26516 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 

commercial banks, savings institutions, and credit 

unions. 

2Section 229.18(e) of Regulation CC requires that 

banks notify account holders who are consumers 

within 30 days after implementing a change that 

improves the availability of funds. 

generally must provide faster 

availability for funds deposited by a 

‘‘local check’’ than by a ‘‘nonlocal 

check.’’ A check is considered local if it 

is payable by or at or through a bank 

located in the same Federal Reserve 

check-processing region as the 

depositary bank. 

Appendix A to Regulation CC 

contains a routing number guide that 

assists banks in identifying local and 

nonlocal banks and thereby determining 

the maximum permissible hold periods 

for most deposited checks. The 

appendix includes a list of each Federal 

Reserve check-processing office and the 

first four digits of the routing number, 

known as the Federal Reserve routing 

symbol, of each bank that is served by 

that office for check-processing 

purposes. Banks whose Federal Reserve 

routing symbols are grouped under the 

same office are in the same checkprocessing region and thus are local to 

one another. 

On July 25, 2009, the Reserve Banks 

will transfer the check-processing 

operations of the head office of the 

Federal Reserve Bank of Minneapolis to 

the head office of the Federal Reserve 

Bank of Cleveland. As a result of this 

change, some checks that are drawn on 

and deposited at banks located in the 

Minneapolis and Cleveland checkprocessing regions and that currently 

are nonlocal checks will become local 

checks subject to faster availability 

schedules. To assist banks in identifying 

local and nonlocal checks and making 

funds availability decisions, the Board 

is amending the lists of routing symbols 

in appendix A associated with the 

Federal Reserve Banks of Minneapolis 

and Cleveland to reflect the transfer of 

check-processing operations from the 

head office of the Federal Reserve Bank 

of Minneapolis to the head office of the 

Federal Reserve Bank of Cleveland. To 

coincide with the effective date of the 

underlying check-processing changes, 

the amendments to appendix A are 

effective July 25, 2009. The Board is 

providing notice of the amendments at 

this time to give affected banks ample 

time to make any needed processing 

changes. Early notice also will enable 

affected banks to amend their 

availability schedules and related 

disclosures if necessary and provide 

their customers with notice of these 

changes.2

Administrative Procedure Act 

The Board has not followed the 

provisions of 5 U.S.C. 553(b) relating to 

notice and public participation in 

connection with the adoption of the 

final rule. The revisions to appendix A 

are technical in nature and are required 

by the statutory and regulatory 

definitions of ‘‘check-processing 

region.’’ Because there is no substantive 

change on which to seek public input, 

the Board has determined that the 

section 553(b) notice and comment 

procedures are unnecessary. In addition, 

the underlying consolidation of Federal 

Reserve Bank check-processing offices 

involves a matter relating to agency 

management, which is exempt from 

notice and comment procedures. 

Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3506; 

5 CFR part 1320 Appendix A.1), the 

Board has reviewed the final rule under 

authority delegated to the Board by the 

Office of Management and Budget. The 

technical amendments to appendix A of 

Regulation CC will delete the reference 

to the head office of the Federal Reserve 

Bank of Minneapolis and reassign the 

routing symbols listed under that office 

to the head office of the Federal Reserve 

Bank of Cleveland. The depository 

institutions that are located in the 

affected check-processing regions and 

that include the routing numbers in 

their disclosure statements would be 

required to notify customers of the 

resulting change in availability under 

§ 229.18(e). However, all paperwork 

collection procedures associated with 

Regulation CC already are in place, and 

the Board accordingly anticipates that 

no additional burden will be imposed as 

a result of this rulemaking. 

List of Subjects in 12 CFR Part 229 

Banks, Banking, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

■ For the reasons set forth in the 

preamble, the Board is amending 12 

CFR part 229 to read as follows: 

PART 229—AVAILABILITY OF FUNDS 

AND COLLECTION OF CHECKS 

(REGULATION CC) 

■ 1. The authority citation for part 229 

continues to read as follows: 

Authority: 12 U.S.C. 4001–4010, 12 U.S.C. 

5001–5018. 

■ 2. The Fourth and Ninth District 

routing symbol lists in appendix A are 

amended by removing the headings and 

listings for the Ninth Federal Reserve 

District and revising the listings for the 

Fourth Federal Reserve Districts to read 

as follows: 

Appendix A to Part 229—Routing 

Number Guide to Next-Day Availability 

Checks and Local Checks 

* * * * * 

Fourth Federal Reserve District 

[Federal Reserve Bank of Cleveland] 

Head Office 

0220 2220 

0223 2223 

0410 2410 

0412 2412 

0420 2420 

0421 2421 

0422 2422 

0423 2423 

0430 2430 

0432 2432 

0433 2433 

0434 2434 

0440 2440 

0441 2441 

0442 2442 

0515 2515 

0519 2519 

0720 2720 

0724 2724 

0740 2740 

0749 2749 

0813 2813 

0830 2830 

0839 2839 

0863 2863 

0910 2910 

0911 2911 

0912 2912 

0913 2913 

0914 2914 

0915 2915 

0918 2918 

0919 2919 

0960 2960 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, May 27, 2009. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. E9–12925 Filed 6–2–09; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 337 

