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Home > Regulation & Examinations > Large Bank Rule |
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The rule applies to insured depository institutions having at least $2 billion in domestic deposits and either: (1) more than 250,000 deposit accounts; or (2) total assets over $20 billion, regardless of the number of deposit accounts. At the time of the publication of the Federal Register notice on July 17, 2008, this was estimated to cover 160 insured depository institutions.
The FDIC uses data reported by an insured depository institution on its Call Report or Thrift Financial Report (TFR). The rule became effective on August 18, 2008, thus the initial group of Covered Institutions was determined based on Call and TFR data reported as of June 30, 2008.
Yes, on October 3, 2008 the FDIC mailed notification letters to all insured depository institutions meeting the criteria of a Covered Institution based on Call and TFR data reported as of June 30, 2008.
No. On October 3, 2008 the FDIC mailed notification letters to all insured depository institutions meeting the criteria of a Covered Institution as of August 18, 2008.
An insured depository institution not meeting the criteria of a Covered Institution as of August 18, 2008 (using June 30, 2008 Call Report or TFR data) is designated a Non-Covered Institution and is not subject to any requirements under the rule. A Non-Covered Institution may meet the criteria of a Covered Institution in the future through organic growth in its deposit base or due to merger activity. If the criteria of a Covered Institution are met for two consecutive quarters your institution will be designated a Covered Institution under this rule and will have 18 months to comply with its requirements.
No. The rule only applies to a Covered Institution. It is possible for a multi-bank holding company to have affiliated insured depository institutions that are both Covered Institutions and Non-Covered Institutions.
Until February 18, 2010.
The number of deposit accounts reported on the Call Report or TFR in some cases is different from the number of accounts posted on the books and records of the institution. With regard to brokered deposits, for example, Call and TFR filers are required to include in the number of accounts each of the underlying owners of the brokered account rather than simply reporting the number of brokered accounts on the books of the institution. This can result in a significant difference between the number of accounts on the books and records of the institution and that reported on the Call or TFR. If you have been informed by the FDIC that your institution is a Covered Institution but you have reason to believe it should not be subject to the requirements of the rule, you may apply to the FDIC for a waiver from these requirements.
An application letter indicating the nature of the request and the basis of the request should be sent to depositclaims@fdic.gov.
The series of events in an insured depository institution failure are as
follows:
No. Section 360.8 does not impose any requirements on a Covered Institution to stop or limit any processes in the event of failure. As part of its pre-assessment review the FDIC will get an understanding of the institution’s operational processes to determine the practicality of stopping or limiting certain operations. At this time the FDIC may request changes to certain of the institution’s operating processes to facilitate a failure scenario.
No. If a Covered Institution is closed on a Friday it is possible the FDIC may be able to conduct an insurance determination over the weekend. In this case the FDIC would provide on Sunday a Debit/Credit file indicating debit and credit transactions to be posted against deposit accounts determined to be uninsured as well as a Non-Monetary Transactions file indicating FDIC holds to be placed.
In most cases a Covered Institution’s deposits rest on its deposit
applications, but in some cases deposits reside on the General Ledger, loan
systems or other systems (such as a human resources system). All deposits
residing on a deposit application are subject to the provisional hold process
and should be reported on the Deposit file, except that omnibus accounts
connected with money market mutual fund sweep accounts are not subject to
provisional holds. Funds considered a deposit for Call Report and TFR purposes
may also rest on the General Ledger or other systems. Generally these funds
do not fall under the scope of this rule. More detail on the treatment of
these accounts is provided in the attached document. For money market mutual
fund omnibus sweep accounts the FDIC would expect the institution to prepare
a separate listing or reconciliation of the account which would identify
the deposit account from which the sweep originated, the account owner,
and the amount.
