Source: https://www.federalregister.gov/documents/2008/10/29/E8-25739/temporary-liquidity-guarantee-program
Timestamp: 2018-04-24 15:28:20
Document Index: 420773222

Matched Legal Cases: ['§\u2009370', 'art 370', '§\u2009370', '§\u2009370', 'art 330', '§\u2009360', '§\u2009360', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009327', '§\u2009308', '§\u2009370', '§\u2009370', '§\u2009370', 'art 327', '§\u2009327', '§\u2009308', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370', '§\u2009370']

Federal Register :: Temporary Liquidity Guarantee Program
A Rule by the Federal Deposit Insurance Corporation on 10/29/2008
The Interim Rule becomes effective on October 23, 2008, except for paragraphs (h)(2) and (h)(3) of Sec. 370.5 which will become effective December 1, 2008. Coverage under the Temporary Liquidity Guarantee Program was established by the Board of Directors of the FDIC as of October 14, 2008. Comments on the rule must be received by November 13, 2008.
73 FR 64179
64179-64191 (13 pages)
E8-25739
D. Payment of Claims by the FDIC Pursuant to the Transaction Account Guarantee Program
E. Payment of Claims by the FDIC Pursuant to the Debt Guarantee Program: Insured Depository Institution Debt
F. Payment of Claims by the FDIC Pursuant to the Debt Guarantee Program: Holding Company Debt
B. Community Development and Regulatory Improvement Act
https://www.federalregister.gov/d/E8-25739 https://www.federalregister.gov/d/E8-25739
The FDIC is issuing this Interim Rule following a determination of systemic risk pursuant to section 13(c)(4)(G) of the Federal Deposit Insurance Act. As a result of this Start Printed Page 64180systemic risk determination, and in an effort to avoid or mitigate serious adverse effects on economic conditions or financial stability, the FDIC is establishing the Temporary Liquidity Guarantee Program. As further described in the Interim Rule, the Temporary Liquidity Guarantee Program has two primary components: the Debt Guarantee Program, by which the FDIC will guarantee the payment of certain newly-issued senior unsecured debt, and the Transaction Account Guarantee Program, by which the FDIC will guarantee certain noninterest-bearing transaction accounts.
The Interim Rule becomes effective on October 23, 2008, except for paragraphs (h)(2) and (h)(3) of § 370.5 which will become effective December 1, 2008. Coverage under the Temporary Liquidity Guarantee Program was established by the Board of Directors of the FDIC as of October 14, 2008. Comments on the rule must be received by November 13, 2008.
E-mail: Comments@FDIC.gov. Include RIN # 3064-AD37 on the subject line of the message.
Instructions: All comments received will be posted generally without change to http://www.fdic.gov/​regulations/​laws/​federal/​propose.html, including any personal information provided.
Diane Ellis, Associate Director, Financial Risk Management, Division of Insurance and Research, (202) 898-8978 or dellis@fdic.gov; William V. Farrell, Manager, Assessment Operations Section, Division of Finance, (703) 562-6168 or wfarrell@fdic.gov; Donna Saulnier. Manager, Assessment Policy Section, Division of Finance, (703) 562-6167 or dsaulnier@fdic.gov; Richard Bogue, Counsel, Legal Division, (202) 898-3726 or rbogue@fdic.gov; Robert Fick, Counsel, Legal Division, (202) 898-8962 or rfick@fdic.gov; A. Ann Johnson, Counsel, Legal Division, (202) 898-3573 or aajohnson@fdic.gov; Gail Patelunas, Deputy Director, Division of Resolutions and Receiverships, (202) 898-6779 or gpatelunas@fdic.gov; John Corston, Associate Director (Large Bank Supervision), Division of Supervision and Consumer Protection, (202) 898-6548 or jcorston@fdic.gov; Serena L. Owens, Associate Director, Supervision and Applications Branch, Division of Supervision and Consumer Protection, (202) 898-8996 or sowens@fdic.gov.
In light of the unprecedented disruption in the nation's credit markets, the Congress, the Department of the Treasury, and the Federal Deposit Insurance Corporation (FDIC), along with other federal banking regulators, have taken steps to preserve the nation's confidence in its financial institutions and in the American and global economy. Congress recently passed the Emergency Economic Stabilization Act of 2008; [1] the Department of the Treasury provided for capital injections into banks; the Board of Governors of the Federal Reserve System made available commercial paper facilities; Congress temporarily raised deposit insurance limits and the FDIC issued interim regulations accordingly.[2] Nonetheless, many insured depository institutions have responded to the market turmoil by retaining cash and severely tightening their lending standards. Disruptions in money markets have significantly impaired the ability of creditworthy companies to issue commercial paper, particularly at longer maturities. Interest rates on commercial paper continue to be extremely high. Issuances of residential and commercial mortgage-backed securities in the first half of 2008 have fallen by more than 90 percent from levels one year ago, and issuances of asset-backed securities have fallen 68 percent over the same period. As a result of this market volatility, economic concern has intensified, and short-term funding markets have slowed significantly.
