UPDATED: FDIC leaders split on final rule for insurance determination, proposed rule on securitization safe harbor

The two appointed members of the federal bank deposit insurer board split on approval of final and proposed rules at their meeting Tuesday, with one citing an erosion of safeguards adopted in the wake of the financial crisis as his reason for casting “no” votes.

Federal Deposit Insurance Corp. (FDIC) Board Member (and former chairman) Martin Gruenberg voted against approval of a final rule on recordkeeping for timely deposit insurance determination, and on a proposed rule for a securitization safe harbor. In both cases, Gruenberg indicated concern that the deposit insurer was retreating from safeguards adopted following the financial crisis of 2008-10.

Gruenberg votes no
FDIC Board Member Martin Gruenberg votes “no” Tuesday on finalizing a rule on recordkeeping for timely deposit insurance determination.

FDIC Board Chairman Jelena McWilliams – the only other appointed member on the current board – voted in favor of both. Joining her were board members (by way of their positions) Joesph Otting, Comptroller of the Currency, and Kathleen (“Kathy”) Kraninger, director of the Consumer Financial Protection Bureau (CFPB).

According to the FDIC, the rule will now allow for an optional one-year extension of the original compliance deadline of April 1, 2020. “Other changes are more technical and are intended to address issues that became apparent as the FDIC staff worked with institutions to comply with Part 370 since it was first adopted in November 2016,” according to an agency release. The agency added that the final rule is similar to what was proposed in April 2019, with some changes made in response to the public comments received.

The rule takes effect Oct. 1.

The proposal on securitization safe harbor would also amend regulations adopted by the FDIC in 2010, in particular with regard to residential-backed mortgage security (RBMS). According to agency staff briefing the board, the proposal would revise certain provisions of its securitization safe harbor rule, which relates to the treatment of financial assets transferred in connection with a securitization or participation transaction, in order to eliminate a requirement that the securitization documents require compliance with Regulation AB of the Securities and Exchange Commission in circumstances where Regulation AB by its terms would not apply to the issuance of obligations backed by such financial assets.

The proposal was issued with a 60-day comment period.

In other action, the board unanimously approved a final rule on joint deposit accounts to provide an alternative method to satisfy the “signature card” requirement. The final rule expands the types of evidence considered when determining whether joint accounts qualify for increased deposit insurance coverage, according to the agency. “The FDIC will continue to look to signature cards when determining deposit insurance coverage on joint accounts but may now also rely on other information contained in a bank’s deposit account records that establishes co-ownership of a joint account,” the agency added.

The change does not expand or contract deposit insurance coverage for joint accounts and does not place any increased burden on depositors or FDIC-insured institutions, the agency added.

The rule takes effect 30 days after publication in the Federal Register.

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