Final Rulemaking on Simplification of Deposit Insurance Rules for Trust and Mortgage Servicing Accounts

This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations

Federal Register

4455

Vol. 87, No. 19

Friday, January 28, 2022

1 Trusts include informal revocable trusts

(commonly referred to as payable-on-death

accounts, in-trust-for accounts, or Totten trusts),

formal revocable trusts, and irrevocable trusts that

do not have an IDI as trustee.

2 See 73 FR 56706 (Sep. 30, 2008).

3 In 2008, the FDIC adopted an insurance

calculation for revocable trusts that have five or

fewer beneficiaries. Pursuant to the 2008

amendments, each trust grantor is insured up to

$250,000 per beneficiary.

4 12 U.S.C. 1821(f).

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 330

RIN 3064–AF27

Simplification of Deposit Insurance

Rules

AGENCY: Federal Deposit Insurance

Corporation.

ACTION: Final rule.

SUMMARY: The Federal Deposit

Insurance Corporation is amending its

regulations governing deposit insurance

coverage. The amendments simplify the

deposit insurance regulations by

establishing a ‘‘trust accounts’’ category

that governs coverage of deposits of both

revocable trusts and irrevocable trusts

using a common calculation, and

provide consistent deposit insurance

treatment for all mortgage servicing

account balances held to satisfy

principal and interest obligations to a

lender.

DATES: The rule is effective on April 1,

2024.

FOR FURTHER INFORMATION CONTACT:

James Watts, Counsel, Legal Division,

(202) 898–6678, jwatts@fdic.gov;

Kathryn Marks, Counsel, Legal Division,

le trusts

using a common calculation, and

provide consistent deposit insurance

treatment for all mortgage servicing

account balances held to satisfy

principal and interest obligations to a

lender.

DATES: The rule is effective on April 1,

2024.

FOR FURTHER INFORMATION CONTACT:

James Watts, Counsel, Legal Division,

(202) 898–6678, jwatts@fdic.gov;

Kathryn Marks, Counsel, Legal Division,

(202) 898–3896, kmarks@fdic.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Simplification of Deposit Insurance

Coverage Rules for Trusts

A. Policy Objectives

B. Background

1. Deposit Insurance and the FDIC’s

Statutory and Regulatory Authority

2. Current Rules for Coverage of Trust

Deposits

C. Final Rule

D. Discussion of Comments

E. Alternatives Considered

II. Amendments to Mortgage Servicing

Account Rule

A. Policy Objectives

B. Background

C. Final Rule

D. Discussion of Comments

III. Regulatory Analysis

A. Expected Effects

1. Simplification of Trust Rules

2. Amendments to Mortgage Servicing

Account Rule

B. Regulatory Flexibility Act

1. Simplification of Trust Rules

2. Amendments to Mortgage Servicing

Account Rule

C. Congressional Review Act

D. Paperwork Reduction Act

E. Riegle Community Development and

Regulatory Improvement Act

F. Plain Language

I. Simplification of Deposit Insurance

Coverage Rules for Trusts

A. Policy Objectives

The Federal Deposit Insurance

Corporation (FDIC) is amending its

regulations governing deposit insurance

coverage for deposits held in connection

with trusts.1 The amendments merge the

revocable and irrevocable trust

categories into one category, ‘‘trust

accounts.’’ Coverage for deposits in this

category will be calculated through a

simple calculation. Each grantor’s trust

deposits will be insured in an amount

up to the standard maximum deposit

insurance amount (currently $250,000)

multiplied by the number of trust

beneficiaries, not to exceed five

amendments merge the

revocable and irrevocable trust

categories into one category, ‘‘trust

accounts.’’ Coverage for deposits in this

category will be calculated through a

simple calculation. Each grantor’s trust

deposits will be insured in an amount

up to the standard maximum deposit

insurance amount (currently $250,000)

multiplied by the number of trust

beneficiaries, not to exceed five. This, in

effect, will limit coverage for a grantor’s

trust deposits at each IDI to a total of

$1,250,000; in other words, maximum

coverage of $250,000 per beneficiary for

up to five beneficiaries.

The amendments: (1) Provide

depositors and bankers with a rule for

trust account coverage that is easy to

understand; and (2) facilitate the prompt

payment of deposit insurance in

accordance with the Federal Deposit

Insurance Act (FDI Act), among other

objectives.

Simplifying Insurance Coverage for

Trust Deposits

The amendments simplify for

depositors, bankers, and other interested

parties the insurance rules and limits for

trust accounts. The deposit insurance

rules for trust deposits, set forth in part

330 of the FDIC’s regulations, have

evolved over time and can be difficult

to apply in some circumstances. The

amendments reduce the number of rules

governing coverage for trust accounts

and establish a straightforward

calculation to determine coverage. This

should alleviate some of the confusion

that depositors and bankers experience

with respect to insurance coverage and

limits.

Under the current regulations, there

are distinct and separate sets of rules

applicable to deposits of revocable

trusts and irrevocable trusts. Each set of

rules has its own criteria for coverage

and methods by which coverage is

calculated. Despite the FDIC’s efforts to

simplify the revocable trust rules in

2008,2 FDIC deposit insurance

specialists have responded to

approximately 20,000 complex

insurance inquiries per year on average

over the last 13 years

rules

applicable to deposits of revocable

trusts and irrevocable trusts. Each set of

rules has its own criteria for coverage

and methods by which coverage is

calculated. Despite the FDIC’s efforts to

simplify the revocable trust rules in

2008,2 FDIC deposit insurance

specialists have responded to

approximately 20,000 complex

insurance inquiries per year on average

over the last 13 years. More than 50

percent of inquiries pertain to deposit

insurance coverage for trust accounts

(revocable or irrevocable). The

amendments further simplify insurance

coverage of trust accounts (revocable

and irrevocable) by harmonizing the

coverage criteria for certain types of

trust accounts and establishing a

simplified formula for calculating

coverage that applies to these deposits.

The calculation is the same calculation

that the FDIC first adopted in 2008 for

revocable trust accounts with five or

fewer beneficiaries. This formula is

straightforward and is already generally

familiar to bankers and depositors.3

Prompt Payment of Deposit Insurance

The FDI Act requires the FDIC to pay

depositors ‘‘as soon as possible’’ after a

bank failure.4 However, the insurance

determination and subsequent payment

for many trust deposits must await the

depositor’s submission of complex trust

agreements, followed by FDIC staff’s

review of that information and

application of the rules to determine

deposit insurance coverage. The final

rule’s amendments are expected to

facilitate more timely deposit insurance

determinations for trust accounts by

reducing the amount of time needed for

FDIC staff to review trust agreements

and determine coverage. These

amendments promote the FDIC’s ability

to pay insurance to depositors promptly

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deposit insurance

determinations for trust accounts by

reducing the amount of time needed for

FDIC staff to review trust agreements

and determine coverage. These

amendments promote the FDIC’s ability

to pay insurance to depositors promptly

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

5 See 12 U.S.C. 1821(a)(1)(E).

6 See 12 U.S.C. 1821(a)(1)(C) (deposits

‘‘maintained by a depositor in the same capacity

and the same right’’ at the same IDI are aggregated

for purposes of the deposit insurance limit).

7 12 U.S.C. 1821(a)(2).

8 See 12 U.S.C. 1817(i), 1821(a).

9 See 12 CFR 330.10, 330.13.

10 12 CFR 330.10(a). In this document, the term

‘‘grantor’’ is used to refer to the party that creates

a trust, though trust agreements also may use terms

such as ‘‘settlor’’ or ‘‘trustor.’’

11 12 CFR 330.10(c).

12 12 CFR 330.10(d).

13 12 CFR 330.10(b)(1).

following the failure of an insured

depository institution (IDI), enabling

depositors to meet their financial needs

and obligations.

Facilitating Resolutions

The changes will also facilitate the

resolution of failed IDIs. The FDIC is

routinely required to make deposit

insurance determinations in connection

with IDI failures. In many of these

instances, however, deposit insurance

coverage for trust deposits is based upon

information that is not maintained in

the failed IDI’s deposit account records.

As a result, FDIC staff works with

depositors, trustees, and other parties to

obtain trust documentation following an

IDI’s failure in order to complete deposit

insurance determinations. The

difficulties associated with completing

such a determination have been

exacerbated by the substantial growth in

the use of formal trusts in recent

decades

n

the failed IDI’s deposit account records.

As a result, FDIC staff works with

depositors, trustees, and other parties to

obtain trust documentation following an

IDI’s failure in order to complete deposit

insurance determinations. The

difficulties associated with completing

such a determination have been

exacerbated by the substantial growth in

the use of formal trusts in recent

decades. The amendments are expected

to reduce the time spent reviewing such

information and provide greater

flexibility to automate deposit insurance

determinations, thereby reducing

potential delays in the completion of

deposit insurance determinations and

payments. Timely payment of deposit

insurance also helps to avoid reductions

in the franchise value of failed IDIs,

expanding resolution options and

mitigating losses.

Effects on the Deposit Insurance Fund

The FDIC is also mindful of the effect

that changes to the deposit insurance

regulations have on deposit insurance

coverage and generally on the Deposit

Insurance Fund (DIF), which is used to

pay deposit insurance in the event of an

IDI’s failure. The FDIC manages the DIF

according to parameters established by

Congress and continually evaluates the

adequacy of the DIF to resolve failed

banks and protect insured depositors.

The FDIC’s general intent is that

amendments to the trust rules are

neutral with respect to the DIF.

B. Background

1. Deposit Insurance and the FDIC’s

Statutory and Regulatory Authority

The FDIC is an independent agency

that maintains stability and public

confidence in the nation’s financial

system by: Insuring deposits; examining

and supervising IDIs for safety and

soundness and compliance with

consumer financial protection laws; and

resolving IDIs and large and complex

financial institutions, and managing

receiverships

nd the FDIC’s

Statutory and Regulatory Authority

The FDIC is an independent agency

that maintains stability and public

confidence in the nation’s financial

system by: Insuring deposits; examining

and supervising IDIs for safety and

soundness and compliance with

consumer financial protection laws; and

resolving IDIs and large and complex

financial institutions, and managing

receiverships. The FDIC has helped to

maintain public confidence in times of

financial turmoil, including the period

from 2008 to 2013, when the United

States experienced a severe financial

crisis, and more recently in 2020 during

the financial stress associated with the

COVID–19 pandemic. During the more

than 88 years since the FDIC was

established, no depositor has lost a

penny of FDIC-insured funds.

The FDI Act establishes the key

parameters of deposit insurance

coverage, including the standard

maximum deposit insurance amount

(SMDIA), currently $250,000.5 In

addition to providing deposit insurance

coverage up to the SMDIA at each IDI

where a depositor maintains deposits,

the FDI Act also provides separate

insurance coverage for deposits that a

depositor maintains in different rights

and capacities (also known as insurance

categories) at the same IDI.6 For

example, deposits in the single

ownership category are separately

insured from deposits in the joint

ownership category at the same IDI.

The FDIC’s deposit insurance

categories have been defined through

both statute and regulation. Certain

categories, such as the government

deposit category, have been expressly

defined by Congress.7 Other categories,

such as joint deposits and corporate

deposits, have been based on statutory

interpretation and recognized through

regulations issued in 12 CFR part 330

pursuant to the FDIC’s rulemaking

authority. In addition to defining the

insurance categories, the deposit

insurance regulations in part 330

provide the criteria used to determine

insurance coverage for deposits in each

category

egories,

such as joint deposits and corporate

deposits, have been based on statutory

interpretation and recognized through

regulations issued in 12 CFR part 330

pursuant to the FDIC’s rulemaking

authority. In addition to defining the

insurance categories, the deposit

insurance regulations in part 330

provide the criteria used to determine

insurance coverage for deposits in each

category.

Over the years, deposit insurance

coverage has evolved to reflect both the

FDIC’s experience and changes in the

banking industry. The FDI Act includes

provisions defining the coverage for

certain trust deposits,8 while coverage

for other trust deposits has been defined

by regulation.9

2. Current Rules for Coverage of Trust

Deposits

The FDIC currently recognizes three

different insurance categories for

deposits held in connection with trusts:

(1) Revocable trusts; (2) irrevocable

trusts; and (3) irrevocable trusts with an

IDI as trustee.

Revocable Trust Deposits

The revocable trust category applies

to deposits for which the depositor has

evidenced an intention that the deposit

will belong to one or more beneficiaries

upon his or her death. This category

includes deposits held in connection

with formal revocable trusts—that is,

revocable trusts established through a

written trust agreement. It also includes

deposits that are not subject to a formal

trust agreement, where the IDI makes

payment to the beneficiaries identified

in the IDI’s records upon the depositor’s

death based on account titling and

applicable State law

th. This category

includes deposits held in connection

with formal revocable trusts—that is,

revocable trusts established through a

written trust agreement. It also includes

deposits that are not subject to a formal

trust agreement, where the IDI makes

payment to the beneficiaries identified

in the IDI’s records upon the depositor’s

death based on account titling and

applicable State law. The FDIC refers to

these types of deposits, including Totten

trust accounts, payable-on-death

accounts, and similar accounts, as

‘‘informal revocable trusts.’’ Deposits

associated with formal and informal

revocable trusts are aggregated for

purposes of the deposit insurance rules;

thus, deposits that will pass from the

same grantor to beneficiaries are

aggregated and insured up to the

SMDIA, currently $250,000, per

beneficiary, regardless of whether the

transfer would be accomplished through

a written revocable trust or an informal

revocable trust.10

Under the current revocable trust

rules, beneficiaries include natural

persons, charitable organizations, and

non-profit entities recognized as such

under the Internal Revenue Code of

1986.11 If a named beneficiary does not

qualify as a beneficiary under the rule,

funds held in trust for that beneficiary

are treated as single ownership funds of

the grantor and aggregated with any

other single ownership accounts that the

grantor maintains at the same IDI.12

Certain requirements also must be

satisfied for a deposit to be insured in

the revocable trust category. The grantor

must intend that the funds will belong

to the beneficiaries upon the depositor’s

death, and this intention must be

manifested in the ‘‘title’’ of the account

using commonly accepted terms such as

‘‘in trust for,’’ ‘‘as trustee for,’’ ‘‘payable-

on-death to,’’ or any acronym for these

terms. For purposes of this requirement,

‘‘title’’ includes the IDI’s electronic

deposit account records

must intend that the funds will belong

to the beneficiaries upon the depositor’s

death, and this intention must be

manifested in the ‘‘title’’ of the account

using commonly accepted terms such as

‘‘in trust for,’’ ‘‘as trustee for,’’ ‘‘payable-

on-death to,’’ or any acronym for these

terms. For purposes of this requirement,

‘‘title’’ includes the IDI’s electronic

deposit account records. For example,

an IDI’s electronic deposit account

records could identify the account as a

revocable trust account through coding

or a similar mechanism.13

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14 12 CFR 330.10(b)(2).

15 12 CFR 330.10(a).

16 12 CFR 330.10(e).

17 12 CFR 330.10(g). For example, if a revocable

trust provides a life estate for the depositor’s spouse

and remainder interests for six other beneficiaries,

the spouse’s life estate interest would be valued at

$250,000 for purposes of the deposit insurance

calculation.

18 12 CFR 330.10(f)(1).

19 12 CFR 330.10(f)(2).

20 12 CFR 330.10(h).

21 The revocable trust rules tend to provide

greater coverage than the irrevocable trust rules

because contingencies are not considered for

revocable trusts. In addition, where five or fewer

beneficiaries are named by a revocable trust,

specific allocations to beneficiaries also are not

considered.

22 12 CFR 330.1(m). For example, a life estate

interest is generally non-contingent, as it may be

valued using the life expectancy tables. However,

where a trustee has discretion to divert funds from

one beneficiary to another (for example, to provide

for the second beneficiary’s medical needs), the first

beneficiary’s interest is contingent upon the

trustee’s discretion.

23 12 CFR 330.13(a).

24 12 CFR 330.13(b)

example, a life estate

interest is generally non-contingent, as it may be

valued using the life expectancy tables. However,

where a trustee has discretion to divert funds from

one beneficiary to another (for example, to provide

for the second beneficiary’s medical needs), the first

beneficiary’s interest is contingent upon the

trustee’s discretion.