Interest Rate Restrictions on Insured 

Depository Institutions That Are Not 

Well Capitalized 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is amending its 

regulations relating to the interest rate 

restrictions that apply to insured 

depository institutions that are not well 


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Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 26517 

capitalized. Under the amended 

regulations, such insured depository 

institutions generally will be permitted 

to offer the ‘‘national rate’’ plus 75 basis 

points. The ‘‘national rate’’ will be 

defined, for deposits of similar size and 

maturity, as a simple average of rates 

paid by all insured depository 

institutions and branches for which data 

are available. For those cases in which 

the FDIC determines that the national 

rate as published on the FDIC’s Web site 

does not represent the prevailing rate in 

a particular market, as indicated by 

available evidence, the depository 

institution will be permitted to offer the 

prevailing rate in that market plus 75 

basis points. The purpose of this final 

rule is to clarify the interest rate 

restrictions for certain insured 

depository institutions and examiners. 

DATES: The final rule is effective 

December 3, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Louis J. Bervid, Senior Examination 

Specialist, Division of Supervision and 

Consumer Protection, (202) 898–6896 or 

lbervid@fdic.gov; or Christopher L. 

Hencke, Counsel, Legal Division, (202) 

898–8839 or chencke@fdic.gov, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429. 

SUPPLEMENTARY INFORMATION: 

I. Section 29 of the Act 

Section 29 of the Federal Deposit 

Insurance Act (‘‘FDI Act’’) provides that 

an insured depository institution that is 

not well capitalized may not accept 

deposits by or through deposit brokers. 

See 12 U.S.C. 1831f(a). Notwithstanding 

this prohibition, section 29 also 

provides that an adequately capitalized 

institution may accept brokered 

deposits if it obtains a waiver from the 

FDIC. See 12 U.S.C. 1831f(c). In 

contrast, an undercapitalized institution 

may not accept brokered deposits under 

any circumstances. See 12 U.S.C. 

1831f(a) and (c). 

The purpose of section 29 generally is 

to limit the acceptance or solicitation of 

deposits by insured depository 

institutions that are not well capitalized. 

This purpose is promoted through two 

means: (1) The prohibition against the 

acceptance of brokered deposits by 

depository institutions that are less than 

well capitalized (as described above); 

and (2) certain restrictions on the 

interest rates that may be paid by such 

institutions. In enacting section 29, 

Congress added the interest rate 

restrictions to prevent institutions from 

avoiding the prohibition against the 

acceptance of brokered deposits by 

soliciting deposits internally through 

‘‘money desk operations.’’ Congress 

viewed the gathering of deposits by 

weaker institutions through either thirdparty brokers or ‘‘money desk 

operations’’ as potentially an unsafe or 

unsound practice. See H.R. Conf. Rep. 

No. 101–222 at 402–403 (1989), 

reprinted in 1989 U.S.C.C.A.N. 432, 

441–42. 

Section 29 imposes different interest 

rate restrictions on different categories 

of insured depository institutions that 

are less than well capitalized. These 

categories are (1) adequately capitalized 

institutions with waivers to accept 

brokered deposits; (2) adequately 

capitalized institutions without waivers 

to accept brokered deposits; and (3) 

undercapitalized institutions. The 

statutory restrictions for each category 

are described in detail below. 

Adequately capitalized institutions 

with waivers to accept brokered 

deposits. Institutions in this category 

may not pay a rate of interest on 

deposits that ‘‘significantly exceeds’’ the 

following: ‘‘(1) The rate paid on deposits 

of similar maturity in such institution’s 

normal market area for deposits 

accepted in the institution’s normal 

market area; or (2) the national rate paid 

on deposits of comparable maturity, as 

established by the [FDIC], for deposits 

accepted outside the institution’s 

normal market area.’’ 12 U.S.C. 1831f(e). 

In this category, an institution must 

adhere to (or not ‘‘significantly exceed’’) 

the prevailing rates in its own ‘‘normal 

market area’’ only with respect to 

deposits accepted from that market area. 

For other deposits, the institution is 

permitted to offer (but not ‘‘significantly 

exceed’’) the ‘‘national rate’’ established 

by the FDIC. Thus, an institution in this 

category is not permitted to outbid local 

institutions for local deposits but is 

permitted to compete with non-local 

institutions for non-local deposits. 

Adequately capitalized institutions 

without waivers to accept brokered 

deposits. In this category, institutions 

may not offer rates that ‘‘are 

significantly higher than the prevailing 

rates of interest on deposits offered by 

other insured depository institutions in 

such depository institution’s normal 

market area.’’ 12 U.S.C. 1831f(g)(3). In 

other words, the institution must adhere 

to the prevailing rates in its own 

‘‘normal market area’’ for all deposits 

(whether local or non-local). Thus, the 

institution will be unable to compete 

with non-local institutions for non-local 

deposits unless the rates in the 

institution’s own ‘‘normal market area’’ 

are competitive with the non-local rates. 

