Simplification of Deposit Insurance Rules

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 330

RIN 3064-AB73

Simplification of Deposit Insurance Rules

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is revising its deposit insurance regulations by

adopting three substantive amendments and numerous technical

amendments. The purpose of these amendments is to increase the public's

understanding of the regulations through simplification. The

substantive amendments in the final rule will: Relax the FDIC's

recordkeeping requirements for certain agency or fiduciary accounts;

create a six-month ``grace period'' following the death of a depositor

for the restructuring of accounts; and clarify the insurance coverage

of revocable trust accounts when an account is held by the depositor

pursuant to a formal ``living trust'' agreement.

EFFECTIVE DATE: July 1, 1998.

FOR FURTHER INFORMATION CONTACT: Christopher L. Hencke, Counsel, (202)

898-8839, or Joseph A. DiNuzzo, Senior Counsel, (202) 898-7349, Legal

Division, Federal Deposit Insurance Corporation, 550 17th Street, N.W.,

Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. Background

Simplifying the deposit insurance regulations is one of the FDIC's

corporate operating projects under its Strategic Plan. The purpose is

to promote public understanding of deposit insurance and, particularly,

to clarify and illustrate rules that have been misunderstood. The

public's misunderstanding of certain of the rules has been reflected in

the large volume of letters and phone calls received by the FDIC

concerning deposit insurance. Also, this simplification effort is in

furtherance of section 303(a) of the Riegle Community Development and

Regulatory Improvement Act of 1994, 12 U.S.C. 4803(a), requiring the

federal banking agencies to reduce regulatory burden and improve

efficiency.

The FDIC's insurance regulations are codified at 12 CFR part 330.

In recent years, the FDIC has revised these regulations twice (not

including a third revision that dealt only with certain disclosure

requirements). In 1980, following the termination of the Federal

Savings and Loan Insurance Corporation (FSLIC), the FDIC issued uniform

regulations applicable to deposits in all insured depository

institutions including those previously insured by the FSLIC. The

issuance of uniform regulations was mandated by the Financial

Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)

(Pub. L. 101-73 (1989)). In 1993, the FDIC revised the rules applicable

to the deposits of employee benefit plans and retirement plans. This

revision was mandated by the Federal Deposit Insurance Corporation

Improvement Act of 1991 (FDICIA) (Pub. L. 102-242 (1991)).

Notwithstanding these relatively recent revisions, the Board of

Directors (Board) believes that the final rule is necessary for the

purpose of simplification.

All revisions to the insurance regulations must be consistent with

section 11(a) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C.

1821(a). Section 11(a) provides that deposits maintained by a depositor

in the same capacity and the same right at the same insured depository

institution must be aggregated and insured up to $100,000. The FDI Act

does not define ``depositor'', ``capacity'' or ``right''. Through the

insurance regulations, the FDIC has implemented these terms by

recognizing different categories of accounts based on ownership. Each

type of account is entitled to separate insurance up to the $100,000

limit if it satisfies certain requirements. For example, single

ownership accounts owned by a particular depositor are not added to

qualifying joint accounts partly owned by the same depositor.

The final rule is the product of a process that began in May of

1996. At that time, the FDIC published an Advance Notice of Proposed

Rulemaking (ANPR). See 61 FR 25596 (May 22, 1996). The ANPR was

followed, in May of 1997, by the publication of a proposed rule. See 62

FR 26435 (May 14, 1997). The evolution of the final rule is discussed

in greater detail below.

The final rule does not complete the FDIC's simplification efforts.

As discussed below, the FDIC is still studying other possible revisions

to its

[[Page 25751]]

insurance regulations pertaining to joint accounts and ``payable-on-

death'' accounts.

II. The Proposed Rule

Through the ANPR (61 FR 25596), the FDIC broadly solicited comments

on how the insurance regulations could be simplified. Also, the FDIC

sought comments on a number of specific revisions. The comment period

ended on August 20, 1996. Almost all of the comments (sixty-eight in

number) supported the FDIC's simplification efforts.

The FDIC did not include some of the revisions mentioned in the

ANPR in the proposed rule (62 FR 26435). In particular, the proposed

rule did not include revisions that would: (1) Eliminate the first step

in the two-step process for determining the insurance coverage of joint

accounts under current Sec. 330.7 (new Sec. 330.9); and (2) expand the

list of qualifying beneficiaries for revocable trust accounts under

current Sec. 330.8 (new Sec. 330.10). In publishing the proposed rule,

the FDIC explained that these revisions required additional study.

Before deciding on these revisions, the Board wished to learn more

about the extent to which the revisions would affect the scope of

deposit insurance coverage.

The proposed rule suggested three substantive revisions to the

insurance regulations: (1) Relaxing the recordkeeping rules for

fiduciary accounts; (2) providing a ``grace period'' following the

death of a depositor; and (3) clarifying the operation of the revocable

trust account rules in cases in which an account is held by a depositor

in connection with a ``living trust.'' Each of these revisions is

discussed in detail below.

A. Recordkeeping Rules for Fiduciary Accounts

The FDIC's recordkeeping rules are largely premised on the concept

of ``pass-through'' insurance. If an agent on behalf of a principal

deposits funds at an insured depository institution, the FDIC does not

treat the agent as the owner of the deposit for purposes of the

$100,000 insurance limit. Rather, the FDIC insures the funds to the

principal or actual owner. In other words, the insurance coverage

``passes through'' the agent to the owner. See 12 CFR 330.6 (new

330.7).

The fact that agency accounts are insured on a ``pass-through''

basis does not mean that agency accounts represent a separate category

of ownership or that agency accounts are entitled to insurance up to

$100,000 separate from all other accounts. On the contrary, agency

accounts are subject to aggregation with any other accounts maintained

by or for the principal in the same right and capacity at the same

insured depository institution. For example, funds in an account held

by an agent for a principal, in the principal's single ownership

capacity, will be aggregated with any single ownership accounts held

directly by the principal.

``Pass-through'' insurance as described above is subject to an

important qualification. Under section 12(c) of the FDI Act (12 U.S.C.

1822(c)), the FDIC is not required to recognize as the owner of a

deposit any person whose interest is not disclosed on the records of

the failed depository institution. In other words, in the absence of

adequate disclosure, an account held by an agent is not entitled to

``pass-through'' insurance coverage. The FDIC has implemented section

12(c) by establishing certain recordkeeping rules for accounts held by

agents or fiduciaries.

Under the FDIC's recordkeeping rules, the deposit account records

of the failed depository institution must expressly disclose, by way of

specific references, the existence of any fiduciary relationship

including, but not limited to, relationships involving a trustee,

agent, nominee, guardian, executor or custodian, pursuant to which

funds in an account are deposited and on which a claim for insurance

coverage is based. See 12 CFR 330.4(b)(1) (new 330.5(b)(1)). Assuming

such disclosure, the details of the relationship and the interests of

other parties in the account must be ascertainable either from the

deposit account records of the insured depository institution or from

records maintained, in good faith and in the regular course of

business, by the depositor or by some person or entity that has

undertaken to maintain such records for the depositor. See 12 CFR

330.4(b)(2) (new 330.5(b)(2)).

The rules quoted above are based upon a basic principle: In paying

insurance, the FDIC is entitled to rely on the account records of the

failed depository institution. If the FDIC, in its sole discretion,

determines that the deposit account records of the insured depository

institution are clear and unambiguous, those records are considered

binding on the depositor, and no other records shall be considered, as

to the manner in which the funds are owned. See 12 CFR 330.4(a)(1). In

other words, under the current regulations, the account records must be

unclear or ambiguous before the FDIC will consider evidence outside of

the account records in determining the ownership of an account.

The FDIC's strict reliance on the account records serves multiple

purposes. First, it enables the FDIC to estimate the amount of insured

deposits when considering resolution options for a failing insured

depository institution. Speed and accuracy in accounting for the assets

and liabilities of the failing institution are critical when the

institution is resolved through a purchase and assumption agreement

(i.e., a transfer of some assets and liabilities, including the deposit

liabilities, to a healthy depository institution). Second, strict

reliance on the account records enables the FDIC to pay insurance very

quickly following the failure of an institution. If the FDIC could not

rely on the records, depositors would not receive their insurance until

the FDIC had completed a lengthy investigation as to the actual legal

ownership of the accounts. Third, strict reliance on the records

discourages the making of fraudulent claims for insurance. If

depositors were not bound by the account records, some depositors over

the $100,000 limit might be tempted to fabricate outside evidence (such

as agency or trust agreements) as to the actual ownership of their

accounts.

For the reasons stated above, the insurance regulations

purposefully restrict the FDIC's ability to consider outside evidence

(i.e., evidence outside of the deposit account records) in determining

the ownership of an account for insurance purposes. Again, under the

current or unrevised regulations, outside evidence will not be

considered unless the FDIC determines--in its own discretion--that the

account records are unclear or ambiguous.

At times, the restrictions on the FDIC's ability to consider

outside evidence has produced results that could be viewed as severe.

At one failed bank, for example, a deposit account was held by a title

company as agent for customers who were buying or selling houses.

Because the bank's deposit account records did not indicate the agency

nature of the account, the funds were deemed to be owned by the title

company and insured to a limit of $100,000. The funds were not insured

up to $100,000 on a ``pass-through'' basis for the interest of each

customer (in aggregation with any other account(s) that each customer

might have held at the same bank). This result was severe because the

name of the agent by itself was suggestive of a possible agency or

fiduciary relationship.

