request for information from an

employee benefit plan depositor; (2)

when an institution’s capital category

changed from ‘‘well capitalized’’ to

‘‘adequately capitalized’’; and (3) when

an institution’s capital category fell

below ‘‘adequately capitalized’’.

Regardless of whether or when notice is

provided to the depositor, ‘‘passthrough’’ insurance coverage on new,

rolled over or renewed deposits may

cease immediately upon notice to the

insured depository institution that its

PCA capital category has been lowered.

Thus, the proposed rule requested

comments on the feasibility of

compliance with the two-day

notification requirement and,

specifically, on whether a longer time

frame might increase the period for

which a depositor’s employee benefit

plan funds would be uninsured.

Of the 42 commenters that

specifically addressed the time frame

requirement, 40 stated that the twobusiness-day period was too short. The

commenters recommended extending

the time requirement from the proposed

period of two business days to periods

of time ranging from five days to 30

days. The most common

recommendation was to extend the

period to 10 business days, the same
7704 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

period of time as required under the

Federal Reserve’s Regulation DD (12

CFR part 230), which implements the

Truth in Savings Act. Seven

commenters recommended five business

days indicating that the required

disclosures could be made within five

business days once policies and

procedures had been established to

ensure compliance with the regulation.

Based on the comments received on

this issue, the Board has decided to

require that the disclosures to be made

upon request be made within five

business days—the shortest period of

time that it believes an institution could

be expected to meet the time

requirements. In arriving at this time

period the FDIC attempted to balance

the feasibility of complying with the

requirement with the need for employee

benefit plan depositors to know, on a

timely basis, whether deposits are and

will continue to be eligible for ‘‘passthrough’’ insurance coverage.

Institutions are encouraged to provide

the required disclosures sooner, if

possible.

The five business day time frame

begins upon the bank’s receipt of the

request and ends when the institution

mails or delivers the required

information to the depositor. ‘‘Receipt’’

means when an institution receives a

request, not when it is received by a

designated department of the

institution.

Secondly, the FDIC has decided to

extend to 10 business days the

notification time frame when an insured

institution must provide notice that

new, renewed or roll-over employee

benefit plan deposits placed with an

institution will not be eligible for ‘‘passthrough’’ insurance coverage. The FDIC

recognizes that this disclosure is more

extensive than an individual request

from an employee benefit plan depositor

and generally will occur when an

institution is experiencing financial

problems. Institutions in this situation

frequently have management

deficiencies and weak internal controls.

For these reasons, adoption of a slightly

longer time frame is believed

appropriate. Institutions are encouraged

to provide disclosures sooner, if

possible.

Despite its decision to extend the

periods in which insured institutions

must comply with the disclosure

requirements of the final rule, the Board

continues to be concerned about

employee benefit plan funds that are

deposited with an institution before the

institution is required to notify

depositors of the discontinuation of the

availability of ‘‘pass-through’’ coverage

on such deposits. An example would be

where an institution becomes

‘‘undercapitalized’’ on Day 1 and a

customer deposits employee benefit

plan funds before the expiration of the

10 days within which the institution is

required to notify employee benefit plan

depositors that ‘‘pass-through’’

insurance will not be available for

deposits placed after Day 1. Under the

FDI Act and § 330.12, such deposits

would not be eligible for ‘‘pass-through’’

coverage because at the time they were

‘‘accepted’’ the institution was

undercapitalized—and, thus, not

permitted to accept brokered deposits.

The Board believes that Congress should

consider amendments to the insurance

provisions of the FDI Act to address this

potential pitfall for employee benefit

plan depositors and, particularly, the

ultimate plan participants.

One commenter recommended that

when an institution notifies existing

employee benefit plan depositors that

‘‘pass-through’’ insurance coverage is no

longer available, the affected depositors

not be assessed a withdrawal penalty.

This would pertain particularly to the

situation where a depositor places

employee benefit plan funds with an

institution between the time that such

deposits become ineligible for ‘‘passthrough’’ coverage and the time the

institution notifies the depositor of the

ineligibility of new deposits for such

coverage. Because the ‘‘pass-through’’

coverage of only newly deposited funds

is potentially affected by this time gap

and then only if the institution fails, the

FDIC has decided not to address the

withdrawal penalty issue in the final

rule. The institution and its employee

benefit plan customers are free to

negotiate this matter. The FDIC

anticipates that insured institutions will

waive any penalty fees in appropriate

circumstances.

D. Disclosure When an Institution’s PCA

Capital Category Changes but ‘‘PassThrough’’ Insurance Coverage Is Still

Available

The proposed rule would have

required an insured depository

institution to provide a written notice to

all employee benefit plan depositors

when the institution’s PCA capital

category changed from ‘‘well

capitalized’’ to ‘‘adequately

capitalized’’, irrespective of whether

employee benefit plan deposits still

would be eligible for ‘‘pass-through’’

insurance coverage. The FDIC requested

comment on whether a disclosure

should be required upon such a

reduction in an institution’s PCA capital

category but the institution had

obtained a waiver from the FDIC under

§ 337.6 of the FDIC’s regulations to

accept brokered deposits, and thus,

there would be no change in the

availability of ‘‘pass-through’’ deposit

insurance coverage for employee benefit

plan deposits.

Of the 46 commenters that

specifically addressed this issue, 40

were against requiring any disclosures if

the availability of ‘‘pass-through’’

coverage had not changed. Commenters

noted that providing disclosures would

cause confusion among depositors,

create an increased regulatory burden

on the institution in having to explain

to affected depositors why the notice

was being sent even though the

availability of ‘‘pass-through’’ insurance

coverage had not changed, encourage

disintermediation, promote financial

instability within institutions, and

encourage bank ‘‘runs’’. They also

indicated that such a disclosure

requirement would be contrary to the

FDIC goals of promoting a safe and

sound banking system and of limiting

losses to the deposit insurance funds.

