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4000 - Advisory Opinions
Deposit Insurance Coverage Afforded Certain Accounts Held by or
For the Department of Treasury and Other Federal Agencies
FDIC--93--29
June 14, 1993
Alan J. Kaplan, Assistant General Counsel
Thank you for your letter of March 24, 1993, requesting information
about the deposit insurance coverage provided by the Federal Deposit
Insurance Corporation for certain types of deposit accounts held by or
for the Department of the Treasury ("Treasury") and other federal
agencies at depository institutions insured by the FDIC.
The first part of your letter describes four types of accounts that
the Treasury maintains at insured depository institutions: Treasury
General Accounts ("TGAs"); Treasury Tax and Loan ("TT&L")
Accounts; Lockbox Service Clearing Accounts ("LBAs"); and
Certificates of Deposits. You ask: whether these accounts are
"deposits" under section 330.1(c) of the FDIC's regulations;
whether funds in the accounts are time and savings deposits or demand
deposits under Part 330 of the FDIC's regulations; whether there is
more than one official custodian of these funds under Part 330; and the
extent and scope of FDIC coverage for each type of account under Part
330. These general questions are responded to in the specific
discussions of the deposit insurance implications of each of the
various types of accounts.
Applicable Statute and Regulations
Section 11(a) of the Federal Deposit Insurance Act ("FDI Act")
states, in pertinent part, that:
"[I]n the case of a depositor who is--
(i) an officer, employee, or agent of the United States
having official custody of public funds and lawfully investing or
depositing the same in time and savings deposits in an insured
depository institution . . . such depositor shall, for the purpose of
determining the amount of insured deposits . . ., be deemed a depositor
in such custodial capacity separate and distinct from any other
officer, employee, or agent of the United States or any public unit
. . . and the deposit of any such depositor shall be insured in an
amount not to exceed $100,000 per account." 12 U.S.C. 1821(a)(2)(A).
Section 330.14(a) of the FDIC's regulations (12 C.F.R. 330.14(a))
interprets section 11(a) of the FDI Act by providing that each official
custodian of funds of the United States lawfully depositing such funds
in an insured depository institution "shall be separately insured in
the amount of: (i) up to $100,000 in the aggregate for all time and
savings deposits; and (ii) up to $100,000 in the aggregate
for all demand deposits." (Emphasis added.) Section 330.14(b) of the
FDIC's regulations (Id. at 330.14(b)) provides that, in
order to qualify under section 330.14(a) as an "official
custodian" the custodian must have "plenary authority, including
control, over funds owned by the public unit which the custodian is
appointed or elected to serve. Control of public funds includes
possession, as
{{4-29-94 p.4758}}well as the authority to establish
accounts for such funds in insured depository institutions and to make
deposits, withdrawals, and disbursements of such
funds." 1
TGAs
As described in your letter, TGAs are uncollateralized demand
deposit accounts ("DDAs") maintained with insured depository
institutions into which federal agencies deposit receipts of public
monies. The institution is required to credit the TGA each business day
for the total amount of daily deposits received, and to transfer the
funds the next business day to the Federal Reserve Bank of New York
("FRB--NY") for credit to the Treasury's General Account at the
FRB--NY. The Treasury assigns duties to a depository institution
through a memorandum of understanding ("MOU") that authorizes the
institution to perform the functions of a TGA depository. The MOU
includes instructions governing the deposit, handling, reporting,
withdrawal and transfer of funds.
Your letter indicates that the MOU for the TGAs is executed between
the Treasury's Financial Management Service ("FMS") and the
depository institution. You note that the FMS component that has
"plenary authority" over TGA depositories is the Banking
Management Division's Banking Operation Branch ("BOB") and that
the MOU is executed by the Chief of Review Section ("CRS") of the
BOB. Based on the information provided in your letter, we agree with
the conclusion reached in your letter that, as the individual who
executes the MOU with the institution and has and exercises control
over the funds in the TGA, the CRS of the BOB qualifies as the official
custodian of the funds in the TGAs; thus, under section 330.14 of the
FDIC's regulations, the TGA deposits at each FDIC-institution would be
insured up to $100,000 for all DDAs. 2
Under section 330.14 of the FDIC's regulations, the deposit insurance
afforded to official custodians pertains separately to each institution
where the custodian maintains deposits. Thus, the TGA at each
institution where the official custodian maintains deposits would be
insured up to $100,000 irrespective of the insurance afforded to other
TGAs held at different insured institutions.
