Final Rule on Unlimited Coverage for Noninterest-bearing Transaction Accounts

Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Rules and Regulations
if they would expect to realize profits by
employing such methods.
Executive Order 12988
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. Under this rule: (1) All State
and local laws and regulations that are
inconsistent with this rule will be
preempted; (2) no retroactive effect will
be given to this rule; and (3) no
retroactive proceedings will be required
before parties may file suit in court
challenging this rule.
Paperwork Requirements
FSIS has reviewed this rule under the
Paperwork Reduction Act of 1995 (44
U.S.C. 3501–3520) and has determined
that the information collection related to
HACCP plans, Sanitation SOPs, and
prerequisite programs has been
approved by OMB under OMB Control
Number 0583–0103.
E-Government Act
FSIS and USDA are committed to
achieving the purposes of the
E-Government Act (44 U.S.C. 3601, et
seq.) by, among other things, promoting
the use of the Internet and other
information technologies and providing
increased opportunities for citizen
access to government information and
services, and for other purposes.
Executive Order 13175
The policies contained in this rule do
not have Tribal Implications that
preempt Tribal Law.

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USDA Nondiscrimination Statement
The U.S. Department of Agriculture
(USDA) prohibits discrimination in all
its programs and activities on the basis
of race, color, national origin, gender,
religion, age, disability, political beliefs,
sexual orientation, and marital or family
status. (Not all prohibited bases apply to
all programs.)
Persons with disabilities who require
alternative means for communication of
program information (Braille, large
print, audiotape, etc.) should contact
USDA’s Target Center at 202–720–2600
(voice and TTY).
To file a written complaint of
discrimination, write USDA, Office of
the Assistant Secretary for Civil Rights,
1400 Independence Avenue, SW.,
Washington, DC 20250–9410 or call
202–720–5964 (voice and TTY). USDA
is an equal opportunity provider and
employer.
Additional Public Notification
Public awareness of all segments of
rulemaking and policy development is
important. Consequently, in an effort to

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ensure that the public and in particular
minorities, women, and persons with
disabilities, are aware of this final rule,
FSIS will announce it on-line through
the FSIS Web page located at http://
www.fsis.usda.gov/regulations/
2010_Interim _&_Final_Rules_Index.
FSIS also will make copies of this
Federal Register publication available
through the FSIS Constituent Update,
which is used to provide information
regarding FSIS policies, procedures,
regulations, Federal Register notices,
FSIS public meetings, and other types of
information that could affect or would
be of interest to our constituents and
stakeholders. The Update is
communicated via Listserv, a free e-mail
subscription service consisting of
industry, trade, and farm groups,
consumer interest groups, allied health
professionals, scientific professionals,
and other individuals who have
requested to be included. The Update
also is available on the FSIS Web page.
Through Listserv and the Web page,
FSIS is able to provide information to a
much broader, more diverse audience.
In addition, FSIS offers an e-mail
subscription service which provides
automatic and customized access to
selected food safety news and
information. This service is available at
http://www.fsis.usda.gov/
news_&_events/email_subscription/.
Options range from recalls to export
information to regulations, directives
and notices. Customers can add or
delete subscriptions themselves, and
have the option to password protect
their accounts.
List of Subjects in 9 CFR Part 310
Meat inspection.
■ Accordingly, the Food Safety and
Inspection Service amends 9 CFR part
310 as follows:
PART 310—POST-MORTEM
INSPECTION
1. The authority citation for part 310
continues to read as follows:

■

Authority: 21 U.S.C. 601–695; 7 CFR 2.18,
2.53.

2. Amend § 310.13 by revising
paragraph (a), redesignating paragraph
(b) as paragraph (b)(1), and adding
paragraph (b)(2) to read as follows:

■

§ 310.13 Inflating carcasses or parts
thereof; transferring caul or other fat.

