Deposit Insurance Coverage

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB28

Deposit Insurance Coverage

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is amending its deposit insurance regulations to

require that: Upon request, an insured depository institution disclose

in writing to depositors of employee benefit plan funds, its current

Prompt Corrective Action (PCA) capital category, its capital ratios,

and whether employee benefit plan deposits would be eligible for

``pass-through'' insurance coverage; upon opening an account comprised

of employee benefit plan funds, an insured depository institution

disclose in writing its PCA capital category, a description of the

requirements for ``pass-through'' insurance coverage and whether, in

the institution's judgment, the deposits are eligible for ``pass-

through'' deposit insurance; and when employee benefit plan deposits

placed with an insured depository institution would no longer qualify

for ``pass-through'' insurance coverage, the institution disclose in

writing to all existing employee benefit plan depositors within 10

business days the institution's PCA capital category and that new,

rolled-over or renewed employee benefit plan deposits will not be

eligible for ``pass-through'' deposit insurance coverage.

The FDIC is also making a number of technical amendments to its

insurance regulations concerning commingled accounts of bankruptcy

trustees, joint accounts, accounts for which an insured depository

institution is acting in a fiduciary capacity, and accounts for which

an insured depository institution is acting as the trustee of an

irrevocable trust.

The intended effect of the final rule is to provide employee

benefit plan depositors important information, not otherwise available,

on ``pass-through'' deposit insurance which may be needed to prudently

manage their funds. The technical amendments clarify the insurance

rules involving commingled accounts of bankruptcy trustees, joint

accounts, accounts for which an insured depository institution is

acting in a fiduciary capacity, and accounts for which an insured

depository institution is acting as the trustee of an irrevocable

trust.

EFFECTIVE DATES: The amendments to 12 CFR 330.12 are effective on July

1, 1995. The amendments to 12 CFR 330.6, 330.7, 330.10 and 330.11 are

effective on March 13, 1995.

FOR FURTHER INFORMATION CONTACT: Daniel M. Gautsch, Examination

Specialist, Division of Supervision (202/898-6912) or Joseph A.

DiNuzzo, Counsel, Legal Division (202/898-7349), Federal Deposit

Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

Background

In May 1993, the FDIC Board of Directors (Board) revised

Sec. 330.12 of the FDIC's regulations (12 CFR 330.12) (58 FR 29952 (May

25, 1993)) to reflect the new limitations imposed by section 311 of the

Federal Deposit Insurance Corporation Improvement Act of 1991

[[Page 7702]] (Pub. L. 102-242, 105 Stat. 2236) (FDICIA) on the ``pass-

through'' deposit insurance provided for employee benefit accounts.

(``Pass-through'' insurance means that the insurance coverage passes

through to each owner/beneficiary of the applicable deposit.) As

required by section 311 of FDICIA, under the revised rules, whether an

employee benefit plan deposit is entitled to ``pass-through'' deposit

insurance coverage is based, in part, upon the capital status of an

insured depository institution at the time the deposit is accepted.

Under Secs. 330.12 (a) and (b), ``pass-through'' insurance shall

not be provided if, at the time an employee benefit plan deposit is

accepted, the institution may not accept brokered deposits pursuant to

section 29 of the FDI Act (12 U.S.C. 1831f(a)) unless, at the time the

deposit is accepted: (1) The institution meets each applicable capital

standard; and (2) the depositor receives a written statement from the

institution indicating that such deposits are eligible for insurance

coverage on a ``pass-through'' basis.\1\ The written statement required

under this exception must be provided each time a deposit is made or

additional employee benefit plan funds are placed with the insured

institution. 58 FR 29957 (May 25, 1993).

\1\The recordkeeping requirements of Sec. 330.4 of the FDIC's

regulations also would have to be satisfied. 12 CFR 330.12(a) &

330.4.

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Section 29 of the FDI Act prohibits insured depository institutions

that are ``adequately capitalized'' but have not obtained a broker

deposit waiver from the FDIC and ``undercapitalized'' institutions (or

institutions in lower capital categories) from accepting brokered

deposits.\2\ A brokered deposit is defined in Sec. 337.6 of the FDIC's

regulations (12 CFR 337.6) as any deposit that is obtained, directly or

indirectly, from or through the mediation or assistance of a deposit

broker.

\2\``Well capitalized'' insured institutions can, in certain

circumstances, avoid a lapse in eligibility for ``pass-through''

insurance of employee benefit plan deposits, should the

institution's PCA capital category be reduced to ``adequately

capitalized'', by obtaining a broker deposit waiver from the FDIC.

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On December 8, 1993, the FDIC published in the Federal Register a

proposed rule (58 FR 64521) to impose several specific disclosure

requirements upon insured depository institutions regarding the

availability of ``pass-through'' insurance coverage for employee

benefit plan deposits. In summary, the proposed rule would have

required that: (1) Upon request (within two business days after receipt

of such request), an insured depository institution provide written

notice to any existing or prospective depositor of employee benefit

plan funds of the institution's leverage ratio, Tier 1 risked-based

capital ratio, total risk-based capital ratio, PCA capital category and

whether or not, in the opinion of the institution, employee benefit

plan deposits made with the institution would be entitled to ``pass-

through'' insurance coverage; (2) upon the opening of any account

comprised of employee benefit plan funds, an insured depository

institution provide written notice to the depositor of the

institution's PCA capital category and whether or not such deposits are

eligible for ``pass-through'' insurance coverage; (3) within two

business days after an insured depository institution's PCA capital

category changes from ``well capitalized'' to ``adequately

capitalized'', the institution provide written notice to all depositors

of employee benefit plan funds of the institution's new PCA capital

category and whether or not new, rolled-over or renewed employee

benefit plan deposits would be eligible for ``pass-through'' insurance

coverage; and (4) within two business days after an insured depository

institution's PCA capital category changes to a category below

``adequately capitalized'', the institution provide written notice to

all depositors of employee benefit plan funds indicating that new,

rolled-over or renewed deposits of employee benefit plan funds made on

or after the date the institution's PCA capital category changed to a

category below adequately capitalized will not be eligible for ``pass-

through'' insurance coverage.

The FDIC issued the proposed rule, in part, because of numerous

comments it received from various sources on the difficulty of

obtaining public information concerning an insured institution's

capital levels and on its current PCA capital category--information

necessary to determine whether employee benefit plan deposits would be

eligible for ``pass-through'' insurance coverage.

Discussion of the Final Rule and Comments on the Proposed Rule

The FDIC received 67 comment letters on the proposed rule. Thirty-

seven were from banks and savings associations, seventeen from bank or

thrift holding companies, seven from trade associations, and six from

other interested parties. Numerous suggestions and recommendations were

made to revise the proposal.

Only three commenters expressed support for all aspects of the

proposed rule. The majority of comments recommended various revisions

to make the proposal less burdensome. Many commenters noted that most

institutions presently do not have a system for identifying employee

benefit plan accounts and that more time was needed to provide the

required disclosures to affected depositors. They also expressed

concern about the administrative cost of complying with all aspects of

the proposal. Others commented that the proposed rule might create a

potential liability for insured institutions and promote bank ``runs.''