Section 141 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) [3] added section 13(c)(4)(G) to the Federal Deposit Insurance Act (FDI Act). 12 U.S.C. 1823(c)(4)(G). That section provides a blueprint that authorizes action by the Federal government in circumstances involving such systemic risk. This provision permits the FDIC to take action or provide assistance as necessary to avoid or mitigate the effects of the perceived risks, following a recommendation of the existence of systemic risk by the Board, with the written concurrence of the Board of Governors of the Federal Reserve System (FRB) and an eventual determination of systemic risk by the Secretary of the Treasury (after consultation with the President).
In making its written recommendation regarding systemic risk and providing for the TLG Program, the Board reviewed a number of factors concerning current economic conditions and the nation's troubled financial Start Printed Page 64181stability. Among the economic factors that the Board considered in making its determination were unduly tightened lending standards and terms, decreased borrowing, rapid outflows of deposits, reduced issuances of commercial paper and asset- and mortgage-backed securities, decreased and costly alternative funding mechanisms, and a lack of confidence in financial institutions based on embedded and uncertain balance sheet losses.
The TLG Program described in the Interim Rule will address the systemic risk recognized by the FDIC and the other agencies. The TLG Program is designed to preserve confidence and encourage liquidity in the banking system in order to ease lending to creditworthy businesses and consumers. The TLG Program is a voluntary and time-limited program that will be funded through special fees without reliance on taxpayer funding. Subject to the conditions set forth in the regulation, the program consists of two basic components: A temporary guarantee of newly-issued senior unsecured debt (the Debt Guarantee Program) and a temporary unlimited guarantee of funds in noninterest-bearing transaction accounts at FDIC-insured institutions (the Transaction Account Guarantee Program). At the expiration of the TLG Program, if funds remain after the FDIC has satisfied all eligible claims, the surplus funds will remain in the Deposit Insurance Fund and will be included in the future calculation of the reserve ratio.
The TLG Program became effective on October 14, 2008. For the first 30 days of the program, all eligible entities are covered under the TLG Program, and the guarantees provided by the TLG Program will be offered at no cost to eligible entities. On or before November 12, 2008, however, eligible entities must inform the FDIC whether they will opt-out of the TLG Program, and they may notify the FDIC on or before that date of their intent to participate in the program. If an eligible entity opts out of the TLG Program, the FDIC's guarantee of its newly-issued senior unsecured debt and noninterest-bearing transaction deposit accounts will expire at the earlier of 11:59 pm EST on November, 12, 2008, or at the time of the FDIC's receipt of the eligible entity's opt-out decision, regardless of the term of the instrument. An eligible entity that chooses not to opt out of either or both programs will become a participating entity in the program.
If an eligible entity remains in the Debt Guarantee Program of the TLG Program, it must clearly disclose to interested lenders and creditors, in writing and in a commercially reasonable manner, what debt it is offering and whether the debt is guaranteed under this program. Debt guaranteed by the FDIC under the Debt Guarantee Program, must be clearly identified as “guaranteed by the FDIC” and properly disclosed to creditors.
If an eligible entity remains in the Transaction Account Guarantee Program, the participating entity must prominently disclose in writing at its main office and at all branches at which deposits are taken its decision to participate in or opt-out of the Transaction Account Guarantee Program. These disclosures must be provided in simple, readily understandable text indicating the institution's participation or nonparticipation in the Transaction Account Guarantee Program. The disclosure must clearly state whether or not covered noninterest-bearing transaction accounts are fully insured by the FDIC. If the institution uses sweep arrangements or takes other actions that result in funds in a noninterest-bearing transaction account being transferred to or reclassified as an interest-bearing account or a non-transaction account, the institution also must disclose those actions to the affected customers and clearly advise them in writing that such actions will void the transaction account guarantee.
The Debt Guarantee Program temporarily will guarantee all newly-issued senior unsecured debt up to prescribed limits that is issued by participating entities on or after October 14, 2008, through and including June 30, 2009. As a result, the unpaid balance Start Printed Page 64182of this newly-issued senior unsecured debt will be paid by the FDIC upon the failure of the issuing institution or the filing of a bankruptcy petition with respect to the issuing holding company. As more fully explained in the interim rule, senior unsecured debt includes, without limitation, federal funds purchased, promissory notes, commercial paper, unsubordinated unsecured notes, certificates of deposit standing to the credit of a bank, bank deposits in an international banking facility (IBF) of an insured depository institution, and Eurodollar deposits standing to the credit of a bank. Senior unsecured debt may be denominated in foreign currency. The term “bank” means an insured depository institution or a depository institution regulated by a foreign bank supervisory agency. To be eligible for the Debt Guarantee Program, senior unsecured debt must be noncontingent. It must be evidenced by a written agreement, contain a specified and fixed principal amount to be paid on a date certain, and not be subordinated to another liability.
Eligible debt must be issued on or before June 30, 2009. For eligible debt issued by that date, the FDIC will provide the guarantee coverage for such debt until the earlier of the maturity date of the debt or until June 30, 2012. This final effective date for coverage is absolute; coverage will expire at 11:59 p.m. EST on June 30, 2012, regardless of whether the liability has matured at that time. If an eligible entity chooses to opt out of the Debt Guarantee Program, the FDIC's debt guarantee will terminate on the earlier of 11:59 p.m. EST p.m. on November 12, 2008, or at the time of the eligible entity's opt-out decision. In order for the newly-issued senior unsecured debt to be guaranteed, the debt instrument must be clearly identified in writing in a commercially reasonable manner on the face of any documentation as “guaranteed by the FDIC,” and this fact must be properly disclosed to the creditors. The Debt Guarantee Program will not apply to debt that is contractually subordinated to other debt of the entity.
