Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34751

1Technically, each Oakar transaction generates

its own AADA. Oakar institutions typically

participate in several Oakar transactions.

Accordingly, and Oakar institution generally has an

overall or composite AADA that consists of all the

individual AADAs generated in the various Oakar

transactions, plus the growth attributable to each

individual AADA. The composite AADA can

generally be treated as a unit as a practical matter,

because all the constituent AADAs (except initial

AADAs) grow at the same rate.

sale of securities on behalf of others in

the open market is not engaged in the

business referred to in section 32.

By order of the Board of Governors of the

Federal Reserve System.

Date: June 26, 1996.

William W. Wiles,

Secretary of the Board.

[FR Doc. 96–16841 Filed 7–02–96; 8:45am]

Billing Code 6210–01–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 327

RIN 3064–AB59

Assessments

AGENCY: Federal Deposit Insurance

Corporation.

ACTION: Proposed Rule.

SUMMARY: The Federal Deposit

Insurance Corporation (FDIC) is

proposing to amend its assessment

regulations by adopting interpretive

rules regarding certain provisions

therein that pertain to so-called Oakar

institutions: institutions that belong to

one insurance fund (primary fund) but

hold deposits that are treated as insured

by the other insurance fund (secondary

fund). Recent merger transactions and

branch-sale cases have revealed

weaknesses in the FDIC’s procedures for

attributing deposits to the two insurance

funds and for computing the growth of

the amounts so attributed. The

interpretive rules would repair those

weaknesses.

In addition, the FDIC is proposing to

simplify and clarify the existing rule by

making changes in nomenclature.

DATES: Comments must be received by

the FDIC on or before September 3,

1996.

ADDRESSES: Send comments to the

Office of the Executive Secretary,

Federal Deposit Insurance Corporation,

550 17th Street, N.W., Washington, D.C.

20429. Comments may be handdelivered to Room F–400, 1776 F Street,

N.W., Washington, D.C., on business

days between 8:30 a.m. and 5:00 p.m.

(FAX number: 202/898–3838. Internet

address: comments@fdic.gov).

Comments will be available for

inspection in the FDIC Public

Information Center, Room 100, 801 17th

Street, N.W., Washington, D.C. between

9:00 a.m. and 4:30 p.m. on business

days.

FOR FURTHER INFORMATION CONTACT:

Allan K. Long, Assistant Director,

Division of Finance, (703) 516–5559;

Stephen Ledbetter, Chief, Assessments

Evaluation Section, Division of

Insurance (202) 898–8658; Jules

Bernard, Counsel, Legal Division, (202)

898–3731, Federal Deposit Insurance

Corporation, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION: This

proposed interpretive regulation would

alter the method for determining the

assessments that Oakar institutions pay

to the two insurance funds.

Accordingly, the proposed regulation

would directly affect all Oakar

institutions. The proposed regulation

would also indirectly affect non-Oakar

institutions, however, by altering the

business considerations that non-Oakar

institutions must take into account

when they transfer deposits to or from

an Oakar institution (including an

institution that becomes an Oakar

institution as a result of the transfer).

I. Background

Section 5(d)(2) of the FDI Act, 12

U.S.C. 1815(d)(2), places a moratorium

on inter-fund deposit-transfer

transactions: mergers, acquisitions, and

other transactions in which an

institution that is a member of one

insurance fund (primary fund) assumes

the obligation to pay deposits owed by

an institution that is a member of the

other insurance fund (secondary fund).

The moratorium is to remain in place

until the reserve ratio of the Savings

Association Insurance Fund (SAIF)

reaches the level prescribed by statute.

Id. 1815(d)(2)(A)(ii); see id.

1817(b)(2)(A)(iv) (setting the target ratio

at 1.25 percentum).

The next paragraph of section 5(d)—

section 5(d)(3) of the FDI Act—is known

as the Oakar Amendment. See Financial

Institutions Reform, Recovery and

Enforcement Act of 1989 (FIRREA), Pub.

L. 101–73 section 206(a)(7), 103 Stat.

183, 199–201 (Aug. 9, 1989); 12 U.S.C.

1815(d)(3). The Amendment permits

certain deposit-transfer transactions that

would otherwise be prohibited by

section 5(d)(2) (Oakar transactions).

The Oakar Amendment introduces the

concept of the ‘‘adjusted attributable

deposit amount’’ (AADA). An AADA is

an artificial construct: a number,

expressed in dollars, that is generated in

the course of an Oakar transaction, and

that pertains to the buyer. The initial

value of a buyer’s AADA is equal to the

amount of the secondary-fund deposits

that the buyer acquires from the seller.

The Oakar Amendment specifies that

the AADA then increases at the same

underlying rate as the buyer’s overall

deposit base—that is, at the rate of

growth due to the buyer’s ordinary

business operations, not counting

growth due to the acquisition of

deposits from another institution (e.g.,

in a merger or a branch purchase). Id.

1815(d)(3)(C)(iii). The FDIC has adopted

the view that ‘‘growth’’ and ‘‘increases’’

can refer to ‘‘negative growth’’ under the

FDIC’s interpretation of the

Amendment, an AADA decreases when

the institution’s deposit base shrinks.

An AADA is used for the following

purposes:

—Assessments. An Oakar institution

pays two assessments to the FDIC—

one for deposit in the institution’s

secondary fund, and the other for

deposit in its primary fund. The

secondary-fund assessment is based

on the portion of the institution’s

assessment base that is equal to its

AADA. The primary-fund assessment

is based on the remaining portion of

the assessment base.

—Insurance. The AADA measures the

volume of deposits that are ‘‘treated

as’’ insured by the institution’s

secondary fund. The remaining

deposits are insured by the primary

fund. If an Oakar institution fails, and

the failure causes a loss to the FDIC,

the two insurance funds share the loss

in proportion to the amounts of

deposits that they insure.

For assessment purposes, the AADA

is applied prospectively, as is the

assessment base. An Oakar institution

has an AADA for a current semiannual

period, which is used to determine the

institution’s assessment for that period.1

The current-period AADA is calculated

using deposit-growth and other

information from the prior period.

II. The proposed rule

A. Attribution of transferred deposits

1. The FDIC’s Current Interpretation:

The ‘‘Rankin’’ Rule

The FDIC has developed a

methodology for attributing deposits to

the Bank Insurance Fund (BIF) on one

hand and to the SAIF on the other when

the seller is an Oakar institution. See

FDIC Advisory Op. 90–22, 2 FED.

DEPOSIT INS. CORP., LAW,

REGULATIONS, RELATED ACTS 4452

(1990) (Rankin letter). The Rankin letter

adopts the following rule: an Oakar

institution transfers its primary-fund

deposits first, and only begins to
34752 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

transfer its secondary-fund deposits

after its primary-fund deposits have

been exhausted.

The chief virtue of this approach is

that of simplicity. Sellers rarely transfer

all their primary-fund deposits. A seller

ordinarily has the same AADA after the

transaction as before, and a buyer does

not ordinarily become an Oakar

institution. The Rankin letter’s approach

also has the virtue of being a wellestablished and well-understood

interpretation.

Nevertheless, the Rankin letter’s

approach has certain weaknesses. For

example, if a seller transfers a large

enough volume of deposits, the seller

becomes insured and assessed entirely

by its secondary fund—even though it

remains a member of its primary fund

in name, and even though its business

has not changed in character.

The Rankin letter’s approach may also

lend itself to ‘‘gaming’’ by Oakar

institutions. Oakar banks—and their

owners—have an incentive to eliminate

their AADAs, because the SAIF

assessment rates are currently much

higher than the BIF rates. If an Oakar

bank belonged to a holding company

system, the holding company could

purge the AADA from the system as a

whole by having the Oakar bank transfer

all its BIF-insured deposits to an

affiliate, and then allowing the remnant

of the Oakar bank to wither away.

2. ‘‘Blended’’ deposits

An alternative approach would be to

adopt the view that an Oakar institution

transfers a blend of deposits to the

assuming institution. The transferred

deposits would be attributed to the two

insurance funds in the same ratio as the

Oakar institution’s overall deposits were

so attributed immediately prior to the

transfer. This ‘‘blended deposits’’

approach would have the virtue of

maintaining the relative proportions of

the seller’s primary-fund deposit-base

and the secondary-fund deposit base,

just as they are preserved in the

ordinary course of business.

As a general rule, the ratio would be

fixed at the start of the quarter in which

the transfer takes place. If the institution

were to acquire deposits after the start

of the quarter but prior to the transfer,

the acquired deposits would be added to

the institution’s store of primary-fund

and secondary-fund deposits as

appropriate, and the resulting amounts

would be used to determine the ratio.

This procedure would be designed to

exclude intra-quarter growth from the

calculation of the ratio. The FDIC

considers that it would be desirable to

do so for two main reasons: it would

keep the methodology simple; and (in

the ordinary case) it would make use of

numbers that are readily available to the

parties.

At the same time, the ‘‘blended

deposits’’ approach would create a new

Oakar institution each time a non-Oakar

institution acquired deposits from an

Oakar institution. Accordingly, this

approach would generally subject

buyers to more complex reporting and

tracking requirements. This approach

would also require more disclosure on

the part of sellers, because buyers would

have to be made aware that they were

acquiring high-cost SAIF deposits. But

the ‘‘blended deposits’’ approach could

remove some uncertainty because the

buyer would know that it was acquiring

such deposits whenever the seller was

an Oakar institution.

In cases where the seller has acquired

deposits prior to the sale but during the

same semiannual period as the sale, the

blended-deposit approach could be

more complex. The acquisition of

deposits would change the seller’s

AADA-to-deposits ratio, which would

need to be calculated and made

available in conjunction with the sale.

