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4000 - Advisory Opinions
Insurability of Certificates of Deposit Held in Two FDIC-Insured
Depository Institutions Upon Their Merger
FDIC--94--47
September 20, 1994
Dirck A. Hargraves, Attorney
This letter is in response to your July 20, 1994 letter wherein you
inquire as to how the FDIC insures certificates of deposits
("CDs") held in two FDIC-insured depository institutions upon
their merger.
You state in your letter that ABC Bank will merge with XYZ Savings
Bank. You want to know whether the CDs held at both depository
institutions would be separately insured for up to $100,000 of FDIC
coverage subsequent to the merger. You indicate that the CDs will
mature in 1995 and 1996, respectively, and will exceed $100,000 after
the merger.
As you may be aware, Section 8(q) of the Federal Deposit Insurance
Act (the "FDIA"), 12 U.S.C.
§ 1818(q), provides that whenever the liabilities of an
insured depository institution are assumed by another insured
depository institution, the insured status of the institution whose
deposits are assumed shall terminate on the date that the FDIC receives
satisfactory evidence of that assumption. The section further provides
that the deposits which are assumed as a result of this transaction
shall be separately insured from the deposits of the assuming
institution for: 1) six months from the date of assumption for all
demand deposits and 2) the earliest maturity date after the six-month
period in the case of time deposits. The FDIC insurance regulations
restate the provisions of section 8(q), 12 C.F.R. § 330.3(g).
Depositors who may have deposits with different insured depository
institutions are thus provided with an opportunity to rearrange their
deposits and retain full insurance coverage if those institutions
should merge.
Thus, the FDIC would extend up to $100,000 of separate insurance
coverage for your CDs held at the two depository institutions that
merge, until the maturity date of those deposits. If the maturity date
of the merged bank CDs should occur before the end of the six-month
period from the date of the merger and you decide to renew the CDs at
the same terms and rates, the CDs would continue to be separately
insured until the new maturity date. If you fail to renew the CDs or
renew the CDs with different terms and rates, the CDs would still be
separately insured, but only until six months after the date of the
merger.
{{2-28-95 p.4901}}
You next ask whether the FDIC has a provision for a waiver of the
penalty for early withdrawal when a bank merger no longer provides full
FDIC insurance coverage of merged CD accounts that exceed $100,000. The
FDIC has no such provisions within its rules and regulations. Since,
however, the FDIC would separately insure the CDs held at both ABC and
XYZ until the maturity date of your deposits, there should be no need
for the waiver of the premature withdrawal penalty.
In summary, the CDs held at ABC and XYZ would be separately insured
for up to $100,000 until the earliest maturity date six months after
the date of the merger.
I hope this is fully responsive to your questions. If not, or if you
have additional questions or comments, feel free to call me at (202)
898-7049.
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