FDIC Approves Proposal on Deposit Account Recordkeeping Requirements for Large Banks

    Mar 08, 2016

    In an effort to facilitate customers’ timely access to deposits in the event of a large bank failure, the Federal Deposit Insurance Corporation (FDIC) on February 17 voted to move forward with a proposed rule that will require institutions with more than two million deposit accounts to adjust their recordkeeping to facilitate quick determinations about deposit insurance in the event of a failure.

    “Timely access to insured deposits is critical to maintaining public confidence in the banking system,” FDIC Chairman Martin J. Gruenberg said. “This proposal would bolster the FDIC's ability to provide depositors at banks with a large number of deposit accounts the same rapid access to their insured funds in the case of a failure as the FDIC does in smaller resolutions.”

    The proposed rule, which will be subject to a 90-day comment period, would require about 36 banks to maintain complete and accurate data on each depositor, and to ensure their information technology systems are capable of calculating the amount of insured money for each depositor within 24 hours of a failure.

    According to the FDIC, as the size and complexity of large banks have increased, so too has the challenge of accurately determining and promptly paying deposit insurance.   The agency notes that it is required to provide depositors with access to their insured accounts as soon as possible after an institution fails. Typically, a bank will be closed on a Friday afternoon, and depositors’ money will be available the following Monday.  However, the process could take longer if a bank’s records are unclear or incomplete.

    “Larger institutions are generally more complex, have more deposit accounts, greater geographic dispersion, multiple deposit systems, and more issues with data accuracy and completeness,” the draft proposal states. “The proposed rule would ensure that customers of both large and small failed banks receive the same prompt access to their funds, reducing disparities that might undermine market discipline or create unintended competitive advantages in the market for large deposits.”

    According to several banking trade associations, institutions covered by the proposed rule will need at least four years to implement the processes envisioned in the proposal.

    “To support and promote the intended system changes, the associations ask the FDIC to provide, as soon as possible, a clear statement of the scope of the deposit accounts/systems to be covered, the business rules that covered banks would need to follow in order to design and operate systems capable of making deposit insurance determinations in-house, and guidance regarding systems expectations,” wrote the American Bankers Association, the Clearing House, and the Consumer Bankers Association in a comment letter filed in response to an advance notice of proposed rulemaking issued by the FDIC in April 2015 to solicit feedback on the recordkeeping plan.

    The Washington Policy Brief is an online advisory that contains brief summaries of recent legislative and regulatory issues that may affect the records and information management profession. Further information about the issue is accessed by clicking on the link provided at the end of each summary.


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