The proposed rule addressed the problem by adding a provision to

the

[[Page 25752]]

regulations that would relax the FDIC's recordkeeping requirements in

certain situations. Specifically, the proposed rule provided that the

FDIC would be free to consider outside evidence of ownership if the

titling of the deposit account and the underlying deposit account

records sufficiently indicate the existence of a fiduciary

relationship. Examples of accounts covered by the proposed rule would

be accounts in the name of escrow agents or title companies.

In requesting comments on this part of the proposed rule, the FDIC

also requested comments on the recordkeeping requirements applicable to

accounts held by multiple levels of fiduciaries. See 12 CFR 330.4(b)(3)

(new 330.5(b)(3)). These requirements specify two methods for

disclosing such multi-tiered relationships. Under the second method,

according to the current regulations, the deposit account records must

state that the depositor is acting in a fiduciary capacity on behalf of

certain persons or entities who may, in turn, be acting in a fiduciary

capacity for others. See 12 CFR 330.4(b)(3)(ii)(A). In complying with

this requirement, fiduciaries have opened accounts with awkward and

unwieldy account titles. To alleviate this problem, the FDIC proposed

to require--under the second method--that the account records merely

indicate that there are multiple levels of fiduciary relationships.

B. ``Grace Period'' Following the Death of a Depositor

The second substantive revision included in the proposed rule was

the creation of a ``grace period'' following the death of a depositor.

Under the deposit contract or applicable state law, the death of a

depositor may result in an immediate and automatic change in ownership

of the deposit account. This is significant for insurance purposes

because deposit insurance is based primarily on legal ownership. Though

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

determining deposit insurance coverage, the regulations provide that

ownership under state law of deposited funds is a necessary condition

for deposit insurance. See 12 CFR 330.3(h) (new 330.3(h)).

Under the current regulations, the FDIC presumes--for certain types

of accounts--that the ownership of the account changes immediately upon

the death of a depositor. This presumption is applied to accounts

characterized by survivorship rights, i.e., joint accounts and

revocable trust or ``payable-on-death'' (POD) accounts. For the sake of

uniformity, the FDIC applies this presumption irrespective of the laws

of the state in which the depository institution is located. In some

cases, following the death of a depositor, the presumption will cause a

dramatic decrease in deposit insurance coverage.

For example, a husband and wife could hold a joint account, a joint

revocable trust (or POD) account for the benefit of their child, and

two individual accounts in their respective names. Assuming the

satisfaction of all applicable requirements, these four accounts could

be insured up to a total of $500,000. Upon the death of either the

husband or wife, however, the surviving spouse would become the sole

owner of the joint account and the joint revocable trust account. Under

the FDIC's established interpretation of the current regulations, the

joint account would be transformed into a single ownership account

subject to aggregation with the surviving spouse's individual account.

(The single ownership account in the name of the deceased spouse would

continue to be insured separately from the other accounts.) Moreover,

the maximum coverage of the joint revocable trust account would be

reduced from $200,000 to $100,000 (i.e., $100,000 for each combination

of settlors and qualifying beneficiaries). In total, the maximum

coverage of the four accounts would be reduced--immediately upon the

death of the husband or wife--from $500,000 to $300,000.

If the depository institution failed before the surviving spouse

restructured the accounts or transferred funds to another institution,

in the example above, the loss to the surviving spouse could be very

substantial. (For the single ownership account in the name of the

deceased spouse, the insurance money would be paid to the trustee of

the decedent's estate.)

The interpretation described above has been criticized as

``penalizing'' the survivors of deceased depositors. Some people have

complained that the immediate restructuring of an account upon the

death of a depositor may not be practicable. For example, in order to

restructure an account, the survivor of an accountholder may be

required to present proof of the accountholder's death to the

depository institution. Also, during a time of grief, the survivors may

not view the restructuring of bank accounts as a matter of high

priority.

Another criticism of the FDIC's interpretation of the current

regulations is that some state laws might not provide for the immediate

change in ownership presumed by the FDIC.

In response to the criticisms and concerns described above, the

proposed rule created a ``grace period'' of six months following the

death of a depositor. During this ``grace period,'' the insurance

coverage of the decedent's accounts would not change unless the

accounts were restructured by those authorized to take such action.

Because the six-month ``grace period'' was not intended to reduce

coverage, the proposed rule also provided that the ``grace period''

would not be applied if its application would result in a decrease in

deposit insurance coverage.

The six-month ``grace period'' prescribed by the proposed rule was

consistent with a policy applied by the former FSLIC. The rationale of

that policy was to ``lessen hardship.''

In publishing the proposed rule, the FDIC specifically requested

comments as to whether six months was the appropriate length of time

for the ``grace period.''

C. The Insurance Coverage of ``Living Trust'' Accounts

The third substantive revision included in the proposed rule was

the insertion into the regulations of language clarifying the insurance

coverage of accounts held pursuant to ``living trust'' agreements. A

``living trust'' is a formal revocable trust in which the owner retains

control of the trust assets during his or her lifetime. Upon the

owner's death, the trust generally becomes irrevocable.

As a type of revocable trust account, a ``living trust'' account is

subject to the rules prescribed by Sec. 330.8 (new Sec. 330.10).

Subject to the requirements discussed below, that section of the

regulations provides that funds deposited in a revocable trust account

(also referred to as a ``payable-on-death'' or ``POD'' account or

``Totten trust'' account) shall be insured up to $100,000 for the

prospective interest of each of the owner's designated beneficiaries.

Such insurance is separate from the insurance coverage afforded to any

single ownership accounts held by the owner or beneficiary at the same

insured depository institution. The revocable trust account will not be

entitled to such separate insurance, however, unless the account

satisfies certain requirements. First, each of the designated

beneficiaries must be the owner's spouse, child or grandchild. Second,

the beneficiaries must be specifically named (i.e., named by name) in

the account records of the depository institution. Third, the title of

the account must include a term such as ``in trust for'' or ``payable-

on-death to'' (or any acronym therefor). Fourth, the revocable trust

agreement must provide unequivocally that the funds shall belong to the

designated beneficiaries

[[Page 25753]]

upon the death of the owner. See 12 CFR 330.8(a) (new 330.10(a)).

In many cases, the trust agreement is simply the signature card for

the account. Generally, in these cases, the fourth requirement above

does not present a problem because the signature card will not include

any conditions upon the interests of the designated beneficiaries. In

other words, the signature card--in simple language--will provide that

the funds shall belong to the beneficiaries upon the death of the

owner. In contrast, most formal ``living trust'' agreements provide

that the funds might belong to the beneficiaries depending upon various

conditions. The FDIC refers to such conditions as ``defeating

contingencies'' if they create the possibility that the beneficiaries

or the estate or heirs of the beneficiaries will never receive the

funds following the death of the owner. In the presence of a

``defeating contingency,'' the revocable trust account will not be

entitled to separate insurance coverage under Sec. 330.8 (new

Sec. 330.10). Rather, the account will be aggregated with any single

ownership accounts held by the owner at the same insured depository

institution.

The subject of ``defeating contingencies'' is explained at length

in FDIC Advisory Opinion 94-32 (May 18, 1994). That advisory opinion is

entitled ``Guidelines for Insurance Coverage of Revocable Trust

Accounts (Including `Living Trust' Accounts).'' Though this advisory

opinion is available upon request, the FDIC continues to receive

numerous inquiries regarding the insurance coverage of ``living trust''

accounts. Moreover, even people who have read the Guidelines often

remain confused about the coverage of such accounts.

In response to the public's confusion, the proposed rule inserted

clarifying language into the regulations. Specifically, the proposed

rule stated that the presence of a ``defeating contingency'' in a

``living trust'' agreement would prevent the account from receiving

separate insurance coverage (i.e., separate from any single ownership

accounts held by the owner at the same insured depository institution).

III. The Final Rule

The FDIC received twenty-six written comments on the proposed rule.

Most of the comments were submitted by depository institutions or their

holding companies. Several comments were submitted by bankers'

associations; several others were submitted by financial services

companies. The FDIC also received a small number of comments from

individuals and one comment from a building company. The comments are

discussed below as they relate to the various components of the final

rule.

A. Recordkeeping Rules for Fiduciary Accounts

Sixteen commenters addressed the proposed relaxation of the FDIC's

recordkeeping requirements for agency or fiduciary accounts. All of the

commenters expressed support for the proposed rule but some also

expressed reservations. The concern expressed by some commenters was

that the proposed rule might impose additional recordkeeping

obligations or other regulatory burdens on insured depository

institutions. The FDIC does not intend to create any such additional

burdens. The proposed rule was directed at the FDIC itself and not at

depository institutions. As previously explained, the proposed rule

granted greater flexibility to the FDIC in considering outside evidence

(i.e., evidence other than the deposit account records) in determining

the ownership of an account. Specifically, the proposed rule provided

that the FDIC would be free to consider outside evidence if the FDIC

determined, in its sole discretion, that the titling of the account and

the underlying deposit account records sufficiently indicate the

existence of a fiduciary relationship. Examples are accounts in the

names of escrow agents, title companies or entities (or nominees of

such entities) whose primary business is to hold--for safekeeping

reasons--deposits of others.

The Board has decided to adopt, in the final rule, the proposed

revision to its recordkeeping requirements. As revised, these

requirements will be codified at Sec. 330.5. The revised requirements

will increase the FDIC's ability to pay insurance to the real owners of

some deposits without undercutting the general rule that unambiguous

deposit account records of a failed depository institution are binding

on depositors.

Also, the final rule includes two revisions to the recordkeeping

requirements applicable to accounts held by multiple levels of

fiduciaries. As revised, these requirements will be codified at

paragraph (b)(3) of Sec. 330.5. First, the FDIC has changed the

regulation to clarify that there are two and not three methods of

satisfying these recordkeeping requirements. Second, in connection with

the second method of satisfying the requirements, the FDIC has removed

the necessity of stating in the account records that the depositor is

acting in a fiduciary capacity on behalf of certain persons or entities

who may, in turn, be acting in a fiduciary capacity for others.