For institutions in this category, the 

statute restricts interest rates in an 

indirect manner. Rather than simply 

setting forth an interest rate restriction 

for adequately capitalized institutions 

without waivers, the statute defines the 

term ‘‘deposit broker’’ to include ‘‘any 

insured depository institution that is not 

well capitalized * * * which engages, 

directly or indirectly, in the solicitation 

of deposits by offering rates of interest 

which are significantly higher than the 

prevailing rates of interest on deposits 

offered by other insured depository 

institutions in such depository 

institution’s normal market area.’’ 12 

U.S.C. 1831f(g)(3). In other words, the 

depository institution itself is a ‘‘deposit 

broker’’ if it offers rates significantly 

higher than the prevailing rates in its 

own ‘‘normal market area.’’ Without a 

waiver, the institution cannot accept 

deposits from a ‘‘deposit broker.’’ Thus, 

the institution cannot accept these 

deposits from itself. In this indirect 

manner, the statute prohibits 

institutions in this category from 

offering rates significantly higher than 

the prevailing rates in the institution’s 

‘‘normal market area.’’ 

Undercapitalized institutions. In this 

category, institutions may not offer rates 

‘‘that are significantly higher than the 

prevailing rates of interest on insured 

deposits (1) in such institution’s normal 

market areas; or (2) in the market area 

in which such deposits would otherwise 

be accepted.’’ 12 U.S.C. 1831f(h). Thus, 

for deposits in its own ‘‘normal market 

area,’’ an undercapitalized institution 

must offer rates that are not 

‘‘significantly higher’’ than the local 

rates. For non-local deposits, the 

institution must offer rates that are not 

‘‘significantly higher’’ than either (1) the 

institution’s own local rates; or (2) the 

applicable non-local rates. In other 

words, the institution must adhere to 

the prevailing rates in its own ‘‘normal 

market area’’ for all deposits (whether 

local or non-local) and also must adhere 

to the prevailing rates in the non-local 

area for any non-local deposits. Thus, 

the institution will be unable to outbid 

non-local institutions for non-local 

deposits even if the non-local rates are 

lower than the rates in the institution’s 

own ‘‘normal market area.’’ 

As described above, section 29 of the 

FDI Act imposes interest rate 

restrictions based on a depository 

institution’s capital category (and 

whether the depository institution has 

obtained a waiver to accept brokered 

deposits). Also, section 29 authorizes 

the FDIC to ‘‘impose, by regulation or 

order, such additional restrictions on 

the acceptance of brokered deposits by 

any institution as the [FDIC] may 

determine to be appropriate.’’ 12 U.S.C. 

1831f(f). 


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26518 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 

1Prior to 1992, the term ‘‘normal market area’’ 

was defined in a footnote in section 337.6. Under 

this definition, a depository institution’s ‘‘normal 

market area’’ depended upon the institution’s 

advertising practices in soliciting deposits. See 12 

CFR 337.6(a)(1)(ii) (1992) (footnote 11). 

II. Section 337.6 of the FDIC’s 

Regulations 

The FDIC has implemented section 29 

of the FDI Act through section 337.6 of 

the FDIC’s regulations. See 12 CFR 

337.6. Prior to its amendment through 

this final rule, section 337.6 added 

several significant definitions to the 

statutory rules. First, the ‘‘national rate’’ 

was defined. Second, the terms 

‘‘significantly exceeds’’ and 

‘‘significantly higher’’ were defined. 

Third, the term ‘‘market area’’ was 

defined. Each of these definitions, and 

the reasoning behind the definitions, are 

discussed in greater detail below. 

The ‘‘National Rate.’’ In section 337.6, 

prior to the adoption of this final rule, 

the ‘‘national rate’’ was defined as 

follows: ‘‘(1) 120 percent of the current 

yield on similar maturity U.S. Treasury 

obligations; or (2) In the case of any 

deposit at least half of which is 

uninsured, 130 percent of such 

applicable yield.’’ 12 CFR 

337.6(b)(2)(ii)(B). In defining the 

‘‘national rate’’ in this manner, the FDIC 

relied upon the fact that such a 

definition is ‘‘objective and simple to 

administer.’’ 57 FR 23933, 23938 (June 

5, 1992). By using percentages (120 

percent or 130 percent of the yield on 

U.S. Treasury obligations) instead of a 

fixed number of basis points, the FDIC 

hoped to ‘‘allow for greater flexibility 

should the spread to Treasury securities 

widen in a rising interest rate 

environment.’’ Id. In deciding not to 

rely on published deposit rates, the 

FDIC offered the following explanation: 

‘‘The FDIC believes this approach 

would not be timely because data on 

market rates must be available on a 

substantially current basis to achieve 

the intended purpose of this provision 

and permit institutions to avoid 

violations. At this time, the FDIC has 

determined not to tie the national rate 

to a private publication. The FDIC has 

not been able to establish that such 

published rates sufficiently cover the 

markets for deposits of different sizes 

and maturities.’’ Id. at 23939. 