Most commenters suggested that the FDIC include optional sample

disclosures in the regulation.

In issuing the proposed rule for comment the FDIC was cognizant of

the attendant regulatory burden that would be imposed upon insured

depository institutions. Thus, the FDIC attempted to balance the

undesirability of imposing additional regulatory requirements on

insured depository institutions with the importance of providing timely

notice to existing and prospective employee benefit plan depositors of

the extent of ``pass-through'' insurance coverage available for their

deposits--information which is important to them and not otherwise

generally available. In response to the public comments, the FDIC has

modified the requirements of the proposed rule so that the final rule

has fewer and less burdensome disclosure requirements than those

proposed. The remaining requirements are believed to be essential,

however, to ensure that the necessary deposit insurance information is

provided to employee benefit plan depositors.

In FDICIA Congress for the first time linked deposit insurance

coverage to the capital level of the insured depository institution.

This relationship between the scope of deposit insurance and an

institution's capital applies only to employee benefit plan deposits.

This special category of deposit insurance coverage, therefore,

requires special disclosure rules; otherwise, employee benefit plan

depositors may be inappropriately disadvantaged. Given the nature of

the statutory requirements for ``pass-through'' insurance coverage for

employee benefit plan accounts, the Board believes the disclosure

requirements are essential to safeguard the interests of employee

benefit plan depositors and ultimately plan participants. As indicated

below, however, the Board acknowledges that the disclosure requirements

do not fully safeguard the interests of the owners of employee benefit

plan deposits and believes that amendments to the insurance provisions

of the FDI Act are [[Page 7703]] needed to remedy the continuing

potential exposure of those owners.

The following is a discussion of the comments received on the

various aspects of the proposed rule including comments received on the

specific issues raised in the proposed rulemaking:

A. Disclosures Upon Request

The proposed rule would have required that, upon request ( within

two business days after receipt of such request), an insured depository

institution provide written notice to any existing or prospective

depositor of employee benefit plan funds of the institution's leverage

ratio, Tier 1 risked-based capital ratio, total risk-based capital

ratio, PCA capital category and whether, in the opinion of the

institution, employee benefit plan deposits placed with the institution

would be eligible for ``pass-through'' insurance coverage. A majority

of the commenters that specifically addressed this issue favored this

provision. They cited the need for depositors to be able to obtain

adequate information in order to make an informed decision about where

to invest their funds. Those opposed to such a requirement cited the

regulatory burden of developing policies and procedures, automation

systems, training of customer service personnel and maintaining current

capital-related information to ensure compliance with the requirement.

Other commenters questioned the need to disclose this capital

information because, in their view, the information would confuse most

individuals.

A number of commenters also questioned the requirement that

institutions make disclosures to prospective employee benefit plan

depositors upon request. They indicated that individuals are free to

take their business elsewhere if they are not satisfied with the

information received. They suggested that market forces can address

this issue and recommended that this requirement be deleted from the

regulation.

The FDIC agrees that prospective customers are free to take their

business elsewhere if they do not get the desired information. Existing

customers, however, may have several reasons why they cannot easily

move their accounts. Therefore, the final rule has been changed to

require disclosures when requested by employee benefit plan customers

that already have accounts at an insured institution.

The FDIC believes that the regulatory burden placed on institutions

can be mitigated if adequate time is given to establish policies and

procedures. Accordingly, the final rule contains a delayed effective

date of July 1, 1995. In addition, the capital information to be

disclosed is based on the most recently available data and need not be

as of the date of the deposit. The FDIC believes that insured

institutions should not have to develop any new, specific procedures to

develop the capital information required by this portion of the rule.

For example, institutions that are clearly ``well capitalized'' and

have experienced only minor variations in their capital ratios since

the filing of their last quarterly Consolidated Report of Condition and

Income (Call Report) may use the capital ratios calculated at that

time.

An institution's capital category and the availability of ``pass-

through'' insurance are, in almost all cases, believed to be derived

from financial information currently available. Further, only a very

few insured depository institutions are not eligible for employee

benefit plan ``pass-through'' deposit insurance coverage. (Based on

September 30, 1994 regulatory reporting data only 279 of 12,774 insured

depository institutions were less than ``well capitalized''.)

Therefore, it is estimated that the regulatory impact of this portion

of the rule will be insignificant.

Some commenters recommended that depositor requests be in writing

and be mailed to a central location. The FDIC believes that once

procedures are developed it should be no more burdensome to honor an

oral request than a written one. In addition, imposing restrictions on

existing depositors that request this information would hamper the

purpose of providing timely information. Therefore, the FDIC has

decided that depositor requests can be made orally or in writing to

designated bank employees.

B. Disclosure Upon Opening an Account

The proposed rule also would have required that, upon the opening

of any employee benefit plan account, the insured depository

institution provide a written notice to the depositor of the

institution's PCA capital category and whether or not such deposits are

eligible for ``pass-through'' insurance coverage. Commenters generally

expressed support for this provision. Some, however, questioned whether

disclosing capital information was meaningful to an employee benefit

plan depositor.

The FDIC continues to believe that it is essential that an employee

plan depositor be notified about whether ``pass-through'' coverage is

available for deposits placed with a depository institution. Moreover,

based on the comments received on this and related issues, the FDIC

also believes that when opening an employee benefit plan account

depositors should be informed (or reminded of) the basic requirements

of the law and regulations regarding the availability of ``pass-

through'' insurance coverage for employee benefit plan deposits. Thus,

the FDIC has revised this provision of the final rule to require that

the written notice provided to an employee benefit plan depositor

include an accurate explanation of the requirements for ``pass-

through'' deposit insurance coverage. (A sample disclosure of this

information is provided below.) Therefore, the final rule retains the

requirement that the written disclosure statement indicate the

institution's PCA capital category and whether, in the institution's

judgment, the funds being deposited are eligible for deposit insurance

coverage. The sample disclosure also contains language informing

employee benefit plan depositors that additional information on the

institution's capital condition may be requested.

C. Timing of Disclosures

The proposed rule would have required that certain information be

provided within two business days to current or prospective employee

plan depositors in three different situations: (1) When an institution

received a request for information from an employee benefit plan

depositor; (2) when an institution's capital category changed from

``well capitalized'' to ``adequately capitalized''; and (3) when an

institution's capital category fell below ``adequately capitalized''.

Regardless of whether or when notice is provided to the depositor,

``pass-through'' insurance coverage on new, rolled over or renewed

deposits may cease immediately upon notice to the insured depository

institution that its PCA capital category has been lowered. Thus, the

proposed rule requested comments on the feasibility of compliance with

the two-day notification requirement and, specifically, on whether a

longer time frame might increase the period for which a depositor's

employee benefit plan funds would be uninsured.

Of the 42 commenters that specifically addressed the time frame

requirement, 40 stated that the two-business-day period was too short.