Instead, the deposit account records must expressly indicate that there

are multiple levels of fiduciary relationships. The FDIC has made this

change in recognition of the fact that fiduciaries have been placing

the required information in the titles of deposit accounts. As a result

of this revision, the titles of multi-tiered fiduciary accounts should

be less unwieldy. Several commenters expressed support for this

provision.

B. ``Grace Period'' Following the Death of a Depositor

Nineteen commenters addressed the proposed creation of a six-month

``grace period'' following the death of a depositor. As previously

explained, this ``grace period'' primarily would affect the insurance

coverage of deposit accounts with survivorship rights (i.e., joint

accounts and revocable trust or ``payable-on-death'' accounts). During

this ``grace period,'' the insurance coverage of such accounts would

not change unless the accounts are restructured by those authorized to

take such action. The FDIC would apply the ``grace period'' only if its

application would increase rather than decrease deposit insurance

coverage.

Only one commenter opposed the creation of a ``grace period.'' That

commenter stated that deposit insurance should be based on the

ownership of accounts. If ownership changes upon the death of a

depositor, in the opinion of this commenter, the insurance coverage

also should change. Another commenter did not oppose a ``grace period''

but expressed concern that it would create additional recordkeeping

obligations on the depository institution. A third commenter supported

a ``grace period'' but favored a ninety-day period as opposed to a six-

month period. With the exceptions noted above, the commenters supported

the proposed rule.

The Board has decided to adopt the proposed creation of a six-month

``grace period.'' The rule will be codified at paragraph (j) of

Sec. 330.3. The FDIC believes that the ``grace period'' is consistent

with the general principle that insurance coverage is based on

ownership but also based on the satisfaction of recordkeeping

requirements. Following the death of a depositor, the actual ownership

of an account will not be reflected by the account records unless the

account is restructured. For example, a joint account immediately

following the death of one of two co-owners will

[[Page 25754]]

appear to remain a joint account. By themselves, the account records

will not indicate that the account is a single ownership account until

the account has been restructured by the survivor. The FDIC's strict

reliance on ownership, under these circumstances, contrasts with the

FDIC's general reliance on the account records.

The FDIC believes that a six-month ``grace period'' will create an

equitable balance between ownership and recordkeeping in cases

involving deceased depositors. Also, the FDIC does not believe that the

``grace period'' will create any recordkeeping burdens on the

depository institution because the ``grace period'' is directed solely

at the FDIC itself and the survivors of deceased depositors. The FDIC

would apply the ``grace period'' only after the depository institution

had failed.

In the case of a revocable trust account, the ``grace period'' will

be triggered by the death of the owner but not by the death of a

beneficiary. Similarly, in the case of an irrevocable trust account,

the ``grace period'' will be triggered by the death of the legal owner

or settlor but not by the death of a beneficiary. The death of the

settlor may or may not be significant under the terms of the

irrevocable trust agreement.

Under many ``living trust'' agreements (discussed in greater detail

below), a revocable trust becomes irrevocable upon the death of the

owner. Through the operation of the ``grace period,'' such ``living

trust'' accounts that qualify as revocable trust accounts for insurance

purposes could be insured up to six months as revocable trust

accounts--rather than irrevocable trust accounts--notwithstanding the

death of the owner.

As mentioned above, only one commenter thought that six months was

not the appropriate length of time for the ``grace period.'' That

commenter favored a period of ninety days. As noted by other

commenters, however, a six-month period is consistent with the six-

month period of ``separate insurance'' following the assumption of the

deposits of one insured depository institution by another insured

depository institution (e.g., a merger). See 12 U.S.C. 1818(q). The

FDIC agrees with the majority of the commenters that a period of six

months is reasonable.

C. The Insurance Coverage of ``Living Trust'' Accounts

Twelve commenters addressed the proposed insertion into the

regulations of language clarifying the insurance coverage of revocable

trust accounts held pursuant to ``living trust'' agreements. As

previously explained, this language would state expressly that the

presence of a ``defeating contingency'' in the ``living trust''

agreement would prevent the account from receiving separate insurance

coverage (i.e., separate from any single ownership accounts held by the

owner at the same insured depository institution).

Ten commenters supported the proposed revision as a means of

reducing depositors' confusion regarding the coverage of such accounts.

The other two commenters did not oppose the insertion of clarifying

language into the regulations but urged the FDIC to take stronger

measures. Specifically, they urged the FDIC to abolish the concept of

``defeating contingencies'' altogether so that a ``living trust''

account would be entitled to separate insurance coverage irrespective

of any such contingencies. The approach recommended by these commenters

would represent an abrupt departure from the FDIC's established

interpretation of the regulations. See FDIC Advisory Opinion 94-32 (May

18, 1994), entitled ``Guidelines for Insurance Coverage of Revocable

Trust Accounts (Including `Living Trust' Accounts).'' Though this

approach would remove one source of confusion regarding the operation

of the insurance regulations, the recommended approach could create

other problems. For example, an owner's ``living trust'' agreement with

various contingencies could specify that one qualifying beneficiary

could assume ownership of the trust funds under one set of

circumstances but that two qualifying beneficiaries (or no qualifying

beneficiaries) could assume ownership of the funds under another set of

circumstances. Following the failure of the depository institution, the

FDIC would be faced with the problem of deciding whether the maximum

separate insurance coverage of the account is $100,000 (one qualifying

beneficiary) or $200,000 (two qualifying beneficiaries).

At this time, the FDIC is not prepared to abandon its long-standing

interpretation of its regulations regarding the insurance coverage of

``living trust'' accounts. As a means of reducing some of the confusion

surrounding these accounts, however, the Board has adopted--in the

final rule--the proposed clarifying language. This language will be

codified at paragraph (f) of Sec. 330.10.

IV. Comments on Other Aspects of the Proposed Rule

In addition to addressing the three substantive revisions discussed

above, some commenters addressed other aspects of the proposed rule.

For example, several commenters applauded the insertion into the

regulations of examples. Another commenter criticized the renumbering

of the sections. Specifically, this commenter stated that the

renumbering of the sections will affect the accuracy of training

materials. Though this concern is understandable, the FDIC believes

that renumbering is necessary as a means of increasing depositors'

understanding of certain rules. For example, the placement of current

paragraph (g) of Sec. 330.3 in new Sec. 330.4 will highlight this rule

governing the continuation of separate deposit insurance after merger

of insured depository institutions.

A number of commenters addressed the revisions in the ANPR that

were not included in the proposed rule. Notably, several voiced

disappointment that the FDIC had not included in the proposed rule

revisions to the joint account and POD account rules. They emphasized

that the current joint account rules, in particular, are very confusing

to both the industry and the public. The Board is mindful of these

comments and has instructed the staff to continue studying the policy,

economic and other implications of amending the joint account and POD

account rules. If the Board determines that such amendments are

warranted, it will authorize the issuance of a proposed rule to obtain

public comment on specific changes to those rules.

A comment regarding the insurance coverage of annuity contract

accounts is addressed below in connection with new Sec. 330.8.

V. Section-by-Section Discussion of the Final Rule

Section 330.1--Definitions

This section has been expanded to include some definitions

currently placed in other sections of part 330. Also, ``Corporation''

has been defined as the FDIC.

Section 330.2--Purpose

This section has been reduced by eliminating a narrative

description of the FDIC's authority to issue deposit insurance

regulations. This information is unnecessary.

Section 330.3--General principles

This section has been amended in several ways. First, examples have

been added to illustrate some of the general principles. Second, in

recognition of its importance, current paragraph (g) of Sec. 330.3 has

been moved from this

[[Page 25755]]

section to new Sec. 330.4 dealing with the continuation of separate

deposit insurance after merger of insured depository institutions.

Third, current Sec. 330.13 has been added to this section as new

paragraph (g) dealing with bank investment contracts. Fourth, a new

provision has been added to provide the survivors of deceased

depositors with a six-month ``grace period'' for the restructuring of

accounts. The provision is new paragraph (j). It is discussed in detail

above.

Section 330.4--Continuation of separate deposit insurance after merger

of insured depository institutions

This is a new section composed of the provisions in current

paragraph (g) of Sec. 330.3. It addresses the deposit insurance

implications of bank mergers and acquisitions. The placement of the

rule in a separate section of the regulations should make the rule more

accessible.

Section 330.5--Recognition of deposit ownership and recordkeeping

requirements

This section is current Sec. 330.4 with two substantive amendments.

First, the FDIC's recordkeeping requirements have been amended by

adding an exception to the general rule that the deposit account

records of a depository institution must expressly disclose the

existence of a fiduciary relationship in order for the FDIC to

recognize the fiduciary nature of the account. The exception provides

that the general requirement would not apply if the FDIC determines, in

its sole discretion, that the titling of the account and the underlying

deposit account records of the depository institution indicate the

existence of a fiduciary relationship. The section specifies that the

exception might apply, for example, where the deposit account title or

records indicate that the account is held by an escrow agent, title

company, or an entity (or its agent or nominee) whose business is to

hold, for safekeeping reasons, deposits for others. Second, the

recordkeeping requirements for accounts held pursuant to multi-tiered

fiduciary relationships (current paragraph (b)(3) of Sec. 330.3 and new

paragraph (b)(3) of Sec. 330.5) have been modified so that the titles

of such accounts can be less unwieldy. These revisions are discussed

above.

Section 330.6--Single ownership accounts

This section is current Sec. 330.5. The definition of a ``sole

proprietorship'' has been moved from this section to new Sec. 330.1.