The FDIC will temporarily guarantee newly issued unsubordinated debt in a total amount up to 125 percent of the par or face value of senior unsecured debt outstanding, excluding debt extended to affiliates, as of September 30, 2008, that is scheduled to mature on or before June 30, 2009. This maximum guaranteed amount will be calculated for each individual participating entity within a holding company structure. Under procedures to be detailed shortly, the FDIC will require that each participating entity calculate its outstanding senior unsecured debt as of September 30, 2008, and provide that information—even if the amount of the senior unsecured debt is zero—to the FDIC.
A participating entity may not represent that its debt is guaranteed by the FDIC if it does not comply with the rules governing the Debt Guarantee Program. If the issuing entity has opted out of the Debt Guarantee Program, it may no longer represent that its newly-issued debt is guaranteed by the FDIC. Similarly, once an entity has reached its 125 percent limit, it may not represent that any additional debt is guaranteed by the FDIC, and must specifically disclose that such debt is not guaranteed.
Under the Transaction Account Guarantee Program, the FDIC has provided a temporary full guarantee for funds held at FDIC-insured depository institutions in noninterest-bearing transaction accounts above the existing deposit insurance limit. The FDIC anticipates that these accounts will include payment-processing accounts, such as payroll accounts, frequently used by an insured depository institution's business customers, and further anticipates that the Transaction Account Guarantee Program will stabilize these and other similar accounts. This coverage became effective on October 14, 2008, and will continue through December 31, 2009 (assuming that the insured depository institution does not opt out of this component of the TLG Program).
Under the Interim Rule, a “noninterest-bearing transaction account” is defined as a transaction account with respect to which interest is neither accrued nor paid and on which the insured depository institution does not reserve the right to require advance notice of an intended withdrawal. This definition encompasses traditional demand deposit checking accounts that allow for an unlimited number of deposits and withdrawals at any time. It also encompasses official checks issued by an insured depository institution. This definition, however, does not encompass negotiable order of Start Printed Page 64183withdrawal (NOW) accounts or money market deposit accounts (MMDAs).
Depository institutions sometimes waive fees or provide fee-reducing credits for customers with checking accounts. Such account features do not prevent an account from qualifying under the Transaction Account Guarantee Program as a noninterest-bearing transaction account, as long as the account otherwise satisfies the definition.
The Interim Rule includes a provision relating to sweep accounts. Under this provision, the FDIC will treat funds in sweep accounts in accordance with the usual rules and procedures for determining sweep balances at a failed depository institution. Under these procedures, funds may be swept or transferred from a noninterest-bearing transaction account to another type of deposit or nondeposit account. The FDIC will treat the funds as being in the account to which the funds were transferred. An exception will exist, however, for funds swept from a noninterest-bearing transaction account to a noninterest-bearing savings account. Such swept funds will be treated as being in a noninterest-bearing transaction account. As a result of this treatment funds swept into a noninterest-bearing savings account will be guaranteed by the Transaction Account Guarantee Program.
Beginning on November 13, 2008, any eligible entity that has not chosen to opt out of the debt guarantee program will be assessed fees for continued coverage. All eligible debt issued from October 14, 2008 (and still outstanding on November 13, 2008), through June 30, 2009, will be charged an annualized fee equal to 75 basis points multiplied by the amount of debt issued, and calculated for the maturity period of that debt or June 30, 2012, whichever is earlier. The fee charged will take into account that no fees will be charged during the first 30 days of the program. If any participating entity issues eligible debt guaranteed by the Debt Guarantee Program, the participating entity's assessment will be based on the total amount of debt issued and the maturity date at issuance. If the guaranteed debt is ultimately retired before its scheduled maturity, fees will not be refunded.
If an eligible entity does not opt out, all newly-issued senior unsecured debt up to the maximum amount will become guaranteed as and when issued. Participating entities are prohibited from issuing guaranteed debt in excess of the maximum amount for the institution. Participating entities are also prohibited from issuing non-guaranteed debt until the maximum allowable amount of guaranteed debt has been issued. A participating entity can then issue non-guaranteed debt in any amount and for any maturity. If a participating entity nonetheless issues debt identified as “guaranteed by the FDIC” in excess of the limit established by the FDIC, it will have its assessment rate for guaranteed debt increased to 150 basis points on all outstanding guaranteed debt, and the participating entity and its institution-affiliated parties will be subject to enforcement actions including the assessment of civil money penalties, as appropriate.