23 12 CFR 330.13(a).

24 12 CFR 330.13(b).

25 See 12 CFR 330.1(r) (definition of ‘‘trust

interest’’ does not include any interest retained by

the settlor).

26 12 U.S.C. 1817(i).

27 Part 330 defines ‘‘trust funds’’ as ‘‘funds held

by an insured depository institution as trustee

pursuant to any irrevocable trust established

pursuant to any statute or written trust agreement.’’

12 CFR 330.1(q).

28 12 CFR 330.12(a).

29 See 86 FR 41766 (Aug. 3, 2021).

In addition, the beneficiaries of

informal trusts (i.e., payable-on-death

accounts) must be named in the IDI’s

deposit account records.14 Since 2004,

the requirement to name beneficiaries in

the IDI’s deposit account records has not

applied to formal revocable trusts; the

FDIC generally obtains information on

beneficiaries of such trusts from

depositors following an IDI’s failure.

Therefore, if a formal revocable trust

deposit exceeds $250,000, and the

depositor’s IDI were to fail, it is likely

that a hold would be placed on the

deposit until the FDIC can review the

trust agreement and verify that coverage

criteria are satisfied.

The calculation of deposit insurance

coverage for revocable trust deposits

depends upon the number of unique

beneficiaries named by a depositor. If

five or fewer beneficiaries have been

named, the depositor is insured in an

amount up to the total number of named

beneficiaries multiplied by the SMDIA,

and the specific allocation of interests

among the beneficiaries is not

considered.15 If more than five

beneficiaries have been named, the

depositor is insured up to the greater of:

mber of unique

beneficiaries named by a depositor. If

five or fewer beneficiaries have been

named, the depositor is insured in an

amount up to the total number of named

beneficiaries multiplied by the SMDIA,

and the specific allocation of interests

among the beneficiaries is not

considered.15 If more than five

beneficiaries have been named, the

depositor is insured up to the greater of:

(1) Five times the SMDIA; or (2) the

total of the interests of each beneficiary,

with each such interest limited to the

SMDIA.16 For purposes of this

calculation, a life estate interest is

valued at the SMDIA.17

Where a revocable trust deposit is

jointly owned by multiple co-owners,

the interests of each account owner are

separately insured up to the SMDIA per

beneficiary.18 However, if the co-owners

are the only beneficiaries of the trust,

the account is instead insured under the

FDIC’s joint account rule.19

The current revocable trust rule also

contains a provision that was intended

to reduce confusion and the potential

for a decrease in deposit insurance

coverage in the case of the death of a

grantor. Specifically, if a revocable trust

becomes irrevocable due to the death of

the grantor, the trust’s deposit may

continue to be insured under the

revocable trust rules.20 Absent this

provision, the irrevocable trust rules

would apply following the grantor’s

death, as the revocable trust becomes

irrevocable at that time, which could

result in a reduction in coverage.21

Irrevocable Trust Deposits

Deposits held by an irrevocable trust

that has been established either by

written agreement or by statute are

insured in the irrevocable trust deposit

insurance category. Calculating coverage

for deposits insured in this category

requires a determination of whether

beneficiaries’ interests in the trust are

contingent or non-contingent

a reduction in coverage.21

Irrevocable Trust Deposits

Deposits held by an irrevocable trust

that has been established either by

written agreement or by statute are

insured in the irrevocable trust deposit

insurance category. Calculating coverage

for deposits insured in this category

requires a determination of whether

beneficiaries’ interests in the trust are

contingent or non-contingent. Non-

contingent interests are interests that

may be determined without evaluation

of any contingencies, except for those

covered by the present worth and life

expectancy tables and the rules for their

use set forth in the Internal Revenue

Service (IRS) Federal Estate Tax

Regulations.22 Funds held for non-

contingent trust interests are insured up

to the SMDIA for each such

beneficiary.23 Funds held for contingent

trust interests are aggregated and

insured up to the SMDIA in total.24

The irrevocable trust rules do not

apply to deposits held for a grantor’s

retained interest in an irrevocable

trust.25 Such deposits are aggregated

with the grantor’s other single

ownership deposits for purposes of

applying the deposit insurance limit.

Deposits Held by an IDI as Trustee of an

Irrevocable Trust

For deposits held by an IDI in its

capacity as trustee of an irrevocable

trust, deposit insurance coverage is

governed by section 7(i) of the FDI Act,

a provision rooted in the Banking Act of

1935. Section 7(i) provides that ‘‘[t]rust

funds held on deposit by an insured

depository institution in a fiduciary

capacity as trustee pursuant to any

irrevocable trust established pursuant to

any statute or written trust agreement

shall be insured in an amount not to

exceed the standard maximum deposit

insurance amount . . . for each trust

estate.’’ 26

The FDIC’s regulations governing

coverage for deposits held by an IDI in

its capacity as trustee of an irrevocable

trust are found in § 330.12

ciary

capacity as trustee pursuant to any

irrevocable trust established pursuant to

any statute or written trust agreement

shall be insured in an amount not to

exceed the standard maximum deposit

insurance amount . . . for each trust

estate.’’ 26

The FDIC’s regulations governing

coverage for deposits held by an IDI in

its capacity as trustee of an irrevocable

trust are found in § 330.12. The rule

provides that ‘‘trust funds’’ held by an

IDI in its capacity as trustee of an

irrevocable trust, whether held in the

IDI’s trust department or another

department, or deposited by the

fiduciary institution in another IDI, are

insured up to the SMDIA for each owner

or beneficiary represented.27 This

coverage is separate from the coverage

provided for other deposits of the

owners or the beneficiaries,28 and

deposits held for a grantor’s retained

interest are not aggregated with the

grantor’s single ownership deposits.

C. Final Rule

In July 2021, the FDIC proposed for

comment a number of amendments to

the rules governing deposit insurance

coverage for trust deposits.29 Generally,

the FDIC proposed to: Merge the

revocable and irrevocable trust

categories into one category; apply a

simpler, common calculation method to

determine insurance coverage for

deposits held by certain revocable and

irrevocable trusts; and eliminate certain

requirements found in the current rules

for revocable and irrevocable trusts.

The FDIC received seven comments in

response to the proposed rule.

Commenters generally supported the

proposed rule, as discussed below. After

careful consideration of the comments,

the FDIC is adopting the rule generally

as proposed, with only technical, non-

substantive changes.

Merger of Revocable and Irrevocable

Trust Categories

The final rule amends § 330.10 of the

FDIC’s regulations, which currently

applies only to revocable trust deposits,

to establish a new ‘‘trust accounts’’

category that would include both

revocable and irrevocable trust deposits

omments,

the FDIC is adopting the rule generally

as proposed, with only technical, non-

substantive changes.

Merger of Revocable and Irrevocable

Trust Categories

The final rule amends § 330.10 of the

FDIC’s regulations, which currently

applies only to revocable trust deposits,

to establish a new ‘‘trust accounts’’

category that would include both

revocable and irrevocable trust deposits.

The rule defines the types of deposits

that would be included in this category:

(1) Informal revocable trust deposits,

such as payable-on-death accounts, in-

trust-for accounts, and Totten trust

accounts; (2) formal revocable trust

deposits, defined to mean deposits held

pursuant to a written revocable trust

agreement under which a deposit passes

to one or more beneficiaries upon the

grantor’s death; and (3) irrevocable trust

deposits, meaning deposits held

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

30 12 CFR 330.10(c).

31 See FDIC Financial Institution Employee’s

Guide to Deposit Insurance at 51 (‘‘Sometimes the

trust agreement will provide that if a primary

beneficiary predeceases the owner, the deceased

beneficiary’s share will pass to an alternative or

contingent beneficiary. Regardless of such language,

if the primary beneficiary is alive at the time of an

IDI’s failure, only the primary beneficiary, and not

the alternative or contingent beneficiary, is taken

into account in calculating deposit insurance

coverage.’’). Including only unique beneficiaries

means that when an owner names the same

beneficiary on multiple trust accounts, the

beneficiary will only be counted once in calculating

trust coverage

beneficiary is alive at the time of an

IDI’s failure, only the primary beneficiary, and not

the alternative or contingent beneficiary, is taken

into account in calculating deposit insurance

coverage.’’). Including only unique beneficiaries

means that when an owner names the same

beneficiary on multiple trust accounts, the

beneficiary will only be counted once in calculating

trust coverage. For example, if a grantor has two

trust deposit accounts and names the same

beneficiary in both trust documents, the total

deposit insurance coverage associated with that

beneficiary is limited to $250,000 in total.

32 See FDIC Financial Institution Employee’s

Guide to Deposit Insurance at 71.

33 See 12 CFR 330.1(r); see also FDIC Financial

Institution Employee’s Guide to Deposit Insurance

at 87.

34 12 CFR 330.10(d).

35 In the unlikely event a trust does not name any

eligible beneficiaries, the FDIC would treat the

trust’s deposits as single ownership deposits. Such

deposits would be aggregated with any other single

ownership deposits that the grantor maintains at the

same IDI and insured up to the SMDIA of $250,000.

36 See FDIC Financial Institution Employee’s

Guide to Deposit Insurance at 74.

37 See 12 CFR 330.10(b)(2).

38 See 12 CFR 330.10(f).

pursuant to an irrevocable trust

established by written agreement or by

statute. Because these deposits would be

considered to be part of the same

category for deposit insurance purposes,

they would be aggregated when

applying the deposit insurance limit.

As amended, § 330.10 does not apply

to deposits maintained by an IDI in its

capacity as trustee of an irrevocable

trust; these deposits are insured

separately pursuant to section 7(i) of the

FDI Act and § 330.12 of the deposit

insurance regulations.

Calculation of Coverage

The FDIC will use one streamlined

calculation to determine the amount of

deposit insurance coverage for deposits

of revocable and irrevocable trusts

ly

to deposits maintained by an IDI in its

capacity as trustee of an irrevocable

trust; these deposits are insured

separately pursuant to section 7(i) of the

FDI Act and § 330.12 of the deposit

insurance regulations.

Calculation of Coverage

The FDIC will use one streamlined

calculation to determine the amount of

deposit insurance coverage for deposits

of revocable and irrevocable trusts. This

method is already utilized by the FDIC

to calculate coverage for revocable trusts

that have five or fewer beneficiaries and

it is an aspect of the current rules that

is generally well-understood by bankers

and trust depositors. The rule provides

that a grantor’s trust deposits will be

insured in an amount up to the SMDIA

(currently $250,000) multiplied by the

number of trust beneficiaries, not to

exceed five beneficiaries. This, in effect,

will limit coverage for a grantor’s trust

deposits at each IDI to a total of

$1,250,000; in other words, maximum

coverage of $250,000 per beneficiary for

up to five beneficiaries. The $1,250,000

per-grantor, per-IDI limit is intended to

be more straightforward and balance the

objectives of simplifying the trust rules,

promoting timely payment of deposit

insurance, facilitating resolutions,

ensuring consistency with the FDI Act,

and limiting risk to the DIF.

Eliminating Certain Requirements

Eligible Beneficiaries

The current revocable trust rules

provide that beneficiaries include

natural persons, charitable

organizations, and non-profit entities

recognized as such under the Internal

Revenue Code of 1986,30 while the

irrevocable trust rules do not establish

criteria for beneficiaries. As stated in the

proposed rule, the FDIC believes that a

single definition should be used to

determine whether an entity is an

‘‘eligible’’ beneficiary. The final rule

will use the current revocable trust

rule’s definition

s, and non-profit entities

recognized as such under the Internal

Revenue Code of 1986,30 while the

irrevocable trust rules do not establish

criteria for beneficiaries. As stated in the

proposed rule, the FDIC believes that a

single definition should be used to

determine whether an entity is an

‘‘eligible’’ beneficiary. The final rule

will use the current revocable trust

rule’s definition.

The final rule also excludes from the

calculation of deposit insurance

coverage beneficiaries that only would

obtain an interest in a trust if one or

more beneficiaries are deceased. This

codifies existing practice to include

only primary, unique beneficiaries in

the deposit insurance calculation.31

Consistent with current treatment,

naming a chain of contingent

beneficiaries that would obtain trust

interests only in event of a beneficiary’s

death will not increase deposit

insurance coverage.

Finally, the FDIC is codifying a

longstanding interpretation of the trust

rules under which an informal

revocable trust designates the

depositor’s formal trust as its

beneficiary. A formal trust generally

does not meet the definition of an

eligible beneficiary for deposit

insurance purposes, but the FDIC has

treated such accounts as revocable trust

accounts under the trust rules, insuring

the account as if it were titled in the

name of the formal trust.32

Retained Interests and Ineligible

Beneficiaries’ Interests

The current trust rules provide that in

some instances, funds intended for

specific beneficiaries are aggregated

with a grantor’s single ownership

deposits at the same IDI for purposes of

the deposit insurance calculation

accounts under the trust rules, insuring

the account as if it were titled in the

name of the formal trust.32

Retained Interests and Ineligible

Beneficiaries’ Interests

The current trust rules provide that in

some instances, funds intended for

specific beneficiaries are aggregated

with a grantor’s single ownership

deposits at the same IDI for purposes of

the deposit insurance calculation. These

instances include a grantor’s retained

interest in an irrevocable trust 33 and

interests of ineligible beneficiaries that

do not satisfy the definition of a

revocable trust ‘‘beneficiary.’’ 34 This

adds complexity to the deposit

insurance calculation, as a detailed

review of a trust agreement may be

required to value such interests in order

to aggregate them with a grantor’s single

ownership funds. In order to implement

the streamlined calculation for trust

deposits, the FDIC is eliminating these

provisions. Under the final rule, the

grantor and other beneficiaries that do

not satisfy the definition of ‘‘eligible

beneficiary’’ are not included in the

deposit insurance calculation.35

Importantly, this does not in any way

limit a grantor’s ability to establish such

trust interests under State law; these

interests simply do not factor into the

calculation of deposit insurance

coverage.

Future Trusts Named as Beneficiaries

Trusts often contain provisions for the

establishment of one or more new trusts

upon the grantor’s death, and the final

rule clarifies deposit insurance coverage

in these situations. Specifically, if a

trust agreement provides that trust

funds will pass into one or more new

trusts upon the death of the grantor (or

grantors), the future trust (or trusts) will

not be treated as beneficiaries for

purposes of the calculation under the

proposed rule

ne or more new trusts

upon the grantor’s death, and the final

rule clarifies deposit insurance coverage

in these situations. Specifically, if a

trust agreement provides that trust

funds will pass into one or more new

trusts upon the death of the grantor (or

grantors), the future trust (or trusts) will

not be treated as beneficiaries for

purposes of the calculation under the

proposed rule. Rather, the future trust(s)

will be considered mechanisms for

distributing trust funds, and the natural

persons or organizations that receive the

trust funds through the future trusts will

be considered the beneficiaries for

purposes of the deposit insurance

calculation. This clarification is

consistent with published guidance and

does not represent a substantive change

in deposit insurance coverage.36

Naming of Beneficiaries in Deposit

Account Records

Consistent with the current revocable

trust rules, the final rule continues to

require the beneficiaries of an informal

revocable trust to be specifically named

in the deposit account records of the

IDI.37

Presumption of Ownership

Consistent with the current revocable

trust rules, the final rule provides that,

unless otherwise specified in an IDI’s

deposit account records, a deposit of a

trust established by multiple grantors

will be presumed to be owned in equal

shares.38

Bankruptcy Trustee Deposits

The FDIC will maintain the current

treatment of deposits placed at an IDI by

a bankruptcy trustee. Under the final

rule, if funds of multiple bankruptcy

estates are commingled in a single

account at the IDI, each estate will be

separately insured up to the SMDIA.

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he current

treatment of deposits placed at an IDI by

a bankruptcy trustee. Under the final

rule, if funds of multiple bankruptcy

estates are commingled in a single

account at the IDI, each estate will be

separately insured up to the SMDIA.