Also, in the section dealing with a decedent's account, a cross-

reference has been added to new paragraph (j) of Sec. 330.3. The latter

provides a six-month ``grace period'' for the restructuring of accounts

following the death of a depositor.

Section 330.7--Accounts held by an agent, nominee, guardian, custodian

or conservator

This section is current Sec. 330.6. The provision on mortgage

servicing accounts has been clarified to indicate that such accounts

are not entitled to separate insurance. Rather, they are insured as

custodial or agency accounts subject to aggregation with other accounts

held by the owner at the same insured depository institution. Also, the

provisions on annuity contract accounts have been moved from this

section to new Sec. 330.8.

Section 330.8--Annuity contract accounts

This is a new section composed of the provisions in current

paragraph (f) of Sec. 330.6. Under this section, funds held by an

insurance company for the sole purpose of funding life insurance or

annuity contracts are insured up to $100,000 per annuitant if certain

requirements are satisfied. The FDIC is placing this rule in a separate

section of the regulations--rather than keeping the rule in the section

dealing with the ``pass-through'' coverage of agency accounts--because

annuity contract accounts represent a separate category of insurance.

Also, in stating that such accounts shall be insured separately in the

amount of up to $100,000 per annuitant, the FDIC is adding the word

``separately.''

One commenter objected to the addition of the word ``separately.''

In the opinion of this commenter, the addition of this word would

result in a windfall for insurance companies by creating a new category

of insured deposits.

Subject to the requirements in the regulation, the FDIC's long-

standing staff position is that annuity contract accounts represent a

separate category of insured deposits. In other words, the revision

does not create a new category of insured deposits but simply clarifies

the existing coverage of such accounts. The need for such clarification

is emphasized by the comment.

While adding the word ``separately,'' the FDIC has removed the

phrase ``different right and capacity.'' The phrase is unnecessary and

confusing.

Section 330.9--Joint ownership accounts

This section is current Sec. 330.7. Though it has not been changed

substantively, the section has been clarified through the addition of

several examples.

Section 330.10--Revocable trust accounts

This section is current Sec. 330.8. For the purpose of

clarification, the section has been rephrased and examples have been

added. Also, a paragraph has been added to clarify the insurance

coverage of revocable trust accounts held pursuant to formal ``living

trust'' agreements. The paragraph states specifically that the presence

of a ``defeating contingency'' in the trust agreement would prevent a

beneficiary's interest from receiving separate insurance under this

section. The addition of this new paragraph is explained in detail

above.

Section 330.11--Accounts of a corporation, partnership or

unincorporated association

This section is current Sec. 330.9. The definition of ``independent

activity'' has been moved from this section to Sec. 330.1.

Section 330.12--Accounts held by a depository institution as the

trustee of an irrevocable trust

This section is current Sec. 330.10. The modifications are slight

and not substantive.

Section 330.13--Irrevocable trust accounts

This section is current Sec. 330.11. The definitions of ``trust

interest'' and ``non-contingent trust interest'' have been moved from

this section to Sec. 330.1.

Section 330.14--Retirement and other employee benefit plan accounts

This section is current Sec. 330.12. It is unchanged except for the

deletion of current paragraph (h)(2)(ii) of Sec. 330.12, which required

a notice to certain depositors within ten business days after July 1,

1995. That provision is obsolete.

Section 330.15--Public unit accounts

This section is current Sec. 330.14. It is essentially unchanged.

Section 330.16--Effective dates

Changes have been made to this section to indicate that the

designated effective dates apply to former changes to part 330. The

FDIC has retained this information in part 330 because the effective

dates might be relevant in connection with time deposits issued prior

to December 19, 1991, until the maturity date of such deposits.

In addition to the changes explained above, two sections have been

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eliminated by the final rule. First, current Sec. 330.13 (``Bank

investment contracts'') has been reduced and moved to new paragraph (g)

of Sec. 330.3. Second, current Sec. 330.15 (``Notice to depositors'')

has been removed altogether as unnecessary.

VI. Paperwork Reduction Act

No collection of information pursuant to the Paperwork Reduction

Act is contained in the final rule. Consequently, no information has

been submitted to the Office of Management and Budget for review.

VII. Regulatory Flexibility Act

The Board of Directors certifies that the final rule will not have

a significant economic impact on a substantial number of small

businesses within the meaning of the Regulatory Flexibility Act (5

U.S.C. 601 et seq.). The revisions to the deposit insurance rules will

impose no new reporting, recordkeeping or other compliance requirements

upon those entities. Accordingly, the Act's requirements relating to an

initial and final regulatory flexibility analysis are not applicable.

VIII. Small Business Regulatory Enforcement Fairness Act

The Office of Management and Budget has determined that the final

rule is not a ``major rule'' within the meaning of the relevant

sections of the Small Business Regulatory Enforcement Fairness 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 final rule may be reviewed. The effective

date is July 1, 1998.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Banks, Banking, Reporting and recordkeeping

requirements, Savings and loan associations, Trusts and trustees.

The Board of Directors of the Federal Deposit Insurance Corporation

hereby revises part 330 of chapter III of title 12 of the Code of

Federal Regulations to read as follows:

PART 330--DEPOSIT INSURANCE COVERAGE

Sec.

330.1 Definitions.

330.2 Purpose.

330.3 General principles.

330.4 Continuation of separate deposit insurance after merger of

insured depository institutions.

330.5 Recognition of deposit ownership and recordkeeping

requirements.

330.6 Single ownership accounts.

330.7 Accounts held by an agent, nominee, guardian, custodian or

conservator.

330.8 Annuity contract accounts.

330.9 Joint ownership accounts.

330.10 Revocable trust accounts.

330.11 Accounts of a corporation, partnership or unincorporated

association.

330.12 Accounts held by a depository institution as the trustee of

an irrevocable trust.

330.13 Irrevocable trust accounts.

330.14 Retirement and other employee benefit plan accounts.

330.15 Public unit accounts.

330.16 Effective dates.

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

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

Sec. 330.1 Definitions.

For the purposes of this part:

(a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et

seq.).

(b) Corporation means the Federal Deposit Insurance Corporation.

(c) Default has the same meaning as provided under section 3(x) of

the Act (12 U.S.C. 1813(x)).

(d) Deposit has the same meaning as provided under section 3(l) of

the Act (12 U.S.C. 1813(l)).

(e) Deposit account records means account ledgers, signature cards,

certificates of deposit, passbooks, corporate resolutions authorizing

accounts in the possession of the insured depository institution and

other books and records of the insured depository institution,

including records maintained by computer, which relate to the insured

depository institution's deposit taking function, but does not mean

account statements, deposit slips, items deposited or cancelled checks.

(f) FDIC means the Federal Deposit Insurance Corporation.

(g) Independent activity. A corporation, partnership or

unincorporated association shall be deemed to be engaged in an

``independent activity'' if the entity is operated primarily for some

purpose other than to increase deposit insurance.

(h) Insured branch means a branch of a foreign bank any deposits in

which are insured in accordance with the provisions of the Act.

(i) Insured deposit has the same meaning as that provided under

section 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).

(j) Insured depository institution is any depository institution

whose deposits are insured pursuant to the Act, including a foreign

bank having an insured branch.

(k) Natural person means a human being.

(l) Non-contingent trust interest means a trust interest capable of

determination without evaluation of contingencies except for those

covered by the present worth tables and rules of calculation for their

use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations

(26 CFR 20.2031-7) or any similar present worth or life expectancy

tables which may be adopted by the Internal Revenue Service.

(m) Sole proprietorship means a form of business in which one

person owns all the assets of the business, in contrast to a

partnership or corporation.

(n) Trust estate means the determinable and beneficial interest of

a beneficiary or principal in trust funds but does not include the

beneficial interest of an heir or devisee in a decedent's estate.

(o) Trust funds means funds held by an insured depository

institution as trustee pursuant to any irrevocable trust established

pursuant to any statute or written trust agreement.

(p) Trust interest means the interest of a beneficiary in an

irrevocable express trust (other than an employee benefit plan) created

either by written trust instrument or by statute, but does not include

any interest retained by the settlor.

Sec. 330.2 Purpose.

The purpose of this part is to clarify the rules and define the

terms necessary to afford deposit insurance coverage under the Act and

provide rules for the recognition of deposit ownership in various

circumstances.

Sec. 330.3 General principles.

(a) Ownership rights and capacities. The insurance coverage

provided by the Act and this part is based upon the ownership rights

and capacities in which deposit accounts are maintained at insured

depository institutions. All deposits in an insured depository

institution which are maintained in the same right and capacity (by or

for the benefit of a particular depositor or depositors) shall be added

together and insured in accordance with this part. Deposits maintained

in different rights and capacities, as recognized under this part,

shall be insured separately from each other.

(Example: Single ownership accounts and joint ownership accounts

are insured separately from each other.)

(b) Deposits maintained in separate insured depository institutions

or in separate branches of the same insured depository institution. Any

deposit accounts maintained by a depositor at one insured depository

institution are insured separately from, and without regard to, any

deposit accounts that the same depositor maintains at any other

[[Page 25757]]

separately chartered and insured depository institution, even if two or

more separately chartered and insured depository institutions are

affiliated through common ownership.

(Example: Deposits held by the same individual at two different

banks owned by the same bank holding company would be insured

separately, per bank.)

The deposit accounts of a depositor maintained in the same right

and capacity at different branches or offices of the same insured

depository institution are not separately insured; rather they shall be

added together and insured in accordance with this part.