‘‘Significantly Exceeds.’’ Through 

section 337.6, the FDIC has provided 

that a rate of interest ‘‘significantly 

exceeds’’ another rate, or is 

‘‘significantly higher’’ than another rate, 

if the first rate exceeds the second rate 

by more than 75 basis points. See 12 

CFR 337.6(b)(2)(ii), (b)(3)(ii) and (b)(4). 

In adopting this standard, the FDIC 

offered the following explanation: 

‘‘Based upon the FDIC’s experience with 

the brokered deposit prohibitions to 

date, it is believed that this number will 

allow insured depository institutions 

subject to the interest rate ceilings 

* * * to compete for funds within 

markets, and yet constrain their ability 

to attract funds by paying rates 

significantly higher than prevailing 

rates.’’ 57 FR at 23939. 

‘‘Market Area.’’ In section 337.6, the 

term ‘‘market area’’ is defined as 

follows: ‘‘A market area is any readily 

defined geographical area in which the 

rates offered by any one insured 

depository institution soliciting deposits 

in that area may affect the rates offered 

by other insured depository institutions 

operating in the same area.’’ 12 CFR 

337.6(b)(4). In adopting this definition, 

the FDIC offered the following 

explanation: ‘‘Under the final rule, the 

market area will be determined 

pragmatically, on a case-by-case basis, 

based on the evident or likely impact of 

a depository institution’s solicitation of 

deposits in a particular area, taking into 

account the means and media used and 

volume and sources of deposits 

resulting from such solicitation.’’ 57 FR 

at 23939. 

These rules and definitions in section 

337.6 have been difficult for insured 

depository institutions and examiners to 

apply. Prior to the adoption of this final 

rule, one issue was that section 337.6 

defined ‘‘market area’’ but did not 

define ‘‘normal market area.’’ In the 

absence of a definition, institutions and 

examiners struggled to determine 

‘‘normal market areas.’’ 1

Another issue was that the definition 

of the ‘‘national rate’’ became outdated. 

As discussed above, prior to the 

adoption of this final rule, the ‘‘national 

rate’’ was defined as ‘‘120 percent of the 

current yield on similar U.S. Treasury 

obligations’’ (or 130 percent in the case 

of a deposit ‘‘at least half of which is 

uninsured’’). 12 CFR 337.6(b)(2)(ii)(B). 

For many years, this definition 

functioned well because rates on 

Treasury obligations tracked closely 

with rates on deposits. At present, 

however, the rates on certain Treasury 

obligations are low compared to deposit 

rates. Consequently, the ‘‘national rate’’ 

as defined in the FDIC’s regulations has 

been artificially low. By setting a low 

rate, the FDIC’s regulations required 

some insured depository institutions to 

offer unreasonably low rates on some 

deposits, thereby restricting access even 

to market-rate funding. 

III. The Proposed Rule 

In response to the issues discussed 

above, the FDIC sought public 

comments on a proposed rule. See 74 

FR 5904 (February 3, 2009). Through the 

proposed rule, the FDIC addressed two 

basic problems: (1) The obsolescence of 

the FDIC’s definition of the ‘‘national 

rate’’; and (2) the difficulty experienced 

by insured depository institutions and 

examiners in determining prevailing 

rates in ‘‘normal market areas’’ and 

other market areas. 

In response to the first problem, the 

FDIC proposed to redefine the ‘‘national 

rate’’ as ‘‘a simple average of rates paid 

by all insured depository institutions 

and branches for which data are 

available.’’ In other words, the FDIC 

proposed to sever the connection 

between the national rate and the yield 

on U.S. Treasury obligations. 

In response to the second problem, 

the FDIC proposed to create a 

presumption that the prevailing rate in 

any market would be the national rate 

(as defined above). An insured 

depository institution could rebut this 

presumption by presenting evidence to 

the FDIC that the prevailing rate in a 

particular market is higher than the 

national rate. If the FDIC agreed with 

this evidence, the institution would be 

permitted to pay as much as 75 basis 

points above the local prevailing rate. 

IV. The Comments 

In response to the publication of the 

proposed rule, the FDIC received twenty 

comments from insured depository 

institutions, banking associations and 

bank service providers. Some 

commenters urged the FDIC to adopt 

tougher interest rate restrictions on 

insured depository institutions that are 

not well capitalized. They expressed 

concern that such institutions, through 

high interest rates, are driving up costs 

for healthy banks. Most commenters, 

however, urged the FDIC to provide 

insured depository institutions with 

greater flexibility in offering interest 

rates. 

The commenters did not dispute that 

the ‘‘national rate’’ has become 

outdated. Also, they generally 

supported the concept of allowing an 

insured depository institution to submit 

evidence that the national rate, in a 

particular market, does not represent the 

actual prevailing rate. In regard to 

determining the prevailing or applicable 

rate in a particular market, the 

commenters made various suggestions 

including the following: 

• A bank should be free to choose any 

of the following rates as the applicable 

prevailing rate: (1) The national rate; (2) 

the State rate; (3) the ‘‘metropolitan 

statistical area’’ or ‘‘MSA’’ rate; or (4) 

the Internet rate (for Internet banks). 


