Proposed rule aims to give large banks a break in recordkeeping requirements

Gruenberg dissents on record keeping proposal

Thirty-six large banks with more than 2 million deposit accounts each will receive some relief from recordkeeping under one of two proposals issued for comment by the federal insurer of bank deposits Friday.

The Federal Deposit Insurance Corp. (FDIC) Board approved two proposals to amend two rules to simplify the process for making insurance determinations in the event a bank is placed into receivership.

The first proposal is intended to improve the “Recordkeeping for Timely Deposit Insurance Determination” regulations of the agency (Part 370 of FDIC Rules and Regulations), which were adopted in 2016 to ensure that the agency can rapidly determine the amount of insured deposits if any bank covered by the rule should fail.

FDIC Chairman Jelena McWilliams, in a statement, said since the rule was adopted, covered institutions have made “substantial progress” toward compliance. “During the course of this work, it has become clear that there are features of the rule that could be improved,” she stated.

She said the amendments the board proposed are intended to provide the improvements and to “better balance the benefits of the rules with the burdens, provide limited relief where appropriate, and improve clarity, while still ensuring the FDIC will have access to the information it needs.”

The proposed changes also include an optional one-year extension of time for compliance with Part 370, she said. The proposal only affects those banks and thrifts with more than 2 million deposit accounts (totaling 36, according to McWilliams).

However, Board Member (and former Chairman) Martin Gruenberg voted against the proposal. In a lengthy dissent, Gruenberg said the 2016 rule was “one of the most important rules that the FDIC has adopted to manage the orderly failure of large, complex banks.” He concluded his dissent by pointing out flaws, as he saw them, in the proposal. “There should not be a presumption of approval for exceptions for one institution based on exceptions granted to other institutions, even if the institution’s notification letter to the FDIC would need to include supporting information,” he said. “In my view, the discipline provided by the FDIC’s responsibility to analyze and approve such a request, and reply in writing with an explanation, would assure the appropriate rigor of analysis that granting such an exception should warrant.”

The second proposal – applying to all FDIC-insured institutions – is intended to provide an alternative to current rules requiring signature cards on joint accounts. Now, in order for deposits in a joint account to be insured separately from deposits individually owned by the account’s co-owners upon the failure of an insured institution, each co-owner of the joint account must have signed a signature card (under Part 330 of the agency’s rules). Under the proposal, insured institutions could continue to maintain signature cards, but the signature card requirement could be satisfied by other information contained in an institution’s deposit account records establishing co-ownership of a joint account.

The proposal has no impact on the deposit insurance coverage for joint accounts, the FDIC said. It also would not impose any new requirements on depositors or banks, the agency said.

Both proposals were issued for 30-day comment periods.

FDIC Board Proposes Changes to Recordkeeping Requirements for Deposit Insurance Determinations

Statement by Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation, Notice of Proposed Rulemaking: Revisions to the Supplementary Leverage Ratio to Exclude Certain Central Bank Deposits of Banking Organizations Predominantly Engaged in Custody, Safekeeping, and Asset Servicing Activities

Statement of Martin J. Gruenberg, Member, FDIC Board of Directors, Notice of Proposed Rulemaking: Amendments to 12 CFR Part 370 Recordkeeping for Timely Deposit Insurance Determination