(c) Deposits maintained by foreigners and deposits denominated in

foreign currency. The availability of deposit insurance is not limited

to citizens and residents of the United States. Any person or entity

that maintains deposits in an insured depository institution is

entitled to the deposit insurance provided by the Act and this part. In

addition, deposits denominated in a foreign currency shall be insured

in accordance with this part. Deposit insurance for such deposits shall

be determined and paid in the amount of United States dollars that is

equivalent in value to the amount of the deposit denominated in the

foreign currency as of close of business on the date of default of the

insured depository institution. The exchange rates to be used for such

conversions are the 12 PM rates (the ``noon buying rates for cable

transfers'') quoted for major currencies by the Federal Reserve Bank of

New York on the date of default of the insured depository institution,

unless the deposit agreement specifies that some other widely

recognized exchange rates are to be used for all purposes under that

agreement, in which case, the rates so specified shall be used for such

conversions.

(d) Deposits in insured branches of foreign banks. Deposits in an

insured branch of a foreign bank which are payable by contract in the

United States shall be insured in accordance with this part, except

that any deposits to the credit of the foreign bank, or any office,

branch, agency or any wholly owned subsidiary of the foreign bank,

shall not be insured. All deposits held by a depositor in the same

right and capacity in more than one insured branch of the same foreign

bank shall be added together for the purpose of determining the amount

of deposit insurance.

(e) Deposits payable solely outside of the United States and

certain other locations. Any obligation of an insured depository

institution which is payable solely at an office of such institution

located outside the States of the United States, the District of

Columbia, Puerto Rico, Guam, the Commonwealth of the Northern Mariana

Islands, American Samoa, the Trust Territory of the Pacific Islands,

and the Virgin Islands, is not a deposit for the purposes of this part.

(f) International banking facility deposits. An ``international

banking facility time deposit,'' as defined by the Board of Governors

of the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or

in any successor regulation, is not a deposit for the purposes of this

part.

(g) Bank investment contracts. As required by section 11(a)(8) of

the Act (12 U.S.C. 1821(a)(8)), any liability arising under any

investment contract between any insured depository institution and any

employee benefit plan which expressly permits ``benefit responsive

withdrawals or transfers'' (as defined in section 11(a)(8) of the Act)

are not insured deposits for purposes of this part. The term

``substantial penalty or adjustment'' used in section 11(a)(8) of the

Act means, in the case of a deposit having an original term which

exceeds one year, all interest earned on the amount withdrawn from the

date of deposit or for six months, whichever is less; or, in the case

of a deposit having an original term of one year or less, all interest

earned on the amount withdrawn from the date of deposit or three

months, whichever is less.

(h) Application of state or local law to deposit insurance

determinations. In general, deposit insurance is for the benefit of the

owner or owners of funds on deposit. However, 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. Deposit 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.

(i) Determination of the amount of a deposit--(1) General rule. The

amount of a deposit is the balance of principal and interest

unconditionally credited to the deposit account as of the date of

default of the insured depository institution, plus the ascertainable

amount of interest to that date, accrued at the contract rate (or the

anticipated or announced interest or dividend rate), which the insured

depository institution in default would have paid if the deposit had

matured on that date and the insured depository institution had not

failed. In the absence of any such announced or anticipated interest or

dividend rate, the rate for this purpose shall be whatever rate was

paid in the immediately preceding payment period.

(2) Discounted certificates of deposit. The amount of a certificate

of deposit sold by an insured depository institution at a discount from

its face value is its original purchase price plus the amount of

accrued earnings calculated by compounding interest annually at the

rate necessary to increase the original purchase price to the maturity

value over the life of the certificate.

(3) Waiver of minimum requirements. In the case of a deposit with a

fixed payment date, fixed or minimum term, or a qualifying or notice

period that has not expired as of such date, interest thereon to the

date of closing shall be computed according to the terms of the deposit

contract as if interest had been credited and as if the deposit could

have been withdrawn on such date without any penalty or reduction in

the rate of earnings.

(j) Continuation of insurance coverage following the death of a

deposit owner. The death of a deposit owner shall not affect the

insurance coverage of the deposit for a period of six months following

the owner's death unless the deposit account is restructured. The

operation of this grace period, however, shall not result in a

reduction of coverage. If an account is not restructured within six

months after the owner's death, the insurance shall be provided on the

basis of actual ownership in accordance with the provisions of

Sec. 330.5(a)(1).

Sec. 330.4 Continuation of separate deposit insurance after merger of

insured depository institutions.

Whenever the liabilities of one or more insured depository

institutions for deposits are assumed by another insured depository

institution, whether by merger, consolidation, other statutory

assumption or contract:

(a) The insured status of the institutions whose liabilities have

been assumed terminates on the date of receipt by the FDIC of

satisfactory evidence of the assumption; and

(b) The separate insurance of deposits assumed continues for six

months from the date the assumption takes effect or, in the case of a

time deposit, the earliest maturity date after the six-month period. In

the case of time deposits which mature within six months of the date

the deposits are assumed and which are renewed at the same dollar

amount (either with or without accrued

[[Page 25758]]

interest having been added to the principal amount) and for the same

term as the original deposit, the separate insurance applies to the

renewed deposits until the first maturity date after the six-month

period. Time deposits that mature within six months of the deposit

assumption and that are renewed on any other basis, or that are not

renewed and thereby become demand deposits, are separately insured only

until the end of the six-month period.

Sec. 330.5 Recognition of deposit ownership and recordkeeping

requirements.

(a) Recognition of deposit ownership--(1) Evidence of deposit

ownership. Except as indicated in this paragraph (a)(1) or as provided

in Sec. 330.3(j), in determining the amount of insurance available to

each depositor, the FDIC shall presume that deposited funds are

actually owned in the manner indicated on the deposit account records

of the insured depository institution. If the FDIC, in its sole

discretion, determines that the deposit account records of the insured

depository institution are clear and unambiguous, those records shall

be considered binding on the depositor, and the FDIC shall consider no

other records on the manner in which the funds are owned. If the

deposit account records are ambiguous or unclear on the manner in which

the funds 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. Despite the general requirements of this

paragraph (a)(1), if the FDIC has reason to believe that the insured

depository institution's deposit account records misrepresent the

actual ownership of deposited funds and such misrepresentation would

increase deposit insurance coverage, the FDIC may consider all

available evidence and pay claims for insured deposits on the basis of

the actual rather than the misrepresented ownership.

(2) Recognition of deposit ownership in custodial accounts. In the

case of custodial deposits, the interest of each beneficial owner may

be determined on a fractional or percentage basis. This may be

accomplished in any manner which indicates that where the funds of an

owner are commingled with other funds held in a custodial capacity and

a portion thereof is placed on deposit in one or more insured

depository institutions without allocation, the owner's insured

interest in the deposit in any one insured depository institution would

represent, at any given time, the same fractional share as his or her

share of the total commingled funds.

(b) Recordkeeping requirements--(1) Disclosure of fiduciary

relationships. The ``deposit account records'' (as defined in

Sec. 330.1(e)) of an insured depository institution must expressly

disclose, by way of specific references, the existence of any fiduciary

relationship including, but not limited to, relationships involving a

trustee, agent, nominee, guardian, executor or custodian, pursuant to

which funds in an account are deposited and on which a claim for

insurance coverage is based. No claim for insurance coverage based on a

fiduciary relationship will be recognized if no fiduciary relationship

is evident from the deposit account records of the insured depository

institution. The general requirement for the express indication that

the account is held in a fiduciary capacity will not apply, however, in

instances where the FDIC determines, in its sole discretion, that the

titling of the deposit account and the underlying deposit account

records sufficiently indicate the existence of a fiduciary

relationship. This exception may apply, for example, where the deposit

account title or records indicate that the account is held by an escrow

agent, title company or a company whose business is to hold deposits

and securities for others.

(2) Details of fiduciary relationships. If the deposit account

records of an insured depository institution disclose the existence of

a relationship which might provide a basis for additional insurance

(including the exception provided for in paragraph (b)(1) of this

section), the details of the relationship and the interests of other

parties in the account must be ascertainable either from the deposit

account records of the insured depository institution or from records

maintained, in good faith and in the regular course of business, by the

depositor or by some person or entity that has undertaken to maintain

such records for the depositor.

(3) Multi-tiered fiduciary relationships. In deposit accounts where

there are multiple levels of fiduciary relationships, there are two

methods of satisfying paragraphs (b)(1) and (b)(2) of this section to

obtain insurance coverage for the interests of the true beneficial

owners of a deposit account.

(i) One method is to:

(A) Expressly indicate, on the deposit account records of the

insured depository institution, the existence of each and every level

of fiduciary relationships; and

(B) Disclose, at each level, the name(s) and interest(s) of the

person(s) on whose behalf the party at that level is acting.

(ii) An alternative method is to:

(A) Expressly indicate, on the deposit account records of the

insured depository institution, that there are multiple levels of

fiduciary relationships;

(B) Disclose the existence of additional levels of fiduciary

relationships in records, maintained in good faith and in the regular

course of business, by parties at subsequent levels; and

(C) Disclose, at each of the levels, the name(s) and interest(s) of

the person(s) on whose behalf the party at that level is acting. No

person or entity in the chain of parties will be permitted to claim

that they are acting in a fiduciary capacity for others unless the

possible existence of such a relationship is revealed at some previous

level in the chain.