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

39 See 12 U.S.C. 1821(a)(1)(D); 12 CFR 330.14.

40 Under the current deposit insurance rules,

deposits maintained by trusts or other business

arrangements that are subject to certain securities

laws are insured for up to $250,000 in total,

regardless of the number of underlying investors. 12

CFR 330.11(a)(2).

Deposits Covered Under Other Rules

The final rule excludes from coverage

under § 330.10 certain trust deposits

that are covered by other sections of the

deposit insurance regulations. For

example, employee benefit plan

deposits are insured pursuant to

§ 330.14, and investment company

deposits are insured as corporate

deposits pursuant to § 330.11. Deposits

held by an insured depository

institution in its capacity as trustee of

an irrevocable trust are insured

pursuant to § 330.12. In addition, if the

co-owners of an informal or formal

revocable trust are the trust’s sole

beneficiaries, deposits held in

connection with the trust are treated as

joint deposits under § 330.9. In each of

these cases, the FDIC will not alter the

current rules.

Effective Date

The effective date of the final rule is

April 1, 2024. This is intended to

provide IDIs, depositors, and the FDIC

time to prepare for the changes in

deposit insurance coverage. IDIs will

have an opportunity to review the

changes in coverage, train employees,

and update publications if necessary

er § 330.9. In each of

these cases, the FDIC will not alter the

current rules.

Effective Date

The effective date of the final rule is

April 1, 2024. This is intended to

provide IDIs, depositors, and the FDIC

time to prepare for the changes in

deposit insurance coverage. IDIs will

have an opportunity to review the

changes in coverage, train employees,

and update publications if necessary. In

addition, ‘‘covered institutions’’ under

the FDIC’s rule entitled ‘‘Recordkeeping

for timely deposit insurance

determination,’’ codified at 12 CFR part

370 will need to prepare to implement

changes to recordkeeping and

information technology capabilities.

Depositors may review insurance

coverage for their deposits and adjust

their deposit account arrangements and

deposit relationships, if desired. In

addition, the FDIC must reprogram the

information technology infrastructure

that it uses to determine deposit

insurance coverage and to make

payment to insured depositors and

update its deposit insurance coverage

publications, including publications

that provide guidance to covered

institutions.

D. Discussion of Comments

The FDIC received seven comments

on the proposed rule, including one

joint letter from three national trade

associations and individual letters from

another national trade association, a

State banker’s association, a deposit

solutions provider, and three

individuals. Several commenters

expressed appreciation for the FDIC’s

efforts to simplify the trust rules and

offered suggestions for modifications to

the proposed rule.

Some commenters also offered

suggestions that relate primarily to other

parts of the FDIC’s regulations and thus

are outside the scope of the proposed

rule. Nonetheless, the FDIC reviewed

these suggestions as part of the process

of developing the final rule as discussed

below

r the FDIC’s

efforts to simplify the trust rules and

offered suggestions for modifications to

the proposed rule.

Some commenters also offered

suggestions that relate primarily to other

parts of the FDIC’s regulations and thus

are outside the scope of the proposed

rule. Nonetheless, the FDIC reviewed

these suggestions as part of the process

of developing the final rule as discussed

below.

Institutional Trusts

Three trade associations raised a

concern about the coverage that would

apply to certain institutional trusts

under the proposed rule, including

common trust funds, collective

investment funds, indenture bonds, and

securitization trusts. The commenters

explained that these types of irrevocable

trusts are sometimes established by

entities other than insured depository

institutions—such as uninsured limited

purpose nationally-chartered banks,

limited purpose state-chartered banks,

and state-chartered trust companies—to

collectively invest funds, issue bonds,

or form securitized investments. The

commenters asserted that deposits of

such trusts potentially fall within the

scope of the existing irrevocable trust

category and would experience a

reduction in coverage under the

proposed rule because per-beneficiary

coverage would be provided only for up

to five eligible beneficiaries. The

commenters urged the FDIC to amend

the pass-through deposit insurance rules

and, in the interim, to clarify through

guidance that institutional trusts qualify

for pass-through insurance coverage.

Pass-through insurance coverage

applies to deposits of specific types of

institutional trusts under the current

rules, and this coverage would not be

affected by the rule. The commenters

noted that collective trust funds are

established for the purpose of investing

assets of retirement, pension, profit

sharing, stock bonus or other employee

benefit trusts

pass-through insurance coverage.

Pass-through insurance coverage

applies to deposits of specific types of

institutional trusts under the current

rules, and this coverage would not be

affected by the rule. The commenters

noted that collective trust funds are

established for the purpose of investing

assets of retirement, pension, profit

sharing, stock bonus or other employee

benefit trusts. Deposits of employee

benefit plans are insured on a pass-

through basis pursuant to statute and

regulation.39 Moreover, § 330.10(f)(2) of

the proposed rule stated that deposits of

employee benefit plans would be

covered pursuant to the rules for

employee benefit plan deposits found in

§ 330.14, even if such deposits belonged

to a trust.

Pass-through insurance coverage

generally does not apply to deposits of

other types of investment trusts, such as

mutual funds or other investment

company structures.40 While some

institutional trusts (similarly to some

individual trusts) may experience a

reduction in deposit insurance coverage

under this final rule, the FDIC believes

that a simplified insurance calculation

for trust deposits has substantial

benefits for depositors and IDIs.

Per-Grantor Coverage Limit

Two individuals submitted comment

letters questioning the elimination of

coverage for a grantor’s trust deposits

exceeding $1,250,000 at a single IDI.

The FDIC recognizes that this aspect of

the proposed rule may result in a

reduction in deposit insurance coverage

for a small number of trust depositors

that hold deposits exceeding $1,250,000

at a single IDI, and these depositors may

wish to restructure their trust deposits.

However, the FDIC believes that a

simplified insurance calculation for

trust deposits has substantial benefits

for depositors and IDIs, as discussed

above

he proposed rule may result in a

reduction in deposit insurance coverage

for a small number of trust depositors

that hold deposits exceeding $1,250,000

at a single IDI, and these depositors may

wish to restructure their trust deposits.

However, the FDIC believes that a

simplified insurance calculation for

trust deposits has substantial benefits

for depositors and IDIs, as discussed

above. The $1,250,000 per-grantor, per-

IDI limit is intended to be more

straightforward and balance the

objectives of simplifying the trust rules,

promoting timely payment of deposit

insurance, facilitating resolutions,

ensuring consistency with the FDI Act,

and limiting risk to the DIF. In addition,

as discussed below, the FDIC intends to

update its publications and engage in

public outreach to promote awareness of

the changes in coverage.

Educational Materials

A trade association suggested that the

FDIC provide template language for

bankers to explain trust coverage

changes to depositors and publish and

regularly update guidance and

frequently asked questions on its

website to address specific scenarios.

The FDIC appreciates this suggestion

and recognizes the need for public

outreach on a variety of fronts. The

FDIC already has many resources for

bankers and the public that help explain

deposit insurance coverage generally,

and several presentations that are

specific to trust accounts, including the

following:

• Financial Institution Employee’s

Guide to Deposit Insurance: Describes

deposit insurance coverage for various

account categories and provides

examples of coverage in multiple

different scenarios.

• Bankers’ seminars: The FDIC holds

deposit insurance seminars for bankers

multiple times each year, during which

FDIC staff discuss the current rules and

take questions.

• Electronic Deposit Insurance

Estimator (EDIE): A tool on the FDIC’s

website that can be used to help

determine deposit insurance coverage

for particular account arrangements

coverage in multiple

different scenarios.

• Bankers’ seminars: The FDIC holds

deposit insurance seminars for bankers

multiple times each year, during which

FDIC staff discuss the current rules and

take questions.

• Electronic Deposit Insurance

Estimator (EDIE): A tool on the FDIC’s

website that can be used to help

determine deposit insurance coverage

for particular account arrangements.

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

41 12 U.S.C. 1821(a)(1)(C).

42 12 CFR 330.10(c) provides that ‘‘[f]or purposes

of this section, a beneficiary includes a natural

person as well as a charitable organization and

other non-profit entity recognized as such under the

Internal Revenue Code of 1986, as amended.’’

• Published guidance and materials

relating to deposit insurance coverage

intended to assist the covered

institutions subject to part 370

As part of its implementation of the

final rule by the effective date of April

1, 2024, the FDIC intends to review all

relevant resources and publications and

update or remove those materials, as

appropriate. Additionally, the FDIC will

ensure that all materials, including

brochures and any other documents, are

updated and available for distribution.

The FDIC will also consider additional

ways to inform the public regarding the

final rule and ways to assist bankers in

explaining any changes to depositors.

Comments Focused on Part 370

Commenters also addressed various

aspects of the NPR that have

implications for covered institutions.

Issues raised by these commenters and

the FDIC’s responses are discussed

below. The commenters also raised

issues with part 370 that are outside the

scope of this rulemaking effort. While

the FDIC acknowledges those

comments, it believes those comments

are not directly related to the final rule

ers also addressed various

aspects of the NPR that have

implications for covered institutions.

Issues raised by these commenters and

the FDIC’s responses are discussed

below. The commenters also raised

issues with part 370 that are outside the

scope of this rulemaking effort. While

the FDIC acknowledges those

comments, it believes those comments

are not directly related to the final rule.

Beneficiaries of Future Trusts

Several trade associations argued that

the proposed rule’s treatment of

beneficiaries of future trusts would add

considerable burden to compliance with

part 370 and urged the FDIC to treat

future trusts as another type of eligible

beneficiary. The FDIC does not believe

that looking through future trusts to

identify potential beneficiaries will add

any compliance burden for part 370

covered institutions. Under

§ 370.4(b)(2), a covered institution is not

required to maintain the identity of a

formal trust’s beneficiary(ies) in its

deposit account records for the trust’s

account(s) if it does not otherwise

maintain the information that would be

needed for its information technology

system to meet the requirements set

forth in § 370.3. Thus, to the extent a

trust’s beneficiaries include a future

trust, the covered institution would not

be required to collect information on the

beneficiaries of a future trust in order to

comply with part 370. It is important to

note, however, that regardless of

whether or not an insured depository

institution is covered by part 370, if an

insured depository institution were to

fail, then the depositor may need to

provide the identity(ies) of a future

trust’s beneficiary(ies) in order for the

FDIC to make a complete and accurate

deposit insurance determination

in order to

comply with part 370. It is important to

note, however, that regardless of

whether or not an insured depository

institution is covered by part 370, if an

insured depository institution were to

fail, then the depositor may need to

provide the identity(ies) of a future

trust’s beneficiary(ies) in order for the

FDIC to make a complete and accurate

deposit insurance determination. In

addition, the FDIC notes that it is

required by statute to aggregate each

depositor’s deposits within each

insurance category when making an

insurance determination.41 Recognizing

a future trust as an eligible beneficiary

could result in duplicative coverage to

the extent the beneficiaries of the

existing trust and the future trust

overlap.

Multiple Beneficiaries Across Multiple

Trust Accounts

Three trade associations

recommended that any final rulemaking

for trust coverage simplification should

include a specific example to explain

part 370 recordkeeping requirements

when there are more than five

beneficiaries associated with more than

one trust account established by the

same grantor. According to the example

recommended by commenters, when a

grantor has established both an informal

trust account (e.g., a payable-on-death

(POD) account) and a formal trust that

also has accounts at the same covered

institution, the covered institution

would be required to identify the

beneficiary(ies) only for the informal

trust account in the deposit account

records.

As the commenters note, accounts

held in connection with a formal trust

that are insured under § 330.10, as

amended pursuant to this final rule (or

§ 330.13 prior to the effective date of

this final rule), are eligible for

alternative recordkeeping under

§ 370.4(b)(2)

would be required to identify the

beneficiary(ies) only for the informal

trust account in the deposit account

records.

As the commenters note, accounts

held in connection with a formal trust

that are insured under § 330.10, as

amended pursuant to this final rule (or

§ 330.13 prior to the effective date of

this final rule), are eligible for

alternative recordkeeping under

§ 370.4(b)(2). A covered institution is

not required to maintain information

identifying the beneficiaries of a formal

trust in the deposit account records for

purposes of part 370 if it does not

otherwise maintain the information that

would be needed for its information

technology system to meet the

requirements set forth in § 370.3.

Nevertheless, if a covered institution

should fail, the depositor (or the trustee

for the formal trust) may need to submit

to the FDIC information identifying the

formal trust’s beneficiary(ies).

Need To Provide Trust Documentation

Upon Bank Failure

A deposit solutions provider

submitted a comment letter describing

its operation of a sweep program and

the method by which it allocates trust

deposits among several banks. The

commenter indicated that if the

depositor’s originating bank does not

provide information on trust

beneficiaries, only up to $250,000 of

that depositor’s funds will be allocated

to a single bank in the network. The

commenter requested the FDIC

recognize that operating the program in

this way eliminates the need for the

originating bank to provide trust

documentation to the FDIC after a bank

failure or for the purpose of complying

with part 370’s recordkeeping

requirements.

The deposit solutions provider’s

methodology for allocating the trust

deposits is intended to ensure that the

total corpus of trust funds would be

eligible for deposit insurance (because

the amount placed at each receiving

bank would not exceed the SMDIA for

each beneficial owner of the deposits)

a bank

failure or for the purpose of complying

with part 370’s recordkeeping

requirements.

The deposit solutions provider’s

methodology for allocating the trust

deposits is intended to ensure that the

total corpus of trust funds would be

eligible for deposit insurance (because

the amount placed at each receiving

bank would not exceed the SMDIA for

each beneficial owner of the deposits).

That methodology, however, would not

necessarily provide the FDIC with all of

the requisite information to complete an

accurate deposit insurance

determination on a particular

depositor’s accounts. Several other

factors must be considered and

evaluated.

Although it may be uncommon for an

individual depositor participating in the

commenter’s program to maintain other

deposit accounts at a bank holding the

swept trust funds, the FDIC is required

by statute to aggregate all of a beneficial

owner’s funds placed in one bank in the

same right and capacity. Consequently,

the FDIC would have to obtain any

additional depositor or trust account

information (or confirm that there is

none) in order to aggregate all the

depositor’s accounts in the trust

category. The requisite information

would include identification of both the

grantor(s) and the beneficiaries of the

trust. For example, in the event that a

depositor maintained more than one

trust account with the same beneficiary,

that particular beneficiary would only

count once for purposes of deposit

insurance eligibility. Additionally, it is

possible that an entity listed as a

beneficiary would not meet the

definition of a ‘‘beneficiary’’ as set forth

in § 330.10(c).42 Finally, if the grantor

has multiple trust accounts at the same

bank, it is possible that the FDIC would

provide deposit insurance for one trust

account before receiving the necessary

trust account information for another

trust account

ity. Additionally, it is

possible that an entity listed as a

beneficiary would not meet the

definition of a ‘‘beneficiary’’ as set forth

in § 330.10(c).42 Finally, if the grantor

has multiple trust accounts at the same

bank, it is possible that the FDIC would

provide deposit insurance for one trust

account before receiving the necessary

trust account information for another

trust account. As stated previously, the

FDIC would have to ensure that both

trust accounts are aggregated before

paying additional deposit insurance for

the second trust account. The FDIC

would be unable to perform this

function without the relevant grantor

and beneficiary information.

The part 370 recordkeeping

requirements for informal revocable

trust accounts closely track the

recordkeeping requirements set forth in

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43 See § 330.10(b)(2) which requires ‘‘[f]or

informal revocable trust accounts, the beneficiaries

must be specifically named in the deposit account

records of the insured depository institution.’’

44 Although § 370.10(d) provides that ‘‘[a] covered

institution will not be considered to be in violation

of this part as a result of a change in law that alters

the availability or calculation of deposit insurance

for such period as specified by the FDIC following

the effective date of such change[,]’’ the FDIC is not

providing an additional period of time pursuant to

§ 370.10(d) because the delayed effective date of the

final rule provides covered institutions with at least

24 months to prepare the changes that will need to

be operational on April 1, 2024.

45 12 CFR 370.10(a).

46 84 FR 37020, 37029 (July 30, 2019).