The commenters recommended extending the time requirement from the

proposed period of two business days to periods of time ranging from

five days to 30 days. The most common recommendation was to extend the

period to 10 business days, the same [[Page 7704]] period of time as

required under the Federal Reserve's Regulation DD (12 CFR part 230),

which implements the Truth in Savings Act. Seven commenters recommended

five business days indicating that the required disclosures could be

made within five business days once policies and procedures had been

established to ensure compliance with the regulation.

Based on the comments received on this issue, the Board has decided

to require that the disclosures to be made upon request be made within

five business days--the shortest period of time that it believes an

institution could be expected to meet the time requirements. In

arriving at this time period the FDIC attempted to balance the

feasibility of complying with the requirement with the need for

employee benefit plan depositors to know, on a timely basis, whether

deposits are and will continue to be eligible for ``pass-through''

insurance coverage. Institutions are encouraged to provide the required

disclosures sooner, if possible.

The five business day time frame begins upon the bank's receipt of

the request and ends when the institution mails or delivers the

required information to the depositor. ``Receipt'' means when an

institution receives a request, not when it is received by a designated

department of the institution.

Secondly, the FDIC has decided to extend to 10 business days the

notification time frame when an insured institution must provide notice

that new, renewed or roll-over employee benefit plan deposits placed

with an institution will not be eligible for ``pass-through'' insurance

coverage. The FDIC recognizes that this disclosure is more extensive

than an individual request from an employee benefit plan depositor and

generally will occur when an institution is experiencing financial

problems. Institutions in this situation frequently have management

deficiencies and weak internal controls. For these reasons, adoption of

a slightly longer time frame is believed appropriate. Institutions are

encouraged to provide disclosures sooner, if possible.

Despite its decision to extend the periods in which insured

institutions must comply with the disclosure requirements of the final

rule, the Board continues to be concerned about employee benefit plan

funds that are deposited with an institution before the institution is

required to notify depositors of the discontinuation of the

availability of ``pass-through'' coverage on such deposits. An example

would be where an institution becomes ``undercapitalized'' on Day 1 and

a customer deposits employee benefit plan funds before the expiration

of the 10 days within which the institution is required to notify

employee benefit plan depositors that ``pass-through'' insurance will

not be available for deposits placed after Day 1. Under the FDI Act and

Sec. 330.12, such deposits would not be eligible for ``pass-through''

coverage because at the time they were ``accepted'' the institution was

undercapitalized--and, thus, not permitted to accept brokered deposits.

The Board believes that Congress should consider amendments to the

insurance provisions of the FDI Act to address this potential pitfall

for employee benefit plan depositors and, particularly, the ultimate

plan participants.

One commenter recommended that when an institution notifies

existing employee benefit plan depositors that ``pass-through''

insurance coverage is no longer available, the affected depositors not

be assessed a withdrawal penalty. This would pertain particularly to

the situation where a depositor places employee benefit plan funds with

an institution between the time that such deposits become ineligible

for ``pass-through'' coverage and the time the institution notifies the

depositor of the ineligibility of new deposits for such coverage.

Because the ``pass-through'' coverage of only newly deposited funds is

potentially affected by this time gap and then only if the institution

fails, the FDIC has decided not to address the withdrawal penalty issue

in the final rule. The institution and its employee benefit plan

customers are free to negotiate this matter. The FDIC anticipates that

insured institutions will waive any penalty fees in appropriate

circumstances.

D. Disclosure When an Institution's PCA Capital Category Changes but

``Pass-Through'' Insurance Coverage Is Still Available

The proposed rule would have required an insured depository

institution to provide a written notice to all employee benefit plan

depositors when the institution's PCA capital category changed from

``well capitalized'' to ``adequately capitalized'', irrespective of

whether employee benefit plan deposits still would be eligible for

``pass-through'' insurance coverage. The FDIC requested comment on

whether a disclosure should be required upon such a reduction in an

institution's PCA capital category but the institution had obtained a

waiver from the FDIC under Sec. 337.6 of the FDIC's regulations to

accept brokered deposits, and thus, there would be no change in the

availability of ``pass-through'' deposit insurance coverage for

employee benefit plan deposits.

Of the 46 commenters that specifically addressed this issue, 40

were against requiring any disclosures if the availability of ``pass-

through'' coverage had not changed. Commenters noted that providing

disclosures would cause confusion among depositors, create an increased

regulatory burden on the institution in having to explain to affected

depositors why the notice was being sent even though the availability

of ``pass-through'' insurance coverage had not changed, encourage

disintermediation, promote financial instability within institutions,

and encourage bank ``runs''. They also indicated that such a disclosure

requirement would be contrary to the FDIC goals of promoting a safe and

sound banking system and of limiting losses to the deposit insurance

funds.

The FDIC concludes that this requirement would be an unnecessary

burden and has decided to eliminate this provision from the final rule.

Although a reduction in an institution's PCA capital category to

``adequately capitalized'' reflects a decline in an institution's

capital level and, thus, may be helpful information for an employee

benefit plan depositor, this change is only one of many factors that an

employee benefit plan depositor should consider when monitoring the

financial condition of an insured depository institution. In addition,

the final rule requires that employee benefit plan depositors be

notified if and when new, renewed or rolled-over employee benefit plan

deposits will no longer be eligible for ``pass-through'' insurance

coverage. Also, under the final rule, information on an institution's

PCA capital category and whether ``pass-through'' coverage is available

can be obtained from an institution under the ``upon request''

provision of the final rule.

E. Form of Disclosures

In the proposed rule the FDIC solicited specific comment on the

form of disclosure. The five specific areas addressed were whether: (1)

the required disclosures should have to be in a separate mailing; (2) a

written acknowledgement from the intended recipient of the disclosure

should be required; (3) the disclosure should be required to be

prominent and conspicuous (for example, requiring bold type); (4) the

disclosure should be part of the deposit agreement; and (5) other

related information may be disclosed. [[Page 7705]]

The FDIC received only a few comments on each of these areas. In

general, commenters favored the option of using a separate mailing, the

requirement that disclosures be ``prominent and conspicuous'', and the

ability to include other related information in the disclosure--such as

explaining why an institution had a capital deficiency. The respondents

opposed requiring an institution to obtain a written acknowledgement

from employee benefit plan depositors or requiring that the disclosures

be part of the deposit agreement.

The FDIC has decided not to establish any specific forms or

procedures on the required disclosures except for a general requirement

that the required disclosures be ``clear and conspicuous.'' This phrase

is believed to be more representative of the standard that disclosures

must be in a reasonably understandable form. It does not require that

disclosures be segregated from other material or located in any

particular place or be in any particular type size.

Institutions may, at their discretion, use any of the above or

other disclosure methods as long as it meets the ``clear-and-

conspicuous'' standard and the time requirements. For example, an

institution that is opening an employee benefit plan account may

provide a separate written disclosure statement to the customer or

reference the specific section of the deposit agreement that contains

the disclosure information.