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Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 26519 

• The prevailing rate should be based 

upon the rates offered by insured 

depository institutions but also should 

be based upon the rates offered by credit 

unions (and perhaps other entities not 

insured by the FDIC). 

• The prevailing rate should be based 

upon the highest rates in a market. The 

lowest rates should not be considered 

because banks offering low rates are not 

competing for deposits. 

• Different rates should apply to 

different deposit products. For example, 

time deposits should not be compared 

to deposits without maturity dates. 

Further, deposits without maturity dates 

should be divided into smaller 

categories based on distinct features (for 

example, ‘‘money market deposit 

accounts’’ or ‘‘MMDAs’’ could be 

separated from ‘‘negotiable order of 

withdrawal’’ or ‘‘NOW’’ accounts). 

• Certain types of deposit accounts 

(such as transaction accounts) should be 

exempt from any interest rate 

restrictions because such accounts 

represent core deposits. 

V. The Final Rule 

After considering the comments, the 

FDIC has decided to adopt certain 

amendments to section 337.6. Each of 

these amendments is discussed in turn 

below. 

Paragraph (a)(5)(iii). Prior to the 

adoption of the final rule, this paragraph 

provided that the term ‘‘deposit broker’’ 

includes ‘‘any insured depository 

institution that is not well capitalized, 

and any employee of any such insured 

depository institution, which engages, 

directly or indirectly, in the solicitation 

of deposits by offering rates of interest 

(with respect to such deposits) which 

are significantly higher than the 

prevailing rates of interest on deposits 

offered by other insured depository 

institutions in such depository 

institution’s normal market area.’’ This 

provision in the regulations is based 

upon corresponding language in the 

statute itself. See 12 U.S.C. 1831f(g)(3). 

As previously discussed, the effect of 

this provision is to prohibit certain 

insured depository institutions 

(adequately capitalized institutions 

without waivers to accept brokered 

deposits) from offering rates of interest 

significantly higher than the prevailing 

rates in the institution’s normal market 

area. 

Through the proposed rule, the FDIC 

proposed adding the following sentence: 

‘‘For purposes of this paragraph, the 

prevailing rates of interest in such 

depository institution’s normal market 

area shall be deemed to be the national 

rate as defined in paragraph (b)(2)(ii)(B) 

unless the FDIC determines, based on 

available evidence, that the prevailing 

rates differ from the national rate.’’ 

Through the final rule, the FDIC has 

adopted the substance of this provision 

but the FDIC has decided not to add this 

sentence to paragraph (a)(5)(iii). Rather, 

the FDIC has moved this provision to 

new paragraph (e) (discussed below). 

Paragraph (b)(2)(ii)(B). As amended 

by the final rule, this paragraph defines 

the ‘‘national rate’’ as follows: ‘‘[T]he 

national rate shall be a simple average 

of rates paid by all insured depository 

institutions and branches for which data 

are available. This rate shall be 

determined by the FDIC.’’ 

In adopting this definition, the FDIC 

does not mean to prevent insured 

depository institutions from offering 

evidence that the prevailing rate in a 

particular market differs from the 

national rate. On the contrary, the FDIC 

will allow insured depository 

institutions to submit such evidence 

under new paragraph (e) (discussed 

below). The purpose of this paragraph 

(b)(2)(ii)(B) is simply to provide insured 

depository institutions and examiners 

with a clear ‘‘safe harbor’’ that can be 

used in determining permissible rates. 

This ‘‘safe harbor’’ (i.e., the rate 

published by the FDIC) will be based 

upon the rates offered by all insured 

depository institutions and branches. 

The FDIC intends to publish or post 

the national rate on its Web site. In 

publishing the national rate, the FDIC 

would publish separate rates for 

deposits of different amounts and 

maturities. In addition, the FDIC might 

publish separate rates for different types 

of deposit products. For example, the 

FDIC might publish a rate for NOW 

accounts and a separate rate for 

MMDAs. 

Some commenters suggested that the 

FDIC’s definition of the ‘‘national rate’’ 

(based on all insured depository 

institutions and branches) is too strict. 

These commenters argued that the FDIC, 

in calculating a national average, should 

use no institutions or branches except 

those offering the highest rates. 

For two reasons, the FDIC has not 

adopted this suggestion. First, the 

exclusion of the rates offered by some 

insured depository institutions and 

branches would result in a national rate 

that does not represent a true average 

national rate. On the contrary, the 

exclusion of low rates would produce a 

national rate that exceeds the true 

average. Such a rate would fail to serve 

as a meaningful restriction on insured 

depository institutions that are not well 

capitalized. Second, for cases in which 

the FDIC’s published national rate does 

not represent the actual prevailing rate 

in a particular market, the FDIC believes 

that insured depository institutions will 

be given a fair opportunity to establish 

the prevailing rate through new 

paragraph (e) (discussed below). 

Paragraph (b)(4). Prior to the adoption 

of the final rule, this paragraph defined 

‘‘market area.’’ Also, this paragraph set 

forth a procedure (interpolation) for 

determining average or effective yields 

on time deposits with odd maturities in 

a particular market area. Through the 

final rule, the substance of these 

provisions has not been changed but the 

provisions have been moved to new 

paragraph (e) (discussed below). 