Participating entities can take part in the guaranteed debt program as outlined above without any further action on their part. If a participating entity wants to have the option of issuing certain non-guaranteed senior unsecured debt before issuing the maximum amount of guaranteed debt, it must elect to do so through FDIC connect on or before 11:59 p.m. EST on November 12, 2008. Election of this option would require a participating entity to pay a nonrefundable fee in exchange for which it will be able to issue, at any time and without regard to the cap, non-guaranteed senior unsecured debt with a maturity date after June 30, 2012. The fee would be applied to the par or face value of senior unsecured debt, excluding debt extended to affiliates, outstanding as of September 30, 2008, that is scheduled to mature on or before June 30, 2009. The fee will equal the 75 basis point annual rate charged for six months (or 37.5 basis points). The six-month period is based upon estimates of the weighted average remaining maturity of existing debt that matures on or before June 30, 2009. It recognizes that much of the outstanding debt as of September 30, 2008, which is not guaranteed, will be rolled over into guaranteed debt only when the outstanding debt matures. The nonrefundable fee will be collected in six equal monthly installments. An entity electing the nonrefundable fee option will also be billed as it issues guaranteed debt under the Debt Guarantee Program, and the amounts paid as a nonrefundable fee will be applied to offset these bills until the nonrefundable fee is exhausted. Thereafter, the institution will have to pay additional assessments on guaranteed debt as it issues the debt.
The Interim Rule requires the FDIC to impose an emergency systemic risk assessment on insured depository institutions if the fees and assessments Start Printed Page 64184collected under the TLG Program are insufficient to cover any loss incurred as a result of the TLG Program. In addition, if at the conclusion of these programs there are any excess funds collected from the fees associated with the TLG Program, the funds will remain as part of the Deposit Insurance Fund.
The Interim Rule sets forth the process for payment and recovery of FDIC guarantees of “noninterest-bearing transaction accounts,” as that term is defined in the Interim Rule. Under the rule, the FDIC's obligation to make payment, in its capacity as guarantor of deposits held in noninterest-bearing transaction accounts, arises upon the failure of a participating federally insured depository institution. The payment and claims process for satisfying claims under the Transaction Account Guarantee Program generally will follow the procedures prescribed for deposit insurance claims pursuant to section 11(f) of the FDI Act (12 U.S.C. 1821(f)), and the FDIC will be subrogated to the rights of depositors against the institution pursuant to section 11(g) of the FDI Act (12 U.S.C. 1821(g)).
As it does in satisfying claims for insured deposits, the FDIC will rely on the books and records of the insured depository institution to establish ownership and coverage for payment of deposits subject to the Transaction Account Guarantee Program. In making its determination about what amounts are guaranteed, the FDIC will be entitled to the same discretion it has under section 11(f)(2) of the FDI Act (12 U.S.C. 1821(f)(2)), in requiring the depositor to file a proof of claim (POC). The FDIC does not anticipate that a POC will be required during the normal course of guarantee determination and payment pursuant to the Transaction Account Guarantee Program, but situations requiring a POC to be filed may arise. The FDIC's determination of the guaranteed amount will be final and will be considered a final administrative determination subject to judicial review in accordance with Chapter 7 of Title 5, similar to that provided for in sections 11(f)(4) and (5) of the FDI Act (12 U.S.C. 1821(f)(4) and (5)), regarding judicial review of insured deposit claims. A noninterest-bearing transaction account depositor may seek judicial review of the FDIC's determination on payment of the guaranteed amount in the United States district court for the federal judicial district where the principal place of business of the depository institution is located within 60 days of the date on which the FDIC's final determination is issued.
Pursuant to the Debt Guarantee Program the FDIC will guarantee senior unsecured debt, as that term is defined, for institutions that have chosen to participate in the Debt Guarantee Program. The FDIC's obligation to make payment, in its capacity as guarantor of senior unsecured debt issued by participating insured depository institutions, arises upon the failure of a participating insured depository institution. The FDIC will use the well-established receivership claims process to process guarantee requests. The FDIC will not consider any evidence provided by the debt holder that is not presented to the FDIC within 90 days of the publication of the claims notice by the receiver for the failed institution. The FDIC anticipates that many debt holders, particularly sellers of federal funds, will be paid on the next business day immediately following the failure of an insured depository institution. In all instances, the FDIC commits to pay claims related to its debt guarantee expeditiously and will strive to make payment on the next business day after the claim is determined to be valid. .
With respect to senior unsecured debt of holding companies eligible for payment based on the Debt Guarantee Program, when the holding company files for bankruptcy protection, the FDIC will make payment to the debt holder for the principal amount of the debt and interest to the date of the filing of a bankruptcy petition by the issuing institution. As with claims for debt issued by insured depository institutions, the FDIC will strive to expedite the claims payment process, but the FDIC generally will not make payment on the guaranteed amount for a debt asserted against a bankruptcy estate, unless and until the claim for the unsecured senior debt has been determined to be an allowed claim against the bankruptcy estate and such claim in not subject to reconsideration under 11 U.S.C. 502(j). If the FDIC does not pay eligible guaranteed debt within one business day of the filing of a bankruptcy petition with respect to a participating bank or savings and loan holding company, the FDIC will pay interest until payment is made on the eligible debt at the 90-day T-bill rate in effect when the bankruptcy petition was filed.
To properly establish ownership and coverage under this aspect of the TLG Program, the FDIC normally will require the holder to file a POC within 90 days of the published bar date of the bankruptcy proceeding. The FDIC may also consider the books and records of the holding company and its affiliates to determine the holder of the unsecured senior debt and the amount eligible for payment under the Debt Guarantee Program. The holder of the unsecured Start Printed Page 64185senior debt of a holding company will also be required to timely file a bankruptcy POC against the holding company's bankruptcy estate and to present evidence of such timely filed bankruptcy POC in order to be eligible for a debt guarantee payment under the TLG Program.