(4) Exceptions to recordkeeping requirements--(i) Deposits

evidenced by negotiable instruments. If any deposit obligation of an

insured depository institution is evidenced by a negotiable certificate

of deposit, negotiable draft, negotiable cashier's or officer's check,

negotiable certified check, negotiable traveler's check, letter of

credit or other negotiable instrument, the FDIC will recognize the

owner of such deposit obligation for all purposes of claim for insured

deposits to the same extent as if his or her name and interest were

disclosed on the records of the insured depository institution;

provided, that the instrument was in fact negotiated to such owner

prior to the date of default of the insured depository institution. The

owner must provide affirmative proof of such negotiation, in a form

satisfactory to the FDIC, to substantiate his or her claim. Receipt of

a negotiable instrument directly from the insured depository

institution in default shall, in no event, be considered a negotiation

of said instrument for purposes of this provision.

(ii) Deposit obligations for payment of items forwarded for

collection by depository institution acting as agent. Where an insured

depository institution in default has become obligated for the payment

of items forwarded for collection by a depository institution acting

solely as agent, the FDIC will recognize the holders of such items for

all purposes of claim for insured deposits to the same extent as if

their name(s) and interest(s) were disclosed as depositors on the

deposit account records of the insured depository institution, when

such claim for insured deposits, if otherwise payable, has been

[[Page 25759]]

established by the execution and delivery of prescribed forms. The FDIC

will recognize such depository institution forwarding such items for

the holders thereof as agent for such holders for the purpose of making

an assignment to the FDIC of their rights against the insured

depository institution in default and for the purpose of receiving

payment on their behalf.

Sec. 330.6 Single ownership accounts.

(a) Individual accounts. Funds owned by a natural person and

deposited in one or more deposit accounts in his or her own name shall

be added together and insured up to $100,000 in the aggregate.

Exception: Despite the general requirement in this paragraph (a), if

more than one natural person has the right to withdraw funds from an

individual account (excluding persons who have the right to withdraw by

virtue of a Power of Attorney), the account shall be treated as a joint

ownership account (although not necessarily a qualifying joint account)

and shall be insured in accordance with the provisions of Sec. 330.9,

unless the deposit account records clearly indicate, to the

satisfaction of the FDIC, that the funds are owned by one individual

and that other signatories on the account are merely authorized to

withdraw funds on behalf of the owner.

(b) Sole proprietorship accounts. Funds owned by a business which

is a ``sole proprietorship'' (as defined in Sec. 330.1(m)) and

deposited in one or more deposit accounts in the name of the business

shall be treated as the individual account(s) of the person who is the

sole proprietor, added to any other individual accounts of that person,

and insured up to $100,000 in the aggregate.

(c) Single-name accounts containing community property funds.

Community property funds deposited into one or more deposit accounts in

the name of one member of a husband-wife community shall be treated as

the individual account(s) of the named member, added to any other

individual accounts of that person, and insured up to $100,000 in the

aggregate.

(d) Accounts of a decedent and accounts held by executors or

administrators of a decedent's estate. Funds held in the name of a

decedent or in the name of the executor, administrator, or other

personal representative of his or her estate and deposited into one or

more deposit accounts shall be added together and insured up to

$100,000 in the aggregate; provided, however, that nothing in this

paragraph (d) shall affect the operation of Sec. 330.3(j). The deposit

insurance provided by this paragraph (d) shall be separate from any

insurance coverage provided for the individual deposit accounts of the

executor, administrator, other personal representative or the

beneficiaries of the estate.

Sec. 330.7 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 shall be governed by the

provisions of Sec. 330.13.

(b) Guardian, custodian or conservator accounts. Funds held by a

guardian, custodian, or conservator for the benefit of his or her ward,

or for the benefit of a minor under the Uniform Gifts to Minors Act,

and deposited into one or more accounts in the name of the guardian,

custodian or conservator shall, for purposes of this part, be deemed to

be agency or nominee accounts and shall be insured in accordance with

paragraph (a) of this section.

(c) Accounts held by fiduciaries on behalf of two or more persons.

Funds held by an agent, nominee, guardian, custodian, conservator or

loan servicer, on behalf of two or more persons jointly, shall be

treated as a joint ownership account and shall be insured in accordance

with the provisions of Sec. 330.9.

(d) Mortgage servicing accounts. Accounts maintained by a mortgage

servicer, in a custodial or other fiduciary capacity, which are

comprised of payments by mortgagors of principal and interest, shall be

insured in accordance with paragraph (a) of this section for the

interest of each owner (mortgagee, investor or security holder) in such

accounts. Accounts maintained by a mortgage servicer, in a custodial or

other fiduciary capacity, which are comprised of payments by mortgagors

of taxes and insurance premiums shall be added together and insured in

accordance with paragraph (a) of this section for the ownership

interest of each mortgagor in such accounts.

(e) Custodian accounts for American Indians. Paragraph (a) of this

section shall not apply to any interest an individual American Indian

may have in funds deposited by the Bureau of Indian Affairs of the

United States Department of the Interior (the ``BIA'') on behalf of

that person pursuant to 25 U.S.C. 162(a), or by any other disbursing

agent of the United States on behalf of that person pursuant to similar

authority, in an insured depository institution. The interest of each

American Indian in all such accounts maintained at the same insured

depository institution shall be added together and insured, up to

$100,000, separately from any other accounts maintained by that person

in the same insured depository institution.

Sec. 330.8 Annuity contract accounts.

(a) Funds held by an insurance company or other corporation in a

deposit account for the sole purpose of funding life insurance or

annuity contracts and any benefits incidental to such contracts, shall

be insured separately in the amount of up to $100,000 per annuitant,

provided that, pursuant to a state statute:

(1) The corporation establishes a separate account for such funds;

(2) The account cannot be charged with the liabilities arising out

of any other business of the corporation; and

(3) The account cannot be invaded by other creditors of the

corporation in the event that the corporation becomes insolvent and its

assets are liquidated.

(b) Such insurance coverage shall be separate from the insurance

provided for any other accounts maintained by the corporation or the

annuitants at the same insured depository institution.

Sec. 330.9 Joint ownership accounts.

(a) Separate insurance coverage. Qualifying joint accounts, whether

owned as joint tenants with right of survivorship, as tenants in common

or as tenants by the entirety, shall be insured separately from any

individually owned (single ownership) deposit accounts maintained by

the co-owners.

(Example: If A has a single ownership account and also is a

joint owner of a qualifying joint account, A's interest in the joint

account would be insured separately from his or her interest in the

individual account.) Qualifying joint accounts in the names of both

husband and wife which are comprised of community property funds

shall be added together and insured up to $100,000, separately from

any funds deposited into accounts bearing their individual names.

(b) Determination of insurance coverage. Step one: all qualifying

joint accounts owned by the same combination of individuals shall be

added together; the aggregate amount is insurable up to a limit of

$100,000.

(Example: A qualifying joint account owned by ``A&B'' would be

added to a

[[Page 25760]]

qualifying joint account owned by ``B&A'' and the insurable limit on

the combined balances in those accounts would be $100,000. Moreover,

the insurable limit on a single qualifying joint account owned by

``A&B'' would be $100,000. Thus, any qualifying joint account (or

group of qualifying joint accounts owned by the same combination of

persons) with a balance over $100,000 will be over the insurance

limit.)

Step two: the interests of each co-owner in all qualifying joint

accounts, whether owned by the same or different combinations of

persons, shall then be added together and the total shall be insured up

to $100,000.

(Example: ``A&B'' have a qualifying joint account with a balance

of $100,000; ``A&C'' have a qualifying joint account with a balance

of $150,000; and ``A&D'' have a qualifying joint account with a

balance of $100,000. The balance in the account owned by ``A&C''

exceeds $100,000, so under step one the excess amount, $50,000,

would be uninsured. A's combined ownership interests in the

insurable amounts in the accounts would be $150,000, of which under

step two $100,000 would be insured and $50,000 would be uninsured;

B's ownership interest would be $50,000, all of which would be

insured; C's insurable ownership interest would be $50,000, all of

which would be insured; and D's ownership interest would be $50,000,

all of which would be insured.)

(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'' (as defined in Sec. 330.1(k)); 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 signature-card 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. 330.5(a), 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 (although not necessarily

a qualifying 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.

(d) Nonqualifying joint accounts. A deposit account held in two or

more names which is not a qualifying joint account, for purposes of

this section, shall be treated as being owned by each named owner, as

an individual, corporation, partnership, or unincorporated association,

as the case may be, and the actual ownership interest of each

individual or entity in such account shall be added to any other single

ownership accounts of such individual or other accounts of such entity,

and shall be insured in accordance with the provisions of this part

governing the insurance of such accounts.

(e) Determination of interests. The interests of the co-owners of

qualifying joint accounts, held as tenants in common, shall be deemed

equal, unless otherwise stated in the depository institution's deposit

account records. This section applies regardless of whether the

conjunction ``and'' or ``or'' is used in the title of a joint deposit

account, even when both terms are used, such as in the case of a joint

deposit account with three or more co-owners.

Sec. 330.10 Revocable trust accounts.

(a) General rule. Funds owned by an individual and deposited into

an account evidencing an intention that upon the death of the owner the

funds shall belong to one or more qualifying beneficiaries shall be

insured in the amount of up to $100,000 in the aggregate as to each

such named qualifying beneficiary, separately from any other accounts

of the owner or the beneficiaries. For purposes of this provision, the

term ``qualifying beneficiaries'' means the owner's spouse, child/

children or grandchild/grandchildren.

(Example: If A establishes a qualifying account payable upon

death to his spouse, two children and one grandchild, assuming

compliance with the requirements of this provision, the account

would be insured up to $400,000 separately from any other different

types of accounts either A or the beneficiaries may have with the

same depository institution.)

Accounts covered by this provision are commonly referred to as

tentative or ``Totten trust'' accounts, ``payable-on-death'' accounts,

or revocable trust accounts.

