The Federal Deposit Insurance Corporation (FDIC) today proposed a rule that would create new recordkeeping requirements for large FDIC-insured banks and govern the determination and payment of insured customer deposits in the event of a large bank failure. In substance, the proposed rule would require approximately 35 covered banks (banks with 2 million or more deposit accounts) to maintain complete and accurate records on each depositor and maintain information technology systems that could calculate the amount of each depositor’s insured deposit within 24 hours of a failure. A covered bank’s failure to comply with the new rule would subject it to regulatory criticism and possible administrative enforcement action under section 8 of the Federal Deposit Insurance Act.
The FDIC’s proposed rule is not unexpected—it follows an advanced notice of proposed rulemaking in April 2015 that solicited comment on the recordkeeping concepts reflected in the rule that was proposed today. The primary goal of the FDIC’s proposed rule is to assist in determining a large bank’s depositors and the amounts of their deposits and to assure the prompt payment of all insured deposits in the event of the bank’s failure.
Although the FDIC’s proposed rule is of interest for several reasons, a major element of the proposed rule would be to require a covered bank to maintain “on-site” depositor information on the beneficial owners of all deposits. This requirement would extend to the banks’ brokered deposits and deposits made by a depositor in a fiduciary, agency, or other representative capacity that are entitled to “pass-through” deposit insurance coverage. For covered banks, this new provision would materially change the FDIC’s quarter-century practice of making deposit insurance determinations based on records held by third-party brokers, agents, and other representatives. The FDIC states, however, that it is not proposing to change the pass-through deposit insurance coverage standards for a covered bank’s depositors. In this regard, the FDIC states that it “does not intend to penalize the covered institutions’ depositors for the possible inadequacies of the covered institutions’ records or IT systems . . . ,” but does caution that in such cases, insurance payments to pass-through deposit accounts owners might be delayed.
Comments on the proposed rule will be due 90 days after the FDIC’s notice is published in the Federal Register.