The FDIC invites comments on all aspects of the Temporary Liquidity Guarantee Program as described in the Interim Rule and suggestions for its implementation.
Negotiable order of withdrawal (NOW) accounts are excepted from the definition of definition of “noninterest-bearing transaction account” in the Interim Rule. Should the definition be modified and the FDIC's transaction guarantee be extended to include coverage for NOW accounts held by sole proprietorships, non-profit religious, philanthropic, charitable organizations and the like, or governmental units for the deposit of public funds if the interest paid is de minimis?
The Interim Rule provides for a number of disclosures relative to the FDIC's Debt Guarantee Program. Does the certainty of payment provided by the required disclosures to lenders and creditors outweigh the burden on participating entities in providing the disclosures? Are there alternative, less burdensome ways to achieve the same result and foster creditor confidence in the Debt Guarantee Program?
Pursuant to section 553(b)(B) of the Administrative Procedure Act (APA), notice and comment are not required prior to the issuance of a final rule if an agency for good cause finds that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. In addition, section 553(d)(3) of the APA provides that an agency, for good cause found and published with the rule, does not have to comply with the requirements that a final rule be published not less than 30 days before its effective date. The FDIC finds good cause to adopt this Interim Rule without prior notice and comment and without the 30-day delayed effective date.
The FDIC's finding is based upon the severe financial conditions that threaten the stability of the nation's economy generally and the banking system in particular, the serious adverse effects on economic conditions and financial stability that would result from any delay of the effective date of the Interim Rule, and the fact that the Temporary Liquidity Guarantee Program became effective on October 14, 2008. Nevertheless, the FDIC desires to have the benefit of public comment before adopting a permanent final rule and thus invites interested parties to submit comments during a 15-day comment period. The 15-day comment period will allow the FDIC to receive comments in a timely manner and provide the industry with a final rule as quickly as possible, given the Interim Rule's October 23, 2008, effective date. In adopting the final regulation, the FDIC will revise the Interim Rule, if appropriate, in light of the comments received on the Interim Rule.
The Riegle Community Development and Regulatory Improvement Act requires that any new rule prescribed by a Federal banking agency that imposes additional reporting, disclosures, or other new requirements on insured depository institutions take effect on the first day of a calendar quarter unless the agency determines, for good cause published with the rule, that the rule should become effective before such time.[4] Based upon the severe financial conditions that threaten the stability of the nation's economy generally and the banking system in particular, the serious adverse effects on economic conditions and financial stability that would result from any delay of the effective date of the Interim Rule, and the fact that the Temporary Liquidity Guarantee Program has been in effect since October 14, 2008, the FDIC invokes the good cause exception to make the Interim Rule effective on October 23, 2008.
The Office of Management and Budget has determined that the Interim Rule is not a “major rule” within the meaning of the relevant sections of the Small Business Regulatory Enforcement Act of 1996 (SBREFA), 5 U.S.C. 801 et seq. As required by SBREFA, the FDIC will file the appropriate reports with Congress and the General Accounting Office so that the rule may be reviewed.
This interim rule contains information collection requirements subject to the Paperwork Reduction Act (PRA). The FDIC has submitted a request for review and approval of a collection of information under the emergency processing procedures in Office of Management and Budget (OMB) regulation, 5 CFR 1320.13. The FDIC is requesting approval by October 23, 2008, of reporting requirements on amounts of senior unsecured debt, decisions to opt in or opt out of the TLG Program or either of its components, issuance of guaranteed debt and debt holder guarantee claims against a receivership; disclosure requirements regarding participation in the debt guarantee component, participation in the transaction account guarantee component, and termination of participation in the TLG Program.
These reporting and disclosure requirements are needed immediately to facilitate the FDIC's administration of Start Printed Page 64186the Temporary Liquidity Guarantee Program and to ensure notice to the public about which entities are participating in the program. The use of emergency clearance procedures is necessary because of the sudden, unanticipated systemic risks posed to the nation's financial system by recent economic conditions and because public harm is reasonably likely to result if liquidity is not restored to financial markets. The burden for reporting requirements on the amount of uninsured deposits and reporting and recordkeeping requirements will be accounted for, as appropriate, by an amendment to Consolidated Reports of Condition and Income (OMB No. 3064-0052) and Thrift Financial Reports or by adjustments to the information collection for this interim rule.
Notice of termination of participation—once.
Subsequent reports on amount of senior unsecured debt hour—1.
Bankruptcy POC/evidence of POC—1 hour.
Initial report of amount of senior unsecured debt—14,400 hours.
Subsequent reports on amount of senior unsecured debt—57,600 hours.
Opt-out/opt-in notice—800 hours.
Notice of debt guarantee—15,300 hours.
Notice of transaction account guarantee—16,000 hours.
Notice of issuance of debt guarantee—2,086,900 hours.
Notice of termination of participation—900 hours.
Debt-holder guarantee claims—6,900 hours.
Bankruptcy POC/evidence of POC—300 hours.