(b) Required intention. The required intention in paragraph (a) of

this section that upon the owner's death the funds shall belong to one

or more qualifying beneficiaries must be manifested in the title of the

account using commonly accepted terms such as, but not limited to, ``in

trust for,'' ``as trustee for,'' ``payable-on-death to,'' or any

acronym therefor. In addition, the beneficiaries must be specifically

named in the deposit account records of the insured depository

institution. The settlor of a revocable trust account shall be presumed

to own the funds deposited into the account.

(c) Interests of nonqualifying beneficiaries. If a named

beneficiary of an account covered by this section is not a qualifying

beneficiary, the funds corresponding to that beneficiary shall be

treated as individually owned (single ownership) accounts of such

owner(s), aggregated with any other single ownership accounts of such

owner(s), and insured up to $100,000 per owner.

(Examples: If A establishes an account payable upon death to his

or her nephew, the account would be insured as a single ownership

account owned by A. Similarly, if B establishes an account payable

upon death to her husband, son and nephew, two-thirds of the account

balance would be eligible for POD coverage up to $200,000

corresponding to the two qualifying beneficiaries (i.e., the spouse

and child). The amount corresponding to the non-qualifying

beneficiary (i.e., the nephew) would be deemed to be owned by B in

her single ownership capacity and insured accordingly.)

(d) Joint revocable trust accounts. Where an account described in

paragraph (a) of this section is established by more than one owner and

held for the benefit of others, some or all of whom are within the

qualifying degree of kinship, the respective interests of each owner

(which shall be deemed equal unless otherwise stated in the insured

depository institution's deposit account records) held for the benefit

of each qualifying beneficiary shall be separately insured up to

$100,000. However, where a husband and a wife establish a revocable

trust account naming themselves as the sole beneficiaries, such account

shall not be insured according to the provisions of this section but

shall instead be insured

[[Page 25761]]

in accordance with the joint account provisions of Sec. 330.9.

(e) Definition of ``children'' and ``grandchildren''. For the

purpose of establishing the qualifying degree of kinship set forth in

paragraph (a) of this section, the term ``children'' includes any

biological, adopted and step-children of the owner and

``grandchildren'' includes biological, adopted, or step-children of any

of the owner's children.

(f) Living trusts. This section also applies to revocable trust

accounts held in connection with a so-called ``living trust,'' a formal

trust which an owner creates and retains control over during his or her

lifetime. If a named beneficiary in a living trust is a qualifying

beneficiary under this section, then the deposit account held in

connection with the living trust may be eligible for deposit insurance

under this section, assuming compliance with all the provisions of this

part. If, however, for example, the living trust includes a ``defeating

contingency'' relative to that beneficiary's interest in the trust

assets, then insurance coverage under this section would not be

provided. For purposes of this section, a ``defeating contingency'' is

defined as a condition which would prevent the beneficiary from

acquiring a vested and non-contingent interest in the funds in the

deposit account upon the owner's death.

Sec. 330.11 Accounts of a corporation, partnership or unincorporated

association.

(a) Corporate accounts. (1) The deposit accounts of a corporation

engaged in any ``independent activity'' (as defined in Sec. 330.1(g))

shall be added together and insured up to $100,000 in the aggregate. If

a corporation has divisions or units which are not separately

incorporated, the deposit accounts of those divisions or units shall be

added to any other deposit accounts of the corporation. If a

corporation maintains deposit accounts in a representative or fiduciary

capacity, such accounts shall not be treated as the deposit accounts of

the corporation but shall be treated as fiduciary accounts and insured

in accordance with the provisions of Sec. 330.7.

(2) Notwithstanding any other provision of this part, any trust or

other business arrangement which has filed or is required to file a

registration statement with the Securities and Exchange Commission

pursuant to section 8 of the Investment Company Act of 1940 or that

would be required so to register but for the fact it is not created

under the laws of the United States or a state or but for sections

2(b), 3(c)(1), or 6(a)(1) of that act shall be deemed to be a

corporation for purposes of determining deposit insurance coverage.

(b) Partnership accounts. The deposit accounts of a partnership

engaged in any ``independent activity'' (as defined in Sec. 330.1(g))

shall be added together and insured up to $100,000 in the aggregate.

Such insurance coverage shall be separate from any insurance provided

for individually owned (single ownership) accounts maintained by the

individual partners. A partnership shall be deemed to exist, for

purposes of this paragraph, any time there is an association of two or

more persons or entities formed to carry on, as co-owners, an

unincorporated business for profit.

(c) Unincorporated association accounts. The deposit accounts of an

unincorporated association engaged in any independent activity shall be

added together and insured up to $100,000 in the aggregate, separately

from the accounts of the person(s) or entity(ies) comprising the

unincorporated association. An unincorporated association shall be

deemed to exist, for purposes of this paragraph, whenever there is an

association of two or more persons formed for some religious,

educational, charitable, social or other noncommercial purpose.

(d) Non-qualifying entities. The deposit accounts of an entity

which is not engaged in an ``independent activity'' (as defined in

Sec. 330.1(g)) shall be deemed to be owned by the person or persons

owning the corporation or comprising the partnership or unincorporated

association, and, for deposit insurance purposes, the interest of each

person in such a deposit account shall be added to any other deposit

accounts individually owned by that person and insured up to $100,000

in the aggregate.

Sec. 330.12 Accounts held by a depository institution as the trustee

of an irrevocable trust.

(a) Separate insurance coverage. ``Trust funds'' (as defined in

Sec. 330.1(o)) held by an insured depository institution in its

capacity as trustee of an irrevocable trust, whether held in its trust

department, held or deposited in any other department of the fiduciary

institution, or deposited by the fiduciary institution in another

insured depository institution, shall be insured up to $100,000 for

each owner or beneficiary represented. This insurance shall be separate

from, and in addition to, the insurance provided for any other deposits

of the owners or the beneficiaries.

(b) Determination of interests. The insurance for funds held by an

insured depository institution in its capacity as trustee of an

irrevocable trust shall be determined in accordance with the following

provisions:

(1) Allocated funds of a trust estate. If trust funds of a

particular ``trust estate'' (as defined in Sec. 330.1(n)) are allocated

by the fiduciary and deposited, the insurance with respect to such

trust estate shall be determined by ascertaining the amount of its

funds allocated, deposited and remaining to the credit of the claimant

as fiduciary at the insured depository institution in default.

(2) Interest of a trust estate in unallocated trust funds. If funds

of a particular trust estate are commingled with funds of other trust

estates and deposited by the fiduciary institution in one or more

insured depository institutions to the credit of the depository

institution as fiduciary, without allocation of specific amounts from a

particular trust estate to an account in such institution(s), the

percentage interest of that trust estate in the unallocated deposits in

any institution in default is the same as that trust estate's

percentage interest in the entire commingled investment pool.

(c) Limitation on applicability. This section shall not apply to

deposits of trust funds belonging to a trust which is classified as a

corporation under Sec. 330.11(a)(2).

Sec. 330.13 Irrevocable trust accounts.

(a) General rule. Funds representing the ``non-contingent trust

interest(s)'' (as defined in Sec. 330.1(l)) of a beneficiary deposited

into one or more deposit accounts established pursuant to one or more

irrevocable trust agreements created by the same settlor(s)

(grantor(s)) shall be added together and insured up to $100,000 in the

aggregate. Such insurance coverage shall be separate from the coverage

provided for other accounts maintained by the settlor(s), trustee(s) or

beneficiary(ies) of the irrevocable trust(s) at the same insured

depository institution. Each ``trust interest'' (as defined in

Sec. 330.1(p)) in any irrevocable trust established by two or more

settlors shall be deemed to be derived from each settlor pro rata to

his or her contribution to the trust.

(b) Treatment of contingent trust interests. In the case of any

trust in which certain trust interests do not qualify as non-contingent

trust interests, the funds representing those interests shall be added

together and insured up to $100,000 in the aggregate. Such insurance

coverage shall be in addition to the coverage provided for the funds

[[Page 25762]]

representing non-contingent trust interests which are insured pursuant

to paragraph (a) of this section.

(c) 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 up to $100,000,

separately from the funds of any other such estate.

Sec. 330.14 Retirement and other employee benefit plan accounts.

(a) ``Pass-through'' insurance. Except as provided in paragraph (b)

of this section, any deposits of an employee benefit plan or of any

eligible deferred compensation plan described in section 457 of the

Internal Revenue Code of 1986 (26 U.S.C. 457) in an insured depository

institution shall be insured on a ``pass-through'' basis, in the amount

of up to $100,000 for the non-contingent interest of each plan

participant, provided that the FDIC's recordkeeping requirements, as

prescribed in Sec. 330.5, are satisfied.

(b) Exception. ``Pass-through'' insurance shall not be provided

pursuant to paragraph (a) of this section with respect to any deposit

accepted by an insured depository institution which, at the time the

deposit is accepted, may not accept brokered deposits pursuant to

section 29 of the Act (12 U.S.C. 1831f) 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.

(c) Aggregation--(1) Multiple plans. Funds representing the non-

contingent interests of a beneficiary in an employee benefit plan, or

eligible deferred compensation plan described in section 457 of the

Internal Revenue Code of 1986 (26 U.S.C. 457), which are deposited in

one or more deposit accounts shall be aggregated with any other

deposited funds representing such interests of the same beneficiary in

other employee benefit plans, or eligible deferred compensation plans

described in section 457 of the Internal Revenue Code of 1986,

established by the same employer or employee organization.