The FDIC concludes that this

requirement would be an unnecessary

burden and has decided to eliminate

this provision from the final rule.

Although a reduction in an institution’s

PCA capital category to ‘‘adequately

capitalized’’ reflects a decline in an

institution’s capital level and, thus, may

be helpful information for an employee

benefit plan depositor, this change is

only one of many factors that an

employee benefit plan depositor should

consider when monitoring the financial

condition of an insured depository

institution. In addition, the final rule

requires that employee benefit plan

depositors be notified if and when new,

renewed or rolled-over employee benefit

plan deposits will no longer be eligible

for ‘‘pass-through’’ insurance coverage.

Also, under the final rule, information

on an institution’s PCA capital category

and whether ‘‘pass-through’’ coverage is

available can be obtained from an

institution under the ‘‘upon request’’

provision of the final rule.

E. Form of Disclosures

In the proposed rule the FDIC

solicited specific comment on the form

of disclosure. The five specific areas

addressed were whether: (1) the

required disclosures should have to be

in a separate mailing; (2) a written

acknowledgement from the intended

recipient of the disclosure should be

required; (3) the disclosure should be

required to be prominent and

conspicuous (for example, requiring

bold type); (4) the disclosure should be

part of the deposit agreement; and (5)

other related information may be

disclosed.
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 7705

The FDIC received only a few

comments on each of these areas. In

general, commenters favored the option

of using a separate mailing, the

requirement that disclosures be

‘‘prominent and conspicuous’’, and the

ability to include other related

information in the disclosure—such as

explaining why an institution had a

capital deficiency. The respondents

opposed requiring an institution to

obtain a written acknowledgement from

employee benefit plan depositors or

requiring that the disclosures be part of

the deposit agreement.

The FDIC has decided not to establish

any specific forms or procedures on the

required disclosures except for a general

requirement that the required

disclosures be ‘‘clear and conspicuous.’’

This phrase is believed to be more

representative of the standard that

disclosures must be in a reasonably

understandable form. It does not require

that disclosures be segregated from

other material or located in any

particular place or be in any particular

type size.

Institutions may, at their discretion,

use any of the above or other disclosure

methods as long as it meets the ‘‘clearand-conspicuous’’ standard and the

time requirements. For example, an

institution that is opening an employee

benefit plan account may provide a

separate written disclosure statement to

the customer or reference the specific

section of the deposit agreement that

contains the disclosure information.

A reasonableness standard will be

used when reviewing compliance with

this section of the regulation.

Institutions should consider the level of

sophistication of a depositor when

providing required disclosures to assure

that they are communicated in a clear

and understandable fashion. The FDIC

believes that, in general, managers and

administrators of employee benefit

plans are more sophisticated financial

persons than the average depositor.

F. Discussion of Sample Disclosures

The FDIC requested comment on

whether the final rule should include a

specific notice that institutions would

have to provide to employee benefit

plan depositors when an institution’s

PCA capital category changed from

‘‘well capitalized’’ to ‘‘adequately

capitalized’’ or to a level below

‘‘adequately capitalized.’’ The majority

of commenters specifically addressing

this issue suggested that the FDIC

provide sample language in the final

rule but recommended that any sample

disclosures be optional and that

additional information be permitted to

be disclosed to the employee benefit

plan depositor—such as the reasons for

an institution’s capital deficiency. Other

commenters expressed concern about

the tone of the sample language

included in the proposed rule while

others suggested alternate language.

One commenter recommended that

the FDIC also provide a sample

disclosure when a depositor opens an

employee benefit plan account. Other

commenters suggested a disclosure that

only informs the depositor whether

employee benefit plan deposits would

be eligible for ‘‘pass-through’’ coverage

under the regulations.

Based on these comments, the FDIC

has provided below two sample

disclosure notices. One applies when a

depositor opens an employee benefit

plan account and includes a description

of the requirements for ‘‘pass-through’’

insurance coverage. The other is when

new, renewed or rolled-over employee

benefit plan deposits would not be

eligible for ‘‘pass-through’’ insurance

coverage.

Additional information can be

included with the disclosure as long as

the overall disclosure statement meets

the clear-and-conspicuous standard in

the regulation. This may include, for

example, additional information on an

institution’s capital deficiency and

when, in the institution’s opinion, the

deficiency is expected to be corrected.

A few commenters noted that the

sample disclosure statements indicate

that the FDIC is not bound, in its

insurance determinations, by

information provided by insured

institutions to depositors on the

eligibility of the employee benefit plan

deposits to ‘‘pass-through’’ insurance

coverage. It is correct that the FDIC is

not bound in its insurance

determinations by information provided

by an insured institution to its

customers. The FDIC also is not

responsible for or bound by a depository

institution’s failure to provide the

required disclosure statements.

Although it may be helpful for an

insured institution to inform employee

benefit plan depositors that the FDIC is

not bound by information provided by

an insured institution to its customers,

the Board believes the inclusion of that

information in the required disclosure

statements should be optional. The

thrust of the disclosure requirements

imposed by the final rule is to alert

employee benefit plan depositors to the

rules regarding ‘‘pass-through’’

insurance coverage and, in particular, to

inform them when such coverage is no

longer available. Requiring insured

institutions to indicate whether the

FDIC would be bound by incorrect

information in the disclosure statements

goes beyond the necessary scope of the

required disclosure.