Rule Account Types
A foreign deposit is a deposit residing in a foreign branch or office location of a domestic insured depository institution which is not payable in the United States. In order for the deposit to be payable in the United States, it is necessary for the deposit agreement to designate it as payable in the United States. A deposit residing in a domestic office of an insured depository institution is not a foreign deposit, even if it is denominated in a foreign currency or owned by a foreign individual or corporation. Generally deposits located in a foreign branch or office location of a domestic insured depository institution are not payable in the United States. Designation as payable in the United States would make such funds domestic deposits, thus subject to deposit insurance assessments and reserve requirements.
Yes, foreign deposits are subject to provisional holds and should be reported on the Deposit file. There is a field on the Deposit file for designating a foreign deposit as such.
An IBF is not a physical location, rather a separate set of books maintained by a domestic insured depository institution. An IBF is limited to taking deposits from and making loans to nonresidents of the United States and other IBFs. IBFs are not subject to the same regulations that apply to domestic banking operations.
Yes, IBF deposits are subject to provisional holds and should be reported on the Deposit file.
Any sweep arrangement which moves funds from one domestic deposit
account to another is not considered to be a sweep account for the
purposes of this rule. These deposit-to-deposit sweeps include zero-balance
accounts (involving a parent deposit account connected with several
child deposit accounts, which typically maintain a zero balance at
the institution’s normal end of day) and reserve (or retail)
sweep products (which move funds from a transaction account into a
money market deposit account, which may be structured as a sub-account,
for the purposes of reducing required reserves). The accounts involved
in a deposit-to-deposit sweep should be reported on the Deposit file
and be subject to provisional holds as would any similarly situated
deposit account. Further, deposit-to-deposit sweep arrangements should
not be designated as a sweep account on the Deposit file. Sweep arrangements
where the investment vehicle is a money market mutual fund also are
not considered a sweep account for the purposes of this rule.
For the purposes of the rule a sweep account involves the pre-arranged
movement of funds from a deposit account to an investment vehicle located
on the books of the Covered Institution. The most prevalent sweep investment
vehicles are repurchase agreements and Eurodollars (typically funds
swept to a Cayman Island branch deposit), but others may include such
things as fed funds and holding company commercial paper. For these
sweep arrangements the deposit account component should be reported
on the Deposit file with DP_Sweep_Code = “Y” and, for provisional
hold purposes, treated as any other similarly situated deposit account.
The funds resting in the sweep investment vehicle are subject to a
separate provisional hold mechanism and should be reported on the Sweep/Automated
Credit Account file.
A money market mutual fund sweep moves funds from a deposit account to
an investment vehicle outside the depository institution. There are two
common types of money market mutual fund sweep arrangements: same-day and
next-day. In a same-day arrangement sweep funds are transmitted to the
market mutual fund prior to its daily cutoff time, usually 4 p.m. Since
customer funds have left the institution prior to its normal end of day,
these funds are not included in end-of-day ledger balances. For a same-day
arrangement the deposit account connected with the sweep is reported on
the Deposit file and subject to provisional holds as a similarly situated
deposit account. Customer funds resting with the money market mutual fund
are not reported on the data file extract nor are they subject to the provisional
hold process.
A next-day money market mutual fund sweep moves funds from the customer’s deposit account after the day’s deposit transactions are processed. Since by this point it is too late to transfer the customer’s funds to the money market mutual fund they are held in an omnibus account as of the end of day. It is not until the following business day that the funds are transferred to the money market mutual fund. The funds resting in the omnibus account are a deposit for insurance purposes. If the omnibus account rests on the general ledger these funds should not be reported on the Deposit file or be subject to a provisional hold. In the event of failure the FDIC would need a report showing the individual account interests making up the omnibus account. This report should include the account number from which the funds originated, the account name and the amount (which could be positive or negative). If the omnibus account rests on a deposit application the balance in the account should be reported in the Deposit file, but this account is not subject to the provisional hold requirement. In the event of failure the FDIC also would ask for a report on the underlying owners of this omnibus account.