At first, the FDIC considered that this

problem could be addressed by using

the ratio at the beginning of the quarter

for all transactions during that quarter.

But the FDIC later came to the view that

this technique could open up the

blended-deposit approach to gaming

strategies that institutions could use to

decrease their AADAs.

Finally, under the blended-deposit

approach, Oakar banks—which are BIF

members—could find it difficult (or

expensive) to transfer deposits to other

institutions, due to market uncertainty

regarding the prospect of a special

assessment to capitalize SAIF and the

alternative prospect of a continued

premium differential between BIF and

SAIF.

Any change to a blended-deposit

approach would only apply to transfers

that take place on and after January 1,

1997. Accordingly, the change would

not affect any assessments that Oakar

institutions have paid in prior years.

Nor would it affect the business aspects

of transactions that have already

occurred, or that may occur during the

remainder of 1996.

B. FDIC Computation of the AADA;

Reporting Requirements

The FDIC currently requires all

institutions that assume secondary-fund

deposits in an Oakar transaction to

submit an Oakar transaction worksheet

for the transaction. The FDIC provides

the worksheet. The FDIC provides the

name of the buyer and the seller, and

the consummation date of the

transaction. The buyer provides the total

deposits acquired, and the value of the

AADA thereby generated. In addition,

Oakar institutions must complete a

growth adjustment worksheet to recalculate their AADA as of December 31

of each year. Finally, Oakar banks report

the value of their AADA, on a quarterly

basis, in their quarterly reports of

condition (call reports).

To implement the proposal to adjust

AADAs on a quarterly basis, and to

ensure compliance with the statutory

requirement that an AADA does not

grow during the semiannual period in

which it is acquired, see 12 U.S.C.

1815(d)(3)(C)(iii), the FDIC initially

considered replacing the current annual

growth adjustment worksheet with a

slightly more detailed quarterly

worksheet. The FDIC was concerned

that this approach might impose a

burden on Oakar institutions, however.

The FDIC was further concerned that

this approach could result in an

increase in the frequency of errors

associated with these calculations.

Accordingly, the FDIC now believes it

might be more appropriate to relieve

Oakar institutions of this burden by

assuming the responsibility for

calculating each Oakar institution’s

AADA, and eliminating the growth

adjustment worksheet entirely. The

FDIC would calculate the AADA as part

of the current quarterly payment

process. The calculation, with

supporting documentation, would

accompany each institution’s quarterly

assessment invoice.

If the FDIC assumes the responsibility

for calculating the AADA, Oakar

institutions would no longer have to

report their AADAs in their call reports.

But they would have to report three

items on a quarterly basis. Oakar

institutions already report two of the

items as part of their annual growth

adjustment worksheets: total deposits

acquired in the quarter, and secondaryfund deposits acquired in the quarter.

Oakar institutions would therefore have

to supply one other item: total deposits

sold in the quarter.

These items will be zero in most

quarters. Even in quarters in which

some transactions have occurred, the

FDIC considers that the items should be

readily available and easy to calculate.

While for operational purposes, the

FDIC would prefer to add these three

items to the call report, an alternative

approach would be simply to replace

the current growth adjustment

worksheet with a very simple quarterly

worksheet essentially consisting only of

these items. The FDIC expects this

specific issue to be addressed in a

Request for Comment on Call Report
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34753

2The correlation is not so close as it first appears.

Various factors distort the relation between an

Oakar institution’s deposit base on one hand and

its primary-fund and secondary-fund assessment

bases on the other.

The chief factor is the so-called float deduction,

which is equal to the sum of one-sixth of an

institution’s demand deposits plus one percentum

of its time and savings deposits. See 12 CFR

327.5(a)(2). An Oakar institution’s secondary-fund

assessment base is equal to the full value of its

AADA, however. See id. 327.32(a)(2). The impact of

the float deduction falls entirely on the primaryfund assessment base.

Accordingly, neither the primary-fund

assessment base nor the secondary-fund assessment

base is directly proportional to the institutional’s

total deposits. Nor does the split between the

Continued

Revisions for 1997 currently expected to

be issued jointly by the three banking

agencies in July.

In addition, if the FDIC adopts the

blended-deposit approach for attributing

transferred deposits, the FDIC would

need an additional quarterly worksheet

from Oakar institutions in order to

calculate AADAs accurately. The

additional worksheet would report the

date and amount of deposits involved in

each transaction in which the Oakar

institution transferred deposits to

another institution during the quarter.

This information is not currently

collected.

C. Treatment of AADAs on a Quarterly

Basis

The FDIC is proposing to adopt the

view that—under its existing

regulation—an AADA for a semiannual

period may be considered to have two

quarterly components. The increment

by which an AADA grows during a

semiannual period may be considered to

be the result of the growth of each

quarterly component.

1. Quarterly Components

a. Propriety of quarterly components.

The FDIC’s assessment regulation

speaks of an institution’s AADA ‘‘for

any semiannual period’’. 12 CFR

327.32(a)(3). The FDIC currently

interprets this phrase to mean that an

AADA has a constant value throughout

a semiannual period. The FDIC has

taken this view largely for historical

reasons. Recent changes in the Oakar

Amendment give the FDIC room to alter

its view.

The FDIC’s ‘‘constant value’’ view

derives from the 1989 version of the

Oakar Amendment. See 12 U.S.C.

1815(d)(3) (Supp. I 1989). That version

of the Amendment said that an Oakar

bank’s AADA measured the ‘‘portion of

the average assessment base’’ that the

SAIF could assess. Id. 1815(d)(3)(B).

The FDI Act (as then in effect) defined

the ‘‘average assessment base’’ as the

average of the institution’s assessment

bases on the two dates for which the

institution was required to file a call

report. Id. 1817(b)(3). As a result, an

AADA—even a newly created one, and

even one that was generated in a

transaction during the latter quarter of

the prior semiannual period—served to

allocate an Oakar bank’s entire

assessment base for the entire current

semiannual period. The FDIC issued

rules in keeping with this view. 54 FR

51372 (Dec. 15, 1989).

Congress decoupled the AADA from

the assessment base at the beginning of

1994, as part of the FDIC’s changeover

to a risk-based assessment system. See

Federal Deposit Insurance Corporation

Improvement Act of 1991 (FDICIA),

Pub. L. 102–242, section 302(e) & (g),

105 Stat. 2236, 2349 (Dec. 19, 1991); see

also Defense Production Act

Amendments of 1992, Pub L. 102–558,

section 303(b)(6)(B), 106 Stat. 4198,

4225 (Oct. 28, 1992) (amending the

FDICIA in relevant part); cf. 58 FR

34357 (June 23, 1993). The Oakar

Amendment no longer links the AADA

directly to the assessment base. The

Amendment merely declares, ‘‘[T]hat

portion of the deposits of [an Oakar

institution] for any semiannual period

which is equal to [the Oakar

institution’s AADA] * * * shall be

treated as deposits which are insured by

[the Oakar institution’s secondary

fund]’’. See 12 U.S.C. 1815(d)(3).

The FDIC has not changed its rules for

assessing Oakar institutions, and has

continued to interpret the rules in the

same manner as before. Accordingly, the

‘‘constant value’’ concept of the AADA

has continued to be the view of the

FDIC.

But the FDIC is no longer compelled

to retain this view. Furthermore, as

discussed below, the FDIC has found

that this approach has certain

disadvantages. The FDIC is therefore

proposing to re-interpret the phrase ‘‘for

any semiannual period’’ as it appears in

§ 327.32(a)(3) in the light of the FDIC’s

quarterly assessment program. The FDIC

would take the position that an Oakar

institution’s AADA for a semiannual

period may be determined on a quarterby-quarter basis—just as the assessment

base for a semiannual period is so

determined—and may be used to

measure the portion of each quarterly

assessment base that is to be assessed by

the institution’s secondary fund. The

FDIC would also take the view that, if

an AADA is generated in a transaction

that takes place during the second

calendar quarter of a semiannual period,

the first quarterly component of the

AADA for the current (following)

semiannual period is zero; only the

second quarterly component is equal to

the volume of the secondary-fund

deposits that the buyer so acquired.

The FDIC considers that this view of

the phrase ‘‘for any semiannual period’’

is appropriate because the phrase is the

counterpart of, and is meant to interpret,

the following language in the Oakar

Amendment:

(C) DETERMINATION OF ADJUSTED

ATTRIBUTABLE DEPOSIT AMOUNT.—The

adjusted attributable deposit amount which

shall be taken into account for purposes of

determining the amount of the assessment

under subparagraph (B) for any semiannual

period * * *

12 U.S.C. 1815(d)(3)(C).

This passage speaks of the

assessment—not the AADA—‘‘for any

semiannual period’’. Insofar as the

AADA is concerned, the statutory

language merely specifies the

semiannual period for which the AADA

is to be computed: the period for which

the assessment is due. The FDIC

believes that the phrase ‘‘for a

semiannual period’’ may properly be

read to have the same meaning.

Moreover, while the Amendment says

the AADA must ‘‘be taken into account’’

in determining a semiannual

assessment, the Amendment does not

prescribe any particular method for

doing so. The FDIC considers that this

language provides enough latitude for

the FDIC to apply the AADA in a

manner that is appropriate to the

quarterly payment program.

The FDIC’s existing regulation is

compatible with this interpretation. The

regulation speaks of an assessment base

for each quarter, not of an average of

such bases. The regulation further says

that an Oakar institution’s AADA fixes

a portion of its ‘‘assessment base’’. See

12 CFR 327.32(a)(2) (i) & (ii).

Accordingly, the FDIC is not proposing

to modify the text that specifies the

method for computing AADAs.

b. Need for the re-interpretation.