G. Separate Enforcement Provision

The FDIC requested comment on

whether a free-standing enforcement

and/or penalty provision should be

included in the final rule. The few

commenters that addressed this

question requested that any sanctions

imposed be limited to cases of

intentional disregard or willful

noncompliance and that civil money

penalties should not be assessed. In the

proposed rule, the FDIC indicated that

violations of regulatory requirements

would be subject to the full array of

enforcement sanctions (including the

imposition of civil monetary penalties)

contained in section 8 of the FDI Act (12

U.S.C. 1818).

The FDIC has decided that separate

enforcement provisions are not required

to enforce the requirements of the final

rule. The current provisions in section

8 of the FDI Act (12 U.S.C. 1818) are

considered adequate and will be used to

enforce compliance when deemed

appropriate.

H. Inclusion of Information in Call

Reports

The FDIC requested comment on

whether the capital ratios and PCA

category of an institution should be

made a general disclosure requirement

in, for example, quarterly Consolidated

Reports of Condition and Income (Call

Reports). In this way, existing and

prospective employee benefit plan

depositors and other interested parties

would be able to obtain an official,

publicly available statement of an

institution which clearly indicates this

important information.

Of the 15 commenters that addressed

this issue, 12 favored adding the

information to the Call Reports. Those

in favor suggested that including this

information would provide depositors

with an efficient and independent

means of obtaining relevant financial

data on an insured institution. They also

recognized that employee benefit plan

administrators have a fiduciary

obligation to determine the capital

status of an insured institution. Two

commenters also recommended that this

information be disclosed on Thrift

Financial Reports (TFRs). Two others

suggested that this information be in

lieu of the required disclosures in the

proposed rule. One commenter

specifically opposed any revision to the

Call Report indicating that plan

administrators had the sophistication to

determine an institution’s capital ratios

and PCA capital category.
7706 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

Two other commenters suggested that

a ‘‘yes/no’’ box be included on the Call

Report that would indicate whether

‘‘pass-through’’ coverage was available.

They opined that this one disclosure

would provide employee benefit plan

depositors with an explicit statement on

a quarterly basis on whether an

institution could provide ‘‘passthrough’’ coverage and would avoid the

question whether an institution

classified as ‘‘adequately capitalized’’

was able to offer ‘‘pass-through’’

insurance coverage.

The FDIC does not have the authority

to change the Call Report or the TFR on

its own and has decided not to reach a

conclusion at this time. Instead it will

recommend to the Federal Financial

Institutions Examination Council that it

consider whether the Call Report and

the TFR should be amended to include

a line item for designating an

institution’s PCA capital category.

Although public disclosure of this

information would be beneficial to the

public, it also could be misleading

without further information or

investigation. For example, the

continued availability of ‘‘pass-through’’

coverage would not be known in the

case of institutions reporting an

‘‘adequately capitalized’’ condition,

although this information would raise a

‘‘red flag’’ that depositors could

investigate further. In addition, a Call

Report disclosure is as of the date of the

report and it may not reflect interim

events between Call Report dates.

Moreover, an institution’s PCA capital

category may not constitute an accurate

representation of an institution’s overall

financial condition or future

prospects—factors that employee benefit

plan depositors also need to consider.

Finally, it should be noted that the PCA

rules do not prohibit an institution from

disclosing its PCA capital category in

response to inquiries from investors,

depositors, or other third parties.

However, such disclosures should

include appropriate caveats in order to

avoid misleading the public.

The FDIC considered the

recommendation of including a ‘‘yes/

no’’ box on the Call Report but does not

favor this proposal out of a concern that

the disclosure would be more prone to

reporting error and would create a

greater regulatory burden on

institutions.

I. Definition of ‘‘Employee Benefit Plan

Depositor’’

The FDIC indicated in the preamble of

the proposed rule that the required

information may be provided to an

employee benefit plan administrator or

manager instead of to each participant

in a plan. One commenter

recommended that the final rule define

the term ‘‘employee benefit plan

depositor’’ to mean managers or

administrators of such plans. Thus, it

would make clear that the required

disclosures only need be made to the

administrator or manager of an

employee benefit plan and not to each

individual beneficiary of the plan. The

FDIC has decided to include such a

definition in the final rule. The final

rule also specifies that, for purposes of

the requirements of the final rule, the

definition of the term ‘‘employee benefit

plan’’ includes eligible deferred

compensation plans described in

section 457 of the Internal Revenue

Code (26 U.S.C. 457).

J. Sample Disclosures

1. A sample disclosure that an insured

depository institution may use when a

depositor opens an account consisting

of employee benefit plan deposits is as

follows:

Under federal law, whether an employee

benefit plan deposit is entitled to perparticipant (or ‘‘pass-through’’) deposit

insurance coverage is based, in part, upon the

capital status of the insured institution at the

time each deposit is made. Specifically,

‘‘pass-through’’ coverage is not provided if, at

the time an employee benefit plan deposit is

accepted by an FDIC-insured bank or savings

association, the institution may not accept

brokered deposits under the applicable

provisions of the Federal Deposit Insurance

Act. Whether an institution may accept

brokered deposits depends, in turn, upon the

institution’s capital level. If an institution’s

capital category is either ‘‘well capitalized,’’

or is ‘‘adequately capitalized’’ and the

institution has received the necessary broker

deposit waiver from the FDIC, then the

institution may accept brokered deposits. If

an institution is either ‘‘adequately

capitalized’’ without a waiver from the FDIC

or is in a capital category below ‘‘adequately

capitalized,’’ then the institution may not

accept brokered deposits. The FDI Act and

FDIC regulations provide an exception from

this general rule on the availability of ‘‘passthrough’’ insurance coverage for employee

benefit plan deposits when, although an

institution is not permitted to accept

brokered deposits, the institution is

‘‘adequately capitalized’’ and the depositor

receives a written statement from the

institution indicating that such deposits are

eligible for insurance coverage on a ‘‘passthrough’’ basis. The availability of ‘‘passthrough’’ insurance coverage for employee

benefit plan deposits also is dependent upon

the institution’s compliance with FDIC

recordkeeping requirements.