47 Id

fied by the FDIC following

the effective date of such change[,]’’ the FDIC is not

providing an additional period of time pursuant to

§ 370.10(d) because the delayed effective date of the

final rule provides covered institutions with at least

24 months to prepare the changes that will need to

be operational on April 1, 2024.

45 12 CFR 370.10(a).

46 84 FR 37020, 37029 (July 30, 2019).

47 Id. The FDIC explained further that ‘‘[t]his

capability will facilitate the FDIC’s resolution

efforts by enabling a successor [insured depository

institution] to continue payments processing

uninterrupted, and will also mitigate adverse effects

of the covered institution’s failure on these account

holders.’’

48 Id., discussing trust deposits insured pursuant

to 12 CFR 330.13, which coverage is now combined

under revised 12 CFR 330.10.

49 See 86 FR 41766, 41776 (Aug. 3, 2021).

12 CFR 330.10, as amended. For

example, § 370.4(a)(1)(iii) requires the

covered institution to maintain

information concerning the beneficiaries

of a payable-on-death account in the

covered institution’s records.43

Therefore, this information should be

immediately available to the FDIC at a

covered institution’s failure. In contrast,

for formal trust accounts, § 370.4(b)(2)

permits alternative recordkeeping

treatment and requires a covered

institution to maintain some, but not all,

of the requisite information the FDIC

would need to have to complete an

accurate deposit insurance

determination. Nevertheless, the FDIC

would require this information to be

available after a covered institution’s

failure for the reasons discussed above.

Implementation of Part 370 Capabilities

Three trade associations urged the

FDIC to postpone part 370 examinations

on the types of deposit accounts

impacted. Part 370 requires a covered

institution to implement information

technology and recordkeeping

capabilities to calculate deposit

insurance as provided under part 330

ter a covered institution’s

failure for the reasons discussed above.

Implementation of Part 370 Capabilities

Three trade associations urged the

FDIC to postpone part 370 examinations

on the types of deposit accounts

impacted. Part 370 requires a covered

institution to implement information

technology and recordkeeping

capabilities to calculate deposit

insurance as provided under part 330.

The final rule has a delayed effective

date and will not go into effect until

April 1, 2024.44 Accordingly, covered

institutions will have at least 24 months

after the FDIC’s adoption of the final

rule to prepare the updates or changes

to its information technology system or

recordkeeping capabilities that will be

necessary to satisfy part 370

requirements as of the effective date of

the final rule. The FDIC is also

publishing a separate notification

elsewhere in this issue of the Federal

Register to part 370 covered institutions

regarding the final rule’s implications

regarding compliance with part 370.

FDIC Testing of Part 370 Capabilities

Several trade associations suggested

that the FDIC delay part 370 compliance

tests for three years after a covered

institution’s part 370 annual

certification following the effective date

of the final rule. The FDIC will continue

to conduct periodic tests pursuant to 12

CFR 370.10(b) and evaluate the part 370

capabilities under the rules effective at

the time of the compliance test. Ongoing

compliance testing is necessary because

a covered institution could fail at any

time, and the FDIC would need to

utilize the covered institution’s part 370

capabilities to effectively conduct a

timely deposit insurance determination.

The FDIC relies on compliance testing

to provide it with insight regarding how

comprehensive a covered institution’s

part 370 capabilities are

test. Ongoing

compliance testing is necessary because

a covered institution could fail at any

time, and the FDIC would need to

utilize the covered institution’s part 370

capabilities to effectively conduct a

timely deposit insurance determination.

The FDIC relies on compliance testing

to provide it with insight regarding how

comprehensive a covered institution’s

part 370 capabilities are. Further, the

revisions to deposit insurance coverage

made by the final rule are expected to

impact a relatively small volume of a

covered institution’s deposit balances so

should not significantly impact

compliance testing, and would

nonetheless be useful in assessing a

covered institution’s part 370

capabilities.

Comments Outside the Scope of This

Rulemaking

Finally, commenters recommended

certain changes to part 370

requirements. Three trade associations

suggested that the FDIC limit the annual

certification requirement for testing and

attestation to material changes only and

waive certain recordkeeping

requirements for grantors. The FDIC

believes that the recommendations to

change part 370 compliance and

recordkeeping requirements are outside

the scope of the current part 330

rulemaking and would require an

amendment to part 370 instead.

Currently, covered institutions are

required to submit to the FDIC a

certification of compliance that must,

among other requirements, ‘‘confirm

that the covered institution has

implemented all required capabilities

and tested its information technology

system during the proceeding twelve

months.’’ 45 The purpose of this

requirement is to guarantee that a

covered institution perform an end-to-

end test of its part 370 capabilities at

least once per year and to confirm that

those capabilities function properly. In

the event that a covered institution were

to fail, the FDIC would rely upon all of

the covered institution’s part 370

capabilities to complete the deposit

insurance calculations

purpose of this

requirement is to guarantee that a

covered institution perform an end-to-

end test of its part 370 capabilities at

least once per year and to confirm that

those capabilities function properly. In

the event that a covered institution were

to fail, the FDIC would rely upon all of

the covered institution’s part 370

capabilities to complete the deposit

insurance calculations. Moreover, the

FDIC would not limit its testing to only

the capabilities that the covered

institution has materially changed

during the preceding compliance year.

Rather it would test the covered

institution’s capabilities to calculate

deposit insurance should the need arise

and understand which capabilities

function properly and which do not.

Among the comments related solely to

part 370, a trade association requested

that the FDIC waive certain

recordkeeping requirements under

§ 370.4 that are applicable to formal

revocable trust and irrevocable trust

accounts with transactional features,

namely the requirement that a covered

institution maintain a unique identifier

for the trust’s grantor. In the preamble

to the 2019 part 370 final rule, the FDIC

stated that having a method to identify

the grantor at failure (i.e., a unique

identifier) would enable the FDIC to

aggregate the deposits of formal

revocable trusts established by the same

grantor and insure those accounts up to

the SMDIA.46 This could enable

payment instructions presented against

those accounts to be completed after

failure.47 The same approach would be

used for certain irrevocable trust

accounts that have a common grantor.48

Trade association commenters also

recommended that the FDIC allow

covered institutions to amend existing

exception requests and provide

extensions for granted relief to account

for changes to part 330. This request is

outside the scope of this rulemaking,

and the FDIC will consider this outside

the scope of this rulemaking

certain irrevocable trust

accounts that have a common grantor.48

Trade association commenters also

recommended that the FDIC allow

covered institutions to amend existing

exception requests and provide

extensions for granted relief to account

for changes to part 330. This request is

outside the scope of this rulemaking,

and the FDIC will consider this outside

the scope of this rulemaking.

The FDIC reiterates that

recommendations to amend part 370 are

beyond the scope of this final rule.

E. Alternatives Considered

The FDIC considered a number of

alternatives to the amendments to the

trust rules that could meet its objectives,

as described in the preamble to the

proposed rule.49 Commenters generally

did not address these alternatives, and

for the reasons stated in the preamble to

the proposed rule, the FDIC concludes

that the proposed rule was preferable to

the alternatives.

II. Amendments to Mortgage Servicing

Account Rule

A. Policy Objectives

The FDIC’s regulations governing

deposit insurance coverage include

specific rules on deposits maintained at

IDIs by mortgage servicers. These rules

are intended to be easy to understand

and apply in determining the amount of

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50 Certain funds collected from mortgagors and

held by a bank may not be ‘‘deposits’’ under the FDI

Act, and thus fall outside the scope of deposit

insurance coverage. For example, funds received by

a bank that are immediately applied to reduce the

debt owed to that bank are specifically excluded

from the statutory definition of ‘‘deposit.’’ 12 U.S.C.

1813(l)(3).

51 See 73 FR 61658, 61658–59 (Oct. 17, 2008)

ollected from mortgagors and

held by a bank may not be ‘‘deposits’’ under the FDI

Act, and thus fall outside the scope of deposit

insurance coverage. For example, funds received by

a bank that are immediately applied to reduce the

debt owed to that bank are specifically excluded

from the statutory definition of ‘‘deposit.’’ 12 U.S.C.

1813(l)(3).

51 See 73 FR 61658, 61658–59 (Oct. 17, 2008).

52 In order to fulfill their contractual obligations

with investors, covered institutions maintain

mortgage principal and interest balances at a pool

level and remittances, advances, advance

reimbursement and excess funds applications that

affect pool-level balances are not allocated back to

individual borrowers.

53 See 86 FR 41766 (Aug. 3, 2021).

54 Servicers’ advances may have been insured

under the rule that applied to mortgage servicing

account deposits prior to 2008. Prior to 2008,

mortgage servicing deposits were insured on a pass-

through basis. Under the pass-through insurance

rules, the identity of the party that pays funds into

a deposit account does not generally factor into

insurance coverage. In this sense, the proposed rule

can be viewed as restoring coverage to the previous

level.

deposit insurance coverage for a

mortgage servicer’s deposits. The FDIC

also seeks to avoid uncertainty

concerning the extent of deposit

insurance coverage for such deposits, as

deposits in mortgage servicing accounts

(MSAs) provide a source of funding for

IDIs.

The FDIC is amending its rules

governing insurance coverage for

deposits maintained at IDIs by mortgage

servicers that are comprised of

mortgagors’ principal and interest

payments. The amendments are

intended to address an aspect of

servicing arrangements that was not

previously covered by the mortgage

servicing account rule

rvicing accounts

(MSAs) provide a source of funding for

IDIs.

The FDIC is amending its rules

governing insurance coverage for

deposits maintained at IDIs by mortgage

servicers that are comprised of

mortgagors’ principal and interest

payments. The amendments are

intended to address an aspect of

servicing arrangements that was not

previously covered by the mortgage

servicing account rule. Specifically,

some servicing arrangements may

permit or require servicers to advance

their own funds to the lenders when

mortgagors are delinquent in making

principal and interest payments, and

servicers might commingle such

advances in the MSA with principal and

interest payments collected directly

from mortgagors. This may be required,

for example, under certain mortgage

securitizations. The FDIC believes that

the factors that motivated the FDIC to

establish its current rules for mortgage

servicing accounts, described below,

argue for treating funds advanced by a

mortgage servicer in order to satisfy

mortgagors’ principal and interest

obligations to the lender as if such funds

were collected directly from

borrowers.50

B. Background

The FDIC’s rules governing coverage

for mortgage servicing accounts were

originally adopted in 1990 following the

transfer of responsibility for insuring

deposits of savings associations from the

Federal Savings and Loan Insurance

Corporation (FSLIC) to the FDIC. Under

the rules adopted in 1990, deposits

comprised of payments of principal and

interest were insured on a pass-through

basis to lenders, mortgagees, investors,

or security holders (lenders). In

adopting this rule, the FDIC focused on

the fact that principal and interest funds

were generally owned by lenders, on

whose behalf the servicer, as agent,

accepted principal and interest

payments

er

the rules adopted in 1990, deposits

comprised of payments of principal and

interest were insured on a pass-through

basis to lenders, mortgagees, investors,

or security holders (lenders). In

adopting this rule, the FDIC focused on

the fact that principal and interest funds

were generally owned by lenders, on

whose behalf the servicer, as agent,

accepted principal and interest

payments. By contrast, payments of

taxes and insurance were insured to the

mortgagors or borrowers on a pass-

through basis because the borrower

owns such funds until tax and

insurance bills are paid by the servicer.

In 2008, however, the FDIC

recognized that securitization methods

and vehicles for mortgages had become

more complex, exacerbating the

difficulty of determining the ownership

of deposits comprised of principal and

interest payments by mortgagors and

extending the time required to make a

deposit insurance determination for

deposits of a mortgage servicer in the

event of an IDI’s failure.51 The FDIC

expressed concern that a lengthy

insurance determination could lead to

continuous withdrawal of deposits of

principal and interest payments from

IDIs and unnecessarily reduce a funding

source for such institutions. The FDIC

therefore amended its rules to provide

coverage to lenders based on each

mortgagor’s payments of principal and

interest into the mortgage servicing

account, up to the SMDIA (currently

$250,000) per mortgagor. The FDIC did

not amend the rule for coverage of tax

and insurance payments, which

continued to be insured to each

mortgagor on a pass-through basis and

aggregated with any other deposits

maintained by each mortgagor at the

same IDI in the same right and capacity.

The 2008 amendments to the rules for

mortgage servicing accounts did not

provide for the fact that servicers may

be required to advance their own funds

to make payments of principal and

interest on behalf of delinquent

borrowers to the lenders

tgagor on a pass-through basis and

aggregated with any other deposits

maintained by each mortgagor at the

same IDI in the same right and capacity.

The 2008 amendments to the rules for

mortgage servicing accounts did not

provide for the fact that servicers may

be required to advance their own funds

to make payments of principal and

interest on behalf of delinquent

borrowers to the lenders. However, this

is required of mortgage servicers under

some mortgage servicing arrangements.

Covered institutions identified

challenges to implementing certain

recordkeeping requirements with

respect to MSA deposit balances as a

result of the ways in which servicer

advances are administered and

accounted.52

The current rule provides coverage for

principal and interest funds only to the

extent ‘‘paid into the account by the

mortgagors’’; it does not provide

coverage for funds paid into the account

from other sources, such as the

servicer’s own operating funds, even if

those funds satisfy mortgagors’ principal

and interest payments. As a result,

deposits into an MSA by a servicer for

the purpose of making an advance are

not provided the same level of coverage

as other deposits in a mortgage servicing

account consisting of principal and

interest payments directly from the

borrower, which are insured up to the

SMDIA for each borrower. Instead, the

advances are aggregated and insured to

the servicer as corporate funds for a

total of $250,000. The FDIC is

concerned that this inconsistent

treatment of principal and interest

amounts could result in financial

instability during times of stress, and

could further complicate the insurance

determination process, a result that is

inconsistent with the FDIC’s policy

objectives.

C

ead, the

advances are aggregated and insured to

the servicer as corporate funds for a

total of $250,000. The FDIC is

concerned that this inconsistent

treatment of principal and interest

amounts could result in financial

instability during times of stress, and

could further complicate the insurance

determination process, a result that is

inconsistent with the FDIC’s policy

objectives.

C. Final Rule

In July 2021, the FDIC proposed to

amend the rules governing coverage for

deposits in mortgage servicing accounts

to provide consistent deposit insurance

treatment for all MSA deposit balances

held to satisfy principal and interest

obligations to a lender, regardless of

whether those funds are paid into the

account by borrowers, or paid into the

account by another party (such as the

servicer) in order to satisfy a periodic

obligation to remit principal and

interest due to the lender.53 Under the

rule, accounts maintained by a mortgage

servicer in an agency, custodial, or

fiduciary capacity, for the purpose of

payment of a borrower’s principal and

interest obligations, would be insured

for the cumulative balance paid into the

account in order to satisfy principal and

interest obligations to the lender,

whether paid directly by the borrower

or by another party, up to the limit of

the SMDIA per mortgagor. Mortgage

servicers’ advances of principal and

interest funds on behalf of delinquent

borrowers would therefore be insured

up to the SMDIA per mortgagor,

consistent with the coverage rules for

payments of principal and interest

collected directly from borrowers.54

The FDIC received one joint comment

letter responding to the proposed

change in coverage for mortgage

servicing accounts, discussed below.

Under the final rule, the composition

of an MSA attributable to principal and

interest payments would also include

collections by a servicer, such as

foreclosure proceeds, that are used to

satisfy a borrower’s principal and

interest obligations to the lender

C received one joint comment

letter responding to the proposed

change in coverage for mortgage

servicing accounts, discussed below.

Under the final rule, the composition

of an MSA attributable to principal and

interest payments would also include

collections by a servicer, such as

foreclosure proceeds, that are used to

satisfy a borrower’s principal and

interest obligations to the lender. These

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

55 The count of institutions includes FDIC-

insured U.S. branches of institutions headquartered

in foreign countries.

56 FDIC Call Report data, September 30, 2021.

57 Data on failed banks comes from the FDIC’s

Claims Administration System, which contains data

on depositors’ funds from every failed IDI since

September 2010.

funds will be insured up to the limit of

the SMDIA per mortgagor.