A reasonableness standard will be used when reviewing compliance

with this section of the regulation. Institutions should consider the

level of sophistication of a depositor when providing required

disclosures to assure that they are communicated in a clear and

understandable fashion. The FDIC believes that, in general, managers

and administrators of employee benefit plans are more sophisticated

financial persons than the average depositor.

F. Discussion of Sample Disclosures

The FDIC requested comment on whether the final rule should include

a specific notice that institutions would have to provide to employee

benefit plan depositors when an institution's PCA capital category

changed from ``well capitalized'' to ``adequately capitalized'' or to a

level below ``adequately capitalized.'' The majority of commenters

specifically addressing this issue suggested that the FDIC provide

sample language in the final rule but recommended that any sample

disclosures be optional and that additional information be permitted to

be disclosed to the employee benefit plan depositor--such as the

reasons for an institution's capital deficiency. Other commenters

expressed concern about the tone of the sample language included in the

proposed rule while others suggested alternate language.

One commenter recommended that the FDIC also provide a sample

disclosure when a depositor opens an employee benefit plan account.

Other commenters suggested a disclosure that only informs the depositor

whether employee benefit plan deposits would be eligible for ``pass-

through'' coverage under the regulations.

Based on these comments, the FDIC has provided below two sample

disclosure notices. One applies when a depositor opens an employee

benefit plan account and includes a description of the requirements for

``pass-through'' insurance coverage. The other is when new, renewed or

rolled-over employee benefit plan deposits would not be eligible for

``pass-through'' insurance coverage.

Additional information can be included with the disclosure as long

as the overall disclosure statement meets the clear-and-conspicuous

standard in the regulation. This may include, for example, additional

information on an institution's capital deficiency and when, in the

institution's opinion, the deficiency is expected to be corrected.

A few commenters noted that the sample disclosure statements

indicate that the FDIC is not bound, in its insurance determinations,

by information provided by insured institutions to depositors on the

eligibility of the employee benefit plan deposits to ``pass-through''

insurance coverage. It is correct that the FDIC is not bound in its

insurance determinations by information provided by an insured

institution to its customers. The FDIC also is not responsible for or

bound by a depository institution's failure to provide the required

disclosure statements.

Although it may be helpful for an insured institution to inform

employee benefit plan depositors that the FDIC is not bound by

information provided by an insured institution to its customers, the

Board believes the inclusion of that information in the required

disclosure statements should be optional. The thrust of the disclosure

requirements imposed by the final rule is to alert employee benefit

plan depositors to the rules regarding ``pass-through'' insurance

coverage and, in particular, to inform them when such coverage is no

longer available. Requiring insured institutions to indicate whether

the FDIC would be bound by incorrect information in the disclosure

statements goes beyond the necessary scope of the required disclosure.

G. Separate Enforcement Provision

The FDIC requested comment on whether a free-standing enforcement

and/or penalty provision should be included in the final rule. The few

commenters that addressed this question requested that any sanctions

imposed be limited to cases of intentional disregard or willful

noncompliance and that civil money penalties should not be assessed. In

the proposed rule, the FDIC indicated that violations of regulatory

requirements would be subject to the full array of enforcement

sanctions (including the imposition of civil monetary penalties)

contained in section 8 of the FDI Act (12 U.S.C. 1818).

The FDIC has decided that separate enforcement provisions are not

required to enforce the requirements of the final rule. The current

provisions in section 8 of the FDI Act (12 U.S.C. 1818) are considered

adequate and will be used to enforce compliance when deemed

appropriate.

H. Inclusion of Information in Call Reports

The FDIC requested comment on whether the capital ratios and PCA

category of an institution should be made a general disclosure

requirement in, for example, quarterly Consolidated Reports of

Condition and Income (Call Reports). In this way, existing and

prospective employee benefit plan depositors and other interested

parties would be able to obtain an official, publicly available

statement of an institution which clearly indicates this important

information.

Of the 15 commenters that addressed this issue, 12 favored adding

the information to the Call Reports. Those in favor suggested that

including this information would provide depositors with an efficient

and independent means of obtaining relevant financial data on an

insured institution. They also recognized that employee benefit plan

administrators have a fiduciary obligation to determine the capital

status of an insured institution. Two commenters also recommended that

this information be disclosed on Thrift Financial Reports (TFRs). Two

others suggested that this information be in lieu of the required

disclosures in the proposed rule. One commenter specifically opposed

any revision to the Call Report indicating that plan administrators had

the sophistication to determine an institution's capital ratios and PCA

capital category. [[Page 7706]]

Two other commenters suggested that a ``yes/no'' box be included on

the Call Report that would indicate whether ``pass-through'' coverage

was available. They opined that this one disclosure would provide

employee benefit plan depositors with an explicit statement on a

quarterly basis on whether an institution could provide ``pass-

through'' coverage and would avoid the question whether an institution

classified as ``adequately capitalized'' was able to offer ``pass-

through'' insurance coverage.

The FDIC does not have the authority to change the Call Report or

the TFR on its own and has decided not to reach a conclusion at this

time. Instead it will recommend to the Federal Financial Institutions

Examination Council that it consider whether the Call Report and the

TFR should be amended to include a line item for designating an

institution's PCA capital category.

Although public disclosure of this information would be beneficial

to the public, it also could be misleading without further information

or investigation. For example, the continued availability of ``pass-

through'' coverage would not be known in the case of institutions

reporting an ``adequately capitalized'' condition, although this

information would raise a ``red flag'' that depositors could

investigate further. In addition, a Call Report disclosure is as of the

date of the report and it may not reflect interim events between Call

Report dates. Moreover, an institution's PCA capital category may not

constitute an accurate representation of an institution's overall

financial condition or future prospects--factors that employee benefit

plan depositors also need to consider. Finally, it should be noted that

the PCA rules do not prohibit an institution from disclosing its PCA

capital category in response to inquiries from investors, depositors,

or other third parties. However, such disclosures should include

appropriate caveats in order to avoid misleading the public.

The FDIC considered the recommendation of including a ``yes/no''

box on the Call Report but does not favor this proposal out of a

concern that the disclosure would be more prone to reporting error and

would create a greater regulatory burden on institutions.

I. Definition of ``Employee Benefit Plan Depositor''

The FDIC indicated in the preamble of the proposed rule that the

required information may be provided to an employee benefit plan

administrator or manager instead of to each participant in a plan. One

commenter recommended that the final rule define the term ``employee

benefit plan depositor'' to mean managers or administrators of such

plans. Thus, it would make clear that the required disclosures only

need be made to the administrator or manager of an employee benefit

plan and not to each individual beneficiary of the plan. The FDIC has

decided to include such a definition in the final rule. The final rule

also specifies that, for purposes of the requirements of the final

rule, the definition of the term ``employee benefit plan'' includes

eligible deferred compensation plans described in section 457 of the

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

J. Sample Disclosures

1. A sample disclosure that an insured depository institution may

use when a depositor opens an account consisting of employee benefit

plan deposits is as follows:

Under federal law, whether an employee benefit plan deposit is

entitled to per-participant (or ``pass-through'') deposit insurance

coverage is based, in part, upon the capital status of the insured

institution at the time each deposit is made. Specifically, ``pass-

through'' coverage is not provided if, at the time an employee

benefit plan deposit is accepted by an FDIC-insured bank or savings

association, the institution may not accept brokered deposits under

the applicable provisions of the Federal Deposit Insurance Act.