[Name of institution]’s capital category

currently is [insert prompt corrective action

capital category]. Thus, in our best judgment,

employee benefit plan deposits are currently

eligible for ‘‘pass-through’’ insurance

coverage under the applicable federal law

and FDIC insurance regulations.

Under the FDIC’s insurance regulations on

employee benefit plan deposits, an insured

bank or savings association must notify

employee benefit plan depositors if new,

rolled-over or renewed employee benefit plan

deposits would be ineligible for ‘‘passthrough’’ insurance and must provide certain

ratios on the institution’s capital condition to

employee benefit plan depositors who

request such information. If you would like

additional information on [name of

institution]’s capital condition, please make

a request [describe procedures for obtaining

the additional capital information].

2. A sample disclosure that an insured

depository institution may use when

new, renewed or rolled-over employee

benefit plan deposits will not be eligible

for ‘‘pass-through’’ insurance coverage

is as follows:

On [date] [name of institution]’s capital

category changed from [previous PCA

category] to [current PCA category]. Because

of this change in [name of institution]’s

capital category and the institution’s inability

otherwise to satisfy the applicable FDIC

requirements in this regard, any employee

benefit plan funds deposited, rolled-over or

renewed with [name of institution] after

[date] will NOT be eligible for ‘‘passthrough’’ (or per-participant) deposit

insurance coverage under § 330.12 of the

FDIC’s regulations. Accordingly, plan

deposits made, rolled-over or renewed after

[date] will be aggregated and insured only up

to $100,000. This unavailability of ‘‘passthrough’’ insurance coverage on new, rolledover or renewed deposits will continue until

the institution’s capital category improves

and/or other applicable requirements are

satisfied. Deposits made over the period of

time when ‘‘pass-through’’ insurance

coverage is unavailable will not be eligible

for ‘‘pass-through’’ coverage unless and until

these deposits are rolled-over or renewed at

a time when ‘‘pass-through’’ insurance

coverage is again available. ‘‘Pass-through’’

insurance coverage on deposits made before

[insert date when ‘‘pass-through’’ coverage

no longer is available] is not affected.

K. Delayed Effective Date of the

Disclosure Requirements

Four commenters recommended that

the effective date of the final rule be

delayed 150 to 180 days to permit

institutions the time needed to develop

automation systems, and policies and

procedures to ensure compliance. Many

commenters indicated they presently do

not have a recordkeeping system that

will identify employee benefit plan

accounts. Some commenters indicated

that they would have to notify all

existing depositors in order to develop

such a recordkeeping system.

As indicated in § 330.12 of the FDIC’s

regulations, in order for employee

benefit plan deposits to be eligible for

pass-through insurance coverage, among

other things, the recordkeeping

requirements of § 330.4 of the FDIC’s
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 7707

3FDIC Advisory Opinions published on this

subject include FDIC–93–59 (August 17, 1993),

FDIC 89–21 (June 13, 1989), FDIC–88–74

(November 9, 1988), FDIC 87–17 (October 9, 1987),

and FDIC–82–8 (March 25, 1982).

regulations (12 CFR 330.4) must be

satisfied. Under § 330.4, in order for

pass-through insurance to be available

for fiduciary-type accounts (in which

one party has deposited funds for the

benefit of others) the bank’s deposit

account records must disclose the

existence of the fiduciary relationship,

and the details of the relationship and

the interests of the other party(ies) must

be ascertainable from the deposit

account records of the insured

depository institution or records

maintained by the depositor, or a third

party who has contracted with the

depositor to maintain such records on

his/her behalf.

Some insured depository institutions

that commented on the proposed rule

stated that their records did not classify

deposits specifically as employee

benefit plan deposits; thus, they

contended that it would be burdensome

to develop and implement a new system

for purposes of complying with the

proposed disclosure requirements. The

FDIC believes the final rule addresses

this issue. A list can be maintained for

new accounts going forward and a list

of existing customers can be established

over time. An event triggering the

required disclosures when an institution

no longer can offer ‘‘pass-through’’

insurance coverage is believed to be an

infrequent occurrence.

The changes made by FDICIA to

insurance coverage applicable to

employee benefit plan deposits have

been in effect since December 1992.

Thus, institutions should be aware of

the need to provide customers with

timely disclosures on the availability of

‘‘pass-through’’ coverage for employee

benefit plan deposits. We assume that

this already has been done by a general

or specific mailing by institutions to

affected depositors.

Taking into consideration the period

of time the revised ‘‘pass-through’’

insurance rules have been in effect but

factoring in the ‘‘lead-time’’ several

commenters said was needed to develop

and implement the mechanisms

required to comply with the ‘‘uponrequest’’ disclosure provisions of the

final rule, the Board has decided to

delay the effective date of the revisions

to § 330.12 until July 1, 1995. This

should provide insured depository

institutions a sufficient period of time to

satisfy all of the disclosure requirements

of the final rule. This delay in the

effective date also takes into

consideration section 302 of the Riegle

Community Development and

Regulatory Improvement Act of 1994

(Pub. L. 103–325) (RCDRIA), which

states, in part, that any new regulations

and amendments to existing regulations

which impose reporting, disclosure, or

other requirements on insured

depository institutions may only take

effect on the first day of a calendar

quarter unless certain exceptions are

met.