The FDIC did not propose changes to

the deposit insurance coverage provided

for mortgage servicing accounts

comprised of payments from mortgagors

of taxes and insurance premiums. Such

aggregate escrow accounts are held

separately from the principal and

interest MSAs and the deposits therein

are held in trust for the mortgagors until

such time as tax and insurance

payments are disbursed by the servicer

on the borrower’s behalf. Such deposits

continued to be insured based on the

ownership interest of each mortgagor in

the account and aggregated with other

deposits maintained by the mortgagor at

the same IDI in the same capacity and

right.

D. Discussion of Comments

The proposed rule provided that

balances in mortgage servicing accounts

that were paid into the account by either

the borrower or another party would be

insurable if they were held to satisfy the

principal and interest obligations of a

mortgagor

ccount and aggregated with other

deposits maintained by the mortgagor at

the same IDI in the same capacity and

right.

D. Discussion of Comments

The proposed rule provided that

balances in mortgage servicing accounts

that were paid into the account by either

the borrower or another party would be

insurable if they were held to satisfy the

principal and interest obligations of a

mortgagor. The comment was

supportive of this change, noting that

the allocations provided would allow

for more stability in these types of

accounts in periods of turmoil. The

FDIC is finalizing the rule as proposed.

Three trade associations, through a

joint comment letter, specifically

requested additional clarity on the

coverage that would be provided for

three specific types of funds placed into

mortgage servicing accounts by the

servicer—interest shortfall payments,

funds from distressed homeowner

programs, and funds used to satisfy

buyout or repurchase obligations.

Interest shortfall payments are funded

by the servicer when a loan is

refinanced or paid off before the end of

a month. The associations noted that

servicers are generally required to fund

the interest that would have accrued

during the month, just as if the borrower

had continued the payment stream as

agreed. Because these payments are

traceable at the loan level and held to

satisfy the interest obligation of the

mortgagor, they are covered under the

mortgage servicing account rule.

Federal, state, and local governments

have created various programs during

emergencies that provide funds to

borrowers who are having difficulties

paying their home mortgages. While the

most recent iterations of these programs

were spurred by the COVID–19

pandemic, these types of programs can

result from other types of emergencies

as well (e.g., natural disasters) and can

vary in duration

ederal, state, and local governments

have created various programs during

emergencies that provide funds to

borrowers who are having difficulties

paying their home mortgages. While the

most recent iterations of these programs

were spurred by the COVID–19

pandemic, these types of programs can

result from other types of emergencies

as well (e.g., natural disasters) and can

vary in duration. While each program

would need to be evaluated on its

individual terms, the FDIC expects that

funds originating from most government

programs designed to help homeowners

with mortgage payments would be

included in the borrower’s insurable

balance covered by the mortgage

servicing account rule due to the

provision of funds to satisfy the

borrower’s principal and interest

obligations.

With respect to servicer-funded

buyouts and repurchases of loans, it is

common for the servicer to be requested

to repurchase or substitute a loan in a

securitization if the loan is defective or

in a specific delinquency status.

Although the amount of unpaid

principal balance plus the accrued but

unpaid interest on that loan is the price

paid to repurchase the loan from the

pool, the repurchase of the loan from

the investor pool does not satisfy the

borrower’s principal and interest

obligation, and thus, falls outside the

scope of the rule.

Alternatively, the associations

suggested that the FDIC eliminate the

borrower-level allocation, as most

mortgage servicers account for the

deposits in their account on the

portfolio level as opposed to the loan-

specific level. The commenters’

suggested removal of the borrower

allocation would change the insurable

amount calculation to insure the lesser

of the balance in the mortgage servicing

account or the number of borrowers

multiplied by the SMDIA. The FDIC

believes that the elimination of the

borrower-level allocation would

significantly expand deposit insurance

coverage in some circumstances and

declines to adopt the suggested

alternative

f the borrower

allocation would change the insurable

amount calculation to insure the lesser

of the balance in the mortgage servicing

account or the number of borrowers

multiplied by the SMDIA. The FDIC

believes that the elimination of the

borrower-level allocation would

significantly expand deposit insurance

coverage in some circumstances and

declines to adopt the suggested

alternative. For example, a balance

representing a large commercial

mortgage payment could be fully

insured if the pooled custodial account

contained funds for a large number of

other borrowers, even if this large

payment significantly exceeded the

$250,000 deposit insurance limit.

III. Regulatory Analysis

A. Expected Effects

1. Simplification of Trust Rules

Generally, the simplification of the

trust rules is expected to have benefits

including clarifying depositors’ and

bankers’ understanding of the insurance

rules, promoting the timely payment of

deposit insurance following an IDI’s

failure, facilitating the transfer of

deposit relationships to failed bank

acquirers (thereby potentially reducing

the FDIC’s resolution costs), and

addressing differences in the treatment

of revocable trust deposits and

irrevocable trust deposits contained in

the current rules. The changes to the

current rules would directly affect the

level of deposit insurance coverage

provided to some depositors with trust

deposits. In some cases, which the FDIC

expects are rare, the changes could

reduce deposit insurance coverage; for

the vast majority of depositors, the FDIC

expects the coverage level to be

unchanged. The FDIC has also

considered the impact of any changes in

the deposit insurance rules on the DIF

and on the covered institutions that are

subject to part 370. Finally, the FDIC

describes other potential effects of the

changes, such as the effects on

information technology (IT) service

providers to the institutions that could

be affected by the final rule

e coverage level to be

unchanged. The FDIC has also

considered the impact of any changes in

the deposit insurance rules on the DIF

and on the covered institutions that are

subject to part 370. Finally, the FDIC

describes other potential effects of the

changes, such as the effects on

information technology (IT) service

providers to the institutions that could

be affected by the final rule. These

effects are discussed in greater detail

below.

Effects on Deposit Insurance Coverage

The final rule would affect deposit

insurance coverage for deposits held in

connection with trusts. According to

September 30, 2021 Call Report data,

the FDIC insures 4,923 depository

institutions 55 that report holding

approximately 812 million deposit

accounts. Additionally, 1,551 IDIs have

powers granted by a state or national

regulatory authority to administer

accounts in a fiduciary capacity (i.e.,

trust powers) and 1,155 exercise those

powers, comprising 31.5 percent and

23.5 percent, respectively, of all IDIs.56

However, individual depositors may

establish a trust account at an IDI even

if that IDI does not itself have or

exercise trust powers, and in fact, as

discussed below, 99 percent of a sample

of failed banks had trust accounts.

Therefore, the FDIC estimates that the

final rule could affect between 1,155

and 4,923 IDIs.

The FDIC does not have detailed data

on depositors’ trust arrangements that

would allow it to precisely estimate the

number of trust accounts that are

currently held by FDIC-insured

institutions. However, the FDIC

estimated the number of trust accounts

and trust account depositors utilizing

data from failed banks. Based on data

from 249 failed banks 57 between 2010

and 2020, 335,657 deposit accounts—

owned by 250,139 distinct depositors—

were trust accounts (revocable or

irrevocable), out of a total of 3,013,575

deposit accounts

t are

currently held by FDIC-insured

institutions. However, the FDIC

estimated the number of trust accounts

and trust account depositors utilizing

data from failed banks. Based on data

from 249 failed banks 57 between 2010

and 2020, 335,657 deposit accounts—

owned by 250,139 distinct depositors—

were trust accounts (revocable or

irrevocable), out of a total of 3,013,575

deposit accounts. Thus, about 11.14

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

58 There were approximately 812 million deposit

accounts reported by FDIC-insured institutions as of

September 30, 2021, based on Call Report data.

Assuming that 11.14 percent of accounts are trust

accounts, then there are an estimated 90.5 million

trust accounts as of September 30, 2021.

59 Using the data from failed banks, 250,139

distinct depositors held 335,657 revocable or

irrevocable trust accounts, or there were 0.745 trust

account depositors per trust account (250,139

divided by 335,657). The estimated number of trust

depositors at FDIC-insured institutions (67.4

million) is obtained by multiplying the estimated

number of trust accounts by the number of trust

account depositors per trust account (90.5 million

multiplied by 0.745).

60 As discussed above, the provisions relating to

contingent interests may not apply when a trust has

become irrevocable due to the death of one or more

grantors. In such instances, the revocable trust rules

continue to apply.

61 As discussed above, deposits maintained by an

IDI as trustee of an irrevocable trust would not be

included in this aggregation, and would remain

separately insured pursuant to section 7(i) of the

FDI Act and 12 CFR 330.12

t interests may not apply when a trust has

become irrevocable due to the death of one or more

grantors. In such instances, the revocable trust rules

continue to apply.

61 As discussed above, deposits maintained by an

IDI as trustee of an irrevocable trust would not be

included in this aggregation, and would remain

separately insured pursuant to section 7(i) of the

FDI Act and 12 CFR 330.12.

62 Data obtained in connection with IDI failures

during the recent financial crisis suggests that

irrevocable trust deposits comprise less than one

percent of trust deposits. However, as discussed

above, the FDIC does not possess sufficient

information to enable it to estimate the effects of the

final rule on trust account depositors at all IDIs.

63 In the data obtained in connection with IDI

failures during the recent financial crisis, only 51

out of 250,139 depositors with trust accounts had

both revocable and irrevocable types. Of these 51

depositors, nine had total trust account balances

greater than $250,000, and only one had a total trust

balance of more than $1,250,000.

64 To estimate the numbers of trust account

depositors and trust accounts affected, the FDIC

performed the following calculation. First, based on

data from 249 failed banks between 2010 and 2020,

the FDIC determined that there were 335,657 trust

accounts out of 3,013,575 deposit accounts (trust

account share). Second, the FDIC determined the

number of trust accounts per trust depositor

(335,657/250,139). The FDIC then estimated the

number of trust accounts by multiplying the trust

account share (335,657/3,013,575) by the number of

deposit accounts across all IDIs (812,414,977)

according to September 30, 2021, Call Report data.

This step yielded an estimate of 90,488,133 trust

accounts. Based on the estimated number of trust

accounts per trust depositor from the failed bank

data, the FDIC estimated the total number of trust

depositors to be 67,433,752

lying the trust

account share (335,657/3,013,575) by the number of

deposit accounts across all IDIs (812,414,977)

according to September 30, 2021, Call Report data.

This step yielded an estimate of 90,488,133 trust

accounts. Based on the estimated number of trust

accounts per trust depositor from the failed bank

data, the FDIC estimated the total number of trust

depositors to be 67,433,752. Using failed bank data,

100 out of 250,139 trust depositors had balances in

excess of $1,250,000 in their trust accounts. Thus,

the FDIC estimated that, of the approximately 67.4

million trust depositors, (100/250,139) of them—

approximately 26,959—had balances in excess of

$1,250,000 in their trust accounts, and therefore

could be directly affected by the final rule. These

estimated 26,959 trust depositors are associated

with an estimated 36,175 trust accounts, based on

the observed number of trust accounts per trust

depositor from the data from 249 failed banks

between 2010 and 2020.

percent of the deposit accounts at the

249 failed banks were trust accounts. Of

the 249 institutions, 247 (99 percent)

reported having trust accounts at time of

failure. Of the 247 failed banks that

reported trust accounts, 212 reported

not having trust powers as of their last

Call Report. Assuming the percentage of

trust accounts at failed banks is

representative of the percentage of trust

accounts among all FDIC-insured

institutions, the FDIC estimates, for

purposes of this analysis, that there are

approximately 90.5 million trust

accounts in existence at FDIC-insured

institutions.58 Additionally, based on

the observed number of trust account

depositors per trust account in the

population of 249 failed banks, the FDIC

estimates, for purposes of this analysis,

that there are approximately 67.4

million trust depositors.59 These

estimates are subject to considerable

uncertainty, since the percentage of

deposit accounts that are trust accounts

and the number of depositors per trust

account for all FDI

rved number of trust account

depositors per trust account in the

population of 249 failed banks, the FDIC

estimates, for purposes of this analysis,

that there are approximately 67.4

million trust depositors.59 These

estimates are subject to considerable

uncertainty, since the percentage of

deposit accounts that are trust accounts

and the number of depositors per trust

account for all FDIC insured institutions

may differ from what was observed at

the 249 failed banks. The FDIC does not

have information that would shed light

on whether or how the numbers of trust

accounts and trust depositors at failed

banks differs from the corresponding

numbers for other FDIC-insured

institutions.

The FDIC also does not have detailed

data on depositors’ trust arrangements

that would allow the FDIC to precisely

estimate the quantitative effects of the

final rule on deposit insurance coverage.

Thus, the effects of the changes to the

insurance rules are outlined

qualitatively below. The FDIC expects

that most depositors would experience

no change in the coverage for their

deposits under the final rule. However,

some depositors that maintain trust

deposits would experience a change in

their insurance coverage under the final

rule.

The FDIC anticipates that deposit

insurance coverage for some irrevocable

trust deposits would increase under the

final rule. The FDIC’s experience

suggests that the provisions of the

current irrevocable trust rules that

require the identification and

aggregation of contingent interests often

apply due to the inclusion of

contingencies in such trusts.60 Thus,

even where an irrevocable trust names

multiple beneficiaries, the current trust

rules often provide a total of only

$250,000 in deposit insurance coverage.

The final rule would not consider such

contingencies in the calculation of

coverage, and per-beneficiary coverage

would apply

ggregation of contingent interests often

apply due to the inclusion of

contingencies in such trusts.60 Thus,

even where an irrevocable trust names

multiple beneficiaries, the current trust

rules often provide a total of only

$250,000 in deposit insurance coverage.

The final rule would not consider such

contingencies in the calculation of

coverage, and per-beneficiary coverage

would apply.

In limited instances, the merger of the

revocable trust and irrevocable trust

categories may decrease coverage for

depositors. Deposits of revocable trusts

and deposits of irrevocable trusts are

currently insured separately. The final

rule would require aggregation for

purposes of applying the deposit

insurance limit, thereby increasing the

likelihood of the combined trust

account balances exceeding the

insurance limit.61 However, the FDIC’s

experience is that irrevocable trust

deposits comprise a relatively small

share of the average IDI’s deposit base,62

and that it is rare for IDIs to hold

deposits in connection with irrevocable

and revocable trusts established by the

same grantor(s).63 Individual grantors’

trust deposits held for the benefit of up

to five different beneficiaries would

continue to be separately insured.

With respect to revocable and

irrevocable trusts, depositors who have

designated more than five beneficiaries

and structured their trust accounts in a

manner that provides for more than

$1,250,000 in coverage per grantor, per

IDI under the current rules would

experience a reduction in coverage. The

FDIC’s experience suggests that the

$1,250,000 maximum coverage amount

per grantor, per IDI would not affect the

vast majority of trust depositors, as most

trusts have either five or fewer

beneficiaries, less than $1,250,000 per

grantor on deposit at the same IDI, or are

structured in a manner that results in

only $1,250,000 in coverage under the

current rules

reduction in coverage. The

FDIC’s experience suggests that the

$1,250,000 maximum coverage amount

per grantor, per IDI would not affect the

vast majority of trust depositors, as most

trusts have either five or fewer

beneficiaries, less than $1,250,000 per

grantor on deposit at the same IDI, or are

structured in a manner that results in

only $1,250,000 in coverage under the

current rules. The FDIC estimates that

approximately 26,959 trust account

depositors and approximately 36,175

trust accounts could be directly affected

by this aspect of the final rule,

representing about 0.04 percent of both

the estimated number of trust account

depositors and the estimated number of

trust accounts.64 The actual number of

trust depositors and trust accounts

impacted will likely differ, as the

estimates rely on data from failed banks,

and failed banks may differ from other

institutions in their percentages of trust

depositors or trust accounts. It is also

possible depositors may restructure

their deposits in response to changes to

the rule, thus mitigating the potential

effects on deposit insurance coverage.

Clarification of Insurance Rules

The merger of certain revocable and

irrevocable trust categories is intended

to simplify deposit insurance coverage

for trust accounts. Specifically, the

merger of these categories would mostly

eliminate the need to distinguish

revocable and irrevocable trusts

currently required to determine

coverage for a particular trust deposit.