Whether an institution may accept brokered deposits depends, in

turn, upon the institution's capital level. If an institution's

capital category is either ``well capitalized,'' or is ``adequately

capitalized'' and the institution has received the necessary broker

deposit waiver from the FDIC, then the institution may accept

brokered deposits. If an institution is either ``adequately

capitalized'' without a waiver from the FDIC or is in a capital

category below ``adequately capitalized,'' then the institution may

not accept brokered deposits. The FDI Act and FDIC regulations

provide an exception from this general rule on the availability of

``pass-through'' insurance coverage for employee benefit plan

deposits when, although an institution is not permitted to accept

brokered deposits, the institution is ``adequately capitalized'' and

the depositor receives a written statement from the institution

indicating that such deposits are eligible for insurance coverage on

a ``pass-through'' basis. The availability of ``pass-through''

insurance coverage for employee benefit plan deposits also is

dependent upon the institution's compliance with FDIC recordkeeping

requirements.

[Name of institution]'s capital category currently is [insert

prompt corrective action capital category]. Thus, in our best

judgment, employee benefit plan deposits are currently eligible for

``pass-through'' insurance coverage under the applicable federal law

and FDIC insurance regulations.

Under the FDIC's insurance regulations on employee benefit plan

deposits, an insured bank or savings association must notify

employee benefit plan depositors if new, rolled-over or renewed

employee benefit plan deposits would be ineligible for ``pass-

through'' insurance and must provide certain ratios on the

institution's capital condition to employee benefit plan depositors

who request such information. If you would like additional

information on [name of institution]'s capital condition, please

make a request [describe procedures for obtaining the additional

capital information].

2. A sample disclosure that an insured depository institution may

use when new, renewed or rolled-over employee benefit plan deposits

will not be eligible for ``pass-through'' insurance coverage is as

follows:

On [date] [name of institution]'s capital category changed from

[previous PCA category] to [current PCA category]. Because of this

change in [name of institution]'s capital category and the

institution's inability otherwise to satisfy the applicable FDIC

requirements in this regard, any employee benefit plan funds

deposited, rolled-over or renewed with [name of institution] after

[date] will NOT be eligible for ``pass-through'' (or per-

participant) deposit insurance coverage under Sec. 330.12 of the

FDIC's regulations. Accordingly, plan deposits made, rolled-over or

renewed after [date] will be aggregated and insured only up to

$100,000. This unavailability of ``pass-through'' insurance coverage

on new, rolled-over or renewed deposits will continue until the

institution's capital category improves and/or other applicable

requirements are satisfied. Deposits made over the period of time

when ``pass-through'' insurance coverage is unavailable will not be

eligible for ``pass-through'' coverage unless and until these

deposits are rolled-over or renewed at a time when ``pass-through''

insurance coverage is again available. ``Pass-through'' insurance

coverage on deposits made before [insert date when ``pass-through''

coverage no longer is available] is not affected.

K. Delayed Effective Date of the Disclosure Requirements

Four commenters recommended that the effective date of the final

rule be delayed 150 to 180 days to permit institutions the time needed

to develop automation systems, and policies and procedures to ensure

compliance. Many commenters indicated they presently do not have a

recordkeeping system that will identify employee benefit plan accounts.

Some commenters indicated that they would have to notify all existing

depositors in order to develop such a recordkeeping system.

As indicated in Sec. 330.12 of the FDIC's regulations, in order for

employee benefit plan deposits to be eligible for pass-through

insurance coverage, among other things, the recordkeeping requirements

of Sec. 330.4 of the FDIC's [[Page 7707]] regulations (12 CFR 330.4)

must be satisfied. Under Sec. 330.4, in order for pass-through

insurance to be available for fiduciary-type accounts (in which one

party has deposited funds for the benefit of others) the bank's deposit

account records must disclose the existence of the fiduciary

relationship, and the details of the relationship and the interests of

the other party(ies) must be ascertainable from the deposit account

records of the insured depository institution or records maintained by

the depositor, or a third party who has contracted with the depositor

to maintain such records on his/her behalf.

Some insured depository institutions that commented on the proposed

rule stated that their records did not classify deposits specifically

as employee benefit plan deposits; thus, they contended that it would

be burdensome to develop and implement a new system for purposes of

complying with the proposed disclosure requirements. The FDIC believes

the final rule addresses this issue. A list can be maintained for new

accounts going forward and a list of existing customers can be

established over time. An event triggering the required disclosures

when an institution no longer can offer ``pass-through'' insurance

coverage is believed to be an infrequent occurrence.

The changes made by FDICIA to insurance coverage applicable to

employee benefit plan deposits have been in effect since December 1992.

Thus, institutions should be aware of the need to provide customers

with timely disclosures on the availability of ``pass-through''

coverage for employee benefit plan deposits. We assume that this

already has been done by a general or specific mailing by institutions

to affected depositors.

Taking into consideration the period of time the revised ``pass-

through'' insurance rules have been in effect but factoring in the

``lead-time'' several commenters said was needed to develop and

implement the mechanisms required to comply with the ``upon-request''

disclosure provisions of the final rule, the Board has decided to delay

the effective date of the revisions to Sec. 330.12 until July 1, 1995.

This should provide insured depository institutions a sufficient period

of time to satisfy all of the disclosure requirements of the final

rule. This delay in the effective date also takes into consideration

section 302 of the Riegle Community Development and Regulatory

Improvement Act of 1994 (Pub. L. 103-325) (RCDRIA), which states, in

part, that any new regulations and amendments to existing regulations

which impose reporting, disclosure, or other requirements on insured

depository institutions may only take effect on the first day of a

calendar quarter unless certain exceptions are met.

L. Explanation of the Disclosure Requirements Under Sec. 330.12,

Including the Requirement Affecting Existing Deposits on the Effective

Date of the Final Rule That Are Not Eligible for ``Pass-Through''

Insurance Coverage

The final rule will apply with respect to employee benefit plan

funds on deposit with an insured depository institution on the

effective date of the final rule and such funds deposited on and after

that date. Institutions with employee benefit plan deposits on the

effective date of the final rule that, when deposited, were not

eligible for ``pass-through'' insurance coverage (under Sec. 330.12(a)

and (b) of the FDIC's regulations) must provide to such existing

depositors the disclosure statement and notice that ordinarily are

required under Sec. 330.12(h)(2) of the final rule when an employee

benefit plan account is opened. This requirement encompasses employee

benefit plan funds deposited between December 19, 1992 (the effective

date of the applicable provisions of FDICIA) and the effective date of

the final rule. These depositors otherwise would not come within the

scope of the final rule and thus, would not receive the disclosures

otherwise required. The disclosure documents referred to above must be

provided within 10 business days after the effective date of the final

rule.