By its own terms, paragraph (b)(4) 

applied solely to the interest rate 

restrictions applicable to (1) adequately 

capitalized insured depository 

institutions with waivers to accept 

brokered deposits (see paragraph 

(b)(2)(ii)(A)); and (2) undercapitalized 

insured depository institutions (see 

paragraph (b)(3)(ii)). It did not apply to 

the interest rate restrictions applicable 

to adequately capitalized insured 

depository institutions without waivers 

to accept brokered deposits (see 

paragraph (a)(5)(iii)). This limitation on 

paragraph (b)(4) was illogical. For this 

reason, through the final rule, the FDIC 

has removed paragraph (b)(4) and 

moved its provisions to new paragraph 

(e). The latter paragraph is discussed 

below. 

Paragraph (e). Under new paragraph 

(e), ‘‘a presumption shall exist that the 

effective yield in the relevant market is 

the national rate * * * unless the FDIC 

determines, based on available 

evidence, that the effective yield differs 

from the national rate.’’ Under this 

provision, an institution not choosing to 

avail itself of the national rate will be 

able to assert it is operating in a highrate environment and provide evidence 

of such to the appropriate FDIC regional 

office. In evaluating this evidence, the 

FDIC may use segmented market rate 

information (for example, evidence by 

State, county or MSA). Also, the FDIC 

may consider evidence as to the rates 

offered by credit unions but only if the 

insured depository institution competes 

directly with the credit unions in the 

particular market. Finally, the FDIC may 

consider evidence that the rates on 

certain deposit products differ from the 

rates on other products. For example, in 

a particular market, the rates on NOW 

accounts might differ from the rates on 

MMDAs. NOW accounts might be 

distinguished from MMDAs because the 

two types of accounts are subject to 

different legal requirements. See 12 

U.S.C. 1832 and 12 CFR 204.2(e)(2) 

(dealing with NOW accounts); 12 CFR 

204.2(d)(2) (dealing with MMDAs). 


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26520 Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 

The FDIC does not intend, however, 

to provide the insured depository 

institution (being less than well 

capitalized) with complete freedom in 

determining the prevailing rates on 

various deposit products. For example, 

the FDIC will not consider alleged 

distinctions between the MMDAs 

offered by one insured depository 

institution and the MMDAs offered by 

other insured depository institutions in 

the same market. Such an approach 

would enable an insured depository 

institution, by adding special features to 

its deposit products, to avoid 

comparison to the interest rates offered 

by other insured depository institutions 

located in the same area. This result 

would be inconsistent with the purpose 

of section 29 of the FDI Act, which is 

meant to restrict the interest rates that 

can be offered by insured depository 

institutions that are not well capitalized. 

Though the final rule revises the 

definition of the ‘‘national rate’’ and 

changes the methodology for 

determining prevailing rates in different 

markets, the final rule does not change 

the meaning of ‘‘significantly exceeds’’ 

or ‘‘significantly higher.’’ Under the 

amended regulations, an interest rate 

will continue to be ‘‘significantly 

higher’’ than a second rate if the first 

rate exceeds the second rate by more 

than 75 basis points. Most of the 

commenters did not object to this 

standard. 

The final rule will not become 

effective until six months after the date 

of publication in the Federal Register. 

The FDIC believes that a delayed 

effective date may be necessary to 

enable insured depository institutions to 

adjust to the new rules. 

Notwithstanding this delayed effective 

date, the FDIC intends to post national 

average rates on its Web site 

immediately. These rates may assist 

insured depository institutions in 

complying with the current rules as well 

as the new rules. Indeed, under either 

set of rules, the staff believes that the 

national average rates may represent the 

prevailing rates in many market areas. 

For this reason, the FDIC would not 

object to the immediate use of the 

posted rates by an insured depository 

institution that is not well capitalized 

though such use will not be mandatory. 

VI. Conclusion 

The purpose of the final rule is to 

provide examiners and insured 

depository institutions that are not well 

capitalized with a clear method for 

determining the highest permissible 

interest rates. Under the amended 

regulations, an insured depository 

institution will be able to ascertain the 

‘‘national rate’’ and the applicable rate 

cap by checking the FDIC’s Web site. In 

those cases in which the depository 

institution believes that the average rate 

in a relevant market exceeds the 

national rate, the depository institution 

will be permitted to offer evidence of 

such higher rate. Assuming the evidence 

confirms the higher rate, the institution 

will be permitted to offer rates up to the 

higher rate cap. 

Community Development and 

Regulatory Improvement Act 

The final rule does not impose any 

new reporting or disclosure 

requirements on insured depository 

institutions under the Riegle 

Community Development and 

Regulatory Improvement Act. 

Paperwork Reduction Act 

The final rule does not involve any 

new collections of information under 

the Paperwork Reduction Act (44 U.S.C. 

3501 et seq.). Consequently, no 

information collection has been 

submitted to the Office of Management 

and Budget for review. 

Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act (5 U.S.C. 