(a) Establishments that slaughter
livestock and prepare livestock
carcasses and parts may inflate
carcasses or parts of carcasses with air
if they develop, implement, and
maintain controls to ensure that the air
inflation procedure does not cause

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insanitary conditions or adulterate
product. Establishments shall
incorporate these controls into their
HACCP plans or Sanitation SOPs or
other prerequisite programs.
(b)(1) * * *
(2) Injecting compressed air into the
skulls of cattle in conjunction with a
captive bolt stunner to hold the animal
still for dressing operations is
prohibited.
*
*
*
*
*
Done at Washington, DC, on October 29,
2010.
Alfred V. Almanza,
Administrator.
[FR Doc. 2010–28650 Filed 11–12–10; 8:45 am]
BILLING CODE 3410–DM–P

FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 330
RIN 3064–AD65

Deposit Insurance Regulations;
Unlimited Coverage for NoninterestBearing Transaction Accounts
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
AGENCY:

The FDIC is adopting a final
rule amending its deposit insurance
regulations to implement section 343 of
the Dodd-Frank Wall Street Reform and
Consumer Protection Act (‘‘Dodd-Frank
Act’’),1 providing for unlimited deposit
insurance for ‘‘noninterest-bearing
transaction accounts’’ for two years
starting December 31, 2010.
DATES: Effective Date: The final rule is
effective December 31, 2010.
FOR FURTHER INFORMATION CONTACT:
Joseph A. DiNuzzo, Supervisory
Counsel, Legal Division (202) 898–7349
or [email protected]; Mike Figge,
Honors Attorney, Legal Division (202)
898–6750 or [email protected]; or James
V. Deveney, Chief, Deposit Insurance
Section, Division of Supervision and
Consumer Protection (202) 898–6687 or
[email protected].
SUPPLEMENTARY INFORMATION:
SUMMARY:

I. The Proposed Rule
On September 30, 2010, the FDIC
published a proposed rule (‘‘proposed
rule’’) to implement section 343 of the
Dodd-Frank Act (‘‘Section 343’’).2
Section 343 amended the deposit
insurance provisions of the FDI Act (12
U.S.C. 1821(a)(1)) to provide temporary
1 Public
2 75

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Law 111–203 (July 21, 2010).
FR 60341 (Sept. 30, 2010).

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Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Rules and Regulations

separate insurance coverage for
noninterest-bearing transaction
accounts. In summary, the proposed
rule: Followed the Section 343
definition of noninterest-bearing
transaction account; identified and
discussed the differences between
Section 343 and the FDIC’s Transaction
Account Guarantee Program (‘‘TAGP’’);
explained the separate deposit
insurance available for noninterestbearing transaction accounts under
Section 343; proposed disclosure and
notice requirements as part of the
implementation of Section 343;
announced that, because of this
Congressional action, the FDIC would
not be extending the TAGP beyond its
sunset date of December 31, 2010; and
requested comments on all aspects of
the proposed rule.

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II. Comments on the Proposed Rule
The comment period on the proposed
rule ended on October 15, 2010. The
FDIC received ninety-three comments
from trade associations, insured
depository institutions (‘‘IDIs’’) and law
firms, among others. In particular, the
FDIC received eighty-four comments
from state-bar affiliated associations and
five comments from banking and other
associations. The remaining four
comments were from individual IDIs.
Trade associations and bankers
commented that the proposed rule
reflects an accurate interpretation of
Section 343. A number of banks and
state bar associations commented that
the exclusion of Interest on Lawyer
Trust Accounts (‘‘IOLTAs’’) from Section
343, and consequently the proposed
rule, was the result of an inadvertent
omission on the part of Congress. These
comments referenced a pending bipartisan Senate bill to include IOLTAs
in the Section 343 definition of
noninterest-bearing transaction account.
The commenters oppose the proposed
rule’s requirement that IDIs notify
IOLTA and negotiable order of
withdrawal (‘‘NOW’’) account holders of
changes in the deposit insurance
scheme before Congress has the
opportunity to amend Section 343 to
include IOLTAs. Their comments reflect
a concern that the exclusion of IOLTA
and NOW accounts from the definition
of noninterest-bearing transaction
account will cause large IOLTA and
NOW account depositors to spread these
deposits across multiple IDIs to ensure
full deposit insurance coverage or to
place their deposits with institutions
deemed ‘‘too big to fail.’’ Their
comments also reflect a concern that
failure to provide unlimited insurance
to IOLTA and NOW accounts will