After the effective date of the final rule, insured depository

institutions that accept employee benefit plan deposits that are not

eligible for ``pass-through'' insurance coverage are subject to the

disclosure requirements contained in Sec. 330.12(h)(3) of the final

rule.

M. Coordination With Other Federal Agencies

The FDIC has consulted with the other federal banking and thrift

regulators in developing the final rule and intends to continue to work

with the other federal regulators to assure, among other things,

consistent and minimally burdensome implementation of the final rule.

Technical Amendments to Part 330 Unrelated to the Proposed Amendments

to Sec. 330.12

The following is a discussion of the technical amendments to Part

330 made by the final rule that are unrelated to the proposed

amendments to Sec. 330.12. The amendments pertain to commingled

accounts of bankruptcy trustees, joint accounts, accounts for which an

insured depository institution is acting in a fiduciary capacity, and

accounts for which an insured depository institution is acting as the

trustee of an irrevocable trust. Because, as discussed below, the

amendments merely clarify current rules applicable to deposit insurance

coverage, they are outside the scope of section 302 of RCDRIA. Thus,

they need not take effect on the first day of a calendar quarter;

instead, the technical amendments will become effective 30 days after

the final rule is published in the Federal Register.

A. Commingled Accounts of Bankruptcy Trustees

One technical amendment codifies the FDIC's long-standing staff

interpretation of the insurance coverage available to a commingled

bankruptcy trustee's account. For many years, the FDIC's staff has

advised bankruptcy trustees and other interested parties that, when a

bankruptcy trustee appointed under title 11 of the United States Code

commingles the funds of two or more bankruptcy estates in the same

trust account (such an account is viewed as the account of a statutory

irrevocable trust created by one of the chapters of title 11 of the

United States Code), the funds of each title 11 bankruptcy estate will

receive pass-through coverage--that is, each bankruptcy estate will be

separately insured for up to $100,000--provided that the recordkeeping

requirements of 12 CFR 330.4(b) are met.3 However, in spite of the

FDIC's staff interpretation, the Department of Justice's Executive

Office for United States Trustees (Executive Office), the organization

charged with supervising the administration of bankruptcy estates and

trustees, has declined to recognize that there is pass-through

insurance for such accounts. In accordance with section 345 of the

Bankruptcy Code, 11 U.S.C. 345, the Executive Office has required banks

holding such bankruptcy trustee accounts to provide collateral for any

such funds that are not insured by the FDIC. But because the Executive

Office does not recognize pass-through insurance for such accounts,

banks holding such accounts are being required to pledge more

collateral than is actually necessary. The Executive Office has stated

that it will recognize pass-through coverage, and reduce its

[[Page 7708]] collateral requirements accordingly, provided that the

FDIC Board takes formal action assuring such accounts pass-through

coverage. For this reason, the Board has decided to include an

amendment to the FDIC's insurance regulations, in the form of a new

Sec. 330.11(d), confirming that pass-through insurance coverage will be

provided for such bankruptcy trustee accounts.

\3\FDIC Advisory Opinions published on this subject include

FDIC-93-59 (August 17, 1993), FDIC 89-21 (June 13, 1989), FDIC-88-74

(November 9, 1988), FDIC 87-17 (October 9, 1987), and FDIC-82-8

(March 25, 1982).

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The technical amendment codifying the long-standing interpretation

by FDIC staff of the insurance coverage available to the commingled

account of a bankruptcy trustee qualifies as an interpretative rule;

thus, it is exempt from the prior notice and comment requirements

ordinarily imposed by the Administrative Procedure Act, 5 U.S.C.

553(b)(3)(A).

B. Joint Deposit Accounts

Another technical amendment clarifies the meaning of Sec. 330.7(c)

of the FDIC's regulations (12 CFR 330.7(c)), which specifies the

requirements an account must meet to qualify for separate insurance

coverage as a joint account. Section 330.7(c) exempts certain types of

accounts, such as certificates of deposit, from the general requirement

that each co-owner must sign a signature card, but the regulation

states that ``all such deposit accounts, must, in fact, be jointly

owned''. Contrary to the FDIC's long-standing interpretation, some

courts have interpreted the quoted language to require the FDIC to

consider state law and evidence outside the deposit account records of

the insured institution to contradict otherwise unambiguous deposit

account records, in connection with claims that what appear to be joint

accounts are in fact individually-owned. The FDIC intended, however,

that depositors be bound by its recordkeeping regulation at 12 CFR

330.4(a), which requires that the deposit account records be considered

conclusive if they are unambiguous. Reliance on the deposit account

records is critical if the FDIC is to fulfill its obligation to make

insurance determinations and issue checks in a timely fashion after a

bank fails. It is also critical in preventing fraudulent claims.

Several courts have recognized the need for the FDIC to rely on such

records in making insurance determinations. Fouad & Sons v. FDIC, 898

F.2d 482 (5th Cir. 1990), In re Collins Securities Corp., 998 F.2d 551

(8th Cir. 1993), Jones v. FDIC, 748 F.2d 1400 (10th Cir. 1984).

For this reason, the amendment as presently proposed would remove

the ``but all such deposits must, in fact, be jointly owned'' language

from Sec. 330.7(c), and add that all deposit accounts which meet the

requirements for qualifying joint accounts, including those which are

exempted from the requirement that every co-owner must sign a signature

card, will be deemed to be jointly-owned if the FDIC determines that

the deposit account records are clear and unambiguous. The signatures

of two or more persons on a deposit account signature card or the names

of two or more persons on a certificate of deposit shall be conclusive

evidence of a joint account if the deposit account records are clear

and unambiguous. Only if the deposit account records are found to be

ambiguous on the issue of ownership will evidence outside the deposit

account records be considered, in accordance with the recordkeeping

provisions of Sec. 330.4(a). After taking into account the comments

received on this amendment, FDIC staff has revised the amendment

proposed earlier (and published for comment at 58 FR 64525 (December 8,

1993)) to conform more closely to the long-standing FDIC practice

articulated by Sec. 330.4(a).

The technical amendment on joint account coverage was published for

comment as part of the proposed version of this capital disclosure

regulation. 58 FR 64521 (December 8, 1993). The FDIC received two

comments on the proposed amendment clarifying what evidence is

necessary to determine the ownership of a joint account. An industry

trade group opposed the amendment because of concern that it might

permit the FDIC to ignore outside evidence of ``fundamental claims''

about the ``viability'' of a joint account under state law--for

example, evidence that an account signature was forged, that one of the

signers was incompetent when he signed, or that his signature was

coerced. A savings association cited similar concerns but suggested

that any outside evidence on such issues be considered under federal

law, not state law.

