FDIC releases NPRs on recordkeeping for timely deposit insurance determination has been saved
FDIC releases NPRs on recordkeeping for timely deposit insurance determination
Relief points and anticipated challenges
The FDIC released two NPRs addressing the signature card requirements of Part 330.9 and Part 370 “Recordkeeping for Timely Deposit Insurance Determination.” Learn more.
April 15, 2019 | Financial services
On Friday, March 29, the Federal Deposit Insurance Corporation (FDIC) released two Notices of Proposed Rulemakings (
Part 330.9 - The “signature card requirement” for Joint Ownership Deposit Accounts: Part 330.9 details the methods that satisfy the identification requirements of ownership for joint accounts, one of the 16 unique ownership right and capacity (ORC) codes which a depositor may be separately insured at each institution.1
Part 370 - Recordkeeping for Timely Deposit Insurance Determination: Part 370 became effective on April 1, 2017 and required covered institutions2 (CIs) to maintain complete and accurate records on deposit accounts’ ownership and insurability, as well as implementing an information technology (IT) system within three years of the effective date that comprehensively manages the calculation and payment of deposit insurance in the event of failure.3
As the nation’s largest banks who are subject to Part 370 began developing their capabilities in order
Deloitte has identified the most consequential potential relief points and challenges banks should take into consideration regarding their impact.
The FDIC’s proposal amends the regulation to state expressly that the signature card requirement may be satisfied electronically, a point of guidance previously stated in the IT Functional Guide and FAQs, but now proposed to be amended in the rule. The proposal also adds an alternative method to satisfy the signature requirement. This is significant as many impacted banks do not have the required documentation to meet the signature card requirement.
It also reflects the reality that changes have taken place in how accounts are established and used in the time that has passed since the signature card requirement was put in place. It now allows the signature card requirement to be satisfied by information contained in deposit account records to establish co-ownership. This includes evidence that an institution has issued a mechanism for accessing the account to each co-owner, such as a debit card, or evidence of usage of the deposit account by each owner, which can include any form of transactions that can be tracked to the individual participating depositors. The rule is flexible as to how these requirements are satisfied allowing them to be
These changes, depending on the circumstances at each CI, should significantly reduce the compliance burden by providing flexibility on how an institution chooses to identify activity and evidence of use by deposit account owners. Institutions should perform data availability and quality analysis to determine the best approach to take advantage of this added flexibility, as the transaction to account holder linkages may not be readily available in all instances.
Proposed amendments to the definition of accounts with “transactional features”
The FDIC refined its definition of what constitutes a deposit account with “transactional features” to apply to accounts that have transactions that are executed but not completed in the end-of-day processing with the transaction being reflected on a later day than the initial transaction. The focus of the FDIC is on accounts that have regular transactions that could have rejected items causing disruption. They also include accounts that provide for the transfer from deposits accounts with non-transactional features to deposit accounts within the same institution that have transactional features.
A distinction was also made regarding
The FDIC softened the language in several areas surrounding the bank certifying official’s attestation. The first involves the overall certification, allowing the chief executive officer (CEO) or chief operating officer (COO) to confirm that the institution has implemented all required capabilities and tested its IT system during the preceding 12 months and made with the best of “his or her knowledge after due inquiry.” Previously, the certification required “successful testing” of the IT system that indicated that the institution is “in compliance,” which posed concerns about the absolute nature and implied liability of the original language. CEOs and COOs should find the updated language on the certification process to be more reasonable.
Second, the certification requirements have been removed with regard to accounts with transactional features. What is required under the proposal is a CI “must take steps reasonably calculated to ensure that the account holder will provide to the FDIC the information needed” to calculate deposit insurance coverage within 24 hours of close. Those steps include implementing contractual arrangements with account holders to deliver
record keeping requirements for certain trusts
Two proposed revisions were made regarding trust accounts that
Data changes to alternative
record keeping requirements for certain trusts
While the FDIC expanded the trust accounts allowed for alternative
The FDIC proposed to amend recordkeeping requirements for deposits resulting from a borrower making an overpayment on a loan account (e.g. credit card, auto loan, etc.) where there is no principal balance. Upon failure, the CI must restrict credit balances owed on the borrower's account. If this cannot be done, the CI can restrict an equal amount in that borrower’s deposit account at the CI, in the event the borrower has a deposit account. The key is to be able to allow customer access to use credit facilities without impacting the credit balance until an aggregation can be performed. Since access is most critical to revolving credits, the CI must also have the capability to produce a list of all open (revolving)—which need access—and closed-ended accounts with overpayments at point of failure.
While more clarity has been provided regarding the requirements for credit balances on loans, it did not appear to come in the form of relief. For CIs that can isolate the credit balance, the impact will be more in the form of establishing a process to match the account holder information across loan and deposit systems to support
To support the ability to perform aggregations between loan systems and deposit systems, the proposed amendment requires CIs to have the ability to produce a listing of customer information with loan overpayments (open and close-ended) upon bank failure in the file format similar to those used for pass-through accounts. The report for open-ended (revolving) credit needs to be produced within the first 24 hours since those accounts need access to their credit facility.
Conclusion and next steps
In the coming weeks, Deloitte will publish an expanded point of view on the implications of these proposed rules in order to help CIs formulate responses, plan for implementation, and ultimately comply with these new regulations.
1 Federal Deposit Insurance Corporation, Joint Ownership Deposit Accounts (April 4, 2019), available at https://www.federalregister.gov/documents/2019/04/04/2019-06534/joint-ownership-deposit-accounts
2 A covered institution is defined as an insured depository institution (IDI) that has 2 million or more deposit accounts.
3 Federal Deposit Insurance Corporation Recordkeeping for Timely Deposit Insurance Determination (April 11, 2019), available at https://www.federalregister.gov/documents/2019/04/11/2019-06713/recordkeeping-for-timely-deposit-insurance-determination
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