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significantly restrict community
lending.
One commenter requested that the
final rule clarify whether the notice
requirements apply to all depositors
who hold NOW accounts in IDIs
participating in the TAGP, or only to
depositors who may be affected by the
change in deposit insurance coverage.
According to this comment letter, most
NOW account holders will not be
affected by the change because they
have less than the standard maximum
deposit insurance amount of $250,000
(‘‘SMDIA’’) and remain fully insured
should an IDI default. Another
commenter requested clarification that
one notice per account, rather than one
notice per account holder, will satisfy
the notice requirement. Similarly, when
depositors have multiple accounts that
are affected, the commenter requested
clarification that compliance with the
notice requirement is achieved by
sending one notice which lists all
affected accounts along with the
account holder’s statement. Another
comment letter requested clarification
that the language included in the
proposed rule under 12 CFR
330.16(c)(1) is language that may be
used to comply with the notice
requirement.
Several commenters expressed
concerns over the unintended
consequences of providing unlimited
deposit insurance coverage for
noninterest-bearing transaction
accounts, contending that providing
such coverage for these accounts
promotes moral hazard. Four
commenters suggested charging a
separate assessment, in addition to the
normal assessment rates, to address
what they deem to be disproportionately
high assessment rates on banks with a
relatively low level of noninterestbearing transaction accounts. One
commenter requested clarification on
how the FDIC intends to treat official
checks for deposit insurance purposes
under the proposed rule, in light of the
provision in the FDIC’s current deposit
insurance regulations dealing with
negotiable instruments,12 CFR
330.5(b)(4)(i).
Finally, one commenter requested
clarification that the absence of a
contract interest rate will determine
whether an account qualifies for
unlimited deposit-insurance coverage.
Likewise, the commenter requested
confirmation that interest-bearing
accounts may be converted to
noninterest-bearing accounts after
December 31, 2010, and still obtain
unlimited insurance.

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III. The Final Rule
Definition of Noninterest-Bearing
Transaction Account
As in the proposed rule, the final rule
follows the definition of noninterestbearing transaction account in Section
343. Section 343 defines a noninterestbearing transaction account as ‘‘a
deposit or account maintained at an
insured depository institution with
respect to which interest is neither
accrued nor paid; on which the
depositor or account holder is permitted
to make withdrawals by negotiable or
transferable instrument, payment orders
of withdrawal, telephone or other
electronic media transfers, or other
similar items for the purpose of making
payments or transfers to third parties or
others; and on which the IDI does not
reserve the right to require advance
notice of an intended withdrawal.’’ One
commenter on the proposed rule
suggested that the FDIC define a
depositor’s balance in a noninterestbearing transaction account as the
‘‘average balance collected within the
insured account over the past 30 days’’
prior to the date of failure of the IDI.
The FDIC believes this definition would
be inconsistent with the definition of
noninterest-bearing transaction account
in Section 343 and would lead to
depositor confusion and uncertainty as
to the extent of deposit insurance
coverage available on noninterestbearing transaction accounts.
The Section 343 definition of
noninterest-bearing transaction account
is similar to the definition of that term
in the TAGP, but it includes no interestbearing accounts. The Section 343
definition of noninterest-bearing
transaction account encompasses only
traditional, noninterest-bearing demand
deposit (or checking) accounts that
allow for an unlimited number of
deposits and withdrawals at any time,
whether held by a business, an
individual or other type of depositor.
Unlike the definition of noninterestbearing transaction account in the
TAGP, the Section 343 definition of
noninterest-bearing transaction account
does not include NOW accounts
(regardless of the interest rate paid on
the account) or IOLTAs. Therefore,
under the final rule, neither NOW
accounts nor IOLTAs are within the
definition of noninterest-bearing
transaction account. Also, like the
TAGP, the final rule does not include
money market deposit accounts
(‘‘MMDAs’’) within the definition of
noninterest-bearing transaction account.
As noted in the comment summary,
the FDIC received numerous comments
from law firms, IDIs, attorney trade