605(b)), the FDIC certifies that the final 

rule will not have a significant impact 

on a substantial number of small 

entities. This conclusion is based upon 

the fact that the final rule merely 

clarifies the interest rate restrictions set 

forth in the Federal Deposit Insurance 

Act. The final rule does not impose any 

new restrictions. Indeed, under the final 

rule, the burden of determining 

compliance with the interest rate 

restrictions will be eased because 

insured depository institutions that are 

not well capitalized (including any 

small entities) can rely on the ‘‘national 

rate’’ determined by the FDIC. In those 

cases in which the insured depository 

institution believes that the rates in its 

‘‘normal market area’’ exceed the 

‘‘national rate,’’ the final rule permits 

the institution to offer evidence of the 

‘‘normal market area’’ rates just as the 

former rules permitted institutions to 

offer evidence of ‘‘normal market area’’ 

rates. 

Impact on Families 

The FDIC has determined that the 

final rule will not affect family wellbeing within the meaning of section 654 

of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 

Plain Language 

Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, 113 

Stat. 1338, 1471 (Nov. 12, 1999), 

requires the Federal banking agencies to 

use plain language in all proposed and 

final rules published after January 1, 

2000. The FDIC requested comments on 

this issue but received none. 

List of Subjects in 12 CFR Part 337 

Banks, Banking, Reporting and 

recordkeeping requirements, Savings 

associations, Securities. 

■ For the reasons stated above, the 

Board of Directors of the Federal 

Deposit Insurance Corporation amends 

part 337 of title 12 of the Code of 

Federal Regulations as follows: 

PART 337—UNSAFE AND UNSOUND 

BANKING PRACTICES 

■ 1. The authority citation for part 337 

is revised to read as follows: 

Authority: 12 U.S.C. 375a(4), 375b, 1816, 

1818(a), 1818(b), 1819, 1820(d)(10), 1821(f), 

1828(j)(2), 1831, 1831f. 

■ 2. In § 337.6, paragraph (b)(2)(ii)(B) is 

revised, paragraph (b)(4) is removed, 

and paragraph (e) is added to read as 

follows: 

§ 337.6 Brokered deposits. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) * * * 

(B) The national rate paid on deposits 

of comparable size and maturity for 

deposits accepted outside the 

institution’s normal market area. For 

purposes of this paragraph (b)(2)(ii)(B), 

the national rate shall be a simple 

average of rates paid by all insured 

depository institutions and branches for 

which data are available. This rate shall 

be determined by the FDIC. 

* * * * * 

(e) A market is any readily defined 

geographical area in which the rates 

offered by any one insured depository 

institution soliciting deposits in that 

area may affect the rates offered by other 

insured depository institutions 

operating in the same area. For purposes 

of this § 337.6, a presumption shall exist 

that the prevailing rate or effective yield 

in the relevant market is the national 

rate as defined in paragraph (b)(2)(ii)(B) 

of this section unless the FDIC 

determines, based on available 

evidence, that the effective yield differs 

from the national rate. The effective 

yield on a deposit with an odd maturity 

shall be determined by interpolating 

between the yields offered by other 

insured depository institutions on 


dwashington3 on PROD1PC60 with RULES
Federal Register / Vol. 74, No. 105 / Wednesday, June 3, 2009 / Rules and Regulations 26521 

1 74 FR 12078 (March 23, 2009). 

2See Section 13(c)(4)(G) of the Federal Deposit 

Insurance Act (FDI Act), 12 U.S.C. 1823(c)(4)(G). 

The determination of systemic risk authorized the 

FDIC to take actions to avoid or mitigate serious 

adverse effects on economic conditions or financial 

stability, and the FDIC implemented the TLGP in 

response. 

Section 9(a) Tenth of the FDI Act, 12 U.S.C. 

1819(a)Tenth, provides additional authority for the 

establishment of the TLGP. 

3 74 FR 12078 (March 23, 2009). 

4Section 204(d) of the Helping Families Save 

Their Homes Act of 2009 (Pub. L. 111–22), enacted 

on May 20, 2009, authorized the FDIC to impose a 

special assessment on depository institution 

holding companies (with the concurrence of the 

Secretary of the Treasury) to recover losses to the 

Deposit Insurance Fund arising from action taken 

or assistance provided with respect to an insured 

depository institution following a system risk 

determination made pursuant to section 

13(c)(4)(G)(i) of the Federal Deposit Insurance Act. 

deposits of the next longer and shorter 

maturities offered in the market. 

Dated at Washington, DC, this 29th day of 

May, 2009. 

Authorized to be published in the Federal 

Register by Order of the Board of Directors 

of the Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E9–12938 Filed 6–2–09; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 370 

RIN 3064–AD37 

Amendment of the Temporary Liquidity 

Guarantee Program To Extend the 

Debt Guarantee Program and To 

Impose Surcharges on Assessments 

for Certain Debt Issued on or After 

April 1, 2009 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is issuing this final 

rule to amend the Temporary Liquidity 

Guarantee Program (TLGP) by providing 

a limited extension of the Debt 

Guarantee Program (DGP) for insured 

depository institutions (IDIs) 

participating in the DGP. The extended 

DGP also applies to other participating 

entities; however, other participating 

entities that did not issue FDICguaranteed debt before April 1, 2009 are 

required to submit an application to and 

obtain approval from the FDIC to 

participate in the extended DGP. The 

final rule imposes surcharges on certain 

debt issued on or after April 1, 2009. 