The benefit of the common set of rules

would likely be particularly significant

for depositors that have established

arrangements involving multiple trusts,

as they would no longer need to apply

two different sets of rules to determine

the level of deposit insurance coverage

that would apply to their deposits

trusts

currently required to determine

coverage for a particular trust deposit.

The benefit of the common set of rules

would likely be particularly significant

for depositors that have established

arrangements involving multiple trusts,

as they would no longer need to apply

two different sets of rules to determine

the level of deposit insurance coverage

that would apply to their deposits. For

example, the final rule would eliminate

the need to consider the specific

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allocation of interests among the

beneficiaries of revocable trusts with six

or more beneficiaries, as well as

contingencies established in irrevocable

trusts. The merger of the categories also

would eliminate the need for current

§ 330.10(h) and (i), which allows for the

continued application of the revocable

trust rules to the account of a revocable

trust that becomes irrevocable due to the

death of the trust’s owner. As previously

discussed, these provisions of the

current trust rules have proven

confusing as illustrated by the

numerous inquiries that are consistently

submitted to the FDIC on these topics.

FDIC-insured depository institutions

may incur some regulatory costs

associated with making necessary

changes to internal processes and

systems and bank personnel training in

order to accommodate the final rule’s

definition of ‘‘trust accounts’’ and

attendant deposit insurance coverage

terms. There also may be some initial

cost for IDIs to become familiar with the

changes to the trust insurance coverage

rules in order to be able to explain them

to potential trust customers,

counterbalanced to some extent by the

fact that the rules should be simpler for

IDIs to understand and explain going

forward

definition of ‘‘trust accounts’’ and

attendant deposit insurance coverage

terms. There also may be some initial

cost for IDIs to become familiar with the

changes to the trust insurance coverage

rules in order to be able to explain them

to potential trust customers,

counterbalanced to some extent by the

fact that the rules should be simpler for

IDIs to understand and explain going

forward.

Prompt Payment of Deposit Insurance

The FDIC also expects that

simplification of the trust rules would

promote the timely payment of deposit

insurance in the event of an IDI’s

failure. The FDIC’s experience has been

that the current trust rules often require

detailed, time-consuming, and resource-

intensive review of trust documentation

to obtain the information that is

necessary to calculate deposit insurance

coverage. This information is often not

found in an IDI’s records and must be

obtained from depositors after the IDI’s

failure. The final rule would ameliorate

the operational challenge of calculating

deposit insurance coverage, which

could be particularly acute in the case

of a failure of a large IDI with a large

number of trust accounts. The final rule

would streamline the review of trust

documents required to make a deposit

insurance determination, promoting

more prompt payment of deposit

insurance. Timely payment of deposit

insurance also can help to facilitate the

transfer of depositor relationships to a

failed bank’s acquirer, potentially

expand resolution options, potentially

reduce the FDIC’s resolution costs, and

support greater confidence in the

banking system.

Deposit Insurance Fund Impact

As discussed above, the final rule is

expected to have mixed effects on the

level of insurance coverage provided for

trust deposits. Coverage for some

irrevocable trust deposits would be

expected to increase, but in the FDIC’s

experience, irrevocable trust deposits

are not nearly as common as revocable

trust deposits

reater confidence in the

banking system.

Deposit Insurance Fund Impact

As discussed above, the final rule is

expected to have mixed effects on the

level of insurance coverage provided for

trust deposits. Coverage for some

irrevocable trust deposits would be

expected to increase, but in the FDIC’s

experience, irrevocable trust deposits

are not nearly as common as revocable

trust deposits. The level of coverage for

some trust deposits would be expected

to decrease due to the final rule’s

simplified calculation of coverage and

its aggregation of revocable and

irrevocable trust deposits. As noted

above, the FDIC does not have detailed

data on depositors’ trust arrangements

to allow it to precisely project the

quantitative effects of the final rule on

deposit insurance coverage.

Indirect Effects

A change in the level of deposit

insurance coverage does not necessarily

result in a direct economic impact, as

deposit insurance is only paid to

depositors in the event of an IDI’s

failure. However, changes in deposit

insurance coverage may prompt

depositors to take actions with respect

to their deposits. In response to changes

in the level of coverage under the final

rule, trust depositors could maximize

coverage relative to the coverage under

the current rule by transferring some of

their trust deposits to other types of

accounts that provide similar or higher

amounts of coverage or by amending the

terms of their trusts. Parties affected

could include IDIs, depositors, and

other firms in the financial services

marketplace (e.g., deposit brokers). Any

costs borne by the depositor in moving

a portion of the funds to a different IDI

to stay under the insurance limit would

be accompanied by benefits, such as

more prompt deposit insurance

determinations, and quicker access to

insured deposits for depositors during

the resolution process

de IDIs, depositors, and

other firms in the financial services

marketplace (e.g., deposit brokers). Any

costs borne by the depositor in moving

a portion of the funds to a different IDI

to stay under the insurance limit would

be accompanied by benefits, such as

more prompt deposit insurance

determinations, and quicker access to

insured deposits for depositors during

the resolution process. The FDIC cannot

estimate these effects because it does

not have information on the individual

costs of each action that confronts each

depositor, their ability to amend their

trust structure or move funds, and their

subjective risk preference with respect

to holding insured and uninsured

deposits.

Part 370 Covered Institutions

As discussed previously, institutions

covered by part 370 must maintain

deposit account records and systems

capable of applying the deposit

insurance rules in an automated

manner. The final rule would change

certain aspects of how coverage is

determined for trust deposits. This

could require covered institutions to

reprogram certain systems to ensure that

those systems continue to be capable of

applying the deposit insurance rules as

part 370 requires.

The FDIC expects that the final rule

would make the deposit insurance

status of a trust account generally

clearer. Moreover, since part 370

requires covered institutions to develop

and maintain the capabilities to

calculate deposit insurance for its

deposits, the final rule could make

compliance with part 370 relatively less

burdensome. This is because the

underlying rules that would be applied

to most trust deposits would be

simplified. In particular, the final rule

requires the aggregation of revocable

and irrevocable trust deposits,

categories that are currently separated

for purposes of the deposit insurance

calculation capabilities required by part

370

ould make

compliance with part 370 relatively less

burdensome. This is because the

underlying rules that would be applied

to most trust deposits would be

simplified. In particular, the final rule

requires the aggregation of revocable

and irrevocable trust deposits,

categories that are currently separated

for purposes of the deposit insurance

calculation capabilities required by part

370. The FDIC does not expect that the

final rule would require significant

changes with respect to covered

institutions’ treatment of informal

revocable trust deposits. Moreover,

many deposits of formal revocable trusts

and irrevocable trusts currently fall

within the scope of part 370’s

alternative recordkeeping provisions,

meaning that covered institutions are

not required to maintain all of the

records necessary to calculate the

maximum amount of deposit insurance

coverage available for these deposits.

These factors may diminish the impact

of the final rule on the part 370 covered

institutions, but the FDIC does not have

sufficient information on covered

institutions’ systems and records to

quantify this effect.

Other Potential Effects

Although the FDIC expects that

coverage for most trust depositors will

be unchanged under the final rule, and

that the rule’s changes simplify the

FDIC’s insurance rules for trust

accounts, the rule may have other

potential effects. For example, the IDIs

affected by the rule may rely on third-

party IT service providers to perform

insurance coverage estimates for their

trust depositors. The final rule may lead

such IT service providers to revise their

systems to account for the final rule’s

changes.

2. Amendments to Mortgage Servicing

Account Rule

The final rule would affect the deposit

insurance coverage for certain principal

and interest payments within MSA

deposits maintained at IDIs by mortgage

servicers

orm

insurance coverage estimates for their

trust depositors. The final rule may lead

such IT service providers to revise their

systems to account for the final rule’s

changes.

2. Amendments to Mortgage Servicing

Account Rule

The final rule would affect the deposit

insurance coverage for certain principal

and interest payments within MSA

deposits maintained at IDIs by mortgage

servicers. According to the September

30, 2021 Call Report data, the FDIC

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65 The count of institutions includes FDIC-

insured U.S. branches of institutions headquartered

in foreign countries.

66 5 U.S.C. 601 et seq.

67 The SBA defines a small banking organization

as having $600 million or less in assets, where ‘‘a

financial institution’s assets are determined by

averaging the assets reported on its four quarterly

financial statements for the preceding year.’’ See 13

CFR 121.201 (as amended by 84 FR 34261, effective

August 19, 2019). ‘‘SBA counts the receipts,

employees, or other measure of size of the concern

whose size is at issue and all of its domestic and

foreign affiliates.’’ See 13 CFR 121.103. Following

these regulations, the FDIC uses a covered entity’s

affiliated and acquired assets, averaged over the

preceding four quarters, to determine whether the

FDIC-supervised institution is ‘‘small’’ for the

purposes of RFA.

68 See 73 FR 56706 (Sep. 30, 2008).

insures 4,923 IDIs.65 Of the 4,923 IDIs,

1,161 IDIs (23.6 percent) report holding

mortgage servicing assets, which

indicates that they service mortgage

loans and could thus be affected by the

rule. In addition, mortgage servicing

accounts may be maintained at IDIs that

do not themselves service mortgage

loans

tion is ‘‘small’’ for the

purposes of RFA.

68 See 73 FR 56706 (Sep. 30, 2008).

insures 4,923 IDIs.65 Of the 4,923 IDIs,

1,161 IDIs (23.6 percent) report holding

mortgage servicing assets, which

indicates that they service mortgage

loans and could thus be affected by the

rule. In addition, mortgage servicing

accounts may be maintained at IDIs that

do not themselves service mortgage

loans. The FDIC does not know how

many IDIs are recipients of mortgage

servicing account deposits, but believes

that most IDIs are not. Therefore, the

FDIC estimates that the number of IDIs

potentially affected by the final rule is

greater than 1,161 but substantially less

than 4,923.

The FDIC does not have detailed data

on MSAs that would allow the FDIC to

reliably estimate the number of MSAs

maintained at IDIs that would be

affected by the rule, or any potential

change in the total amount of insured

deposits. Thus, the potential effects of

the amendments regarding governing

deposit insurance coverage for MSAs

are outlined qualitatively below.

The final rule directly affects the level

of deposit insurance coverage provided

for some MSAs. Under the rule, the

composition of an MSA attributable to

mortgage servicers’ advances of

principal and interest funds on behalf of

delinquent borrowers and collections

such as foreclosure proceeds would be

insured up to the SMDIA per mortgagor,

consistent with the coverage for

payments of principal and interest

collected directly from borrowers.

Under the current rules, principal and

interest funds advanced by a servicer to

cover delinquencies, and foreclosure

proceeds collected by servicers, are not

insured under the rules for MSA

deposits, but instead are insured to the

servicer as corporate funds up to the

SMDIA

mortgagor,

consistent with the coverage for

payments of principal and interest

collected directly from borrowers.

Under the current rules, principal and

interest funds advanced by a servicer to

cover delinquencies, and foreclosure

proceeds collected by servicers, are not

insured under the rules for MSA

deposits, but instead are insured to the

servicer as corporate funds up to the

SMDIA. Therefore, the final rule

expands deposit insurance coverage in

instances where an account maintained

by a mortgage servicer contains

principal and interest funds advanced

by the servicer in order to satisfy the

obligations of delinquent borrowers to

the lender, or foreclosure proceeds

collected by the servicers; and where

the funds in such instances exceed the

mortgage servicer’s SMDIA.

The final rule is likely to benefit a

servicer compelled by the terms of a

pooling and servicing agreement to

advance principal and interest funds to

note holders when a borrower is

delinquent, and therefore the servicer

has not received such funds from the

borrower. In the event that the IDI

hosting the MSA for the servicer fails,

the rule reduces the likelihood that the

funds advanced by the servicer are

uninsured, and thereby facilitates access

to, and helps avoids losses of, those

funds. As previously discussed, the

FDIC does not have detailed data on

MSAs held at IDIs, pooling and

servicing agreements for outstanding

mortgage loans, or servicer payments

into MSAs that would allow the FDIC to

reliably estimate the number of, and

volume of funds within, MSAs

maintained at IDIs that would be

affected by the final rule.

Further, the final rule is likely to

benefit an IDI who is hosting an MSA

for a servicer that is compelled by the

terms of a pooling and servicing

agreement to advance principal and

interest funds to note holders on behalf

of delinquent borrowers by increasing

the volume of insured funds

er of, and

volume of funds within, MSAs

maintained at IDIs that would be

affected by the final rule.

Further, the final rule is likely to

benefit an IDI who is hosting an MSA

for a servicer that is compelled by the

terms of a pooling and servicing

agreement to advance principal and

interest funds to note holders on behalf

of delinquent borrowers by increasing

the volume of insured funds. In the

event that the IDI enters into a troubled

condition, the rule could marginally

increase the stability of MSA deposits

from such servicers, thereby increasing

the general stability of funding.

Finally, the FDIC believes that the

rule poses general benefits to parties

that provide or utilize financial services

related to mortgage products by

amending an inconsistency in the

deposit insurance treatment for

principal and interest payments made

by the borrower and such payments

made by the servicer on behalf of the

borrower.

Effects on Part 370 Covered Institutions

Part 370 covered institutions may bear

some costs in recognizing the expanded

coverage for servicer advances and

foreclosure proceeds. However, part 370

covered institutions already are

responsible for calculating coverage for

MSA accounts based on each borrower’s

payments. Therefore, the FDIC does not

believe the impact of the rule on part

370 covered institutions will be

significant.

B. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA),

requires that, in connection with a final

rulemaking, an agency prepare and

make available for public comment a

regulatory flexibility analysis that

describes the impact of the final rule on

small entities.66 However, a regulatory

flexibility analysis is not required if the

agency certifies that the rule will not

have a significant economic impact on

a substantial number of small entities

and publishes its certification and a

short explanatory statement in the

Federal Register together with the rule

egulatory flexibility analysis that

describes the impact of the final rule on

small entities.66 However, a regulatory

flexibility analysis is not required if the

agency certifies that the rule will not

have a significant economic impact on

a substantial number of small entities

and publishes its certification and a

short explanatory statement in the

Federal Register together with the rule.

The Small Business Administration

(SBA) has defined ‘‘small entities’’ to

include banking organizations with total

assets of less than or equal to $600

million.67 Generally, the FDIC considers

a significant effect to be a quantified

effect in excess of 5 percent of total

annual salaries and benefits per

institution, or 2.5 percent of total

noninterest expenses. The FDIC believes

that effects in excess of these thresholds

typically represent significant effects for

small entities. The FDIC does not

believe that the final rule will have a

significant economic effect on a

substantial number of small entities.

However, some expected effects of the

rule are difficult to assess or accurately

quantify given current information,

therefore the FDIC has included a

Regulatory Flexibility Act Analysis in

this section.

1. Simplification of Trust Rules

Reasons Why This Action Is Being

Considered

As previously discussed, the rules

governing deposit insurance coverage

for trust deposits have been amended on

several occasions, but still frequently

cause confusion for depositors. Under

the current regulations, there are

distinct and separate sets of rules

applicable to deposits of revocable

trusts and irrevocable trusts. Each set of

rules has its own criteria for coverage

and methods by which coverage is

calculated. Despite the FDIC’s efforts to

simplify the revocable trust rules in

2008,68 over the last 10 years, FDIC

deposit insurance specialists have

responded to approximately 20,000

complex insurance inquiries per year on

average

les

applicable to deposits of revocable

trusts and irrevocable trusts. Each set of

rules has its own criteria for coverage

and methods by which coverage is

calculated. Despite the FDIC’s efforts to

simplify the revocable trust rules in

2008,68 over the last 10 years, FDIC

deposit insurance specialists have

responded to approximately 20,000

complex insurance inquiries per year on

average. More than 50 percent pertain to

deposit insurance coverage for trust

accounts (revocable or irrevocable). The

consistently high volume of complex

inquiries about trust accounts over an

extended period of time suggests

continued confusion about insurance

limits.

The FDI Act requires the FDIC to pay

depositors ‘‘as soon as possible’’ after a

bank failure. However, the insurance

determination and subsequent payment

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69 12 U.S.C. 1821(a)(2).