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Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Rules and Regulations
groups and others requesting that the
FDIC either postpone issuance of the
final rule or exclude from the final rule
the requirement that IDIs currently
participating in the TAGP notify IOLTA
customers that, beginning January 1,
2011, IOLTAs no longer will be eligible
for full deposit insurance coverage. The
FDIC believes it is critically important
for depositors to have a clear
understanding of the deposit insurance
rules before placing or retaining
deposits at an FDIC-insured institution.
As a result of the passage of the DoddFrank Act, the temporary full protection
currently afforded to IOLTAs at IDIs
participating in the TAGP will terminate
on January 1, 2011, and the FDIC must
ensure that IOLTA customers know
about this change. If, as the commenters
suggest, Congress acts before December
31, 2010, to add IOLTAs to Section 343,
thus providing temporary full coverage
for these accounts, the FDIC will act
quickly to notify IDIs of the statutory
change and explain how to respond to
this change in complying with the
disclosure requirements in the final
rule.
Importantly, under the FDIC’s general
deposit insurance rules, IOLTAs may
qualify for ‘‘pass-through’’ deposit
insurance coverage, so long as the
regulatory requirements are met. 12 CFR
330.7. That means each client for whom
a law firm holds funds in an IOLTA may
be insured up to $250,000 for his or her
funds. In addition, the accrued interest
to which a legal services entity or
program is entitled may be separately
insured for $250,000. For example, if a
law firm maintains an IOLTA with
$250,000 attributable to Client A,
$150,000 to Client B and $75,000 to
Client C, and the accrued interest of
$5,000 is payable to a legal services
program, the account likely would be
fully insured. If the clients or the legal
services entity have other funds at the
same IDI, those funds would be added
to their respective ownership interest in
the IOLTA for insurance coverage
purposes. But, coverage is available,
generally, on a per-client basis; thus, a
generous amount of deposit insurance
coverage is available for IOLTAs, absent
the availability of unlimited coverage
for IOLTAs under either the TAGP or
Section 343.
Some commenters noted that,
pursuant to Dodd-Frank Act revisions to
the Federal Deposit Insurance Act, the
FDIC would not have the authority to
extend the TAGP beyond that program’s
sunset date of December 31, 2010. The
FDIC agrees with this conclusion.
Therefore, in response to comments that
the FDIC extend the TAGP, so that
IOLTAs would continue to be fully

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protected, the FDIC does not have the
statutory authority to do so. Likewise, in
response to comments that the FDIC
expand the final rule to include
IOLTAs, the Dodd-Frank Act would not
permit such an expansion, given that
the Section 343 definition of
noninterest-bearing transaction excludes
accounts that may pay interest.
One trade group suggested that the
FDIC undertake a study of the benefits
and costs of a permanent selfsupporting, and optional insurance
program for qualifying accounts above
the standard insurance limit. The FDIC
will consider this suggestion.
As under the TAGP, under the final
rule, whether an account is noninterestbearing is determined by the terms of
the account agreement and not by the
fact that the rate on an account may be
zero percent at a particular point in
time. For example, an IDI might offer an
account with a rate of zero percent
except when the balance exceeds a
prescribed threshold. Such an account
would not qualify as a noninterestbearing transaction account even though
the balance is less than the prescribed
threshold and the interest rate is zero
percent. Under the final rule, at all
times, the account would be treated as
an interest-bearing account because the
account agreement provides for the
payment of interest under certain
circumstances. On the other hand, as
under the TAGP, the waiving of fees
would not be treated as the earning of
interest. For example, IDIs sometimes
waive fees or provide fee-reducing
credits for customers with checking
accounts. Under the final rule, such
account features would not prevent an
account from qualifying as a
noninterest-bearing transaction account,
as long as the account otherwise
satisfies the definition of a noninterestbearing transaction account.
One commenter on the proposed rule
asked that the FDIC clarify that ‘‘rewards
programs’’ offered by IDIs on noninterest checking accounts also would
not prevent an account from meeting the
definition of noninterest-bearing
transaction account under the final rule.
Generally, the FDIC will look to current
requirements and interpretations under
Part 329 of its regulations (Interest on
Deposits, 12 CFR part 329) and such
interpretations under Regulation Q of
the Board of Governors of the Federal
Reserve System (12 CFR part 217) to
determine whether rewards provided in
connection with transaction accounts
will be considered interest paid on the
account and, thus, disqualify an account
for treatment as a noninterest-bearing
transaction account.