Total annual burden—2,199,100 hours.
The FDIC plans to follow this emergency request with a request for standard 3-year approval. Although this program, including most of the burden on participating entities, will be largely ended by the end of 2009, a few elements will be ongoing until 2012. The request will be processed under OMB's normal clearance procedures in accordance with the provisions of OMB regulation 5 CFR 1320.10. To facilitate processing of the emergency and normal clearance submissions to OMB, the FDIC invites the general public to comment on: (1) Whether this collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (2) the accuracy of the estimates of the burden of the information collection, including the validity of the methodologies and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and (5) estimates of capital or start up costs, and costs of operation, maintenance and purchase of services to provide the information.
For the reasons stated above, the Board of Directors of the Federal Deposit Insurance Corporation amends title 12 of the Code of Federal Regulations by adding new Part 370 as follows:
Debt Guarantee Program.
Assessments for the Transaction Account Guarantee Program.
Systemic Risk Emergency Special Assessment to recover loss.
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818, 1819(a)(Tenth); 1820(f), 1821(a); 1821(c); 1821(d); 1823(c)(4).
(a) Eligible entity. The term “eligible entity” means any of the following:
(b) Insured Depository Institution. The term “insured depository institution” means an insured depository institution as defined in section 3(c)(2) of the FDI Start Printed Page 64187Act, 12 U.S.C. 1813(c)(2), except that it does not include an “insured branch” of a foreign bank as defined in section 3(s)(3) of the FDI Act, 12 U.S.C. 1813(s)(3), for purposes of the debt guarantee program.
(c) U.S. Bank Holding Company. The term “U.S. Bank Holding Company” means a “bank holding company” as defined in section 2(a) of the Bank Holding Company Act of 1956 (“BHCA”), 12 U.S.C. 1841(a), that is organized under the laws of any State or the District of Columbia.
(d) U.S. Savings and Loan Holding Company. The term “U.S. Savings and Loan Holding Company” means a “savings and loan holding company” as defined in section 10(a)(1)(D) of the Home Owners' Loan Act of 1933 (“HOLA”), 12 U.S.C. 1467a(a)(1)(D), that is organized under the laws of any State or the District of Columbia and either:
(e) Senior unsecured debt. The term “senior unsecured debt” means unsecured borrowing that: Is evidenced by a written agreement; has a specified and fixed principal amount to be paid in full on demand or on a date certain; is noncontingent; and is not, by its terms, subordinated to any other liability.
(1) Senior unsecured debt includes, for example, federal funds purchased, promissory notes, commercial paper, unsubordinated unsecured notes, certificates of deposit standing to the credit of a bank, bank deposits in an international banking facility (IBF) of an insured depository institution, and Eurodollar deposits standing to the credit of a bank. For purposes of this paragraph, the term “bank” means an insured depository institution or a depository institution regulated by a foreign bank supervisory agency.
(3) Senior unsecured debt excludes, for example, obligations from guarantees or other contingent liabilities, derivatives, derivative-linked products, debt paired with any other security, convertible debt, capital notes, the unsecured portion of otherwise secured debt, negotiable certificates of deposit, and deposits in foreign currency and Eurodollar deposits that represent funds swept from individual, partnership or corporate accounts held at insured depository institutions. Also excluded are loans to affiliates, including parents and subsidiaries, and institution affiliated parties.
(f) Newly issued senior unsecured debt. The term “newly issued senior unsecured debt” means senior unsecured debt issued by a participating entity on or after October 14, 2008, and on or before:
(g) Participating entity. The term “participating entity” means:
(h) Noninterest-bearing transaction account. (1) The term “noninterest-bearing transaction account” means a transaction account as defined in 12 CFR 204.2 that is
(i) FDIC-Guaranteed debt. The term “FDIC-guaranteed debt” means senior unsecured debt issued by a participating entity that meets the requirements of this part for debt that is guaranteed under the debt guarantee program, and is clearly identified as “guaranteed by the FDIC.”
(j) Debt guarantee program. The term “debt guarantee program” refers to the protections afforded newly issued senior unsecured debt as described in this part.
(k) Transaction account guarantee program. The term “transaction account guarantee program” refers to the protections afforded funds in noninterest-bearing transaction accounts as described in this part.
(l) Temporary liquidity guarantee program. The term “temporary liquidity guarantee program” includes both the debt guarantee program and the transaction account guarantee program.
(b) Absent action by the FDIC, the maximum amount of debt to be issued under the guarantee is 125 percent of the par value of the participating entity's senior unsecured debt, excluding debt extended to affiliates or institution affiliated parties, outstanding as of September 30, 2008 that was scheduled to mature on or before June 30, 2009. Under certain circumstances and subject to certain conditions, including disclosure requirements, a participating entity may issue senior unsecured debt that is not subject to the guarantee. If the participating entity issues debt identified as “guaranteed by the FDIC” in excess of its maximum amount, it will become subject to assessment increases as provided in § 370.6(e). The FDIC may make exceptions to this guarantee limit, for example, allow a participating entity to exceed the 125 percent guarantee limit, restrict a participating entity to less than 125 percent, and/or impose other limits or requirements. If a participating entity had no senior unsecured debt on September 30, 2008, the entity may seek to have some amount of debt covered by the debt guarantee program. The FDIC, after consultation with the appropriate Federal banking agency, will decide whether, and to what extent, such requests will be granted on a case-by-case basis.