70 The count of institutions includes FDIC-

insured U.S. branches of institutions headquartered

in foreign countries.

71 FDIC Call Report data, September 30, 2021.

72 Id.

73 Whether a failed IDI is considered small is

based on data from its four quarterly Call Reports

prior to failure.

74 The FDIC has also considered the impact of any

changes in the deposit insurance rules on the

Continued

for many trust deposits can be delayed

while FDIC staff reviews complex trust

agreements and apply the rules for

determining deposit insurance coverage.

Moreover, in many of these instances,

deposit insurance coverage for trust

deposits is based upon information that

is not maintained in the failed IDI’s

deposit account records. This requires

FDIC staff to work with depositors,

trustees, and other parties to obtain trust

documentation following an IDI’s failure

in order to complete deposit insurance

determinations

sit insurance coverage.

Moreover, in many of these instances,

deposit insurance coverage for trust

deposits is based upon information that

is not maintained in the failed IDI’s

deposit account records. This requires

FDIC staff to work with depositors,

trustees, and other parties to obtain trust

documentation following an IDI’s failure

in order to complete deposit insurance

determinations. The difficulties

associated with this are exacerbated by

the substantial growth in the use of

formal trusts in recent decades. For

example, following the 2008 failure of

IndyMac Federal Bank, FSB (IndyMac),

FDIC claims personnel contacted more

than 10,500 IndyMac depositors to

obtain the trust documentation

necessary to complete deposit insurance

determinations for their revocable trust

and irrevocable trust deposits. As noted

previously, delays in the payment of

deposit insurance could be

consequential, as revocable trust

deposits in particular can be used by

depositors to satisfy their daily financial

obligations.

Policy Objectives

As discussed previously, the changes

adopted by the final rule are intended

to provide depositors and bankers with

a rule for trust account coverage that is

easy to understand, and also to facilitate

the prompt payment of deposit

insurance in accordance with the FDI

Act. The FDIC believes that

accomplishing these objectives also

would further the agency’s mission in

other respects. Specifically, the changes

would promote depositor confidence

and further the FDIC’s mission to

maintain stability and promote public

confidence in the U.S. financial system

by assisting depositors to more readily

and accurately determine their

insurance limits. The changes will also

facilitate the resolution of failed IDIs in

a least costly manner

the agency’s mission in

other respects. Specifically, the changes

would promote depositor confidence

and further the FDIC’s mission to

maintain stability and promote public

confidence in the U.S. financial system

by assisting depositors to more readily

and accurately determine their

insurance limits. The changes will also

facilitate the resolution of failed IDIs in

a least costly manner. The changes

could reduce the FDIC’s reliance on

trust documentation (which could be

difficult to obtain in a timely manner

during resolutions of IDI failures) and

provide greater flexibility to automate

deposit insurance determinations,

thereby reducing potential delays in the

completion of deposit insurance

determinations and payments. Finally,

in amending the trust rules, the FDIC’s

intent is that the changes would

generally be neutral with respect to the

DIF.

Legal Basis

The FDIC’s deposit insurance

categories have been defined through

both statute and regulation. Certain

categories, such as the government

deposit category, have been expressly

defined by Congress.69 Other categories,

such as joint deposits and corporate

deposits, have been based on statutory

interpretation and recognized through

regulations issued in 12 CFR part 330

pursuant to the FDIC’s rulemaking

authority. In addition to defining the

insurance categories, the deposit

insurance regulations in part 330

provide the criteria used to determine

insurance coverage for deposits in each

category. The FDIC is amending

§ 330.10 of its regulations, which

currently applies only to revocable trust

deposits, to establish a new ‘‘trust

accounts’’ category that would include

both revocable and irrevocable trust

deposits. For a more detailed discussion

of the rule’s legal basis please refer to

section I.C entitled ‘‘Proposed Rule’’

and section I.D entitled ‘‘Discussion of

Comments and Final Rule.’’

The Final Rule

The FDIC is amending the rules

governing deposit insurance coverage

for trust deposits

tablish a new ‘‘trust

accounts’’ category that would include

both revocable and irrevocable trust

deposits. For a more detailed discussion

of the rule’s legal basis please refer to

section I.C entitled ‘‘Proposed Rule’’

and section I.D entitled ‘‘Discussion of

Comments and Final Rule.’’

The Final Rule

The FDIC is amending the rules

governing deposit insurance coverage

for trust deposits. Generally, the

amendments would: Merge the

revocable and irrevocable trust

categories into one category; apply a

simpler, common calculation method to

determine insurance coverage for

deposits held by revocable and

irrevocable trusts; eliminate certain

requirements found in the current rules

for revocable and irrevocable trusts; and

amend certain recordkeeping

requirements for trust accounts. For a

more detailed discussion of the final

rule please refer to section I.C entitled

‘‘Proposed Rule’’ and section I.D

entitled ‘‘Discussion of Comments and

Final Rule.’’

Small Entities Affected

Based on the September 30, 2021 Call

Report data, the FDIC insures 4,923

depository institutions,70 of which

3,303 are considered small entities for

the purposes of RFA.71 Of the 3,303

small IDIs, 783 have powers granted by

a state or national regulatory authority

to administer accounts in a fiduciary

capacity and 539 exercise those powers,

comprising 23.7 percent and 16.3

percent, respectively, of small IDIs.72

However, individuals may establish

trust accounts at an IDI even if that IDI

does not itself have or exercise authority

to administer accounts in a fiduciary

capacity, and in fact, as noted earlier, 99

percent of a sample of failed banks had

trust accounts. Therefore, the FDIC

estimates that the rule could affect

between 539 and 3,303 small, FDIC-

insured institutions.

As noted above, the FDIC does not

have detailed data on depositors’ trust

arrangements for trust accounts held at

small FDIC-insured institutions

nister accounts in a fiduciary

capacity, and in fact, as noted earlier, 99

percent of a sample of failed banks had

trust accounts. Therefore, the FDIC

estimates that the rule could affect

between 539 and 3,303 small, FDIC-

insured institutions.

As noted above, the FDIC does not

have detailed data on depositors’ trust

arrangements for trust accounts held at

small FDIC-insured institutions.

Therefore, it is difficult to accurately

estimate the number of small IDIs that

would be potentially affected by the

final rule. However, the FDIC believes

that the number of small IDIs that will

be directly affected by the rule is likely

to be small, given that in the agency’s

resolution experience only a small

number of trust accounts have balances

above the adopted coverage limit of

$1,250,000 per grantor, per IDI for trust

deposits. For example, data obtained

from a sample of 249 IDIs that failed

between 2010 and 2020 show that only

100 depositors out of 250,139 (or 0.04

percent) had trust account balances

greater than $1,250,000; at small IDIs, 18

out of 34,304 depositors (or 0.05

percent) had trust account balances

greater than $1,250,000.73 The data from

failed banks suggest small IDIs could be

affected by the rule roughly in

proportion to the share of trust

depositors with account balances greater

than $1,250,000 at IDIs of all sizes

which failed between 2010 and 2020.

Expected Effects

The simplification of the deposit

insurance rules for trust deposits is

expected to have a variety of effects. The

changes will directly affect the level of

deposit insurance coverage provided to

some depositors with trust deposits

rtion to the share of trust

depositors with account balances greater

than $1,250,000 at IDIs of all sizes

which failed between 2010 and 2020.

Expected Effects

The simplification of the deposit

insurance rules for trust deposits is

expected to have a variety of effects. The

changes will directly affect the level of

deposit insurance coverage provided to

some depositors with trust deposits. In

addition, simplification of the rules is

expected to have benefits in terms of

promoting the timely payment of

deposit insurance following a small

IDI’s failure, facilitating the transfer of

deposit relationships to failed bank

acquirers with consequent potential

reductions to the FDIC’s resolution

costs, and addressing differences in the

treatment of revocable trust deposits

and irrevocable trust deposits contained

in the current rules. The FDIC has also

considered the impact of any changes in

the deposit insurance rules on the DIF

and other potential effects.74 These

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covered institutions that are subject to part 370. As

described previously, part 370 affects IDIs with two

million or more deposit accounts. Based on Call

Report data as of September 30, 2021, the FDIC

insures one institution with two million or more

deposit accounts that is also considered a small

entity.

effects are discussed in greater detail in

section III.A entitled ‘‘Expected Effects.’’

Overall, due to the fact that the FDIC

expects most small IDIs to have only a

small number of trust accounts with

balances above the adopted coverage

limit of $1,250,000 per grantor, per IDI

for trust deposits, effects on the deposit

insurance coverage of small entities’

customers are likely to be small

ffects are discussed in greater detail in

section III.A entitled ‘‘Expected Effects.’’

Overall, due to the fact that the FDIC

expects most small IDIs to have only a

small number of trust accounts with

balances above the adopted coverage

limit of $1,250,000 per grantor, per IDI

for trust deposits, effects on the deposit

insurance coverage of small entities’

customers are likely to be small. There

also may be some initial cost for small

entities to become familiar with the

changes to the trust insurance coverage

rules in order to be able to explain them

to potential trust customers,

counterbalanced to some extent by the

fact that the rules should be simpler to

understand and explain going forward.

Alternatives Considered

The FDIC has considered a number of

alternatives to the final rule that could

meet its objectives in this rulemaking.

However, for reasons previously stated

in section I.E ‘‘Alternatives

Considered,’’ the FDIC considers the

final rule to be a more appropriate

alternative.

The FDIC also considered the status

quo alternative to not amend the

existing trust rules. However, for

reasons previously stated in section I.E

‘‘Alternatives Considered,’’ the FDIC

considers the final rule to be a more

appropriate alternative.

Other Statutes and Federal Rules

The FDIC has not identified any likely

duplication, overlap, and/or potential

conflict between this final rule and any

other federal rule.

2. Amendments to Mortgage Servicing

Account Rule

Reasons Why This Action Is Being

Considered

As previously discussed, the FDIC

provides coverage, up to the SMDIA for

each borrower, for principal and interest

funds in MSAs only to the extent ‘‘paid

into the account by the mortgagors,’’

and does not provide coverage for funds

paid into the account from other

sources, such as the servicer’s own

operating funds, even if those funds

satisfy mortgagors’ principal and

interest payments under the current

rules

the FDIC

provides coverage, up to the SMDIA for

each borrower, for principal and interest

funds in MSAs only to the extent ‘‘paid

into the account by the mortgagors,’’

and does not provide coverage for funds

paid into the account from other

sources, such as the servicer’s own

operating funds, even if those funds

satisfy mortgagors’ principal and

interest payments under the current

rules. The advances are aggregated and

insured to the servicer as corporate

funds for a total of $250,000. Under

some servicing arrangements, however,

mortgage servicers may be required to

advance their own funds to make

payments of principal and interest on

behalf of delinquent borrowers to the

lenders in certain circumstances. Thus,

under the current rules, such advances

are not provided the same level of

coverage as other deposits in a mortgage

servicing account comprised of

principal and interest payments directly

from the borrower. This could result in

delayed access to certain funds in an

MSA, or to the extent that aggregated

advances insured to the servicer exceed

the insurance limit, loss of such funds,

in the event of an IDI’s failure. The FDIC

is therefore amending its rules

governing coverage for deposits in

mortgage servicing accounts to address

this inconsistency.

Policy Objectives

As discussed previously, the FDIC’s

regulations governing deposit insurance

coverage include specific rules on

deposits maintained at IDIs by mortgage

servicers. With the final rule, the FDIC

seeks to address an inconsistency

concerning the extent of deposit

insurance coverage for such deposits, as

in the event of an IDI’s failure the

current rules could result in delayed

access to certain funds in a mortgage

servicing account (MSA) that have been

aggregated and insured to a mortgage

servicer, or to the extent that aggregated

funds insured to a servicer exceed the

insurance limit, loss of such funds

nsistency

concerning the extent of deposit

insurance coverage for such deposits, as

in the event of an IDI’s failure the

current rules could result in delayed

access to certain funds in a mortgage

servicing account (MSA) that have been

aggregated and insured to a mortgage

servicer, or to the extent that aggregated

funds insured to a servicer exceed the

insurance limit, loss of such funds.

The final rule also addresses a

servicing arrangement that is not

specifically addressed in the current

rules. Specifically, some servicing

arrangements may permit or require

servicers to advance their own funds to

the lenders when mortgagors are

delinquent in making principal and

interest payments, and servicers might

commingle such advances in the MSA

with principal and interest payments

collected directly from mortgagors. This

may be required, for example, under

certain mortgage securitizations. The

FDIC believes that the factors that

motivated the FDIC to establish its

current rules for MSAs, described

previously, argue for treating funds

advanced by a mortgage servicer in

order to satisfy mortgagors’ principal

and interest obligations to the lender as

if such funds were collected directly

from borrowers.

Legal Basis

The FDIC’s deposit insurance

categories have been defined through

both statute and regulation. Certain

categories, such as the government

deposit category, have been expressly

defined by Congress. Other categories,

such as joint deposits and corporate

deposits, have been based on statutory

interpretation and recognized through

regulations issued in 12 CFR part 330

pursuant to the FDIC’s rulemaking

authority. In addition to defining the

insurance categories, the deposit

insurance regulations in part 330

provide the criteria used to determine

insurance coverage for deposits in each

category

egories,

such as joint deposits and corporate

deposits, have been based on statutory

interpretation and recognized through

regulations issued in 12 CFR part 330

pursuant to the FDIC’s rulemaking

authority. In addition to defining the

insurance categories, the deposit

insurance regulations in part 330

provide the criteria used to determine

insurance coverage for deposits in each

category. The FDIC is amending

§ 330.7(d) of its regulations, which

currently applies only to cumulative

balance paid by the mortgagors into an

MSA maintained by a mortgage servicer,

to include balances paid in to the

account to satisfy mortgagors’ principal

or interest obligations to the lender. For

a more detailed discussion of the rule’s

legal basis please refer to section II.C

entitled ‘‘Proposed Rule’’ and section

II.D entitled ‘‘Discussion of Comments

and Final Rule.’’

The Final Rule

The FDIC is amending the rules

governing deposit insurance coverage

for deposits maintained at IDIs by

mortgage servicers. Generally, the

amendments would provide consistent

deposit insurance treatment for all MSA

deposit balances held to satisfy

principal and interest obligations to a

lender, regardless of whether those

funds are paid into the account by

borrowers, or paid into the account by

another party (such as the servicer) in

order to satisfy a periodic obligation to

remit principal and interest due to the

lender. The composition of an MSA

attributable to principal and interest

payments would include mortgage

servicers’ advances of principal and

interest funds on behalf of delinquent

borrowers, and collections by a servicer

such as foreclosure proceeds. The final

rule makes no change to the deposit

insurance coverage provided for

mortgage servicing accounts comprised

of payments from mortgagors of taxes

and insurance premiums

ributable to principal and interest

payments would include mortgage

servicers’ advances of principal and

interest funds on behalf of delinquent

borrowers, and collections by a servicer

such as foreclosure proceeds. The final

rule makes no change to the deposit

insurance coverage provided for

mortgage servicing accounts comprised

of payments from mortgagors of taxes

and insurance premiums. For a more

detailed discussion of the rule please

refer to section II.C entitled ‘‘Proposed

Rule’’ and section II.D entitled

‘‘Discussion of Comments and Final

Rule.’’

Small Entities Affected

Based on the September 30, 2021 Call

Report data, the FDIC insures 4,923

depository institutions, of which 3,303

are considered small entities for the

purposes of RFA. Of the 3,303 small

IDIs, 473 IDIs (14.3 percent) report

holding mortgage servicing assets,

which indicates that they service

mortgage loans and could thus be

affected by the final rule. However,

mortgage servicing accounts may be

maintained at small IDIs that do not

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75 According to the U.S. Census Bureau within

the ‘‘Other Activities Related to Credit

Intermediation’’ (NAICS 522390) national industry

where mortgage servicers are captured there were

3,595 firms in 2018, relative to the 37,627 firms in

the Credit Intermediation and Related Activities

subsector (NAICS 522).

76 12 U.S.C. 4802(a).

77 12 U.S.C. 4802(b).