L. Explanation of the Disclosure

Requirements Under § 330.12, Including

the Requirement Affecting Existing

Deposits on the Effective Date of the

Final Rule That Are Not Eligible for

‘‘Pass-Through’’ Insurance Coverage

The final rule will apply with respect

to employee benefit plan funds on

deposit with an insured depository

institution on the effective date of the

final rule and such funds deposited on

and after that date. Institutions with

employee benefit plan deposits on the

effective date of the final rule that, when

deposited, were not eligible for ‘‘passthrough’’ insurance coverage (under

§ 330.12(a) and (b) of the FDIC’s

regulations) must provide to such

existing depositors the disclosure

statement and notice that ordinarily are

required under § 330.12(h)(2) of the

final rule when an employee benefit

plan account is opened. This

requirement encompasses employee

benefit plan funds deposited between

December 19, 1992 (the effective date of

the applicable provisions of FDICIA)

and the effective date of the final rule.

These depositors otherwise would not

come within the scope of the final rule

and thus, would not receive the

disclosures otherwise required. The

disclosure documents referred to above

must be provided within 10 business

days after the effective date of the final

rule.

After the effective date of the final

rule, insured depository institutions that

accept employee benefit plan deposits

that are not eligible for ‘‘pass-through’’

insurance coverage are subject to the

disclosure requirements contained in

§ 330.12(h)(3) of the final rule.

M. Coordination With Other Federal

Agencies

The FDIC has consulted with the

other federal banking and thrift

regulators in developing the final rule

and intends to continue to work with

the other federal regulators to assure,

among other things, consistent and

minimally burdensome implementation

of the final rule.

Technical Amendments to Part 330

Unrelated to the Proposed Amendments

to § 330.12

The following is a discussion of the

technical amendments to Part 330 made

by the final rule that are unrelated to the

proposed amendments to § 330.12. The

amendments pertain to commingled

accounts of bankruptcy trustees, joint

accounts, accounts for which an insured

depository institution is acting in a

fiduciary capacity, and accounts for

which an insured depository institution

is acting as the trustee of an irrevocable

trust. Because, as discussed below, the

amendments merely clarify current

rules applicable to deposit insurance

coverage, they are outside the scope of

section 302 of RCDRIA. Thus, they need

not take effect on the first day of a

calendar quarter; instead, the technical

amendments will become effective 30

days after the final rule is published in

the Federal Register.

A. Commingled Accounts of Bankruptcy

Trustees

One technical amendment codifies

the FDIC’s long-standing staff

interpretation of the insurance coverage

available to a commingled bankruptcy

trustee’s account. For many years, the

FDIC’s staff has advised bankruptcy

trustees and other interested parties

that, when a bankruptcy trustee

appointed under title 11 of the United

States Code commingles the funds of

two or more bankruptcy estates in the

same trust account (such an account is

viewed as the account of a statutory

irrevocable trust created by one of the

chapters of title 11 of the United States

Code), the funds of each title 11

bankruptcy estate will receive passthrough coverage—that is, each

bankruptcy estate will be separately

insured for up to $100,000—provided

that the recordkeeping requirements of

12 CFR 330.4(b) are met.3 However, in

spite of the FDIC’s staff interpretation,

the Department of Justice’s Executive

Office for United States Trustees

(Executive Office), the organization

charged with supervising the

administration of bankruptcy estates

and trustees, has declined to recognize

that there is pass-through insurance for

such accounts. In accordance with

section 345 of the Bankruptcy Code, 11

U.S.C. 345, the Executive Office has

required banks holding such bankruptcy

trustee accounts to provide collateral for

any such funds that are not insured by

the FDIC. But because the Executive

Office does not recognize pass-through

insurance for such accounts, banks

holding such accounts are being

required to pledge more collateral than

is actually necessary. The Executive

Office has stated that it will recognize

pass-through coverage, and reduce its
7708 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

4On the subject of state law, § 330.3(h) of the

FDIC’s insurance regulations states that ‘‘while

ownership under state law of deposited funds is a

necessary condition for deposit insurance,

ownership under state law is not sufficient for, or

decisive in, determining deposit insurance

coverage.’’ Instead, ‘‘[d]eposit insurance coverage is

also a function of the deposit account records of the

insured depository institution, of recordkeeping

requirements, and of other provisions of this part,

which, in the interest of uniform national rules for

deposit insurance coverage, are controlling for

purposes of determining deposit insurance

coverage’’. 12 CFR 330.3(h).

collateral requirements accordingly,

provided that the FDIC Board takes

formal action assuring such accounts

pass-through coverage. For this reason,

the Board has decided to include an

amendment to the FDIC’s insurance

regulations, in the form of a new

§ 330.11(d), confirming that passthrough insurance coverage will be

provided for such bankruptcy trustee

accounts.

The technical amendment codifying

the long-standing interpretation by FDIC

staff of the insurance coverage available

to the commingled account of a

bankruptcy trustee qualifies as an

interpretative rule; thus, it is exempt

from the prior notice and comment

requirements ordinarily imposed by the

Administrative Procedure Act, 5 U.S.C.

553(b)(3)(A).

B. Joint Deposit Accounts

Another technical amendment

clarifies the meaning of § 330.7(c) of the

FDIC’s regulations (12 CFR 330.7(c)),

which specifies the requirements an

account must meet to qualify for

separate insurance coverage as a joint

account. Section 330.7(c) exempts

certain types of accounts, such as

certificates of deposit, from the general

requirement that each co-owner must

sign a signature card, but the regulation

states that ‘‘all such deposit accounts,

must, in fact, be jointly owned’’.