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The same commenter requested that
the FDIC confirm that interest-bearing
accounts may be converted to
noninterest-bearing checking accounts
after December 31, 2010, and still obtain
the benefits of unlimited FDIC coverage.
Such account would be eligible for
treatment as a noninterest-bearing
transaction account as long as, under
the modified deposit agreement, the
depositor may not earn interest on the
account.
This same principle for determining
whether a deposit account qualifies as a
noninterest-bearing transaction account
will apply when IDIs no longer are
prohibited from paying interest on
demand deposit accounts. Pursuant to
section 627 of the Dodd-Frank Act, as of
July 21, 2011 (one year after the
enactment date of the Dodd-Frank Act),
IDIs no longer will be restricted from
paying interest on demand deposit
accounts. At that time, demand deposit
accounts offered by IDIs that allow for
the payment of interest will not satisfy
the definition of a noninterest-bearing
transaction account. As discussed
below, under the final rule, IDIs are
required to inform depositors of any
changes in the terms of an account that
will affect their deposit insurance
coverage under this new provision of
the deposit insurance rules.
As under the TAGP, the final rule’s
definition of noninterest-bearing
transaction account encompasses
‘‘official checks’’ issued by IDIs. Official
checks, such as cashier’s checks and
money orders issued by IDIs, are
‘‘deposits’’ as defined under the FDI Act
(12 U.S.C. 1813(l)) and part 330 of the
FDIC’s regulations. The payee of the
official check (the party to whom the
check is payable) is the insured party.
Also, as a clarifying point made in one
of the comments received on the
proposed rule, if an official check is
negotiated to a third party, the FDIC
would recognize that person as the
insured party, subject to certain
requirements. 12 CFR 330.5(b)(4).
Because official checks meet the
definition of a noninterest-bearing
transaction account, the payee (or the
party to whom the payee has endorsed
the check) would be insured for the full
amount of the check upon the failure of
the IDI that issued the official check.
Under the FDIC’s rules and
procedures for determining account
balances at a failed IDI (12 CFR 360.8),
funds swept (or transferred) from a
deposit account to either another type of
deposit account or a non-deposit
account are treated as being in the
account to which the funds were
transferred prior to the time of failure.
So, for example, if pursuant to an