Under certain conditions, the FDIC’s

‘‘constant value’’ view of the AADA

appears to be tantamount to doublecounting transferred deposits for a

calendar quarter.

The appearance of ‘‘double-counting’’

occurs when an Oakar institution

acquires secondary-fund deposits in the

latter half of a semiannual period—i.e.,

in the second or fourth calendar quarter.

The seller has the deposits at the end of

the first (or third) quarter; its first

payment for the upcoming semiannual

period is based on them. At the same

time, the buyer’s secondary-fund

assessment is approximately equal to an

assessment on the transferred deposits

for both quarters in the semiannual

period.2
34754 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

institutions two assessment base match the split

between the institution’s primary-fund and

secondary-fund deposits.

The source of this apparent effect is

that, under the FDIC’s current

interpretation of its rule, an AADA—

even a newly generated one—applies to

an Oakar institution’s entire assessment

base for the entire semiannual period.

The following example illustrates the

point. The example focuses on the

average assessment base, in order to

show the relationship between the

AADA and the assessment base up to

the time the FDIC adopted the quarterlypayment procedure:

Seller

(SAIF) Buyer (BIF) Industry total

Before the transaction:

Starting assessment bases (ignoring float, &c.):

SAIF ................................................................................................................................. $200 $0 $200.

BIF .................................................................................................................................... 0 100 100.

200 100 300.

The transaction:

March call report ............................................................................................................................ 200 100 300.

Deposits sold .................................................................................................................................. (100) +100 (AADA) Neutral.

June call report ............................................................................................................................... 100 200 300.

After the transaction:

Ending assessment bases (ignoring float, &c.):

SAIF ................................................................................................................................. 100 100 (AADA) 200.

BIF .................................................................................................................................... 0 100 100.

100 200 300.

Average assessment bases:

(Ignoring float, &c.):

SAIF ................................................................................................................................. 150 100 (AADA) 250.

BIF .................................................................................................................................... 0 50 50.

150 150 300.

The SAIF-assessable portion of the

buyer’s average assessment base is $100.

If the SAIF-assessable portion were

based directly on the average of the

buyer’s SAIF-insured deposits for the

prior two quarters—rather than on the

buyer’s AADA—that portion would only

be $50. The difference is equivalent to

attributing the transferred $100 to the

buyer for an extra one-half of the

semiannual period: by implication, for

the first (or third) quarter as well as for

the second (or fourth) quarter.

The anomaly is most apparent from

the standpoint of the industry as a

whole. The aggregate amount of the

SAIF-assessable deposits temporarily

balloons to $250, while the aggregate

amount of the BIF-assessable deposits

shrinks to $50. The anomaly only lasts

for one semiannual period, however. In

the following period, the seller’s

assessment base is $100 for both

quarters, making its average assessment

base $100. The buyer’s AADA remains

$100. Accordingly, the aggregate

amount of SAIF-assessable deposits

retreats to $200 once more; and the

aggregate amount of BIF-assessable

deposits is back to the full $100.

Broadening the focus to include both

funds also brings out a more subtle

point: the anomaly is not tantamount to

double-counting the transferred deposits

for a quarter, but rather to re-allocating

the buyer’s assessment base from the

BIF to the SAIF. The BIF-assessable

portion of the buyer’s average

assessment base is $50, not $100. The

difference is equivalent to cutting the

buyer’s BIF assessment base by $100 for

half the semiannual period.

The FDIC’s quarterly-payment

procedure has brought attention to these

anomalous effects. The quarterlypayment schedule is merely a new

collections schedule, not a new method

for determining the amount due. See 59

FR 67153 (Dec. 29, 1994). Accordingly,

under current procedures, the buyer and

the seller in the illustration would pay

the amounts specified therein even

under the quarterly-payment schedule.

When an Oakar transaction occurs in

the latter half of a semiannual period,

however, the buyer’s call report for the

prior quarter does not show an AADA.

The buyer’s first payment for the current

semiannual period is therefore based on

its assessment base for that quarter, not

on its AADA. Moreover, the entire

payment is computed using the

assessment rate for the institution’s

primary fund. The FDIC therefore

adjusts (and usually increases) the

amount to be collected in the second

quarterly payment in order to correct

these defects.

Interpreting the semiannual AADA to

consist of two quarterly components

would eliminate this anomaly.

2. Quarterly Growth

The Oakar Amendment says that the

growth rate for an AADA during a

semiannual period is equal to the

‘‘annual rate of growth of deposits’’ of

the Oakar institution. The FDIC

currently interprets the phrase ‘‘annual

rate’’ to mean a rate determined over the

interval of a full year. An Oakar

institution computes its ‘‘annual rate of

growth’’ at the end of each calendar

year, and uses this figure to calculate

the AADA for use during the following

year.

This procedure has a weakness. An

Oakar institution’s AADA tends to drift

out of alignment with the deposit base,

because the AADA remains constant

while the deposit base changes. At the

end of the year, when the institution

computes its AADA for the next year,

the AADA suddenly—but only

temporarily—snaps back into its proper

proportion.

The FDIC does not believe that

Congress intended to cause such a

fluctuation in the relation between an

institution’s AADA and its deposit base.
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34755

Moreover, from the FDIC’s standpoint as

insurer, it would be appropriate to

maintain a relatively steady correlation

between the AADA and the total deposit

base. The FDIC is therefore proposing to

revise its view, and take the position

that—after the end of the semiannual

period in which an institution’s AADA

has been established—the AADA grows

and shrinks at the same basic rate as the

institution’s domestic deposit base (that

is, excluding acquisitions and deposit

sales), measured contemporaneously on

a quarter-by-quarter basis. Over a full

semiannual period, any increase or

decrease in the AADA would

automatically occur at a rate equal to the

‘‘rate of growth of deposits’’ during the

semiannual period, thereby satisfying

the statutory requirement.

The FDIC considers that the statutory

reference to an ‘‘annual rate’’ does not

foreclose this approach. In ordinary

usage, ‘‘annual rate’’ can refer to a rate

that is expressed as an annual rate, even

though the interval during which the

rate applies, and over which it is

determined, is a shorter interval such as

a semiannual period (e.g., in the case of

six-month time deposits). For example,

until recently, the FDIC’s rules

regarding the payment of interest on

deposits spoke of ‘‘the annual rate of

simple interest’’—a phrase that

pertained to rates payable on time

deposits having maturities as short as

seven days. See 12 CFR 329.3 (1993).

Comparison of Annual and Quarterly

AADA Growth Adjustment Methods

Consider an Oakar institution that has

total deposits of $15 as of 12/31/93,

with an AADA of $6.5. Further assume

that the institution’s total deposits grow

by $1 every quarter, and that it does not

participate in any additional

acquisitions or deposit sales. The

following graphs show the effects of

making growth adjustments to its AADA

on an annual basis versus a quarterly

basis.

BILLING CODE 6714–01–P
34756 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

Since an AADA remains constant until a growth adjustment is applied, any change in total deposits is reflected

in the institution’s primary-fund deposits in the annual-adjustment method, while primary-fund deposits and the AADA

vary together with total deposits in the quarterly-adjustment method.

The following graphs express this difference in terms of percents of total deposits.
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34757

In the annual-adjustment method, the AADA becomes a smaller percent of total deposits as the total grows. In

the quarterly-adjustment method, the AADA and the primary-fund deposits remain constant percents of total deposits.

The FDIC considered an alternative approach: using the rate of growth in the institution’s deposit base for the

prior four quarters, measured from the current quarter. This technique would be as consistent with the letter of the

statute as the current method. But the four-prior-quarters method would preserve the lag between the AADA and the

deposit base.

Comparison of Quarterly AADA Adjustments Using Different Growth Rate Bases

Consider the same Oakar institution with beginning total deposits of $15 and constant growth of $1 per quarter.

The following graphs illustrate the effects on deposits of using total-deposit growth rates on two different bases: rolling

one-year growth rates, and quarter-to-quarter growth rates.
34758 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

In both cases, the primary-fund deposits and the AADA appear to vary together with total deposits, but it is difficult

to discern their precise relationship. Graphs of the same effects in terms of percents of total deposits are more illustrative:
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34759

BILLING CODE 6714–01–C
34760 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

3Theoretically, the growth rate is not applied

directly to the prior AADA, but rather to an amount

that is computed afresh each time—which amount

is the sum of the various elements of the prior

AADA.

4A shrinking Oakar thrift would have the

opposite effect: The BIF’s exposure would increase,

and the SAIF’s exposure would decrease. The Oakar

thrifts are comparatively rare, however. The net bias

would run against the SAIF.

In the percent-of-deposits graphs, the

AADA and the primary-fund deposits

are shown to converge when the AADA

growth adjustment is based on rolling

one-year growth rates. In this particular

example, the effect occurs because the

institution’s constant growth of $1 per

quarter results in a steadily decreasing

rate of growth of total deposits.

Therefore, a rolling one-year growth rate

of those total deposits at any point in

time will be more than the actual rate

of growth over the quarter to which the

rolling rate is being applied. While

different growth characteristics for total

deposits would yield different

relationships between the AADA and

the primary fund over time, the general

point is that the relationships of the

AADA and the primary-fund deposits

can vary when the AADA is adjusted,

unless the total-deposit rate of growth

used for the adjustment is drawn from

the same period for which the rate is

applied to the AADA.

As shown in the right-hand graph,

applying the actual quarterly growth

rate for total deposits to the AADA

results in stable percents of total

deposits for the AADA and primary

fund deposits.

In sum, the FDIC considers that the

quarterly approach is permissible under

the statute, and is preferable to any

approach that relies on a yearly interval

to determine growth in the AADA.

