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4000 - Advisory Opinions
Deposit insurance for deposits made to an insured institution
operating a military banking facility in a foreign country
FDIC--96--6
March 5, 1996
Alan J. Kaplan, Assistant General Counsel
This is in response to your letter dated February 26, 1996. Your
letter involved a contract awarded by the United States Department of
Defense to Bank X. Through that contract, Bank X will operate military
banking facilities in several countries. One of these countries is the
Republic of Panama. According to your letter, the XYZ Banking
Commission has requested Bank X to obtain a letter from the Federal
Deposit Insurance Corporation "indicating that the military banking
program deposits received by X; in Panama will be insured by the
FDIC."
The applicable statutory rule is set forth at
12 U.S.C. § 1813(l)(5).
Please note that this statutory section was amended by the Riegle
Community Development and Regulatory Improvement Act of 1994, Pub. L.
No. 103--325 (Sept. 23, 1994). As amended, the section provides that
the term "deposit" shall not include the following:
any obligation of a depository institution which is carried on
the books and records of an office of such bank or savings association
located outside of any State, unless--
(i) such obligation would be a deposit if it were carried on
the books and records of the depository institution, and would be
payable at, an office located in any State; and
(ii) the contract evidencing the obligation provides by
express terms, and not by implication, for payment at an office of the
depository institution located in any State.
12 U.S.C.A. § 1813(l)(5)(A) (West Supp. 1995).
In your letter, you state that Bank X will provide that the U.S.
dollar deposits will be payable at Bank X banking locations within the
United States. Under the definition quoted above, this feature will
enable the deposits to qualify as "deposits" for FDIC insurance
(and assessment) purposes but only if the deposit contract sets forth
the required provision "by express terms, and not by
implication." Bank X should have no difficulty in designing deposit
contracts (such as signature cards and certificates of deposits) with
the appropriate "express terms."
Assuming that the deposits received by Bank X in Panama satisfy the
requirements discussed above, those deposits (with other deposits at
Bank X) will be insured up to $100,000 in accordance with the insurance
regulations at 12 C.F.R. Part 330. The FDIC understands that this
letter will be shown to the Panamanian National Banking
Commission.
{{10-31-96 p.4975}}
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