Contrary to the FDIC’s long-standing

interpretation, some courts have

interpreted the quoted language to

require the FDIC to consider state law

and evidence outside the deposit

account records of the insured

institution to contradict otherwise

unambiguous deposit account records,

in connection with claims that what

appear to be joint accounts are in fact

individually-owned. The FDIC

intended, however, that depositors be

bound by its recordkeeping regulation at

12 CFR 330.4(a), which requires that the

deposit account records be considered

conclusive if they are unambiguous.

Reliance on the deposit account records

is critical if the FDIC is to fulfill its

obligation to make insurance

determinations and issue checks in a

timely fashion after a bank fails. It is

also critical in preventing fraudulent

claims. Several courts have recognized

the need for the FDIC to rely on such

records in making insurance

determinations. Fouad & Sons v. FDIC,

898 F.2d 482 (5th Cir. 1990), In re

Collins Securities Corp., 998 F.2d 551

(8th Cir. 1993), Jones v. FDIC, 748 F.2d

1400 (10th Cir. 1984).

For this reason, the amendment as

presently proposed would remove the

‘‘but all such deposits must, in fact, be

jointly owned’’ language from § 330.7(c),

and add that all deposit accounts which

meet the requirements for qualifying

joint accounts, including those which

are exempted from the requirement that

every co-owner must sign a signature

card, will be deemed to be jointlyowned if the FDIC determines that the

deposit account records are clear and

unambiguous. The signatures of two or

more persons on a deposit account

signature card or the names of two or

more persons on a certificate of deposit

shall be conclusive evidence of a joint

account if the deposit account records

are clear and unambiguous. Only if the

deposit account records are found to be

ambiguous on the issue of ownership

will evidence outside the deposit

account records be considered, in

accordance with the recordkeeping

provisions of § 330.4(a). After taking

into account the comments received on

this amendment, FDIC staff has revised

the amendment proposed earlier (and

published for comment at 58 FR 64525

(December 8, 1993)) to conform more

closely to the long-standing FDIC

practice articulated by § 330.4(a).

The technical amendment on joint

account coverage was published for

comment as part of the proposed

version of this capital disclosure

regulation. 58 FR 64521 (December 8,

1993). The FDIC received two comments

on the proposed amendment clarifying

what evidence is necessary to determine

the ownership of a joint account. An

industry trade group opposed the

amendment because of concern that it

might permit the FDIC to ignore outside

evidence of ‘‘fundamental claims’’ about

the ‘‘viability’’ of a joint account under

state law—for example, evidence that an

account signature was forged, that one

of the signers was incompetent when he

signed, or that his signature was

coerced. A savings association cited

similar concerns but suggested that any

outside evidence on such issues be

considered under federal law, not state

law.

It is important to emphasize that,

when the FDIC says that it will rely on

the deposit account records if they are

clear and unambiguous, it will do so

only to determine the appropriate

ownership category for insurance

purposes. Such reliance will not

necessarily preclude a depositor from

proving that a deposit account existed

when the bank’s deposit account

records show no evidence of such an

account, or that an account actually

contained more funds than are reflected

in the bank’s deposit account records.

When the FDIC determines that the

deposit account records are ambiguous

or unclear, it has the discretion to

consider evidence beyond the deposit

account records. Of course, the FDIC

need not find such extrinsic evidence

persuasive. However, while the FDIC

understands that account records may

not always accurately reflect the intent

of the parties to the account, and that

circumstances may sometimes render

the accounts invalid under state law,4

the FDIC believes that it is essential to

make insurance determinations without

considering outside evidence

concerning the ownership category of

accounts as long as the account records

are clear.

The recordkeeping regulations, by

requiring that the deposit account

records be considered conclusive if they

are unambiguous, serve several

important purposes. When a bank fails,

it is important that the FDIC be

permitted to make insurance

determinations and issue checks to

depositors in a timely fashion, a

timeliness made possible by the FDIC’s

reliance on those deposit account

records that are clear. Reliance on

unambiguous account records also

permits the FDIC to determine the least

cost resolution of a failed institution

and to prevent fraudulent insurance

claims. These purposes require that the

deposit account records, even if they do

not correctly reflect the parties’ intent,

be deemed conclusive if they are

unambiguous. Of course, if the records

are ambiguous or unclear, the FDIC

may, in its discretion, rely on other

evidence. Moreover, as the regulations

already provide, state law concerning

ownership of ambiguously-owned

accounts are only the starting point for

determining the ownership issue;

federal law ultimately controls.

For this reason, the Board has decided

to include as part of this final rule the

proposed amendment to the FDIC’s

deposit insurance rules on joint

accounts. The amendment clarifies that

an account holder seeking to prove that

what appears to be a joint account is

actually an account held in a right and

capacity other than joint ownership (for

example, as an individually-owned

account) must satisfy the requirements

of § 330.4(a) of the FDIC’s regulations
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 7709

(12 CFR 330.4(a)) on the recognition of

deposit ownership. Section 330.4(a)

provides, in part, that, if the FDIC

determines that the deposit account

records of an insured depository

institution are clear and unambiguous,

no other records will be considered as

to the manner in which those funds are

owned. Section 330.5(a) of the FDIC’s

regulations (12 CFR 330.5(a)) already

explicitly addresses the situation where

more than one natural person has the

right to withdraw funds from an account

that is actually viewed as individuallyowned. The amendment applies to

situations involving deposits which

appear to be jointly-owned but which

are claimed to be held in other rights

and capacities.

C. Accounts for Which an Insured

Depository Institution Acts as an Agent,

Nominee, Guardian, Custodian or

Conservator

Another technical amendment

concerns § 330.6(a) of the FDIC’s

regulations (12 CFR 330.6(a)), which

governs the insurance coverage

provided for agency or fiduciary

accounts. Section 330.6(a) currently

indicates that funds deposited by an

insured depository institution acting in

a fiduciary capacity are governed by

§ 330.10 of the insurance regulations.