TT&L Accounts
As explained in your letter, TT&L Accounts are collateralized DDAs
maintained with insured depository institutions into which corporate
taxpayers make tax payments. 3
There are two classifications of TT&L Accounts: the "Note Option"
and the "Remittance Option." The Note Option is where funds are
debited from the TT&L Account and invested in open-end interest bearing
notes of the depository institution on the business day following the
date of deposit. The Remittance Option is where funds equal to the
amounts credited by the depository institution to the TT&L Account are
withdrawn immediately by the applicable Federal Reserve Bank
("FRB") upon receipt of notice from the institution of such
credits. The withdrawals usually are made on the business day following
the date of deposit.
As explained in your letter, the FRB, acting as a fiscal agent of
the United States, executes the contract for the TT&L Accounts with the
depository institution. You note
{{4-29-94 p.4759}}that, in that capacity, the FRB has
oversight responsibility and control of funds on deposit with TT&L
depositories by virtue of its authority to establish the TT&L Account,
to permit the deposit of funds into the account, to withdraw funds from
the account, and to transfer the funds to the Treasury's General
Account at the FRB.
As acknowledged in your letter, funds in the Note Option are
non-deposit obligations of the depository institution; thus, they are
not eligible for FDIC insurance. Based on the information provided in
your letter about the authority and control of the funds in the TT&L
Accounts and the accompanying copy of a sample MOU between an insured
depository institution and the applicable FRB, we agree that the
applicable FRB (or, more specifically, the authorized official of the
FRB who executes the MOU with the insured institution) is the official
custodian of the funds in the TT&L Remittance Account. As such, the
official custodian of the funds would be insured up to $100,000 per
insured institution where the DDAs are
held. 4
LBAs
As described in your letter, LBAs are uncollateralized DDAs
maintained with insured depository institutions for federal agency
units into which persons make payments. The LBAs form the Treasury
Automated Lockbox Network comprised of depository institutions
designated by FMS to provide lockbox remittance services for federal
agency units. Lockbox processing was adopted as a means of accelerating
deposits to the Treasury's General Account at the FRB--NY. Agency units
instruct remitters to mail payments directly to a Treasury designated
lockbox depository. The institution assigns a unique lockbox post
office box number to facilitate receipt and collections processing for
each agency unit. The institution collects remittances from the various
post office boxes, processes remittances, and deposits the funds into
the appropriate LBA. The next day the funds are transferred to the
FRB--NY for credit to the Treasury's General Account.
As noted in your letter, LBAs are established by means of a
three-party MOU among the insured depository institution, FMS, and the
federal program agency. The MOU is generally comprised of a General MOU
("GMOU") and a Supplemental MOU ("SMOU"). The GMOU
specifies the procedures for the collection of mail from the depository
institution's post office boxes, the processing of all such collected
mail, the handling and deposit of all funds received into the
appropriate federal agency unit's LBA, and the transfer of funds to the
FRB--NY. The FMS component that has authority over the GMOU is the Bank
Review Branch ("BRB") whose Manager executes the GMOU. The SMOU,
which incorporates by reference the GMOU, sets up the post office box
number and provides more specific processing requirements tailored to
the federal agency unit's needs. SMOUs are executed by the depository
institution, the federal agency, and FMS--specifically, the Manager of
the Program Implementation Branch (PIB), which is a component of the
Product Management Division of FMS. The establishment of individual
federal agency unit accounts must be requested by the federal agency
through FMS' PIB, which has exclusive authority to contract for such
lockbox services.
Section 330.14(b)(3) of the FDIC's regulations (12 C.F.R.