(2) Certain retirement accounts. (i) Deposits in an insured

depository institution made in connection with the following types of

retirement plans shall be aggregated and insured in the amount of up to

$100,000 per participant:

(A) Any individual retirement account described in section 408(a)

of the Internal Revenue Code of 1986 (26 U.S.C. 408(a));

(B) Any eligible deferred compensation plan described in section

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

(C) Any individual account plan defined in section 3(34) of the

Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and

any plan described in section 401(d) of the Internal Revenue Code of

1986 (26 U.S.C. 401(d)), to the extent that participants and

beneficiaries under such plans have the right to direct the investment

of assets held in individual accounts maintained on their behalf by the

plans.

(ii) The provisions of this paragraph (c) shall not apply with

respect to the deposits of any employee benefit plan, or eligible

deferred compensation plan described in section 457 of the Internal

Revenue Code of 1986, which is not entitled to ``pass-through''

insurance pursuant to paragraph (b) of this section. Such deposits

shall be aggregated and insured in the amount of $100,000 per plan.

(d) Determination of interests--(1) Defined contribution plans. The

value of an employee's non-contingent interest in a defined

contribution plan shall be deemed to be the employee's account balance

as of the date of default of the insured depository institution,

regardless of whether said amount was derived, in whole or in part,

from contributions of the employee and/or the employer to the account.

(2) Defined benefit plans. The value of an employee's non-

contingent interest in a defined benefit plan shall be deemed to be the

present value of the employee's interest in the plan, evaluated in

accordance with the method of calculation ordinarily used under such

plan, as of the date of default of the insured depository institution.

(3) Amounts taken into account. For the purposes of applying the

rule under paragraph (c)(2) of this section, only the present vested

and ascertainable interests of each participant in an employee benefit

plan or ``457 Plan,'' excluding any remainder interest created by, or

as a result of, the plan, shall be taken into account in determining

the amount of deposit insurance accorded to the deposits of the plan.

(e) Treatment of contingent interests. In the event that employees'

interests in an employee benefit plan are not capable of evaluation in

accordance with the provisions of this section, or an account

established for any such plan includes amounts for future participants

in the plan, payment by the FDIC with respect to all such interests

shall not exceed $100,000 in the aggregate.

(f) Overfunded pension plan deposits. Any portion of an employee

benefit plan's deposits which is not attributable to the interests of

the beneficiaries under the plan shall be deemed attributable to the

overfunded portion of the plan's assets and shall be aggregated and

insured up to $100,000, separately from any other deposits.

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

``employee organization'' 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.

(2) The term employee benefit plan has the same meaning given to

such term in section 3(3) of the Employee Retirement Income Security

Act of 1974 (ERISA) (29 U.S.C. 1002) and includes any plan described in

section 401(d) of the Internal Revenue Code of 1986.

(3) The term employee organization means any labor union,

organization, employee representation committee, association, group, or

plan, in which employees participate and which exists for the purpose,

in whole or in part, of dealing with employers concerning an employee

benefit plan, or other matters incidental to employment relationships;

or any employees' beneficiary association organized for the purpose, in

whole or in part, of establishing such a plan.

(4) The term non-contingent interest means an interest capable of

determination without evaluation of contingencies except for those

covered by the present worth tables and rules of calculation for their

use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations

(26 CFR 20.2031-7) or any similar present worth or life expectancy

tables as may be published by the Internal Revenue Service.

(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

[[Page 25763]]

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. 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.

(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 ten 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 (h), 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).

Sec. 330.15 Public unit accounts.

(a) Extent of insurance coverage--(1) Accounts of the United

States. Each official custodian of funds of the United States lawfully

depositing such funds in an insured depository institution shall be

separately insured in the amount of:

(i) Up to $100,000 in the aggregate for all time and savings

deposits; and

(ii) Up to $100,000 in the aggregate for all demand deposits.

(2) Accounts of a state, county, municipality or political

subdivision. (i) Each official custodian of funds of any state of the

United States, or any county, municipality, or political subdivision

thereof, lawfully depositing such funds in an insured depository

institution in the state comprising the public unit or wherein the

public unit is located (including any insured depository institution

having a branch in said state) shall be separately insured in the

amount of:

(A) Up to $100,000 in the aggregate for all time and savings

deposits; and

(B) Up to $100,000 in the aggregate for all demand deposits.

(ii) In addition, each such official custodian depositing such

funds in an insured depository institution outside of the state

comprising the public unit or wherein the public unit is located, shall

be insured in the amount of up to $100,000 in the aggregate for all

deposits, regardless of whether they are time, savings or demand

deposits.

(3) Accounts of the District of Columbia. (i) Each official

custodian of funds of the District of Columbia lawfully depositing such

funds in an insured depository institution in the District of Columbia

(including an insured depository institution having a branch in the

District of Columbia) shall be separately insured in the amount of:

(A) Up to $100,000 in the aggregate for all time and savings

deposits; and

(B) Up to $100,000 in the aggregate for all demand deposits.

(ii) In addition, each such official custodian depositing such

funds in an insured depository institution outside of the District of

Columbia shall be insured in the amount of up to $100,000 in the

aggregate for all deposits, regardless of whether they are time,

savings or demand deposits.

(4) Accounts of the Commonwealth of Puerto Rico and other

government possessions and territories. (i) Each official custodian of

funds of the Commonwealth of Puerto Rico, the Virgin Islands, American

Samoa, the Trust Territory of the Pacific Islands, Guam, or The

Commonwealth of the Northern Mariana Islands, or of any county,

municipality, or political subdivision thereof lawfully depositing such

funds in an insured depository institution in Puerto Rico, the Virgin

Islands, American Samoa, the Trust Territory of the Pacific Islands,

Guam, or The Commonwealth of the Northern Mariana Islands,

respectively, shall be separately insured in the amount of:

(A) Up to $100,000 in the aggregate for all time and savings

deposits; and

(B) Up to $100,000 in the aggregate for all demand deposits.

(ii) In addition, each such official custodian depositing such

funds in an insured depository institution outside of the commonwealth,

possession or territory comprising the public unit or wherein the

public unit is located, shall be insured in the amount of up to

$100,000 in the aggregate for all deposits, regardless of whether they

are time, savings or demand deposits.

(5) Accounts of an Indian tribe. Each official custodian of funds

of an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an

agency thereof having official custody of tribal funds, lawfully

depositing the same in an insured depository institution shall be

separately insured in the amount of:

(i) Up to $100,000 in the aggregate for all time and savings

deposits; and

(ii) Up to $100,000 in the aggregate for all demand deposits.

(b) Rules relating to the ``official custodian''--(1)

Qualifications for an ``official custodian''. In order to qualify as an

``official custodian'' for the purposes of paragraph (a) of this

section, such custodian must have plenary authority, including control,

over funds owned by the public unit which the custodian is appointed or

elected to serve. Control of public funds includes possession, as well

as the authority to establish accounts for such funds in insured

depository institutions and to make deposits, withdrawals, and

disbursements of such funds.

(2) Official custodian of the funds of more than one public unit.

For the purposes of paragraph (a) of this section, if the same person

is an official custodian of the funds of more than one public unit, he

or she shall be separately insured with respect to the funds held by

him or her for each such public unit, but shall not be separately

insured by virtue of holding different offices in such public unit or,

except as provided in paragraph (c) of this section, holding such funds

for different purposes.

(3) Split of authority or control over public unit funds. If the

exercise of authority or control over the funds of a public unit

requires action by, or the consent of, two or more officers, employees,

or agents of such public unit, then they will be treated as one

``official custodian'' for the purposes of this section.

(c) Public bond issues. Where an officer, agent or employee of a

public unit has custody of certain funds which by law or under a bond

indenture are required to be set aside to discharge a debt owed to the

holders of notes or bonds issued by the public unit, any deposit of

such funds in an insured

[[Page 25764]]

depository institution shall be deemed to be a deposit by a trustee of

trust funds of which the noteholders or bondholders are pro rata

beneficiaries, and the beneficial interest of each noteholder or

bondholder in the deposit shall be separately insured up to $100,000.

(d) Definition of ``political subdivision''. The term ``political

subdivision'' includes drainage, irrigation, navigation, improvement,

levee, sanitary, school or power districts, and bridge or port

authorities and other special districts created by state statute or

compacts between the states. It also includes any subdivision of a

public unit mentioned in paragraphs (a)(2), (a)(3) and (a)(4) of this

section or any principal department of such public unit:

(1) The creation of which subdivision or department has been

expressly authorized by the law of such public unit;

(2) To which some functions of government have been delegated by

such law; and

(3) Which is empowered to exercise exclusive control over funds for

its exclusive use.

Sec. 330.16 Effective dates.

(a) Prior effective dates. Former Secs. 330.1(j), 330.10(a),

330.12(c), 330.12(d)(3) and 330.13 (see 12 CFR part 330, as revised

January 1, 1998) became effective on December 19, 1993.

(b) Time deposits. Except with respect to the provisions in former

Sec. 330.12 (a) and (b) (see 12 CFR part 330, as revised January 1,

l998) and current Sec. 330.14(a) and (b), any time deposits made before

December 19, 1991 that do not mature until after December 19, 1993,

shall be subject to the rules as they existed on the date the deposits

were made. Any time deposits made after December 19, 1991 but before

December 19, 1993, shall be subject to the rules as they existed on the

date the deposits were made. Any rollover or renewal of such time

deposits prior to December 19, 1993 shall subject those deposits to the

rules in effect on the date of such rollover or renewal. With respect

to time deposits which mature only after a prescribed notice period,

the provisions of this part shall be effective on the earliest possible

maturity date after June 24, 1993 assuming (solely for purposes of this

section) that notice had been given on that date.

By order of the Board of Directors.

Dated at Washington, D.C., this 28th day of April, 1998.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 98-11987 Filed 5-8-98; 8:45 am]

BILLING CODE 6714-01-P