An automated credit account is an arrangement where the customer directs funds to be placed in an investment vehicle and then at a future point, which could be the following day, the funds are automatically credited to the customer’s deposit account. Automated credit accounts are similar to a sweep account, except the customer directs the investment rather than the investment being calculated by a pre-determined set of rules established by the account agreement. The process of returning the funds to the customer’s account can be the same as a sweep account, which is why the FDIC specifies treatment similar to a sweep product.
The FDIC is in the process of developing its testing policies and procedures. We anticipate the FDIC will be able to test with Covered Institutions sometime during the third quarter of 2009. Whether and the extent to which the FDIC will be able to schedule tests during 2009 will depend on the number of requests received and availability of FDIC resources.
No. Provisional holds are calculated and placed by the Covered Institution. The FDIC will provide the Covered Institution with a provisional hold account balance threshold and percentage. Accounts falling below the specified threshold will be exempt from a provisional hold. Those with a balance above the threshold will be subject to a provisional hold based on the provisional hold percentage applied to the amount in the account above the threshold.
The account thresholds and percentage will be provided in a form similar to
the attached Word document.
Provisional Hold Information
The FDIC will provide the information necessary to construct provisional holds at the point it takes control of the institution on the day of failure.
When the FDIC requests the removal of a provisional hold via a Non-Monetary Transaction file the entire hold should be removed. If the FDIC would like to change the size of the provisional hold it will remove the hold and replace it with another FDIC hold using a second Non-Monetary Transaction file provided at the same time.
Yes, it is possible for a deposit account with a sweep feature to have two or more provisional holds. Sweep accounts are frequently structured so that funds in the deposit account over a targeted balance are swept into the sweep investment vehicle. Thus at the Covered Institution’s normal end of day funds may reside in the deposit account and the sweep investment vehicle. The deposit account is treated as any similarly situated deposit account for provisional hold purposes. Funds residing in the sweep investment vehicle also are subject to a provisional hold. The business day following failure the funds residing in the sweep investment vehicle may be moved back to the deposit account, with the hold intact. Thus the day following failure the deposit account will have one provisional hold based on the funds left in the deposit account after the sweep occurred and a second provisional hold based on the funds that resided in the sweep investment vehicle. Sweep accounts that direct funds into multiple investment vehicles could have three or more provisional holds in effect.
Yes. Provision holds are required on foreign deposits but no account balance threshold is applied; a percentage hold is applied to the entire balance. The same percentage hold is placed on all foreign deposits, regardless of the country in which they are housed.
For the purposes of the rule a sweep account involves the pre-arranged
movement of funds from a deposit account to an investment vehicle located
on the books of the Covered Institution. This definition excludes any sweep
arrangement which moves funds from one domestic deposit account to another.
These deposit-to-deposit sweeps include zero-balance accounts (involving
a parent deposit account connected with several child deposit accounts,
which typically maintain a zero balance at the institution’s normal
end of day) and reserve (or retail) sweep products (which move funds from
a transaction account into a money market deposit account, which may be
structured as a sub-account, for the purposes of reducing required reserves).
The most prevalent sweep investment vehicles are repurchase agreements
and Eurodollars (typically funds swept to a Cayman Island branch deposit),
but others may include such things as fed funds and holding company commercial
paper.
Sweep arrangements covered by this rule are required to have a dual provisional hold capability. The funds remaining in the deposit account component of the sweep account should be treated as any other similarly situated deposit account. The funds residing in the sweep investment vehicle are subject to a provisional hold for that particular type of sweep investment vehicle, each of which could have a different account threshold and percentage.