D. Negative Growth of the AADA

One element of an Oakar institution’s

AADA for a current semiannual period

is ‘‘the amount by which [the AADA for

the preceding semiannual period] 3

would have increased during the

preceding semiannual period if such

increase occurred at a rate equal to the

annual rate of growth of [the Oakar

institution’s] deposits’’. 12 U.S.C.

1815(d)(3)(C)(iii). The FDIC is proposing

to codify its view that the terms

‘‘growth’’ and ‘‘increase’’ encompass

negative growth (shrinkage). But the

FDIC is proposing to change its

interpretation by excluding shrinkage

due to deposit sales.

1. Negative Growth in General

The 1989 version of the Oakar

Amendment focused on an Oakar bank’s

underlying rate of growth for the

purpose of determining the Oakar

bank’s AADA. The 1989 version of the

Amendment set a minimum growth rate

for an AADA of 7 percent. The

Amendment then specified that, if an

Oakar bank’s deposit base grew at a

higher rate, the AADA would grow at

the higher rate too. But the Amendment

excluded growth attributable to mergers,

branch purchases, and other

acquisitions of deposits from other BIF

members: the deposits so acquired were

to be subtracted from the Oakar bank’s

total deposits for the purpose of

determining the growth in the Oakar

bank’s deposit base (and therefore the

rate of growth of the AADA). See 12

U.S.C. 1813(d)(3)(C)(3)(iii) (Supp. I

1989).

The 1989 version of the Oakar

Amendment spoke only of ‘‘growth’’

and ‘‘increases’’ in the AADA. Id. The

statute was internally consistent in this

regard, because AADAs could never

decrease.

Congress eliminated the minimum

growth rate as of the start of 1992.

FDICIA section 501 (a) & (b), 105 Stat.

2389 & 2391. As a result, the Oakar

Amendment now specifies that an

Oakar institution’s AADA grows at the

same rate as its domestic deposits

(excluding mergers, branch acquisitions,

and other acquisitions of deposits). 12

U.S.C. 1813(d)(3)(C).

The modern version of the Oakar

Amendment continues to speak only of

‘‘growth’’ and ‘‘increases,’’ however.

Congress has not—at least not

explicitly—modified it to address the

case of an institution that has a

shrinking deposit base. Nor has

Congress addressed the case of an

institution that transfers deposits in

bulk to another insured institution.

The FDIC regards this omission as a

gap in the statute that requires

interpretation. The FDIC does so

because, if the statute were read to allow

only increases in AADAs, the statute

would generate a continuing shift in the

relative insurance burden toward the

SAIF. Most Oakar institutions—and

nearly all large Oakar institutions—are

BIF-member Oakar banks. If an Oakar

bank’s deposit base were to shrink

through ordinary business operations,

but its AADA could not decline in

proportion to that shrinkage, the SAIF’s

share of the risk presented by the Oakar

bank would increase. But the reverse

would not be true: if an Oakar bank’s

deposit base increased, its AADA would

rise as well, and the SAIF would

continue to bear the same share of the

risk. The result would be a tendency to

displace the insurance burden from the

BIF to the SAIF.4

The FDIC further considers that the

main themes of the changes that

Congress made to the Oakar

Amendment in 1991 are those of

simplification, liberalization, and

symmetry. Congress allowed savings

associations to acquire banks, as well as

the other way around. Congress allowed

institutions to deal with one another

directly, eliminating the requirement

that the institutions must belong to the

same holding company (and the need

for approval by an extra federal

supervisor). Congress established a

mirror-image set of rules for assessing

Oakar banks and Oakar thrifts. As noted

above, Congress repealed the 7

percentum floor on AADA growth,

thereby eliminating the most prominent

cause of divergence between an Oakar

institution’s assessment base and its

deposit base. Congress expanded the

scope of the Oakar Amendment and

made it congruent with the relevant

provisions of section 5(d)(2). See

FDICIA section 501(a), 105 Stat. 2388–

91 (Dec. 19, 1991).

In keeping with this view of the 1991

amendments, the FDIC interprets the

growth provisions of the Oakar

Amendment symmetrically: that is, to

encompass negative growth rates as well

as positive ones. The FDIC takes the

position that an Oakar institution’s

AADA grows and shrinks at the same

underlying rate of growth as the

institution’s domestic deposits.

The FDIC considers that this

interpretation is appropriate because it

accords with customary usage in the

banking industry, and because it is

consistent with the purposes and the

structure of the statute. Under the

FDIC’s interpretation, each fund

continues to bear a constant share of the

risk posed by the institution, and

continues to draw assessments from a

constant proportion of the institution’s

deposit base.

Moreover, the FDIC’s interpretation

encourages banks to make the

investment that Congress wished to

promote. If ‘‘negative increases’’ were

disallowed, Oakar banks would see their

SAIF assessments (which currently

carry a much higher rate) grow

disproportionately when their deposits

shrank through ordinary business

operations.

Finally, the interpretation is designed

to avoid—and has generally avoided—

the anomaly of an institution having an

AADA that is larger than its total

deposit base.

2. Negative Growth Due to DepositTransfers

As noted above, for the purpose of

analyzing deposit sales, the FDIC
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34761

5The regulation also refers to the Resolution

Trust Corporation (RTC). The reference is obsolete,

as the RTC no longer exists.

follows the deposit-attribution

principles set forth in the Rankin letter:

the Oakar institution transfers its

primary-fund deposits until they have

been exhausted, and only then transfers

its secondary-fund deposits. The FDIC

further considers that—consistent with

the moratorium imposed by section

5(d)(2)—the deposits continue to have

the same status for insurance purposes

after the deposit sale as before. The

industry-wide stock of BIF-insured and

SAIF-insured deposits should remain

the same.

The FDIC’s procedure for calculating

the growth of the AADA upsets that

balance, however. The deposit sale

reduces the Oakar bank’s total deposit

base by a certain percentage:

accordingly, the Oakar bank’s AADA—

and therefore its volume of SAIFinsured deposits—is reduced by the

same percentage. Its BIF-insured

deposits increase correspondingly. In

effect, SAIF deposits are converted into

BIF deposits, in violation of the

moratorium.

This effect occurs without regard for

whether the transferred deposits are

primary-fund or secondary-fund

deposits. Even when a BIF-member

Oakar bank transfers deposits to another

BIF-member bank—a transfer that,

under the Rankin letter, would only

involve BIF-insured deposits—the

deposit sale serves to shrink the

transferring bank’s AADA.

The FDIC is proposing to cure this

defect by excluding deposit sales from

the growth computation. The FDIC

continues to believe that the terms

‘‘growth’’ and ‘‘increase’’ as used in the

statute are broad enough to refer to a

negative rate as well as a positive one.

But the FDIC does not consider that it

is required to extend these terms beyond

reasonable limits. In particular, the

FDIC does not believe that it must

necessarily interpret these terms to

include a decrease that is attributable to

a bulk transfer of deposits. The statute

itself excludes the effect of an

acquisition or other deposit-assumption

from the computation of growth. The

FDIC considers that it has ample

authority to make an equivalent

exclusion for deposit sales.

The FDIC believes its proposed

interpretation is sound because deposit

sales do not—in and of themselves—

represent any change in the industrywide deposit base of each fund. It is

inappropriate for the FDIC to generate

such a change on its own as a collateral

effect of its assessment procedures.

Moreover, the proposed interpretation is

in accord with the tenor of the

amendments made by the FDICIA,

because it treats deposit sales

symmetrically with depositacquisitions.

E. Value of an Initial AADA

The Oakar Amendment says that an

Oakar institution’s initial AADA is

equal to ‘‘the amount of any deposits

acquired by the institution in

connection with the transaction (as

determined at the time of such

transaction)’’. Id. 1815(d)(3)(C). The

FDIC has by regulation interpreted the

phrase ‘‘deposits acquired by the

institution’’. 12 CFR 327.32(a)(4). The

regulation distinguishes between cases

in which a buyer assumes deposits from

a healthy seller (healthy-seller cases),

and cases in which the FDIC is serving

as conservator or receiver for the seller

at the time of the transaction (troubledseller cases).5

The FDIC proposes to retain but refine

its interpretation with respect to

healthy-seller cases. The FDIC also

proposes to codify its ‘‘conduit’’ rule for

certain deposits that a buyer promptly

retransfers to a third party. The FDIC

proposes to eliminate the special

provisions for troubled-seller cases.

1. The ‘‘Nominal Amount’’ Rule

The general rule is that a buyer’s

initial AADA equals the full nominal

amount of the assumed deposits. 12 CFR

327.32(a)(3)(4).

The FDIC is proposing to retain the

substance of this provision. The

proposed rule would continue to

emphasize the point that the amount of

the transferred deposits is to be

measured by focusing on the volume

divested by the seller. The purpose of

the rule is to make it clear that posttransaction events—such as deposit runoff—have no bearing on the calculation

of the buyer’s AADA.

The FDIC considers that the nominalvalue rule is appropriate for two chief

reasons. Most importantly, it reflects the

manifest intent of the statute, which

says that the volume of the acquired

deposits are to be ‘‘determined at the

time’’ of the transaction. Second, the

nominal-value rule has the virtues of

clarity and precision. A buyer and a

seller will both know precisely the

value of an AADA that is generated in

an Oakar transaction. The buyer’s

expected secondary-fund assessments

can be an important cost for the parties

to consider when deciding on an

acceptable price. The FDIC considers

that the nominal-value rule reduces

uncertainty on this point.

The proposed rule would update this

aspect of the regulation in two minor

ways. The existing rule is somewhat

obsolete: it presumes that the buyer

assumes all the seller’s deposits, and

that all such deposits are insured by the

buyer’s secondary fund. The reason for

these presumptions is purely historical.