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agreement between an IDI and its
customer, funds are swept daily from a
noninterest-bearing transaction account
to an account or product (such as a
repurchase agreement) that is not a
noninterest-bearing transaction account,
the funds in the resulting account or
product would not be eligible for full
insurance coverage. This is how sweep
account products are treated under the
TAGP and under the final rule.
As under the TAGP, however, the
final rule includes an exception from
the treatment of swept funds in
situations where funds are swept from
a noninterest-bearing transaction
account to a noninterest-bearing savings
account, notably a MMDA. Often
referred to as ‘‘reserve sweeps,’’ these
products entail an arrangement in
which a single deposit account is
divided into two sub-accounts, a
transaction account and an MMDA. The
amount and frequency of sweeps are
determined by an algorithm designed to
minimize required reserves. In some
situations customers may be unaware
that this sweep mechanism is in place.
Under the final rule, the FDIC will
consider such accounts noninterestbearing transaction accounts. In
response to a comment on the proposed
rule that treating such accounts as
noninterest-bearing transaction accounts
is contrary to Section 343, the FDIC
notes that these are single accounts
divided into sub-accounts, on neither of
which the IDI pays interest. Considering
‘‘reserve sweep accounts’’ to be
noninterest-bearing transaction accounts
also is consistent with the treatment of
such accounts under the FDIC’s
regulations on the treatment of sweep
accounts upon the failure of an IDI. 12
CFR 360.8. Apart from this exception for
‘‘reserve sweeps,’’ MMDAs and
noninterest-bearing savings accounts do
not qualify as noninterest-bearing
transaction accounts.
Insurance Coverage
As noted in the proposed rule,
pursuant to Section 343, all funds held
in noninterest-bearing transaction
accounts will be fully insured, without
limit. As also specifically provided for
in Section 343, this unlimited coverage
is separate from, and in addition to, the
coverage provided to depositors with
respect to other accounts held at an IDI.
This means that funds held in
noninterest-bearing transaction accounts
will not be counted in determining the
amount of deposit insurance on deposits
held in other accounts, and in other
rights and capacities, at the same IDI.
Thus, for example, if a depositor has a
$225,000 certificate of deposit and a nointerest checking account with a balance

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of $300,000, both held in a single
ownership capacity, he or she would be
fully insured for $525,000 (plus interest
accrued on the CD), assuming the
depositor has no other single-ownership
funds at the same institution. First,
coverage of $225,000 (plus accrued
interest) would be provided for the
certificate of deposit as a single
ownership account (12 CFR 330.6) up to
the SMDIA of $250,000. Second, full
coverage of the $300,000 checking
account would be provided separately,
despite the checking account also being
held as a single ownership account,
because the account qualifies for
unlimited separate coverage as a
noninterest-bearing transaction account.
One issue raised during the comment
period is how the FDIC will apply the
new Dodd-Frank coverage provision to
determine the amount of insurance
coverage available for revocable trust
accounts. Coverage for revocable trust
accounts, in general, is based on the
number of ‘‘eligible’’ beneficiaries
named in the account. 12 CFR 330.10.
The specific question is how the FDIC
will ‘‘count up’’ the number of eligible
beneficiaries in determining revocable
trust account coverage for an account
owner who has multiple revocable trust
accounts, including one or more such
accounts that would qualify as
noninterest-bearing transaction accounts
under the Dodd-Frank provision. For
example, if a depositor has an interestbearing account with a balance of
$400,000 payable to a niece and a
qualifying noninterest-bearing
transaction account with a balance of
$200,000 payable to a friend, how much
coverage would be available for the
accounts? To make this deposit
insurance calculation, the FDIC would
first determine the total number of
different beneficiaries the account
owner has named in all revocable trust
accounts (both interest-bearing and
noninterest-bearing) at the same IDI. In
this example, there are two (the niece
and the friend). We would then
multiply that number times the SMDIA
of $250,000 to determine the maximum
coverage available on the account
owner’s revocable trust accounts. In this
example, the amount is $500,000. We
then would apply that amount to the
total balance of the account owner’s
interest-bearing revocable trust
accounts. Here, because that amount is
$400,000, it would be fully covered. The
balance of the noninterest-bearing
transaction account (in this case,
$200,000) would be separately and fully
covered under the final rule.