However, in May 1993 the FDIC

amended § 330.10, along with several

other sections of the insurance

regulations, primarily to implement

revisions to the insurance rules made by

section 311 of the Federal Deposit

Insurance Corporation Improvement Act

of 1991 (FDICIA, Pub. L. 102–242, 105

Stat. 2236) (58 FR 29952 (May 25,

1993)). One of those required revisions

limits, effective December 19, 1993, the

separate insurance formerly applicable

to an account held by an insured

depository institution in a fiduciary

capacity to an account held by an

insured depository institution as a

trustee of an irrevocable trust. However,

the May 1993 amendment simply

revised § 330.10; § 330.6 continued to

refer to § 330.10 but was not revised,

stating instead that ‘‘[w]hen such funds

are deposited by an insured depository

institution acting in a fiduciary

capacity, the insurance coverage shall

be governed by the provisions of

§ 330.10 of this part’’.

The present technical amendment

conforms § 330.6(a) to section 311 of

FDICIA. The first sentence of § 330.6(a)

states the general rule—that funds

owned by a principal or principals and

deposited into one or more deposit

accounts in the name of a fiduciary shall

be insured as if deposited in the name

of the principal or principals. The

second sentence implements the FDICIA

change by stating that, when such funds

are deposited by an insured depository

institution acting as a trustee of an

irrevocable trust, the insurance coverage

will be governed by the provisions of

§ 330.10.

Like the technical amendment on

joint account coverage, this technical

amendment was published for comment

as part of the proposed version of this

capital disclosure regulation. 58 FR

64521 (December 8, 1993). The

amendment proposed to state clearly, in

§ 330.6(a), that only funds deposited by

an insured depository institution acting

as a trustee of an irrevocable trust will

be eligible for the separate insurance

coverage described in § 330.10. Up until

this time, § 330.6(a) had stated that

funds deposited by an insured

depository institution acting in a

fiduciary capacity would be insured as

provided by § 330.10, while § 330.10

stated that it pertains only to funds held

by an institution acting as the trustee of

an irrevocable trust. Thus, the

amendment merely clarifies the

language.

The FDIC received four comments on

this technical amendment, all of which

were favorable. Two, however, noted

that the proposed regulatory language

for § 330.6(a) seemed to except deposits

held by insured depository institutions

acting in a representative capacity from

the general rule that all deposits held by

fiduciaries are insured as if owned by

the party represented by the fiduciary.

Of course, even deposits held by

insured depository institutions acting in

a representative capacity follow this

general rule. Thus, this final rule

includes the proposed amendment to

§ 330.6(a), as revised to reflect the

suggested clarification.

D. Accounts Held by Depository

Institutions in Fiduciary Capacities

The final technical amendment

further conforms the FDIC’s regulations

to section 311 of FDICIA, by changing

the present title of § 330.10, ‘‘Accounts

held by depository institutions in

fiduciary capacities’’, to ‘‘Accounts held

by a depository institution as the trustee

of an irrevocable trust’’. This change

conforms § 330.10 to section 311 of

FDICIA and to the rest of § 330.10 itself.

Because the amendment merely makes

the title consistent with § 330.10, and

because the text of § 330.10 was itself

published for comment (57 FR 49026

(October 29, 1992), it is unnecessary,

under the Administrative Procedure

Act, to publish this proposed change for

comment. 5 U.S.C. 553(b)(3)(B).

Paperwork Reduction Act

The final rule is intended to reduce

uncertainty about whether employee

benefit plan deposits are eligible for

‘‘pass-through’’ insurance coverage and

to require depository institutions to

provide timely disclosure to employee

benefit plan depositors when ‘‘passthrough’’ deposit insurance coverage is

no longer available. No collections of

information pursuant to the Paperwork

Reduction Act are contained in the final

rule. Consequently, no information has

been submitted to the Office of

Management and Budget for review.

The technical amendments do not

require any collections of information

pursuant to section 3504(h) of the

Paperwork Reduction Act, 44 U.S.C.

3501 et seq. Accordingly, no

information has been submitted to the

Office of Management and Budget for

review.

Regulatory Flexibility Act

Neither the final rule nor the

technical amendments will have a

significant impact on a substantial

number of small businesses within the

meaning of the Regulatory Flexibility

Act (5 U.S.C. 601 et seq.). Accordingly,

the Act’s requirements relating to an

initial and final regulatory flexibility

analysis are not applicable.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Banks,

Banking, Savings and loan associations,

Trusts and trustees.

The Board of Directors of the Federal

Deposit Insurance Corporation hereby

amends Part 330 of title 12 of the Code

of Federal Regulations as follows:

PART 330—DEPOSIT INSURANCE

COVERAGE

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(Tenth), 1820(f),

1821(a), 1822(c).

2. Section 330.6 is amended by

revising paragraph (a) to read as follows:

§ 330.6 Accounts held by an agent,

nominee, guardian, custodian or

conservator.

(a) Agency or nominee accounts.

Funds owned by a principal or

principals and deposited into one or

more deposit accounts in the name of an

agent, custodian or nominee shall be

insured to the same extent as if

deposited in the name of the

principal(s). When such funds are

deposited by an insured depository

institution acting as a trustee of an

irrevocable trust, the insurance coverage
7710 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

shall be governed by the provisions of

§ 330.10 of this part.

* * * * *

3. Section 330.7 is amended by

revising paragraph (c) to read as follows:

§ 330.7 Joint ownership accounts.