(1) Each participating entity shall calculate the amount of its senior unsecured debt outstanding as of September 30, 2008 excluding debt extended to affiliates, that was scheduled to mature on or before June 30, 2009, using the definitions described in this regulation. Start Printed Page 64188
(2) Each participating entity will report the calculated amount to the FDIC, even if such amount is zero, in an approved format via FDIC connect no later than November 12, 2008.
(1) The proceeds are used to prepay debt that is not FDIC-guaranteed;
(f) Long term non-guaranteed debt option. On or before 11:59 p.m., Eastern Standard Time, November 12, 2008 a participating entity may also notify the FDIC that it has elected to issue non-guaranteed debt with maturities beyond June 30, 2012, at any time, in any amount, and without regard to the guarantee limit. By making this election the participating entity agrees to pay to the FDIC the nonrefundable fee as provided in § 370.6(f).
(a) In addition to the coverage afforded to depositors under 12 CFR Part 330, a depositor's funds in a noninterest-bearing transaction account maintained at a participating entity that is an insured depository institution are insured in full (irrespective of the standard maximum deposit insurance amount defined in 12 CFR 330.1(n)) from October 14, 2008, through the earlier of:
(b) In determining whether funds are in a noninterest-bearing transaction account for purposes of this section, the FDIC will apply its normal rules and procedures under § 360.8 (12 CFR 360.8) for determining account balances at a failed insured depository institution. Under these procedures, funds may be swept or transferred from a noninterest-bearing transaction account to another type of deposit or nondeposit account. Unless the funds are in a noninterest-bearing transaction account after the completion of a sweep under § 360.8, the funds will not be guaranteed under the transaction account guarantee program.
(a) Initial period. All eligible entities are covered under the temporary liquidity guarantee program for the period from October 14, 2008 through November 12, 2008, unless they opt out on or before November 12, 2008 in which case the coverage ends on the date of the opt-out.
(d) An eligible entity may elect to opt out of either the guaranteed debt program or the transaction account guarantee program or both. The choice to opt out, once made, is irrevocable. Similarly, the choice to affirmatively opt in, as provided in § 370.5(c), once made, is irrevocable.
(f) Eligible entities that do not opt out on or before November 12, 2008 will not be able to select which newly issued senior unsecured debt is guaranteed debt; all senior unsecured debt issued by a participating entity up to the guarantee limit will become guaranteed debt as and when issued, subject to § 370.3(f).
(g) Procedures for Opting Out. The FDIC will provide procedures for opting out and for making an affirmative decision to opt in using FDIC's secure e-business Web site, FDIC connect. Entities that are not insured depository institutions will select and solely use an affiliated insured depository institution to submit their opt-out election and to make any assessment payments required under the temporary liquidity guarantee program.
(1) The FDIC will publish on its Web site: Start Printed Page 64189
(3) Each eligible entity that is an insured depository institution must post a prominent notice in the lobby of its main office and each branch clearly indicating whether the entity is participating in the transaction account guarantee program, i.e., whether it has opted out. If the entity is participating in the transaction account guarantee program, the notice must also state that funds held in noninterest-bearing transactions accounts at the entity are insured in full by the FDIC.
(j) Duration—(1) Coverage for guaranteed debt. The ability of participating entities to issue guaranteed debt under the debt guarantee program expires on June 30, 2009. For guaranteed debt issued on or before June 30, 2009, coverage would only be provided until the earlier of the maturity of the liability or June 30, 2012.
(a) Waiver of assessment for initial period. No eligible entity shall pay any assessment associated with the debt guarantee program for the period from October 14, 2008, through November 12, 2008.
(1) Any eligible entity that does not opt out of the Debt Guarantee Program by November 12, 2008, as provided in § 370.5, and issued any guaranteed debt during the period from October 14, 2008 through November 12, 2008 that was still outstanding on November 12, 2008, shall notify the FDIC of that issuance via the FDIC's e-business Web site FDIC connect by December 1, 2008, and the eligible entity's Chief Financial Officer or equivalent shall certify that the issuances outstanding at each point of time did not exceed the guaranteed amount limit as set forth in § 370.3.
(2) Any eligible entity that does not opt out of the program and that issues guaranteed debt after November 12, 2008, shall notify the FDIC of that issuance via the FDIC's e-business Web site FDIC connect within the time period specified by the FDIC. The eligible entity's Chief Financial Officer or equivalent shall certify that the issuance of guaranteed debt does not exceed the guarantee limit as set forth in § 370.3.
(3) The eligible entity shall be required to provide certification that the issuance does not exceed the guaranteed amount limit as set forth in § 370.3.
(d) Amount of assessments for debt within the guarantee limit—(1) Calculation of assessment. The amount of assessment will be determined by multiplying the amount of eligible guaranteed debt times the term of the debt times an annualized 75 basis points. If the debt matures after June 30, 2012, June 30, 2012 will be used as the maturity date.