330.14(b)(3)) provides, in essence, that, if the exercise of authority
or control over public unit funds requires action or consent of two or
more officers, employees or agents of a public unit, then those
officials will be treated as one official custodian of the funds for
insurance purposes. Because, as indicated in your letter, the FMS
officials and the official of the federal program agency are the
parties who execute the GMOU and the SMOU, we believe the combination
of those parties constitute the single official custodian of funds in
the LBA(s) established for each respective federal program agency. As
indicated in your letter, the GMOU specifies, among other things, the
handling of all funds received in the institution's post office boxes,
the deposit of all funds received into the appropriate federal agency's
LBA and the transfer of funds to the FRB--NY. The SMOU, among other
things, provides more specific processing requirements tailored to the
federal agency's needs. We believe the authority (and exercise of the
authority) to execute the GMOU and the SMOU is indicative of the
exclusive
{{4-29-94 p.4760}}authority and control of the public
funds in the LBAs. As such, we deem the combination of the parties
executing the GMOU and the SMOU to be the official custodian of the
funds in the LBAs.
This analysis differs from that offered in your letter, but our
conclusions are the same for insurance purposes. You note that the two
managers of the FMS should be deemed the official custodian of the
funds in the LBAs because they have the exclusive authority to contract
for such lockbox services. Although authority to do so is a relevant
indication of control over the funds in the LBAs, we believe the more
important and telling indication of control is the exercise of the
authority to enter into the GMOU and the SMOU with the respective
depository institutions. The GMOU and the SMOU are the controlling
documents on how the funds in the LBAs are treated and transferred to
the FRB--NY. Without the participation of the official of the
respective federal program agency, the authority to contract for
lockbox services for that agency would not be meaningful and no such
account could be established. We agree with your conclusion, however,
that the funds in the LBA(s) established by and for each such federal
program agency would be insured up to $100,000 per (the three-party)
official custodian of the agency. 5
Certificates of Deposit
Your letter also notes that the Treasury is considering depositing
$95,000 with each insured minority depository institution in
uncollateralized six-month certificates of deposit in furtherance of
the Minority Bank Deposit Program ("MBDP"). There are
approximately 139 depository institutions currently involved in the
MBDP, resulting in the possibility of total deposits of $13,205,000. A
specific depository agreement would be executed with each eligible
depository institution specifying the terms and uses of the deposited
funds.
Based on the information provided in your letter, these deposits
would be insured as public unit deposits of the United States. Thus,
based on section 11(a) of the FDI Act and section 330.14(a) of the
FDIC's regulations, the official custodian of the funds would be
insured up to $100,000 for the time deposits at each institution where
such funds are deposited. This insurance coverage would, as usual,
depend on whether the official custodian had on deposit with the same
institution other funds for which he or she was acting as official
custodian in the same custodial capacity.
Response to Hypothetical
Your letter also poses the following hypothetical:
"Bank X is a minority-owned depository institution. It
maintains one TGA, one TT&L remittance option account, and three LBAs
for three distinct federal agency units. Treasury has also deposited
$95,000 in a six-month certificate of deposit with Bank X to further
the MBDP. Bank X is required to use the $95,000 to make community
loans. Two of the LBAs are for receivables arising out of programs
administered by two separate divisions or units of Agency Y's Office of
Information Audits (OIA); specifically, the Information Collection and
Management Division (ICMD) and the Audit Division (AD). The third LBA
is for the collection of enrollment fees arising out of a program
administered by the Agency Z unit responsible for licensing certain
practitioners to appear before it.
"The TGA MOU was executed by the Chief of the Review Section
of the BOB. The TT&L contract was executed by a FRB official. The LBA
GMOU was executed by FMS' BRB Manager and each of the three SMOUs were
executed by FMS' PIB Manager.
"Bank X receives $100,000 in cash deposits for the TGA
account, the TT&L Account, and each of the three LBA accounts.
Immediately after each of the accounts is credited with $100,000, the
FDIC permanently closes Bank X."
Based on the discussion above on the deposit insurance that
would be provided for TGAs, TT&L Accounts, LBAs and the MBPD
certificates of deposit, we believe the deposit insurance afforded to
the accounts held at Bank X would be as follows: (1) the CRS of
BOB
{{4-29-94 p.4761}}would be deemed the official custodian
of the TGA and that individual would be insured up to $100,000 for the
DDA funds in the TGA held at the Bank; (2) the FRB official would be
considered the official custodian of the TT&L DDA funds and, as such,
would be entitled to $100,000 insurance with respect to those funds;
(3) the official custodian of the MBPD certificate of deposit would be
insured up to $100,000 6
; (4) the LBAs would be insured per (three-party) official custodian of
the respective federal program agency funds up to $100,000 for each
such account with a different official custodian. Thus, if the LBAs for
the ICMD and the AD of Agency Y's OIA each has a different official
custodian, then the LBA for the ICMD and the AD would be insured
separately; if, however, the official custodian of the LBAs is the
same, insurance would be limited to $100,000 for all Agency Y's LBAs;
and (5) the three-party official custodian of the LBA maintained for
Agency Z would be insured separately up to $100,000.