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No Opting Out
Under the TAGP, IDIs could choose
not to participate in the program.
Because Section 343 of the Dodd-Frank
Act provides Congressionally mandated
deposit insurance coverage, IDIs are not
required to take any action (i.e., opt in
or opt out) to obtain separate coverage
for noninterest-bearing transaction
accounts. From December 31, 2010,
through December 31, 2012,
noninterest-bearing transaction accounts
at all IDIs will receive this temporary
deposit insurance coverage. One
commenter complained that the
proposed rule did not allow IDIs to opt
out of the temporary unlimited coverage
for noninterest-bearing transaction
accounts under Dodd-Frank. We note
that, unlike under the TAGP, Section
343 does not allow IDIs to opt out of this
statutory provision.
No Separate Assessment
The FDIC imposes a separate
assessment, or premium, on IDIs that
participate in the TAGP.3 The FDIC will
not charge a separate assessment for the
insurance of noninterest-bearing
transaction accounts pursuant to
Section 343. The FDIC will take into
account the cost for this additional
insurance coverage in determining the
amount of the deposit insurance
assessment the FDIC charges IDIs under
its risk-based assessment system.4 Four
comments from trade groups and IDIs
suggested that the FDIC charge more for
the additional coverage on noninterestbearing transaction accounts similar to
the way additional coverage is charged
for under the TAGP. The proposed rule
was not intended to address assessment
issues, but the FDIC will take this
comment into consideration when
considering future changes to the
assessment rate system. The FDIC notes,
however, that the deposits covered by
the TAGP were not defined as insured
deposits. In contrast, Congress has
specifically determined that
noninterest-bearing transaction accounts
are fully insured deposits.
Disclosure and Notice Requirements
The final rule includes disclosure and
notice requirements as part of the
implementation of Section 343. As
indicated in the proposed rule, the
purpose of these requirements is to
ensure that depositors are aware of and
understand what types of accounts will
be covered by this temporary deposit
insurance coverage for noninterestbearing transaction accounts. As in the
proposed rule, the final rule includes
3 12
4 12

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CFR part 327.

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three such requirements. As explained
in detail below: (1) IDIs must post a
prescribed notice in their main office,
each branch and, if applicable, on their
Web site; (2) IDIs currently participating
in the TAGP must notify NOW account
depositors (that are currently protected
under the TAGP because of interest rate
restrictions on those accounts) and
IOLTA depositors that, beginning
January 1, 2011, those accounts no
longer will be eligible for unlimited
protection; and (3) IDIs must notify
customers individually of any action
they take to affect the deposit insurance
coverage of funds held in noninterestbearing transaction accounts.
1. Posted Notice
The final rule requires each IDI to
post, prominently, a copy of the
following notice in the lobby of its main
office, in each domestic branch and, if
it offers Internet deposit services, on its
Web site. In response to comments
received on the proposed rule, this
notice has been revised from the notice
in the proposed rule to make it more
concise and reader-friendly:

jdjones on DSK8KYBLC1PROD with RULES

NOTICE OF CHANGES IN TEMPORARY
FDIC INSURANCE COVERAGE FOR
TRANSACTION ACCOUNTS
All funds in a ‘‘noninterest-bearing
transaction account’’ are insured in full by
the Federal Deposit Insurance Corporation
from December 31, 2010, through December
31, 2012. This temporary unlimited coverage
is in addition to, and separate from, the
coverage of at least $250,000 available to
depositors under the FDIC’s general deposit
insurance rules.
The term ‘‘noninterest-bearing transaction
account’’ includes a traditional checking
account or demand deposit account on which
the insured depository institution pays no
interest. It does not include other accounts,
such as traditional checking or demand
deposit accounts that may earn interest,
NOW accounts, money-market deposit
accounts, and Interest on Lawyers Trust
Accounts (‘‘IOLTAs’’).
For more information about temporary
FDIC insurance coverage of transaction
accounts, visit www.fdic.gov.

2. Notice to Depositors Protected Under
the TAGP But Not Under the DoddFrank Provision
As discussed above, through
December 31, 2010, low-interest NOW
accounts and all IOLTAs are protected
in full at IDIs participating in the TAGP.
These accounts, however, are not
eligible for unlimited deposit insurance
coverage under the Dodd-Frank
provision. Thus, starting January 1,
2011, all NOW accounts and IOLTAs
will be insured under the general
deposit insurance rules and will no
longer be eligible for unlimited
protection. Because of the potential