Any surcharge collected will be 

deposited into the Deposit Insurance 

Fund (DIF or Fund). The final rule also 

establishes an application process 

whereby entities participating in the 

extended DGP may apply to issue nonFDIC-guaranteed debt during the 

extension period. The final rule restates 

without change the interim rule 

published in the Federal Register by the 

FDIC on March 23, 2009.1

DATES: Effective June 3, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Mark L. Handzlik, Senior Attorney, 

Legal Division, (202) 898–3990 or 

mhandzlik@fdic.gov; Robert C. Fick, 

Counsel, Legal Division, (202) 898–8962 

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

Counsel, Legal Division, (202) 898–3573 

or aajohnson@fdic.gov; (for questions or 

comments related to applications) Lisa 

D Arquette, Associate Director, Division 

of Supervision and Consumer 

Protection, (202) 898–8633 or 

larquette@fdic.gov; Serena L. Owens, 

Associate Director, Supervision and 

Applications Branch, Division of 

Supervision and Consumer Protection, 

(202) 898–8996 or sowens@fdic.gov; Gail 

Patelunas, Deputy Director, Division of 

Resolutions and Receiverships, (202) 

898–6779 or gpatelunas@fdic.gov; 

Donna Saulnier, Manager, Assessment 

Policy Section, Division of Finance, 

(703) 562–6167 or dsaulnier@fdic.gov; 

or Munsell St. Clair, Chief, Bank and 

Regulatory Policy Section, Division of 

Insurance and Research, (202) 898–8967 

or mstclair@fdic.gov. 

SUPPLEMENTARY INFORMATION

I. Background 

The FDIC adopted the TLGP in 

October 2008 following a determination 

of systemic risk by the Secretary of the 

Treasury (after consultation with the 

President) that was supported by 

recommendations from the FDIC and 

the Board of Governors of the Federal 

Reserve System (Federal Reserve).2 The 

TLGP is part of a coordinated effort by 

the FDIC, the U.S. Department of the 

Treasury (Treasury), and the Federal 

Reserve to address unprecedented 

disruptions in credit markets and the 

resultant inability of financial 

institutions to fund themselves and 

make loans to creditworthy borrowers. 

The steps taken to stabilize the 

nation’s financial system by the 

Congress, the Treasury, and the federal 

banking agencies have improved 

conditions in the U.S. credit markets. 

While liquidity in the financial markets 

has not returned to pre-crisis levels, the 

TLGP debt guarantee program has 

benefited participating IDIs, bank and 

certain savings and loan holding 

companies, and certain of their affiliates 

by improving their options for shortterm and intermediate-term funding. 

On March 17, 2009, the FDIC’s Board 

of Directors (Board) adopted an interim 

rule that amended the TLGP by 

providing for a limited extension of the 

DGP, imposing surcharges on 

assessments for certain debt issued on 

or after April 1, 2009, and providing 

procedures to enable participating 

entities to issue certain non-guaranteed 

debt.3 This amendment was designed to 

reduce market disruption at the 

conclusion of the TLGP by facilitating 

the orderly phase-out of the DGP and 

encouraging participating entities to use 

the limited extension of the DGP to plan 

for a successful return to sources of nonFDIC-guaranteed funding markets. 

II. The Interim Rule 

On March 17, 2009, the FDIC’s Board 

adopted an interim rule with request for 

comment that amended the TLGP by 

providing for a limited extension of the 

DGP, surcharges for certain debt 

issuances, and procedures for 

participating entities to issue certain 

non-guaranteed debt. The interim rule 

was published in the Federal Register 

on March 23, 2009. As discussed in the 

section that follows, commenters 

generally favored the interim rule. 

Accordingly, the FDIC is implementing 

the interim rule as a final rule without 

change. 

III. Summary of Comments 

The FDIC received two comments on 

the interim rule from groups 

representing the banking industry. Both 

commenters supported the amendments 

to the DGP made in the interim rule. 

The commenters specifically 

endorsed the surcharges placed on 

certain FDIC-guaranteed debt and made 

applicable to all participating entities 

that issued FDIC-guaranteed debt after 

April 1, 2009. In the event of the 

diminution of the Deposit Insurance 

Fund (DIF) caused by TLGP losses, if 

any, the commenters noted that only 

IDIs would be required to fund a special 

assessment to replenish the DIF, though 

IDIs have not been the primary users of 

the program.4 Depositing surcharges 

directly into the DIF was viewed by 

these commenters as an appropriate 

recognition of the possible exposure that 

all IDIs, both participating and nonparticipating, could face in the event of 

losses caused by the TLGP. The 

commenters also welcomed the 

potential for a corresponding decrease 

in standard assessments for IDIs that 

could result from the deposit of the 

surcharges into the DIF. 


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