It is important to emphasize that, when the FDIC says that it will

rely on the deposit account records if they are clear and unambiguous,

it will do so only to determine the appropriate ownership category for

insurance purposes. Such reliance will not necessarily preclude a

depositor from proving that a deposit account existed when the bank's

deposit account records show no evidence of such an account, or that an

account actually contained more funds than are reflected in the bank's

deposit account records. When the FDIC determines that the deposit

account records are ambiguous or unclear, it has the discretion to

consider evidence beyond the deposit account records. Of course, the

FDIC need not find such extrinsic evidence persuasive. However, while

the FDIC understands that account records may not always accurately

reflect the intent of the parties to the account, and that

circumstances may sometimes render the accounts invalid under state

law,4 the FDIC believes that it is essential to make insurance

determinations without considering outside evidence concerning the

ownership category of accounts as long as the account records are

clear.

\4\On the subject of state law, Sec. 330.3(h) of the FDIC's

insurance regulations states that ``while ownership under state law

of deposited funds is a necessary condition for deposit insurance,

ownership under state law is not sufficient for, or decisive in,

determining deposit insurance coverage.'' Instead, ``[d]eposit

insurance coverage is also a function of the deposit account records

of the insured depository institution, of recordkeeping

requirements, and of other provisions of this part, which, in the

interest of uniform national rules for deposit insurance coverage,

are controlling for purposes of determining deposit insurance

coverage''. 12 CFR 330.3(h).

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The recordkeeping regulations, by requiring that the deposit

account records be considered conclusive if they are unambiguous, serve

several important purposes. When a bank fails, it is important that the

FDIC be permitted to make insurance determinations and issue checks to

depositors in a timely fashion, a timeliness made possible by the

FDIC's reliance on those deposit account records that are clear.

Reliance on unambiguous account records also permits the FDIC to

determine the least cost resolution of a failed institution and to

prevent fraudulent insurance claims. These purposes require that the

deposit account records, even if they do not correctly reflect the

parties' intent, be deemed conclusive if they are unambiguous. Of

course, if the records are ambiguous or unclear, the FDIC may, in its

discretion, rely on other evidence. Moreover, as the regulations

already provide, state law concerning ownership of ambiguously-owned

accounts are only the starting point for determining the ownership

issue; federal law ultimately controls.

For this reason, the Board has decided to include as part of this

final rule the proposed amendment to the FDIC's deposit insurance rules

on joint accounts. The amendment clarifies that an account holder

seeking to prove that what appears to be a joint account is actually an

account held in a right and capacity other than joint ownership (for

example, as an individually-owned account) must satisfy the

requirements of Sec. 330.4(a) of the FDIC's regulations

[[Page 7709]] (12 CFR 330.4(a)) on the recognition of deposit

ownership. Section 330.4(a) provides, in part, that, if the FDIC

determines that the deposit account records of an insured depository

institution are clear and unambiguous, no other records will be

considered as to the manner in which those funds are owned. Section

330.5(a) of the FDIC's regulations (12 CFR 330.5(a)) already explicitly

addresses the situation where more than one natural person has the

right to withdraw funds from an account that is actually viewed as

individually-owned. The amendment applies to situations involving

deposits which appear to be jointly-owned but which are claimed to be

held in other rights and capacities.

C. Accounts for Which an Insured Depository Institution Acts as an

Agent, Nominee, Guardian, Custodian or Conservator

Another technical amendment concerns Sec. 330.6(a) of the FDIC's

regulations (12 CFR 330.6(a)), which governs the insurance coverage

provided for agency or fiduciary accounts. Section 330.6(a) currently

indicates that funds deposited by an insured depository institution

acting in a fiduciary capacity are governed by Sec. 330.10 of the

insurance regulations. However, in May 1993 the FDIC amended

Sec. 330.10, along with several other sections of the insurance

regulations, primarily to implement revisions to the insurance rules

made by section 311 of the Federal Deposit Insurance Corporation

Improvement Act of 1991 (FDICIA, Pub. L. 102-242, 105 Stat. 2236) (58

FR 29952 (May 25, 1993)). One of those required revisions limits,

effective December 19, 1993, the separate insurance formerly applicable

to an account held by an insured depository institution in a fiduciary

capacity to an account held by an insured depository institution as a

trustee of an irrevocable trust. However, the May 1993 amendment simply

revised Sec. 330.10; Sec. 330.6 continued to refer to Sec. 330.10 but

was not revised, stating instead that ``[w]hen such funds are deposited

by an insured depository institution acting in a fiduciary capacity,

the insurance coverage shall be governed by the provisions of

Sec. 330.10 of this part''.

The present technical amendment conforms Sec. 330.6(a) to section

311 of FDICIA. The first sentence of Sec. 330.6(a) states the general

rule--that funds owned by a principal or principals and deposited into

one or more deposit accounts in the name of a fiduciary shall be

insured as if deposited in the name of the principal or principals. The

second sentence implements the FDICIA change by stating that, when such

funds are deposited by an insured depository institution acting as a

trustee of an irrevocable trust, the insurance coverage will be

governed by the provisions of Sec. 330.10.

Like the technical amendment on joint account coverage, this

technical amendment was published for comment as part of the proposed

version of this capital disclosure regulation. 58 FR 64521 (December 8,

1993). The amendment proposed to state clearly, in Sec. 330.6(a), that

only funds deposited by an insured depository institution acting as a

trustee of an irrevocable trust will be eligible for the separate

insurance coverage described in Sec. 330.10. Up until this time,

Sec. 330.6(a) had stated that funds deposited by an insured depository

institution acting in a fiduciary capacity would be insured as provided

by Sec. 330.10, while Sec. 330.10 stated that it pertains only to funds

held by an institution acting as the trustee of an irrevocable trust.

Thus, the amendment merely clarifies the language.

The FDIC received four comments on this technical amendment, all of

which were favorable. Two, however, noted that the proposed regulatory

language for Sec. 330.6(a) seemed to except deposits held by insured

depository institutions acting in a representative capacity from the

general rule that all deposits held by fiduciaries are insured as if

owned by the party represented by the fiduciary. Of course, even

deposits held by insured depository institutions acting in a

representative capacity follow this general rule. Thus, this final rule

includes the proposed amendment to Sec. 330.6(a), as revised to reflect

the suggested clarification.

D. Accounts Held by Depository Institutions in Fiduciary Capacities

The final technical amendment further conforms the FDIC's

regulations to section 311 of FDICIA, by changing the present title of

Sec. 330.10, ``Accounts held by depository institutions in fiduciary

capacities'', to ``Accounts held by a depository institution as the

trustee of an irrevocable trust''. This change conforms Sec. 330.10 to

section 311 of FDICIA and to the rest of Sec. 330.10 itself. Because

the amendment merely makes the title consistent with Sec. 330.10, and

because the text of Sec. 330.10 was itself published for comment (57 FR

49026 (October 29, 1992), it is unnecessary, under the Administrative

Procedure Act, to publish this proposed change for comment. 5 U.S.C.

553(b)(3)(B).

Paperwork Reduction Act

The final rule is intended to reduce uncertainty about whether

employee benefit plan deposits are eligible for ``pass-through''

insurance coverage and to require depository institutions to provide

timely disclosure to employee benefit plan depositors when ``pass-

through'' deposit insurance coverage is no longer available. No

collections of information pursuant to the Paperwork Reduction Act are

contained in the final rule. Consequently, no information has been

submitted to the Office of Management and Budget for review.