At the time the regulation was adopted,

the Oakar Amendment only spoke of

cases in which the seller merged into or

consolidated with the buyer, or in

which the buyer acquired all the seller’s

assets and liabilities. See 12 U.S.C.

1815(d)(3)(A) (Supp. I 1989). The

Amendment did not allow for less

comprehensive Oakar transactions (e.g.,

branch sales). Nor did it contemplate a

transaction in which the seller was an

Oakar institution in its own right.

The proposed rule would make it

clear that the nominal-amount rule

applies to all Oakar transactions. The

proposed rule would also specify that

the AADA is only equal to the nominal

amount of the transferred deposits that

are insured by the secondary fund of the

buyer, not necessarily all the transferred

deposits. Both these points represent the

current view of the FDIC.

2. Deposits Acquired From Troubled

Institutions

The FDIC’s current regulation

provides various discounts that serve to

reduce the buyer’s AADA when the

seller is in conservatorship or

receivership at the time of the sale. See

12 CFR 327.32(a)(3)(4). The FDIC is

proposing to eliminate the discounts, on

the ground that they are no longer

needed.

In adopting the rule, the FDIC

observed that the deposits that a buyer

assumes from a troubled seller are quite

volatile: the buyer generally loses a

certain percentage of the deposits

almost immediately. The FDIC

characterized the lost deposits as

‘‘phantom deposits’’, and said it would

make no sense to require the bank to

continue to pay assessments on them.

The FDIC further said that such a

requirement would impair its ability to

transfer the business of such thrifts to

healthy enterprises, to the detriment of

the communities the thrifts were

serving. See 54 FR at 51373. The FDIC

accordingly adopted an interpretive rule

stating that the nominal amount of the

deposits transferred in such cases were

to be discounted for the purpose of

computing the AADA generated in the

transaction, as follows:

—Brokered deposits: All brokered

deposits are subtracted from the

nominal volume of the transferred

deposits.

—The ‘‘80/80’’ rule: Each remaining

deposit is capped at $80,000. The
34762 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

AADA is equal to 80% of the

aggregate of the deposits as so capped.

The FDIC explained that these

discounts reflected its actual

experience—that is, its experience with

arranging purchase-and-assumption

transactions for institutions in

receivership. Id. But the discounts were

not intended to represent the actual runoff that an individual Oakar institution

would sustain in a particular case.

Rather, they were an approximation or

estimate of the run-off that Oakar

institutions ordinarily sustain in

troubled-seller cases.

As an historical matter, the FDIC

determined that it was appropriate to

provide the discounts because the

funding decisions for troubled thrift

institutions were subject to constraints

and considerations that fell outside the

normal range of factors influencing such

decisions in the market place for

healthy thrifts. The sellers had often

been held in conservatorship for some

time. In order to maintain the assets in

such institutions, it often was necessary

for the conservator to obtain large and

other high-yielding deposits for funding

purposes. Both the size of the discounts,

and the fact that the discounts were

restricted to troubled-seller cases, were

known publicly in 1989 and were

relevant to every potential buyer’s

decision to acquire and price a thrift

institution.

Although healthy sellers in unassisted

transactions also sometimes relied upon

volatile deposits for funding, these

funding decisions were part of a strategy

to maximize the profits of a going

concern, and the management of the

purchasing institutions were

accountable to shareholders. The

comparable decisions for troubled

sellers in assisted transactions were

made by managers of government

conservatorships that were subject to

funding constraints, relatively inflexible

operating rules (necessary to control a

massive government effort to sell failed

thrifts), and other considerations

outside the scope of the typical private

transaction.

While the FDIC recognized that it was

incumbent upon any would-be buyer to

evaluate and price all aspects of a

transaction, the FDIC determined that it

would be counterproductive to require

bidders to price the contingencies

related to volatile deposits in assisted

transactions, given that these deposits

primarily were artifacts of government

conservatorships. Considering the

objective of attracting private capital in

order to avoid additional costs to the

taxpayer, the FDIC sought to avoid the

potential deterrent effect of including

these artificial elements in the pricing

equation. In order to reflect the volatile

deposits acquired in assisted

transactions, the FDIC determined to

provide the above-described discounts.

The FDIC adopted this interpretive

rule at a time when troubled and failed

thrifts were prevalent, and the stress on

the safety net for such institutions was

relatively severe. The stress has been

considerably relieved, however. The

FDIC considers that, under current

conditions, there is no longer any need

to maintain a special set of rules for

troubled-seller cases.

Moreover, the discounts are, at

bottom, simply another factor that helps

to determine the price that a buyer will

pay for a troubled institution. The FDIC

ordinarily must contribute its own

resources to induce buyers to acquire

such institutions. Any reduction in

future assessments that the FDIC offers

as an incentive merely reduces the

amount of money the FDIC must

contribute at the time of the transaction.

The simpler and more straightforward

approach is to reflect all such

considerations in the net price that

buyers pay for such institutions at the

time of the transaction.

3. Conduit Deposits

The FDIC staff has taken the position

that, under certain circumstances, when

an Oakar institution re-transfers some of

the secondary-fund deposits it has

assumed in the course of an Oakar

transaction, the re-transferred deposits

will not be counted as ‘‘acquired’’

deposits for purposes of computing the

Oakar institution’s AADA. The Oakar

institution is regarded as a mere conduit

for the re-transferred deposits. The

deposits themselves retain their original

status as BIF-insured or SAIF-insured

after the re-transfer: whatever their

status in the hands of the original

transferor, the deposits have that status

in the hands of the ultimate transferee.

The FDIC has applied its ‘‘conduit’’

principle only in very narrow

circumstances. The FDIC has done so

only when the Oakar institution has

been required to commit to re-transfer

specified branches as a condition of

approval of the acquisition of the seller;

the commitment has been enforceable;

and the re-transfer has been required to

occur within six months after

consummation of the initial Oakar

transaction. See, e.g., FDIC Advisory

Op. 94–48, 2 FED. DEPOSIT INS.

CORP., LAW, REGULATIONS,

RELATED ACTS 4901–02 (1994).

The FDIC is proposing to codify and

refine this view. As codified, secondaryfund deposits would have the status of

‘‘conduit’’ deposits in the hands of an

Oakar institution only if a Federal

banking supervisory agency or the

United States Department of Justice

explicitly ordered the Oakar institution

to re-transfer the deposits within six

months, if the institution’s obligation to

make the re-transfer was enforceable,

and if the re-transfer had to be

completed in the six-month grace

period.

Conduit deposits would be included

in the Oakar institution’s AADA only on

a temporary basis: for one semiannual

period, or in some cases two periods,

but no more. The deposits would be

counted in the ‘‘amount of deposits

acquired’’ by the Oakar institution—and

therefore in its AADA—during the

semiannual period in which the

transaction occurs. The AADA so

computed would be used to determine

the assessment due for the following

semiannual period. In addition, if the

Oakar institution retained the deposits

during part of that following period, the

deposits would again be included in the

‘‘amount of deposits acquired’’—and

would again be part of the institution’s

AADA—for the purpose of computing

the assessment for the semiannual

period after that. But thereafter the

deposits would be excluded from the

‘‘amount of deposits acquired’’ by the

Oakar institution.

If the conditions were not satisfied,

the conduit principle would not come

into play, and the deposits would be

regarded as having been assumed by the

Oakar institution at the time of the

original Oakar transaction. Any

subsequent transfer of the deposits

would be treated as a separate

transaction, and analyzed

independently of the Oakar transaction.

The FDIC is currently considering

alternative methodologies for attributing

any deposits that an Oakar institution

might transfer to another institution.

The conduit principle’s economic

impact is somewhat greater in the

context of one such methodology than

in that of the other.

The FDIC currently takes the view

that, when an Oakar institution transfers

deposits to another institution, the seller

transfers its primary-fund deposits until

they have been exhausted, and only

then transfers its secondary-fund

deposits. A BIF-member Oakar bank has

a comparatively strong incentive to

invoke the conduit principle under this

methodology. If an Oakar bank can

succeed in characterizing re-transferred

deposits as conduit deposits, the bank

will escape the full impact of the SAIF

assessment on those deposits, which is

comparatively high at the present time.

The FDIC is also considering a

‘‘blended’’ approach, however. Under
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this methodology, whenever an Oakar

institution transferred any deposits to

another institution, the transferred

deposits would be regarded as

consisting of a blend of primary-fund

and secondary-fund deposits. The ratio

of the blend would be the same as that

of the institution as a whole. This

methodology would reduce the

incentive for Oakar banks to invoke the

conduit principle to some extent,

particularly in the case of Oakar banks

having large AADAs. An Oakar bank’s

AADA would shrink as a result of any

transfer of deposits, even one that did

not involve conduit deposits. The

comparative benefit of invoking the

conduit rule would be correspondingly

reduced.

F. Transitional Considerations

1. Freezing Prior AADAs

In theory, an Oakar institution’s

AADA is computed anew for each

semiannual period. An AADA for a

current semiannual period is equal to

the sum of three elements:

—Element 1: The volume of secondaryfund deposits that the institution

originally acquired in the Oakar

transaction;

—Element 2: The aggregate of the

growth increments for all semiannual

periods prior to the one for which

Element 3 is being determined; and

—Element 3: The growth increment for

the period just prior to the current

period (i.e., just prior to the one for

which the assessment is due).

Element 3 is calculated on a base that

equals the sum of elements 1 and 2.

The FDIC has consistently interpreted

its existing rules to mean that, when a

growth increment has already been

determined for an AADA for a

semiannual period, the growth

increment continues to have the same

value thereafter. See, e.g., FDIC

Advisory Op. 92- 19, 2 FED. DEPOSIT

INS. CORP., LAW, REGULATIONS,

RELATED ACTS 4619, 4620–21 (1992).