The rule does not impose any new requirements on a Covered Institution or a deposit broker in dealing with brokered deposits in the event of failure, other than the requirement for a Covered Institution to place a provisional hold on the brokered account and report it on the Deposit file as it would any deposit account. For the typical brokered CD the placement of a provisional hold in the event of failure may have little or no impact as, for practical purposes, the entire account balance is likely to be frozen until the FDIC receives the required data from the broker regarding the underlying owners of the funds. There could be implications for brokered deposits structured as savings accounts, such as those connected with certain sweep arrangements with affiliated brokerage operations where the funds of an underlying owner could be withdrawn the day following failure. The FDIC will view the broker as the depositor. Thus it is the broker’s responsibility to manage the withdrawal of funds from the deposit. This could result in an exposure for the broker. In the case of a Covered Institution affiliated with a brokerage operation, the brokerage affiliate could voluntarily implement its own provisional hold program for funds swept to the Covered Institution. In this case the action of the brokerage affiliate to implement provisional hold functionality is beyond what is required by the rule.
A Covered Institution must have in place a manual process for removing a provisional hold on a case-by-case basis. A limited number of provisional holds could be removed shortly after they have been placed, if necessary. Most provisional holds will be removed in batch using a Non-Monetary Transaction file provided by the FDIC. The first Non-Monetary Transaction file could be sent by the FDIC as soon as two days after failure. Provisional holds will be removed in stages through a process that may take place over several weeks, although the vast majority of provisional holds will be removed through the first several Non-Monetary Transaction files provided by the FDIC.
A Non-Monetary Transaction file will generally, but not always, be accompanied by a companion Debit/Credit file.
To create an accounting trail the FDIC may want to use debit and credit transactions resulting in a net debit to the account. These transactions are illustrated by the following example. A depositor has $350,000 in a deposit account of which $100,000 is uninsured given the current deposit insurance limit of $250,000. Suppose a provisional hold of $30,000 was placed on this account. Using a Non-Monetary Transaction file the FDIC would request the removal of the $30,000 provisional hold. Further suppose that the FDIC wishes to remove $20,000 from the account after completing the insurance determination. [In this example the net debit is $20,000 while the provisional hold was $30,000. The net debit may be different from the provisional hold amount.] For accounting reasons the FDIC will want to reflect a reduction in the account balance to the insurance limit of $250,000 thus a monetary transaction against the account would be a debit of $100,000. The FDIC also will want to reflect an advance dividend of $80,000 through a second monetary credit transaction. The two monetary transactions represent two seperate actions taken by the receiver. In practice the Covered Institution may implement these two transactions in reverse order to avoid the potential for a negative account balance, thus first crediting the account for $80,000 and then debiting it for $100,000. To facilitate this process the FDIC will provide two separate Debit/Credit files, one containing the credit transactions and the second housing the debit transactions.
No. The provisional hold will be an approximation of the loss expected on the uninsured funds in the account. Once the deposit insurance determination is completed for the depositor a better estimate of this loss will be available. The net debit to the account likely will be the same as the provisional hold or a lesser amount.
The Covered Institution should establish a “Due To/From the FDIC” account on its General Ledger to house the offsetting entries to deposit and other accounts.
The FDIC will be in contact with the Covered Institution to determine how early in the day files must be sent to the Covered Institution to be included in that day’s processing cycle. If the FDIC cannot meet this deadline the files should be processed the following business day.
Yes. If the FDIC would like to change the size of the provisional hold it will remove the hold and replace it with another FDIC hold using a second Non-Monetary Transaction file provided at the same time.
Yes. The FDIC could request the placement of a new FDIC hold on an account which did not have a provisional hold. The FDIC realizes that the funds may have left the account at that point, thus may not be available for the hold.
Once the provisional hold is removed these freed funds must be available for the net debit to the account. Funds released by the provisional holds should not be used to satisfy other transactions until the net debit is posted. If the FDIC provides a second Non-Monetary Transaction file that includes a new hold against the account, this hold should be placed so as to immediately capture the funds released by the provisional hold.
All data could be provided through one set of files but multiple sets are permissible. Appendix H to the rule provides requirements for multiple file sets.
The FDIC routinely request extracts of depositor data from insured depository institutions at the onset of significant financial stress, which in most cases is well in advance of failure. Analysis of these data is important to help understand the depository institution’s depositor base and would be used in part to determine the necessary account thresholds and percentages used in the provisional hold process.