The technical amendments do not require any collections of

information pursuant to section 3504(h) of the Paperwork Reduction Act,

44 U.S.C. 3501 et seq. Accordingly, no information has been submitted

to the Office of Management and Budget for review.

Regulatory Flexibility Act

Neither the final rule nor the technical amendments will have a

significant impact on a substantial number of small businesses within

the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

Accordingly, the Act's requirements relating to an initial and final

regulatory flexibility analysis are not applicable.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Banks, Banking, Savings and loan

associations, Trusts and trustees.

The Board of Directors of the Federal Deposit Insurance Corporation

hereby amends Part 330 of title 12 of the Code of Federal Regulations

as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

1. The authority citation for Part 330 continues to read as

follows:

Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q),

1819(Tenth), 1820(f), 1821(a), 1822(c).

2. Section 330.6 is amended by revising paragraph (a) to read as

follows:

Sec. 330.6 Accounts held by an agent, nominee, guardian, custodian or

conservator.

(a) Agency or nominee accounts. Funds owned by a principal or

principals and deposited into one or more deposit accounts in the name

of an agent, custodian or nominee shall be insured to the same extent

as if deposited in the name of the principal(s). When such funds are

deposited by an insured depository institution acting as a trustee of

an irrevocable trust, the insurance coverage [[Page 7710]] shall be

governed by the provisions of Sec. 330.10 of this part.

* * * * *

3. Section 330.7 is amended by revising paragraph (c) to read as

follows:

Sec. 330.7 Joint ownership accounts.

* * * * *

(c) Qualifying joint accounts. (1) A joint deposit account shall be

deemed to be a qualifying joint account, for purposes of this section,

only if:

(i) All co-owners of the funds in the account are natural persons;

and

(ii) Each co-owner has personally signed a deposit account

signature card; and

(iii) Each co-owner possesses withdrawal rights on the same basis.

(2) The requirement of paragraph (c)(1)(ii) of this section shall

not apply to certificates of deposit, to any deposit obligation

evidenced by a negotiable instrument, or to any account maintained by

an agent, nominee, guardian, custodian or conservator on behalf of two

or more persons.

(3) All deposit accounts that satisfy the criteria in paragraph

(c)(1) of this section, and those accounts that come within the

exception provided for in paragraph (c)(2) of this section, shall be

deemed to be jointly owned provided that, in accordance with the

provisions of Sec. 330.4(a) of this part, the FDIC determines that the

deposit account records of the insured depository institution are clear

and unambiguous as to the ownership of the accounts. If the deposit

account records are ambiguous or unclear as to the manner in which the

deposit accounts are owned, then the FDIC may, in its sole discretion,

consider evidence other than the deposit account records of the insured

depository institution for the purpose of establishing the manner in

which the funds are owned. The signatures of two or more persons on the

deposit account signature card or the names of two or more persons on a

certificate of deposit or other deposit instrument shall be conclusive

evidence that the account is a joint account unless the deposit records

as a whole are ambiguous and some other evidence indicates, to the

satisfaction of the FDIC, that there is a contrary ownership capacity.

* * * * *

4. The heading of Sec. 330.10 is revised to read as follows:

Sec. 330.10 Accounts held by a depository institution as the trustee

of an irrevocable trust.

5. Section 330.11 is amended by adding a new paragraph (d) to read

as follows:

Sec. 330.11 Irrevocable trust accounts.

* * * * *

(d) Commingled accounts of bankruptcy trustees. Whenever a

bankruptcy trustee appointed under Title 11 of the United States Code

commingles the funds of various bankruptcy estates in the same account

at an insured depository institution, the funds of each Title 11

bankruptcy estate will be added together and insured for up to

$100,000, separately from the funds of any other such estate.

6. Section 330.12 is amended by revising the heading and

introductory text of paragraph (g), redesignating paragraphs (g)(1),

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

respectively, and adding new paragraphs (g)(1) and (h) to read as

follows:

Sec. 330.12 Retirement and other employee benefit plan accounts.

* * * * *

(g) Definitions of ``depositor'', ``employee benefit plan'',

``employee organizations'' and ``non-contingent interest''. Except as

otherwise indicated in this section, for purposes of this section:

(1) The term depositor means the person(s) administering or

managing an employee benefit plan.

* * * * *

(h) Disclosure of capital status--(1) Disclosure upon request. An

insured depository institution shall, upon request, provide a clear and

conspicuous written notice to any depositor of employee benefit plan

funds of the institution's leverage ratio, Tier 1 risk-based capital

ratio, total risk-based capital ratio and prompt corrective action

(PCA) capital category, as defined in the regulations of the

institution's primary federal regulator, and whether, in the depository

institution's judgment, employee benefit plan deposits made with the

institution, at the time the information is requested, would be

eligible for ``pass-through'' insurance coverage under paragraphs (a)

and (b) of this section. Such notice shall be provided within five

business days after receipt of the request for disclosure.

(2) Disclosure upon opening of an account. (i) An insured

depository institution shall, upon the opening of any account comprised

of employee benefit plan funds, provide a clear and conspicuous written

notice to the depositor consisting of: an accurate explanation of the

requirements for pass-through deposit insurance coverage provided in

paragraphs (a) and (b) of this section; the institution's PCA capital

category; and a determination of whether or not, in the depository

institution's judgment, the funds being deposited are eligible for

``pass-through'' insurance coverage.

(ii) An insured depository institution shall provide the notice

required in paragraph (h)(2)(i) of this section to depositors who have

employee benefit plan deposits with the insured depository institution

on July 1, 1995 that, at the time such deposits were placed with the

insured depository institution, were not eligible for pass-through

insurance coverage under paragraphs (a) and (b) of this section. The

notice shall be provided to the applicable depositors within ten

business days after July 1, 1995.

(3) Disclosure when ``pass-through'' coverage is no longer

available. Whenever new, rolled-over or renewed employee benefit plan

deposits placed with an insured depository institution would no longer

be eligible for ``pass-through'' insurance coverage, the institution

shall provide a clear and conspicuous written notice to all existing

depositors of employee benefit plan funds of its new PCA capital

category, if applicable, and that new, rolled-over or renewed deposits

of employee benefit plan funds made after the applicable date shall not

be eligible for ``pass-through'' insurance coverage under paragraphs

(a) and (b) of this section. Such written notice shall be provided

within 10 business days after the institution receives notice or is

deemed to have notice that it is no longer permitted to accept brokered

deposits under section 29 of the Act and the institution no longer

meets the requirements in paragraph (b) of this section.

(4) Definition of ``employee benefit plan''. For purposes of this

paragraph, the term employee benefit plan has the same meaning as

provided under paragraph (g)(2) of this section but also includes any

eligible deferred compensation plans described in section 457 of the

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

By order of the Board of Directors.

Dated at Washington, D.C., this 31st day of January, 1995.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Acting Executive Secretary.

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

BILLING CODE 6714-01-P