(e) Increased assessments for debt exceeding the Guarantee Limit. Any participating entity that issues guaranteed debt represented as being “guaranteed by the FDIC” exceeding its guaranteed amount limit as set forth in § 370.3(b) shall have its assessment rate for all outstanding guaranteed debt increased to 150 basis points for purposes of the calculations in paragraphs (d)(1) of this section. In addition, any entity making such a misrepresentation may also be subject to enforcement action including civil money penalties under 12 U.S.C. 1818.
(f) Long term non-guaranteed debt fee. Each participating entity that elects to issue long term non-guaranteed debt pursuant to § 370.3(f) must pay the FDIC a nonrefundable fee equal to 37.5 basis points times the amount of the entity's senior unsecured debt (other than debt owed to affiliates) with a maturity date on or before June 30, 2009, outstanding as of September 30, 2008.
(g) Collection of assessments—ACH Debit. Each participating entity shall take all actions necessary to allow the Corporation to debit assessments from the participating entity's designated Start Printed Page 64190deposit account as provided for in § 327.3(a)(2). Each participating entity shall ensure that funds in an amount at least equal to the amount of the assessment are available in the designated account for direct debit by the Corporation on the first business day after posting of the invoice on FDICconnect. Failure to take any such action or to provide such funding of the account shall be deemed to constitute nonpayment of the assessment, and such failure by any participating entity will be subject to the penalties for failure to timely pay assessments as provided for at § 308.132(c)(3)(v).
(a) Waiver of assessment for initial period. No eligible entity shall pay any assessment associated with the transaction account guarantee program for the period from October 14, 2008, through November 12, 2008.
(b) Initiation of assessment. For the period beginning on November 13, 2008, and continuing through December 31, 2009, any eligible entity that has not notified the FDIC that it has opted out of the transaction account guarantee program as provided in § 370.5, will be subject to an assessment that will be reflected on its quarterly certified statement invoices.
(c) Amount of assessment. Any eligible entity that does not opt out of the transaction account guarantee program shall pay quarterly an annualized 10 basis point assessment on any deposit amounts exceeding the existing deposit insurance limit of $250,000, as reported on its quarterly Reports of Condition and Income or Thrift Financial Report in any noninterest-bearing transaction accounts (as defined in § 370.2(h), including any such amounts swept from a noninterest bearing transaction account into an noninterest bearing savings deposit account as provided in § 370.4(c). This assessment shall be in addition to an institution's risk-based assessment imposed under Part 327.
(d) Collection of assessment. Assessments for the transaction account guarantee program shall be collected along with a participating entity's quarterly deposit insurance payment as provided in § 327.3, and subject to penalties for failure to timely pay assessments as referenced in § 308.132(c)(3)(v).
§ 370.8
To the extent that the assessments provided under § 370.6 or § 370.7 are insufficient to cover any loss or expenses arising from the temporary liquidity guarantee program, the Corporation shall impose an emergency special assessment on insured depository institutions as provided under 12 U.S.C. 1823(c)(4)(G)(ii) of the FDI Act.
§ 370.9
§ 370.10
(a) Oversight. Participating entities availing themselves of the temporary liquidity guarantee program are subject to the FDIC's oversight regarding compliance with the terms of the temporary liquidity guarantee program.
§ 370.11
(a) Termination of Participation. If the FDIC, in its discretion, after consultation with the participating entity's appropriate Federal banking agency, determines that the participating entity should no longer be permitted to continue to participate in the temporary liquidity guarantee program, the FDIC will inform the entity that it will no longer be provided the protections of the temporary liquidity guarantee program.
§ 370.12
(a) Claims for Deposits in Guaranteed Transaction Accounts.
(b) Claims for Guaranteed Debt—(1) Guaranteed debt in receivership.
(i) Procedure for claims determination. Holders of debt shall file a claim with the receiver of a failed insured depository institution that is a participating entity within ninety days after the FDIC publishes a notice to creditors of the failed financial institution to present claims pursuant to 12 U.S.C. 1821(d)(3)(B). The FDIC will consider the proof of claim, if timely filed, and will make a determination of the amount guaranteed within 180 days of the filing of the proof of claim, unless extended by written agreement between the claimant and the FDIC. The determination of the FDIC will be final. The FDIC will pay interest at the 90-day T-Bill bill rate if there is a delay in payment beyond the next business day after receivership. Start Printed Page 64191
(ii) Subrogation rights of FDIC. To receive payment under the debt guarantee program, the holder of the unsecured senior debt shall assign its rights, title and interest in the unsecured senior debt to the FDIC and to transfer its validated claim to the FDIC which will be subrogated to such rights.
(v) Review of final determination. The holder of an unsecured senior debt shall have the right to seek judicial review of the FDIC's final determination in the United States District Court for the District of Columbia or the United State District Court for the federal district where the holding company's principal place of business was located. Failure of the holder of the unsecured senior debt to seek such judicial review within sixty (60) days of the date of the rendering of the final determination will deprive the holder of the unsecured senior debt of all further rights and remedies with respect to the guarantee claim.
Dated at Washington, DC, this 23rd day of October, 2008.
1. Public Law No. 110-343 (Oct. 3, 2008).
3. Public Law No. 102-242 (Dec. 19, 1991).
4. 12 U.S.C. 4802.
[FR Doc. E8-25739 Filed 10-24-08; 4:15 pm]