The net effect has been to ‘‘freeze’’

AADAs— and their elements—for prior

semiannual periods. The proposed rule

would codify this principle.

Accordingly, the new interpretations

set forth in the proposed rule would

apply on a purely prospective basis.

They would come into play only for the

purpose of computing future elements

of future AADAs. The new

interpretations would not affect AADAs

already computed for prior semiannual

periods (or the assessments that Oakar

institutions have already paid on them).

Nor would they affect the prior-period

elements of AADAs that are to be

determined for future semiannual

periods. In short, the proposed rule

would ‘‘leave prior AADAs alone’’.

2. 1st-Half 1997 Assessments: Excluding

Deposit Sales From the Growth

Calculation

The FDIC proposes to follow its

existing procedures in computing

AADAs for the first semiannual period

of 1997, with one exception. In

particular, an institution’s AADA for the

first semiannual period of 1997 would

be based on the growth of the

institution’s deposits as measured over

the entire calendar year 1996. The

AADA so determined would be used to

compute both quarterly payments for

the first semiannual period of 1997.

The exception is that, when

computing the growth rate for deposits

during the second semiannual period of

1996, the FDIC would apply its new

interpretation of ‘‘negative’’ growth, and

would decline to consider shrinkage

attributable to transactions that occurred

during July–December 1996.

The FDIC acknowledges that its

proposed new interpretation would

make a significant break with the past.

The FDIC further recognizes that the

new interpretation could affect the

business considerations that the parties

must evaluate when they enter into

deposit-transfer transactions. The FDIC

considers that the industry has ample

notice of the proposed exclusion,

however, and that the parties to any

such transaction can factor in any costs

that the exclusion might produce.

At the same time, the FDIC agrees that

it would be inappropriate to apply its

new interpretation retroactively to

transactions that have been completed

earlier in 1996. The parties to these

transactions did not have notice of the

FDIC’s proposal. The FDIC would

therefore include shrinkage attributable

to deposit sales that occurred during the

first semiannual period of 1996 when

determining the annual growth rate to

be used in computing Oakar

institutions’ AADAs for the first

semiannual period of 1997.

3. 2nd-Half 1997 Assessments: Use of

Quarterly AADAs

The FDIC proposes to begin

measuring AADAs on a quarterly basis

during the first semiannual period of

1997. The first payment that would be

computed using a quarterly component

of an AADA would be the initial

payment for the next semiannual

period—the payment due at the end of

June.

The first time the FDIC would identify

and measure a quarterly component of

a semiannual AADA would be as of

March 31, 1997. The quarterly

component with respect to that date

would reflect the basic rate of growth of

the institution’s deposits during the first

calendar quarter of 1997 (January–

March). The quarterly AADA

component so measured would be used

to determine the institution’s first

quarterly payment for the second

semiannual period in 1997 (the June

payment).

The second quarterly AADA

component would reflect the basic rate

of growth of the institution’s deposits

during the second calendar quarter of

1997 (April–June). The quarterly AADA

component so measured would be used

to determine the institution’s second

quarterly payment for the second

semiannual period in 1997 (the

September payment).

G. Simplification and Clarification of

the Regulation

In some respects, the proposed rule

would simplify and clarify the current

regulation without changing its

meaning. The FDIC is doing so in

response to two initiatives. Section 303

of the Riegle Community Development

and Regulatory Improvement Act of

1994, Pub. L. 103–325, 108 Stat. 2160

(Sept. 23, 1994), requires federal

agencies to streamline and modify their

regulations. In addition, the FDIC has

voluntarily committed itself to review

its regulations on a 5-year cycle. See

Development and Review of FDIC Rules

and Regulations, 2 FED. DEPOSIT INS.

CORP., LAW, REGULATIONS,

RELATED ACTS 5057 (1984). The FDIC

considers that subpart B of part 327 is

a fit candidate for review under each of

these initiatives.

The proposed rule would clarify

subpart B by defining and using the

terms ‘‘primary fund’’ and ‘‘secondary

fund’’. An Oakar institution’s primary

fund would be the fund to which it

belongs; it would be the other insurance

fund. Using these terms, the FDIC is

proposing to simplify paragraphs (1)

and (2) of § 327.32(a) by eliminating

redundant language; the changes would

not alter the meaning of these

provisions.

In addition, the FDIC would clarify

§ 327.6(a) by changing the nomenclature

used therein. ‘‘Deposit-transfer

transaction’’ would be replaced by

‘‘terminating transaction;’’ ‘‘acquiring

institution’’ would be replaced by

‘‘surviving institution;’’ and

‘‘transferring institution’’ would be

replaced by ‘‘terminating institution’’.

The terms now found in § 327.6(a) are

also used in other provisions of part

327, where they have different and less

specialized meaning. The change in

nomenclature in § 327.6(a) is intended
34764 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

to avoid any confusion that the current

terminology might cause.

III. Proposed Effective Date

Section 302(b) of the Riegle

Community Development and

Regulatory Improvement Act of 1994,

Pub. L. 103–325, 108 Stat. 2160, 2214–

15 (1994), requires that new and

amended regulations imposing

additional reporting, disclosure, or other

new requirements on insured depository

institutions must generally take effect

on the first day of a calendar quarter. In

keeping with this requirement, the FDIC

is proposing that the rule, if adopted,

would take effect on January 1, 1997.

IV. Request for Public Comment

The FDIC hereby solicits comment on

all aspects of the proposed rule. In

particular, the FDIC solicits comment on

the following points: attributing

deposits that an Oakar institution

transfers to another institution

according to principles articulated in

the Rankin letter, or treating the

transferred deposits as a blend of

deposits insured by both funds; having

the FDIC, rather than individual

institutions, compute AADAs using

information provided by the

institutions; interpreting AADAs as

consisting of quarterly components, and

computing the growth of AADAs on a

quarterly cycle rather than an annual

one; retaining the concept of negative

growth for the purpose of computing

AADAs; excluding deposit sales from

the computation of growth; applying the

nominal-amount principle for

determining initial AADAs in all cases,

including troubled-seller cases; and

preserving the conduit-deposit concept.

In addition, in accordance with

section 3506(c)(2)(B) of the Paperwork

Reduction Act, 44 U.S.C. 3506(c)(2)(B),

the FDIC solicits comment for the

following purposes on the collection of

information proposed herein:

—to evaluate whether the proposed

collection of information is necessary

for the proper performance of the

functions of the FDIC, including

whether the information has practical

utility;

—to evaluate the accuracy of the FDIC’s

estimate of the burden of the

proposed collection of information;

—to enhance the quality, utility, and

clarity of the information to be

collected; and

—to minimize the burden of the

collection of information on those

who are to respond, including

through the use of automated

collection techniques or other forms

of information technology.

The FDIC also solicits comment on all

other points raised or options described

herein, and on their merits relative to

the proposed rule.

V. Paperwork Reduction Act

Under the FDIC’s existing procedures,

each Oakar institution must compute its

AADA at the end of each year, using a

worksheet provided by the FDIC (annual

growth worksheet). The annual growth

worksheet shows the computation of the

institution’s AADA for the first

semiannual period of the current year—

that is, the AADA that is used to

compute the assessment due for the first

semiannual period of the current year—

which is based on the institution’s

growth during the prior year. The

institution must provide the annual

growth worksheet to the FDIC as a part

of the institution’s certified statement.

In addition, whenever an institution

is the buyer in an Oakar transaction, it

must submit a transaction worksheet

showing the total deposits acquired on

the transaction date. If the seller is an

Oakar institution, and if the buyer

acquires the entire institution, the buyer

must also report the seller’s last AADA

(as shown in the seller’s last call report).

The buyer must then subtract this

number from the total deposits acquired

in order to determine its new AADA.

The proposed rule would change this

procedure for the annual growth

worksheets for the first semiannual

period of 1997 (i.e., for the worksheets

that show the growth of deposits during

1996). The change would only affect

Oakar institutions that transferred

deposits to other institutions during

1996. Such an institution would have to

report the total amount of deposits that

it transferred in transactions from July

1–December 31, 1996.

Thereafter the FDIC would compute

the AADAs for all Oakar institutions,

using information taken from their

quarterly call reports. Institutions would

not have to report additional

information in most cases. An Oakar

institution that neither acquired nor

transferred deposits in the prior quarter

would not have to provide any

additional information at all. An Oakar

institution that acquired deposits would

have to provide the same information at

the end of the quarter that it now

provides at the end of the year; there

would be a change in the timing, but no

change in burden.

Only an Oakar institution that

transferred deposits would have to

provide additional information. The

items of information needed, and the

number of institutions affected, would

depend on the deposit-attribution

methodology chosen by the FDIC. Under

the Rankin letter’s approach, the FDIC

presently anticipates that approximately

100 institutions per year would report

deposit sales. Sellers would have to

report the volume of deposits they

transferred in the transaction. Under the

‘‘blended deposits’’ approach, the FDIC

estimates that approximately 250 Oakar

institutions per year would report

deposit sales. Sellers would have to

report both the volume of deposits

transferred, and the date of the

transaction. In either case, the

information would be readily available:

the extra reporting burden would be

small.

The FDIC expects that the net effect

would be to reduce the overall reporting

burden on Oakar institutions. The

burden of submitting extra information

in deposit-sale cases would be more

than offset by the elimination of the

growth worksheet and by the FDIC’s

assumption of the burden of computing

AADAs.

Accordingly, the FDIC is proposing to

revise an existing collection of

information. The revision has been

submitted to the Office of Management

and Budget for review and approval

pursuant to the Paperwork Reduction

Act of 1980 (44 U.S.C. 3501 et seq.).