Separate Federal Agency Accounts
You also note that some federal agencies have authority both to hold
public money outside of the cash account of the Treasury, and to
deposit such funds in agency depository accounts with eligible
depository institutions. For example, investigative agencies, like
Agency B, have DDAs with local depositories. The public money is used
by Agency B Special Agents to pay informants and purchase contraband in
the course of law enforcement operations. You note that the official
custodian of such funds is generally the Special Agent In Charge
("SAIC") of the regional Agency B office. The SAIC arranges the
deposit of funds into the account, and has authority both to withdraw
the funds and to transfer such funds to his or her Special Agents for
law enforcement purposes.
Your letter states that the Treasury is concerned that federal
agency DDAs may dilute the FDIC coverage for Treasury accounts.
Accordingly, you request our views on the extent and scope of FDI
coverage on such agency accounts and on whether these separate agency
accounts dilute FDIC insurance coverage for Treasury TGAs, LBAs and
TT&L Accounts.
As noted above, the official custodian of public unit deposits is
the depositor entitled to deposit insurance under section 11 of the FDI
Act and Part 330 of the FDIC's regulations. As long as the funds of the
separate federal agency described in your letter are deposited by the
official custodian of those funds, they would be insured separately
from other deposits maintained by other official custodians of other
public unit deposits. Based on the description in your letter of the
control by the SAIC of the funds in issue, it is likely that the SAIC
would be deemed the official custodian of the deposit accounts for
insurance purposes. In such case, there would be no "dilution" of
coverage otherwise afforded to, for example, the Treasury-related
accounts discussed above. 7
* * * * *
We hope this letter responds fully to your request. Please note that
the conclusions reached in this letter are subject to the accuracy and
completeness of the facts presented to us. Different facts may yield
different deposit insurance results. Feel free to call either Joe
DiNuzzo (898-7349) or me (898-3734) with any other comments or
questions.
{{4-29-94 p.4762}}
1As noted in your letter, the "rules relating to official
custodians" in section 330.14(b)(1) of the FDIC's regulations might
be deemed inapplicable to official custodians of funds of the United
States because that provision encompasses funds controlled by a
"public unit" and the United States is not characterized either
in section 11(a) or section 330.14(a) as a public unit. As also noted
in your letter, however, the introductory clause of section
330.14(b)(1) indicates that the "rules" provided in section
330.14(b) for qualifying as an official custodian apply to section
330.14(a), which includes the provision applicable to funds of the
United States. Although admittedly not the model of clarity, section
330.14(b)(1) was intended to apply to official custodians of funds of
the United States as well as public unit deposits of other governmental
entities covered under section 330.14(a). Go Back to Text
2Your letter indicates that TGAs are maintained in DDAs. Under
section 330.14(a), DDAs would be insured up to $100,000. If TGAs were
held in time and savings deposits also, then such deposits would be
insured separately to an aggregate of $100,000. Go Back to Text
3Detailed information on TT&L Accounts is provided in Part 203
of the Treasury's regulations (31 C.F.R. Part 203). Go Back to Text
4Footnote 2 on separate insurance for time and savings deposits
applies here also. Go Back to Text
5The point made in footnote 2 applies here also. Go Back to Text
6Because the certificate of deposit is the only "time and
savings" deposit maintained by the United States at the Bank, this
deposit would be insured up to $100,000, irrespective of whether the
official custodian of this deposit had DDAs at the same institution. As
noted above, under section 330.14(a) of the FDIC's regulations $100,000
insurance is afforded for time and savings deposits and a separate
$100,000 for DDAs. As described in your letter and noted above, all the
other accounts in question are DDAs. Go Back to Text
7Please note that we are assuming here that the funds in issue
are "deposits" under the FDI Act. Specific currency placed by
government agents at insured depository institutions for safekeeping
purposes to be used, for example, as evidence at a trial likely would
not be deposits eligible for FDIC insurance coverage. Go Back to Text
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