* * * * *

(c) Qualifying joint accounts. (1) A

joint deposit account shall be deemed to

be a qualifying joint account, for

purposes of this section, only if:

(i) All co-owners of the funds in the

account are natural persons; and

(ii) Each co-owner has personally

signed a deposit account signature card;

and

(iii) Each co-owner possesses

withdrawal rights on the same basis.

(2) The requirement of paragraph

(c)(1)(ii) of this section shall not apply

to certificates of deposit, to any deposit

obligation evidenced by a negotiable

instrument, or to any account

maintained by an agent, nominee,

guardian, custodian or conservator on

behalf of two or more persons.

(3) All deposit accounts that satisfy

the criteria in paragraph (c)(1) of this

section, and those accounts that come

within the exception provided for in

paragraph (c)(2) of this section, shall be

deemed to be jointly owned provided

that, in accordance with the provisions

of § 330.4(a) of this part, the FDIC

determines that the deposit account

records of the insured depository

institution are clear and unambiguous

as to the ownership of the accounts. If

the deposit account records are

ambiguous or unclear as to the manner

in which the deposit accounts are

owned, then the FDIC may, in its sole

discretion, consider evidence other than

the deposit account records of the

insured depository institution for the

purpose of establishing the manner in

which the funds are owned. The

signatures of two or more persons on the

deposit account signature card or the

names of two or more persons on a

certificate of deposit or other deposit

instrument shall be conclusive evidence

that the account is a joint account

unless the deposit records as a whole

are ambiguous and some other evidence

indicates, to the satisfaction of the FDIC,

that there is a contrary ownership

capacity.

* * * * *

4. The heading of § 330.10 is revised

to read as follows:

§ 330.10 Accounts held by a depository

institution as the trustee of an irrevocable

trust.

5. Section 330.11 is amended by

adding a new paragraph (d) to read as

follows:

§ 330.11 Irrevocable trust accounts.

* * * * *

(d) Commingled accounts of

bankruptcy trustees. Whenever 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 for

up to $100,000, separately from the

funds of any other such estate.

6. Section 330.12 is amended by

revising the heading and introductory

text of paragraph (g), redesignating

paragraphs (g)(1), (g)(2) and (g)(3) as

paragraphs (g)(2), (g)(3) and (g)(4),

respectively, and adding new

paragraphs (g)(1) and (h) to read as

follows:

§ 330.12 Retirement and other employee

benefit plan accounts.

* * * * *

(g) Definitions of ‘‘depositor’’,

‘‘employee benefit plan’’, ‘‘employee

organizations’’ and ‘‘non-contingent

interest’’. Except as otherwise indicated

in this section, for purposes of this

section:

(1) The term depositor means the

person(s) administering or managing an

employee benefit plan.

* * * * *

(h) Disclosure of capital status—(1)

Disclosure upon request. An insured

depository institution shall, upon

request, provide a clear and

conspicuous written notice to any

depositor of employee benefit plan

funds of the institution’s leverage ratio,

Tier 1 risk-based capital ratio, total riskbased capital ratio and prompt

corrective action (PCA) capital category,

as defined in the regulations of the

institution’s primary federal regulator,

and whether, in the depository

institution’s judgment, employee benefit

plan deposits made with the institution,

at the time the information is requested,

would be eligible for ‘‘pass-through’’

insurance coverage under paragraphs (a)

and (b) of this section. Such notice shall

be provided within five business days

after receipt of the request for

disclosure.

(2) Disclosure upon opening of an

account. (i) An insured depository

institution shall, upon the opening of

any account comprised of employee

benefit plan funds, provide a clear and

conspicuous written notice to the

depositor consisting of: an accurate

explanation of the requirements for

pass-through deposit insurance coverage

provided in paragraphs (a) and (b) of

this section; the institution’s PCA

capital category; and a determination of

whether or not, in the depository

institution’s judgment, the funds being

deposited are eligible for ‘‘passthrough’’ insurance coverage.

(ii) An insured depository institution

shall provide the notice required in

paragraph (h)(2)(i) of this section to

depositors who have employee benefit

plan deposits with the insured

depository institution on July 1, 1995

that, at the time such deposits were

placed with the insured depository

institution, were not eligible for passthrough insurance coverage under

paragraphs (a) and (b) of this section.

The notice shall be provided to the

applicable depositors within ten

business days after July 1, 1995.

(3) Disclosure when ‘‘pass-through’’

coverage is no longer available.

Whenever new, rolled-over or renewed

employee benefit plan deposits placed

with an insured depository institution

would no longer be eligible for ‘‘passthrough’’ insurance coverage, the

institution shall provide a clear and

conspicuous written notice to all

existing depositors of employee benefit

plan funds of its new PCA capital

category, if applicable, and that new,

rolled-over or renewed deposits of

employee benefit plan funds made after

the applicable date shall not be eligible

for ‘‘pass-through’’ insurance coverage

under paragraphs (a) and (b) of this

section. Such written notice shall be

provided within 10 business days after

the institution receives notice or is

deemed to have notice that it is no

longer permitted to accept brokered

deposits under section 29 of the Act and

the institution no longer meets the

requirements in paragraph (b) of this

section.

(4) Definition of ‘‘employee benefit

plan’’. For purposes of this paragraph,

the term employee benefit plan has the

same meaning as provided under

paragraph (g)(2) of this section but also

includes any eligible deferred

compensation plans described in

section 457 of the Internal Revenue

Code of 1986 (26 U.S.C. 457).

By order of the Board of Directors.

Dated at Washington, D.C., this 31st day of

January, 1995.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Acting Executive Secretary.

[FR Doc. 95–3178 Filed 2–8–95; 8:45 am]

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