Comments on the accuracy of the

burden estimate, and suggestions for

reducing the burden, should be

addressed to the Office of Management

and Budget, Paperwork Reduction

Project (3064–0057), Washington, D.C.

20503, with copies of such comments

sent to Steven F. Hanft, Assistant

Executive Secretary (Administration),

Federal Deposit Insurance Corporation,

Room F–400, 550 17th St., N.W.,

Washington, D.C. 20429. The impact of

this proposal on paperwork burden

would be to require a one-time de

minimis report from approximately 100

Oakar institutions for the first

semiannual period in 1997, and

thereafter to eliminate the annual

growth worksheet for all 900 Oakar

institutions, which takes an estimated

two hours to prepare. The FDIC would

then compute each Oakar institution’s

AADA from the deposit data in the

institution’s quarterly call report. The

effect of this proposal on the estimated

annual reporting burden for this

collection of information is a reduction

of 1,800 hours:

Approximate Number of Respondents:

900.

Number of Responses per

Respondent: ¥1.

Total Annual Responses: 900.

Average Time per Response: 2 hours.

Total Average Annual Burden Hours:

¥1800 hours.
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34765

The FDIC expects the Federal

Financial Institutions Examination

Council to require (as needed) the

information in the quarterly call reports,

starting with the report for March 31,

1997. If the Council does recommend

these changes, they will be submitted to

the Office of Management and Budget

for review and approval as part of the

call report submission.

VI. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (5

U.S.C. 601–612) does not apply to the

proposed rule. Although the FDIC has

chosen to publish general notice of the

proposed rule, and to ask for public

comment on it, the FDIC is not obliged

to do so, as the proposed rule is

interpretive in nature. See id. 553(b) and

603(a).

Moreover, the FDIC considers that the

proposed rule would amount to a net

reduction in burden for all Oakar

institutions, as they would no longer

have to prepare or file regular annual

growth worksheets after the worksheet

with respect to 1996. Instead, a limited

number of Oakar institutions would

have to submit one new piece of

information, and would have to do so

only for quarters in which they

transferred deposits.

In addition, although the Regulatory

Flexibility Act requires a regulatory

flexibility analysis when an agency

publishes a rule, the term ‘‘rule’’ (as

defined in the Regulatory Flexibility

Act) excludes ‘‘a rule of particular

applicability relating to rates’’. Id.

601(2). The proposed rule relates to the

rates that Oakar institutions must pay,

because it addresses various aspects of

the method for determining the base on

which assessments are computed. The

Regulatory Flexibility Act is therefore

inapplicable to this aspect of the

proposed rule.

Finally, the legislative history of the

Regulatory Flexibility Act indicates that

its requirements are inappropriate to

this aspect of the proposed rule. The

Regulatory Flexibility Act is intended to

assure that agencies’ rules do not

impose disproportionate burdens on

small businesses:

Uniform regulations applicable to all

entities without regard to size or capability

of compliance have often had a

disproportionate adverse effect on small

concerns. The bill, therefore, is designed to

encourage agencies to tailor their rules to the

size and nature of those to be regulated

whenever this is consistent with the

underlying statute authorizing the rule.

126 Cong. Rec. 21453 (1980) (‘‘Description of

Major Issues and Section-by-Section Analysis

of Substitute for S. 299’’).

The proposed rule would not impose

a uniform cost or requirement on all

Oakar institutions regardless of size: to

the extent that it imposes any costs at

all, the costs have to do with the effects

that the proposed rule would have on

Oakar institutions’ assessments.

Assessments are proportional to an

institution’s size. Moreover, while the

FDIC has authority to establish a

separate risk-based assessment system

for large and small members of each

insurance fund, see 12 U.S.C.

1817(b)(1)(D), the FDIC has not done so.

Within the current assessment scheme,

the FDIC cannot ‘‘tailor’’ assessment

rates to reflect the ‘‘size and nature’’ of

institutions.

List of Subjects in 12 CFR Part 327

Assessments, Bank deposit insurance,

Banks, banking, Financing Corporation,

Reporting and recordkeeping

requirements, Savings associations.

For the reasons set forth in the

preamble, the Board of Directors of the

Federal Deposit Insurance Corporation

proposes to amend 12 CFR part 327 as

follows:

PART 327—ASSESSMENTS

1–2. The authority citation for part

327 is revised to read as follows:

Authority: 12 U.S.C. 1441, 1441b, 1815,

1817–1819.

3. In § 327.6 the section heading and

paragraph (a) are revised to read as

follows:

§ 327.6 Terminating transfers; other

terminations of insurance.

(a) Terminating transfer—(1)

Assessment base computation. If a

terminating transfer occurs at any time

in the second half of a semiannual

period, each surviving institution’s

assessment base (as computed pursuant

to § 327.5) for the first half of that

semiannual period shall be increased by

an amount equal to such institution’s

pro rata share of the terminating

institution’s assessment base for such

first half.

(2) Pro rata share. For purposes of

paragraph (a)(1) of this section, the

phrase ‘‘pro rata share’’ means a fraction

the numerator of which is the deposits

assumed by the surviving institution

from the terminating institution during

the second half of the semiannual

period during which the terminating

transfer occurs, and the denominator of

which is the total deposits of the

terminating institution as required to be

reported in the quarterly report of

condition for the first half of that

semiannual period.

(3) Other assessment-base

adjustments. The Corporation may in its

discretion make such adjustments to the

assessment base of an institution

participating in a terminating transfer,

or in a related transaction, as may be

necessary properly to reflect the likely

amount of the loss presented by the

institution to its insurance fund.

(4) Limitation on aggregate

adjustments. The total amount by which

the Corporation may increase the

assessment bases of surviving or other

institutions under this paragraph (a)

shall not exceed, in the aggregate, the

terminating institution’s assessment

base as reported in its quarterly report

of condition for the first half of the

semiannual period during which the

terminating transfer occurs.

* * * * *

4. Section 327.8 is amended by

revising paragraph (h) and adding

paragraphs (j) and (k) to read as follows:

§ 327.8 Definitions.

* * * * *

(h) As used in § 327.6(a), the

following terms are given the following

meanings:

(1) Surviving institution. The term

surviving institution means an insured

depository institution that assumes

some or all of the deposits of another

insured depository institution in a

terminating transfer.

(2) Terminating institution. The term

terminating institution means an

insured depository institution some or

all of the deposits of which are assumed

by another insured depository

institution in a terminating transfer.

(3) Terminating transfer. The term

terminating transfer means the

assumption by one insured depository

institution of another insured

depository institution’s liability for

deposits, whether by way of merger,

consolidation, or other statutory

assumption, or pursuant to contract,

when the terminating institution goes

out of business or transfers all or

substantially all its assets and liabilities

to other institutions or otherwise ceases

to be obliged to pay subsequent

assessments by or at the end of the

semiannual period during which such

assumption of liability for deposits

occurs. The term terminating transfer

does not refer to the assumption of

liability for deposits from the estate of

a failed institution, or to a transaction in

which the FDIC contributes its own

resources in order to induce a surviving

institution to assume liabilities of a

terminating institution.

* * * * *

(j) Primary fund. The primary fund of

an insured depository institution is the
34766 Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules

insurance fund of which the institution

is a member.

(k) Secondary fund. The secondary

fund of an insured depository

institution is the insurance fund that is

not the primary fund of the institution.

5. In § 327.32, paragraph (a) is

amended by revising paragraphs (a)(1)

and (a)(2), and by removing paragraphs

(a)(4) and (a)(5), to read as follows:

§ 327.32 Computation and payment of

assessment.

(a) Rate of assessment—(1) BIF and

SAIF member rates. (i) Except as

provided in paragraph (a)(2) of this

section, and consistent with the

provisions of § 327.4, the assessment to

be paid by an institution that is subject

to this subpart B shall be computed at

the rate applicable to institutions that

are members of the primary fund of

such institution.

(ii) Such applicable rate shall be

applied to the institution’s assessment

base less that portion of the assessment

base which is equal to the institution’s

adjusted attributable deposit amount.

(2) Rate applicable to the adjusted

attributable deposit amount.

Notwithstanding paragraph (a)(1)(i) of

this section, that portion of the

assessment base of any acquiring,

assuming, or resulting institution which

is equal to the adjusted attributable

deposit amount of such institution shall:

(i) Be subject to assessment at the

assessment rate applicable to members

of the secondary fund of such

institution pursuant to subpart A of this

part; and

(ii) Not be taken into account in

computing the amount of any

assessment to be allocated to the

primary fund of such institution.

* * * * *

6. New §§ 327.33 through 327.36 are

added to read as follows:

§ 327.33 ‘‘Acquired’’ deposits.

This section interprets the phrase

‘‘deposits acquired by the institution’’ as

used in § 327.32(a)(3)(i).

(a) In general. (1) Secondary-fund

deposits. The phrase ‘‘deposits acquired

by the institution’’ refers to deposits that

are insured by the secondary fund of the

acquiring institution, and does not

include deposits that are insured by the

acquiring institution’s primary fund.

(2) Nominal dollar amount. Except as

provided in paragraph (b) of this

section, an acquiring institution is

deemed to acquire the entire nominal

dollar amount of any deposits that the

transferring institution holds on the date

of the transaction and transfers to the

acquiring institution.

(b) Conduit deposits—(1) Defined. As

used in this paragraph (b), the term

‘‘conduit deposits’’ refers to deposits

that an acquiring institution has

assumed from another institution in the

course of a transaction described in

§ 327.31(a), and that are treated as

insured by the secondary fund of the

acquiring institution, but which the

acquiring institution has been explicitly

and specifically ordered by the

Corporation, or by the appropriate

federal banking agency for the

institution, or by the Department of

Justice to commit to re-transfer to

another insured depository institution

as a condition of approval of the

transaction. The commitment must be

enforceable, and the divestiture must be

required to occur and must occur within

6 months after the date of the initial

transaction.