The FDIC will not request additional data extracts on days subsequent to failure. Depending on the systems and procedures used by the Covered Institution the Hold file provided the day following failure may not contain information on the FDIC provisional holds. If this is the case a second Hold file should be generated which includes the provisional hold information.
Yes. Each set of files generated should include data for only a single institution charter. If a holding company has two affiliated Covered Institutions, for example, it will be necessary to generate two sets of files, one for each Covered Institution.
No.
Generally the FDIC is interested in receiving information on loan collateral and court order holds. Daily operational holds, such as those related to the check-clearing process, should not be included in the Hold file. The amount of the FDIC provisional hold posted to the account also should be reported in the Hold file.
DP_Bank_No is an internal bank number or such other identifier assigned to an institution.
If the escrow accounts reside on the deposit system, then report them as they reside you your system, DDA or SAV, for example. If the escrow accounts reside on a loan system, these balances should not be reported on the Deposit file.
Place the number in the term field and add a field to the end of the file to show whether the term is in days or months.
DP_Int_Term_No refers to the number of months for a CD (for example, 6 months, 12 months, 36 months or 60 months). The payment frequency for interest is not captured in this field.
We would like to see leading signs for negative values as follows: |-000234.45|
|JOHN DOE |
Along the same lines, our numeric fields for the most part include leading zeroes. If you have a 25 position numeric field, and my matching field is 15 positions, can we send in the file:
|000001234567890|
15 position amount field contains the equivalent of 125, our system expresses it as 000000000000125. Can we send:
|000000000000125|
For name fields or character fields it would be preferable not to have leading or trailing spaces expressed as: |John Doe|. The numeric fields are fine with leading zeros because your account number or SSN/TIN may need these leading zeros such as: |003456789|
If you have no information for a field we would prefer to see back-to-back pipes or TABs, whichever you use.
We request that you provide the data formatted such that the field length is equal to or less than the requested length. Header and footer records are optional but no longer required. When the files are transmitted to the FDIC we would like to see a report showing the number of accounts that are provided along with balancing information that ties to the data you are providing.
The FDIC requires a download of the accrued interest that balances to the trial balance report and general ledger as of the date of the data extract. The accrued interest field must be completed for the FDIC to load it into our system. If interest was paid through the date of close this field could potentially be zero.
No, forward accruals should not be backed out.
A Covered Institution must provide points of contact both when requirements are being developed and on an ongoing basis. A Covered Institution is responsible for ensuring its contacts provided to the FDIC are updated. Current contacts are important to ensure effective communication between the FDIC and Covered Institutions.
A Covered Institution should determine who is best suited to be a point of contact. Points of contact will serve as a basis for communications between the Covered Institution and the FDIC on an ongoing basis. In the event the FDIC will request a set of standard data files from a Covered Institution or is actively preparing for the failure of a Covered Institution, it most likely will establish a communications link at a level higher in the organization than the points of contact provided here.
The rule discusses using FDICconnect, a secure FTP site or the use of
a portable hard drive. For most Covered Institutions the FDIC will use
a secure FTP site as the basis for the transmission of files to and from
the FDIC. The file transmission protocols will be supplied to a Covered
Institution when transmission is necessary. The FDIC routinely uses a secure
FTP mechanism for receiving data on troubled or failing institutions and
in these cases the protocols for the transmission of data are provided
when necessary.
For several of the very largest Covered Institutions the electronic transmission of data files may not be practical due to the potential size of the files. In these cases the data files may be placed on a portable hard drive that would be physically transported to the FDIC. In the event data are required in this format, the FDIC will provide delivery instructions at the time of the file request.
These files also will be provided via a secure FTP site.
No, encryption will not be necessary due to the secure nature of the file transmission mechanism.
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Last Updated 05/04/2009 | regs@fdic.gov |
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