78 Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999), 12 U.S.C. 4809.

themselves service mortgage loans

Credit

Intermediation’’ (NAICS 522390) national industry

where mortgage servicers are captured there were

3,595 firms in 2018, relative to the 37,627 firms in

the Credit Intermediation and Related Activities

subsector (NAICS 522).

76 12 U.S.C. 4802(a).

77 12 U.S.C. 4802(b).

78 Public Law 106–102, section 722, 113 Stat.

1338, 1471 (1999), 12 U.S.C. 4809.

themselves service mortgage loans. The

FDIC does not know how many IDIs that

are small entities are recipients of

mortgage servicing account deposits, but

believes that most such entities are not

because there are relatively few

mortgage servicers.75 Therefore, the

FDIC estimates that the number of small

IDIs potentially affected by the proposed

rule, if adopted, would be between 473

and 3,303, but believes that the number

is close to the lower end of the range.

As noted in section III.A, titled

‘‘Expected Effects,’’ the FDIC does not

have detailed data on MSAs that would

allow the FDIC to reliably estimate the

number of MSAs maintained at IDIs that

would be affected by the final rule, or

any potential change in the total amount

of insured deposits. Therefore, it is

difficult to accurately estimate the

number of small IDIs that would be

potentially affected by the final rule.

Expected Effects

The final rule would directly affect

the level of deposit insurance coverage

for certain funds within MSAs. The rule

is likely to benefit a servicer compelled

by the terms of a pooling and servicing

agreement to advance principal and

interest funds to note holders when a

borrower is delinquent, and therefore

the servicer has not received such funds

from the borrower. In the event that the

IDI hosting the MSA for the servicer

fails, the final rule reduces the

likelihood that the funds advanced by

the servicer are uninsured, and thereby

facilitates access to, and helps avoids

losses of, those funds

dvance principal and

interest funds to note holders when a

borrower is delinquent, and therefore

the servicer has not received such funds

from the borrower. In the event that the

IDI hosting the MSA for the servicer

fails, the final rule reduces the

likelihood that the funds advanced by

the servicer are uninsured, and thereby

facilitates access to, and helps avoids

losses of, those funds. As previously

discussed, the FDIC does not have

detailed data on MSAs held at IDIs,

pooling and servicing agreements for

outstanding mortgage loans, or servicer

payments into MSAs that would allow

the FDIC to reliably estimate the number

of, and volume of funds within, MSAs

maintained at IDIs that would be

affected by the final rule.

Further, the final rule is likely to

benefit a small IDI who is hosting an

MSA for a servicer that is compelled by

the terms of a pooling and servicing

agreement to advance principal and

interest funds to note holders on behalf

of delinquent borrowers by increasing

the volume of insured funds. In the

event that the small IDI enters into a

troubled condition, the proposed rule

could marginally increase the stability

of MSA deposits from such servicers,

thereby increasing the general stability

of funding.

Based on the preceding information

the FDIC believes that the final rule is

unlikely to have a significant economic

effect on a substantial number of small

entities.

Alternatives Considered

The FDIC is adopting revising to the

deposit insurance rules for MSAs to

advance the objectives discussed above.

The FDIC considered the status quo

alternative to not revise the existing

rules for MSAs and not propose the

revisions. However, for reasons

previously stated in section II.B, entitled

‘‘Background,’’ the FDIC considers the

final rule to be a more appropriate

alternative

ered

The FDIC is adopting revising to the

deposit insurance rules for MSAs to

advance the objectives discussed above.

The FDIC considered the status quo

alternative to not revise the existing

rules for MSAs and not propose the

revisions. However, for reasons

previously stated in section II.B, entitled

‘‘Background,’’ the FDIC considers the

final rule to be a more appropriate

alternative. Were the FDIC to not adopt

the rule, then in the event of an IDI’s

failure the current rules could result in

delayed access to certain funds in an

MSA that have been aggregated and

insured to a mortgage servicer, or to the

extent that aggregated funds insured to

a servicer exceed the insurance limit,

loss of such funds.

Other Statutes and Federal Rules

The FDIC has not identified any likely

duplication, overlap, and/or potential

conflict between this rule and any other

federal rule.

C. Congressional Review Act

For purposes of the Congressional

Review Act, the Office of Management

and Budget (OMB) makes a

determination as to whether a final rule

constitutes a ‘‘major’’ rule. If a rule is

deemed a ‘‘major rule’’ by the OMB, the

Congressional Review Act generally

provides that the rule may not take

effect until at least 60 days following its

publication.

The Congressional Review Act defines

a ‘‘major rule’’ as any rule that the

Administrator of the Office of

Information and Regulatory Affairs of

the OMB finds has resulted in or is

likely to result in (1) an annual effect on

the economy of $100,000,000 or more;

Congressional Review Act generally

provides that the rule may not take

effect until at least 60 days following its

publication.

The Congressional Review Act defines

a ‘‘major rule’’ as any rule that the

Administrator of the Office of

Information and Regulatory Affairs of

the OMB finds has resulted in or is

likely to result in (1) an annual effect on

the economy of $100,000,000 or more;

(2) a major increase in costs or prices for

consumers, individual industries,

Federal, State, or local government

agencies or geographic regions, or (3)

significant adverse effects on

competition, employment, investment,

productivity, innovation, or on the

ability of United States-based

enterprises to compete with foreign-

based enterprises in domestic and

export markets. The FDIC will submit

the final rule and other appropriate

reports to Congress and the Government

Accountability Office for review.

D. Paperwork Reduction Act

The Paperwork Reduction Act of 1995

(44 U.S.C. 3501–3521) states that no

agency may conduct or sponsor, nor is

the respondent required to respond to,

an information collection unless it

displays a currently valid OMB control

number. The final rule does not create

any new, or revise any existing,

collections of information under section

3504(h) of the Paperwork Reduction

Act. Consequently, no information

collection request will be submitted to

the OMB for review.

E. Riegle Community Development and

Regulatory Improvement Act

Section 302 of the Riegle Community

Development and Regulatory

Improvement Act of 1994 (RCDRIA)

requires that the Federal banking

agencies, including the FDIC, in

determining the effective date and

administrative compliance requirements

of new regulations that impose

additional reporting, disclosure, or other

requirements on insured depository

institutions, consider, consistent with

principles of safety and soundness and

the public interest, any administrative

burdens that such regulations would

place on depository institutions,

incl

the FDIC, in

determining the effective date and

administrative compliance requirements

of new regulations that impose

additional reporting, disclosure, or other

requirements on insured depository

institutions, consider, consistent with

principles of safety and soundness and

the public interest, any administrative

burdens that such regulations would

place on depository institutions,

including small depository institutions,

and customers of depository

institutions, as well as the benefits of

such regulations.76 Subject to certain

exceptions, new regulations and

amendments to regulations prescribed

by a Federal banking agency which

impose additional reporting,

disclosures, or other new requirements

on insured depository institutions shall

take effect on the first day of a calendar

quarter which begins on or after the date

on which the regulations are published

in final form.77

The final rule does not impose

additional reporting or disclosure

requirements on insured depository

institutions, including small depository

institutions, or on the customers of

depository institutions. However, it may

require part 370 covered institutions to

update their reporting or recordkeeping

to reflect the revised deposit insurance

rules. Accordingly, the FDIC has

established the effective date of the final

rule as the first day of a calendar

quarter, April 1, 2024.

F. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 78 requires the Federal

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eposit insurance

rules. Accordingly, the FDIC has

established the effective date of the final

rule as the first day of a calendar

quarter, April 1, 2024.

F. Plain Language

Section 722 of the Gramm-Leach-

Bliley Act 78 requires the Federal

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

banking agencies to use plain language

in all proposed and final rulemakings

published in the Federal Register after

January 1, 2000. FDIC staff believes the

final rule is presented in a simple and

straightforward manner. The FDIC did

not receive any comments with respect

to the use of plain language.

List of Subjects in 12 CFR Part 330

Bank deposit insurance, Reporting

and recordkeeping requirements,

Savings associations.

Authority and Issuance

For the reasons stated above, the

Board of Directors of the Federal

Deposit Insurance Corporation amends

part 330 of title 12 of the Code of

Federal Regulations as follows:

PART 330—DEPOSIT INSURANCE

COVERAGE

■1. The authority citation for part 330

continues to read as follows:

Authority: 12 U.S.C. 1813(l), 1813(m),

1817(i), 1818(q), 1819(a)(Tenth), 1820(f),

1820(g), 1821(a), 1821(d), 1822(c).

§ 330.1

[Amended]

■2. Amend § 330.1 by removing and

reserving paragraphs (m) and (r).

■3. Revise § 330.7(d) to read as follows:

§ 330.7

Accounts held by an agent,

nominee, guardian, custodian or

conservator.

*

*

*

*

*

tion for part 330

continues to read as follows:

Authority: 12 U.S.C. 1813(l), 1813(m),

1817(i), 1818(q), 1819(a)(Tenth), 1820(f),

1820(g), 1821(a), 1821(d), 1822(c).

§ 330.1

[Amended]

■2. Amend § 330.1 by removing and

reserving paragraphs (m) and (r).

■3. Revise § 330.7(d) to read as follows:

§ 330.7

Accounts held by an agent,

nominee, guardian, custodian or

conservator.

*

*

*

*

*

(d) Mortgage servicing accounts.

Accounts maintained by a mortgage

servicer, in a custodial or other

fiduciary capacity, which are comprised

of payments of principal and interest,

shall be insured for the cumulative

balance paid into the account by

mortgagors, or in order to satisfy

mortgagors’ principal or interest

obligations to the lender, up to the limit

of the SMDIA per mortgagor. 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.

*

*

*

*

*

■4. Revise § 330.10 to read as follows:

§ 330.10

Trust accounts.

(a) Scope and definitions. This section

governs coverage for deposits held in

connection with informal revocable

trusts, formal revocable trusts, and

irrevocable trusts not covered by

§ 330.12 (‘‘trust accounts’’). For

purposes of this section:

(1) Informal revocable trust means a

trust under which a deposit passes

directly to one or more beneficiaries

upon the depositor’s death without a

written trust agreement, commonly

referred to as a payable-on-death

account, in-trust-for account, or Totten

trust account.

(2) Formal revocable trust means a

revocable trust established by a written

trust agreement under which a deposit

passes to one or more beneficiaries upon

the grantor’s death.

eposit passes

directly to one or more beneficiaries

upon the depositor’s death without a

written trust agreement, commonly

referred to as a payable-on-death

account, in-trust-for account, or Totten

trust account.

(2) Formal revocable trust means a

revocable trust established by a written

trust agreement under which a deposit

passes to one or more beneficiaries upon

the grantor’s death.

(3) Irrevocable trust means an

irrevocable trust established by statute

or a written trust agreement, except as

described in paragraph (f) of this

section.

(b) Calculation of coverage—(1)

General calculation. Trust deposits are

insured in an amount up to the SMDIA

multiplied by the total number of

beneficiaries identified by each grantor,

up to a maximum of 5 beneficiaries.

(2) Aggregation for purposes of

insurance limit. Trust deposits that pass

from the same grantor to beneficiaries

are aggregated for purposes of

determining coverage under this

section, regardless of whether those

deposits are held in connection with an

informal revocable trust, formal

revocable trust, or irrevocable trust.

(3) Separate insurance coverage. The

deposit insurance coverage provided

under this section is separate from

coverage provided for other deposits at

the same insured depository institution.

(4) Equal allocation presumed. Unless

otherwise specified in the deposit

account records of the insured

depository institution, a deposit held in

connection with a trust established by

multiple grantors is presumed to have

been owned or funded by the grantors

in equal shares.

r this section is separate from

coverage provided for other deposits at

the same insured depository institution.

(4) Equal allocation presumed. Unless

otherwise specified in the deposit

account records of the insured

depository institution, a deposit held in

connection with a trust established by

multiple grantors is presumed to have

been owned or funded by the grantors

in equal shares.

(c) Number of beneficiaries. The total

number of beneficiaries for a trust

deposit under paragraph (b) of this

section will be determined as follows:

(1) Eligible beneficiaries. Subject to

paragraph (c)(2) of this section,

beneficiaries include natural persons, as

well as charitable organizations and

other non-profit entities recognized as

such under the Internal Revenue Code

of 1986, as amended.

(2) Ineligible beneficiaries.

Beneficiaries do not include:

(i) The grantor of a trust; or

(ii) A person or entity that would only

obtain an interest in the deposit if one

or more identified beneficiaries are

deceased.

(3) Future trust(s) named as

beneficiaries. If a trust agreement

provides that trust funds will pass into

one or more new trusts upon the death

of the grantor(s) (‘‘future trusts’’), the

future trust(s) are not treated as

beneficiaries of the trust; rather, the

future trust(s) are viewed as

mechanisms for distributing trust funds,

and the beneficiaries are the natural

persons or organizations that shall

receive the trust funds through the

future trusts.

(4) Informal trust account payable to

depositor’s formal trust. If an informal

revocable trust designates the

depositor’s formal trust as its

beneficiary, the informal revocable trust

account will be treated as if titled in the

name of the formal trust.

st funds,

and the beneficiaries are the natural

persons or organizations that shall

receive the trust funds through the

future trusts.

(4) Informal trust account payable to

depositor’s formal trust. If an informal

revocable trust designates the

depositor’s formal trust as its

beneficiary, the informal revocable trust

account will be treated as if titled in the

name of the formal trust.

(d) Deposit account records—(1)

Informal revocable trusts. The

beneficiaries of an informal revocable

trust must be specifically named in the

deposit account records of the insured

depository institution.

(2) Formal revocable trusts. The title

of a formal trust account must include

terminology sufficient to identify the

account as a trust account, such as

‘‘family trust’’ or ‘‘living trust,’’ or must

otherwise be identified as a

testamentary trust in the account

records of the insured depository

institution. If eligible beneficiaries of

such formal revocable trust are

specifically named in the deposit

account records of the insured

depository institution, the FDIC shall

presume the continued validity of the

named beneficiary’s interest in the trust

consistent with § 330.5(a).

(e) Commingled deposits of

bankruptcy trustees. If 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 the SMDIA,

separately from the funds of any other

such estate.

0.5(a).

(e) Commingled deposits of

bankruptcy trustees. If 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 the SMDIA,

separately from the funds of any other

such estate.

(f) Deposits excluded from coverage

under this section—(1) Revocable trust

co-owners that are sole beneficiaries of

a trust. If the co-owners of an informal

or formal revocable trust are the trust’s

sole beneficiaries, deposits held in

connection with the trust are treated as

joint ownership deposits under § 330.9.

(2) Employee benefit plan deposits.

Deposits of employee benefit plans,

even if held in connection with a trust,

are treated as employee benefit plan

deposits under § 330.14.

(3) Investment company deposits.

This section shall not apply to deposits

of trust funds belonging to a trust

classified as a corporation under

§ 330.11(a)(2).

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Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations

(4) Insured depository institution as

trustee of an irrevocable trust. Deposits

held by an insured depository

institution in its capacity as trustee of

an irrevocable trust are insured as

provided in § 330.12.

§ 330.13

[Removed and Reserved]

■5. Remove and reserve § 330.13.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, this 21st day of

January, 2022.

James P. Sheesley,

Assistant Executive Secretary.

[FR Doc

ts

held by an insured depository

institution in its capacity as trustee of

an irrevocable trust are insured as

provided in § 330.12.

§ 330.13

[Removed and Reserved]

■5. Remove and reserve § 330.13.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, this 21st day of

January, 2022.

James P. Sheesley,

Assistant Executive Secretary.

[FR Doc. 2022–01607 Filed 1–27–22; 8:45 am]

BILLING CODE 6714–01–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 370

Notification to Institutions Covered by

the FDIC’s Recordkeeping for Timely

Deposit Insurance Determination Rule

Regarding Amendments to the Deposit

Insurance Coverage Rules

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Notification.

SUMMARY: The FDIC is publishing this

notification to insured depository

institutions covered by its

Recordkeeping for Timely Deposit

Insurance Determi

This text is long and has been trimmed here. Open the source document for the complete record.