(2) Exclusion from AADA

computation. Conduit deposits are not

considered to be acquired by the

acquiring institution within the

meaning of § 327.32(a)(3)(i) for the

purpose of computing the acquiring

institution’s adjusted attributable

deposit amount for a current

semiannual period that begins after the

end of the semiannual period following

the semiannual period in which the

acquiring institution re-transfers the

deposits.

§ 327.34 Application of AADAs.

This section interprets the meaning of

the phrase ‘‘an insured depository

institution’s ‘adjusted attributable

deposit amount’ for any semiannual

period’’ as used in the opening clause of

§ 327.32(a)(3).

(a) In general. The phrase ‘‘for any

semiannual period’’ refers to the current

semiannual period: that is, the period

for which the assessment is due, and for

which an institution’s adjusted

attributable deposit amount (AADA) is

computed.

(b) Quarterly components of AADAs.

An AADA for a current semiannual

period consists of two quarterly AADA

components. The first quarterly AADA

component for the current period is

determined with respect to the first

quarter of the prior semiannual period,

and the second quarterly AADA

component for the current period is

determined with respect to the second

quarter of the prior period.

(c) Application of AADAs. The value

of an AADA that is to be applied to a

quarterly assessment base in accordance

with § 327.32(a)(2) is the value of the

quarterly AADA component for the

corresponding quarter.

(d) Initial AADAs. If an AADA for a

current semiannual period has been

generated in a transaction that has

occurred in the second calendar quarter

of the prior semiannual period, the first

quarterly AADA component for the

current period is deemed to have a

value of zero.

(e) Transition rule. Paragraphs (b), (c)

and (d) of this section shall apply to any

AADA for any semiannual period

beginning on or after July 1, 1997.

§ 327.35 Grandfathered AADA elements.

This section explains the meaning of

the phrase ‘‘total of the amounts

determined under paragraph (a)(3)(iii)’’

in § 327.32(a)(3)(ii). The phrase ‘‘total of

the amounts determined under

paragraph (a)(3)(iii)’’ refers to the

aggregate of the increments of growth

determined in accordance with

§ 327.32(a)(3)(iii). Each such increment

is deemed to be computed in

accordance with the contemporaneous

provisions and interpretations of such

section. Accordingly, any increment of

growth that is computed with respect to

a semiannual period has the value

appropriate to the proper calculation of

the institution’s assessment for the

semiannual period immediately

following such semiannual period.

§ 327.36 Growth computation.

This section interprets various

phrases used in the computation of

growth as prescribed in

§ 327.32(a)(3)(iii).

(a) Annual rate. The annual rate of

growth of deposits refers to the rate,

which may be expressed as an annual

percentage rate, of growth of an

institution’s deposits over any relevant

interval. A relevant interval may be less

than a year.

(b) Growth; increase; increases.

Except as provided in paragraph (c) of

this section, references to ‘‘growth,’’

‘‘increase,’’ and ‘‘increases’’ may

generally include negative values as

well as positive ones.

(c) Growth of deposits. ‘‘Growth of

deposits’’ does not include any decrease

in an institution’s deposits representing

deposits transferred to another insured

depository institution, if the transfer

occurs on or after July 1, 1996.

(d) Quarterly determination of growth.

For the purpose of computing

assessments for semiannual periods

beginning on July 1, 1997, and

thereafter, the rate of growth of deposits

for a semiannual period, and the

amount by which the sum of the

amounts specified in § 327.32(a)(3) (i)

and (ii) would have grown during a

semiannual period, is to be determined

by computing such rate of growth and

such sum of amounts for each calendar

quarter within the semiannual period.

7. Section 327.37 is added to read as

follows:
Federal Register / Vol. 61, No. 129 / Wednesday, July 3, 1996 / Proposed Rules 34767

ALTERNATIVE ONE

§ 327.37 Attribution of transferred

deposits.

This section explains the attribution

of deposits to the BIF and the SAIF

when one insured depository institution

(acquiring institution) acquires deposits

from another insured depository

institution (transferring institution). For

the purpose of determining whether the

assumption of deposits (assumption

transaction) constitutes a transaction

undertaken pursuant to section 5(d)(3)

of the Federal Deposit Insurance Act,

and for the purpose of computing the

adjusted attributable deposit amounts, if

any, of the acquiring and the

transferring institutions after the

transaction:

(a) Transferring institution—(1)

Transfer of primary-fund deposits. To

the extent that the aggregate volume of

deposits that is transferred by a

transferring institution in a transaction,

or in a related series of transactions,

does not exceed the volume of deposits

that is insured by its primary fund

(primary-fund deposits) immediately

prior to the transaction (or, in the case

of a related series of transactions,

immediately prior to the initial

transaction in the series), the transferred

deposits shall be deemed to be insured

by the institution’s primary fund. The

primary institution’s volume of primaryfund deposits shall be reduced by the

aggregate amount so transferred.

(2) Transfer of secondary-fund

deposits. To the extent that the aggregate

volume of deposits that is transferred by

the transferring institution in a

transaction, or in a related series of

transactions, exceeds the volume of

deposits that is insured by its primary

fund immediately prior to the

transaction (or, in the case of a related

series of transactions, immediately prior

to the initial transaction in the series),

the following volume of the deposits so

transferred shall be deemed to be

insured by the institution’s secondary

fund (secondary-fund deposits): the

aggregate amount of the transferred

deposits minus that portion thereof that

is equal to the institution’s primaryfund deposits. The transferring

institution’s volume of secondary-fund

deposits shall be reduced by the volume

of the secondary-fund deposits so

transferred.

(b) Acquiring institution. The deposits

shall be deemed, upon assumption by

the acquiring institution, to be insured

by the same fund or funds in the same

amount or amounts as the deposits were

so insured immediately prior to the

transaction.

ALTERNATIVE TWO

§ 327.37 Attribution of transferred

deposits.

This section explains the attribution

of deposits to the BIF and the SAIF

when one insured depository institution

(acquiring institution) assumes the

deposits from another insured

depository institution (transferring

institution). On and after January 1,

1997, for the purpose of determining

whether the assumption of deposits

constitutes a transaction undertaken

pursuant to section 5(d)(3) of the

Federal Deposit Insurance Act, and for

the purpose of computing the adjusted

attributable deposit amounts, if any, of

the acquiring and the transferring

institutions after the transaction:

(a) Attribution of the deposits as to the

transferring institution. The deposits

shall be attributed to the primary and

secondary funds of the transferring

institution in the same ratio as the

transferring institution’s total deposits

were so attributed immediately prior to

the deposit-transfer transaction. The

transferring institution’s stock of BIFinsured deposits and of SAIF-insured

deposits shall each be reduced in the

appropriate amounts.

(b) Attribution of deposits as to the

acquiring institution. Upon assumption

by the acquiring institution, the deposits

shall be attributed to the same insurance

funds in the same amounts as the

deposits were so attributed immediately

prior to the transaction. The acquiring

institution’s stock of BIF-insured

deposits and of SAIF-insured deposits

shall each be increased in the

appropriate amounts.

(c) Ratio fixed at start of quarter. For

the purpose of determining the ratio

specified in paragraph (a) of this

paragraph for any transaction:

(1) In general. The ratio shall be

determined at the beginning of the

quarter in which the transaction occurs.

Except as provided in paragraph (c)(2)

of this section, the ratio shall not be

affected by changes in the transferring

institution’s deposit base.

(2) Prior acquisitions by a transferring

institution. If the transferring institution

acquires deposits after the start of the

quarter but prior to the transaction, the

deposits so acquired shall be added to

the transferring institution’s deposit

base, and shall be attributed to the

transferring institution’s primary and

secondary funds in accordance with this

section.

By order of the Board of Directors.

Dated at Washington, DC, this 17th day of

June 1996.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 96–16349 Filed 7–2–96; 8:45 am]

BILLING CODE 6714–01–P

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 39

[Docket No. 95–NM–266–AD]

RIN 2120–AA64

Airworthiness Directives; De Havilland

Model DHC–8–100 Series Airplanes

AGENCY: Federal Aviation

Administration, DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: This document proposes to

revise an existing airworthiness

directive (AD), applicable to certain de

Havilland Model DHC–8 series

airplanes, that currently requires clearly

marking the location and means of

entering the lavatory. That AD was

prompted by reports of passengers

mistaking the airstair door operating

handle for the means of gaining access

to the lavatory. The actions specified by

that AD are intended to prevent

inadvertent opening of the airstair door

and consequent depressurization of the

airplane. This action would limit the

applicability of the rule to fewer

airplanes.

DATES: Comments must be received by

July 29, 1996.

ADDRESSES: Submit comments in

triplicate to the Federal Aviation

Administration (FAA), Transport

Airplane Directorate, ANM–103,

Attention: Rules Docket No. 95–NM–

266–AD, 1601 Lind Avenue, SW.,

Renton, Washington 98055–4056.

Comments may be inspected at this

location between 9:00 a.m. and 3:00

p.m., Monday through Friday, except

Federal holidays.

The service information referenced in

the proposed rule may be obtained from

Bombardier, Inc., Bombardier Regional

Aircraft Division, Garratt Boulevard,

Downsview, Ontario, Canada M3K 1Y5.

This information may be examined at

the FAA, Transport Airplane

Directorate, 1601 Lind Avenue, SW.,

Renton, Washington.

FOR FURTHER INFORMATION CONTACT:

Marc Goldstein, Aerospace Engineer,

Systems and Equipment Branch, ANE–

172, FAA, New York Aircraft

Certification Office, Engine and