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depositor confusion about this change
in the FDIC’s treatment of NOWs and
IOLTAs, the final rule requires IDIs
currently participating in the TAGP to
provide individual notices to depositors
with NOW accounts currently protected
in full under the TAGP and IOLTAs that
those accounts will not be insured
under the new temporary insurance
category for noninterest-bearing
transaction accounts. IDIs are required
to provide such notice to applicable
depositors by mail no later than
December 31, 2010. To comply with this
requirement, IDIs may use electronic
mail for depositors who ordinarily
receive account information in this
manner. The notice may be in the form
of a copy of the notice required to be
posted in IDI main offices, branches and
on Web sites.
One commenter asked that the FDIC
address certain specifics about
complying with this notice requirement.
In response to that comment: (1) As to
joint accounts protected under the
TAGP as of December 31, 2010, IDIs
need only mail the notice to the address
designated on the account; (2) if
depositors have more than one affected
account, one notice is sufficient if it
identifies all the applicable accounts;
and (3) the notice mailed to affected
depositors may be in the form of the
‘‘posting’’ notice in § 330.16(c) (1) of the
final rule.
Several commenters requested that
this notice requirement either be
eliminated, limited to NOW account
owners with balances over the SMDIA
or postponed until a date after the
effective date of December 31, 2010. The
FDIC has not adopted these suggestions
because the Dodd-Frank coverage
provision becomes effective on
December 31, 2010; thus, starting
January 1, 2011, low-interest NOW
accounts and IOLTAs at IDIs
participating in the TAGP no longer will
be eligible for unlimited protection. As
noted, the FDIC believes it is critical
that depositors understand the current
deposit insurance rules in placing or
retaining funds at FDIC-insured
institutions.
3. Notice To Sweep Account and Other
Depositors Whose Coverage on
Noninterest-Bearing Transaction
Accounts Is Affected by an IDI Action
Under the TAGP regulations, if an IDI
offers an account product in which
funds are automatically transferred, or
‘‘swept,’’ from a noninterest-bearing
transaction account to another account
(such as a savings account) or bank
product that does not qualify as a
noninterest-bearing transaction account,
it must inform those customers that,

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69581

upon such transfer, the funds will no
longer be fully protected under the
TAGP. As in the proposed rule, the final
rule contains a similar, though
somewhat more expansive, requirement,
mandating that IDIs notify customers of
any action that affects the deposit
insurance coverage of their funds held
in noninterest-bearing transaction
accounts. This notice requirement is
intended primarily to apply when IDIs
begin paying interest on demand
deposit accounts, as will be permitted
beginning July 21, 2011, under section
627 of the Dodd-Frank Act (discussed
above). Thus, under the final rule’s
notice requirements, if an IDI modifies
the terms of its demand deposit account
agreement so that the account may pay
interest, the IDI must notify affected
customers that the account no longer
will be eligible for full deposit
insurance coverage as a noninterestbearing transaction account. Though
such notifications are mandatory, the
final rule does not impose specific
requirements regarding the form of the
notice. Rather, the FDIC expects IDIs to
act in a commercially reasonable
manner and to comply with applicable
state and federal laws and regulations in
informing depositors of changes to their
account agreements.
One commenter on the proposed rule
recommended that the FDIC issue
additional guidance on the
implementation of Section 343. The
FDIC will consider publishing such
guidance if it seems helpful to do so.
IV. Regulatory Analysis and Procedure
A. Effective Date
Section 302 of the Riegle Community
Development and Regulatory
Improvement Act of 1994 (12 U.S.C.
Section 4802(b)) requires, subject to
certain exceptions, that regulations
imposing additional reporting,
disclosure or other requirements take
effect on the first day of the calendar
quarter after publication of the final
rule. One of the statutory exceptions to
this requirement is when the regulation
is required to take effect on a date other
than on the first day of the calendar
quarter after publication of the final
rule. The effective date of Section 343
is December 31, 2010. Thus, the
effective date of the final rule is
December 31, 2010.
B. Paperwork Reduction Act
In accordance with section 3512 of
the Paperwork Reduction Act of 1995
(‘‘PRA’’), 44 U.S.C. 3501 et seq., an
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it

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69582

Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Rules and Regulations

displays a currently valid Office of
Management and Budget (‘‘OMB’’)
control number. This final rule contains
disclosure requirements, some of which
implicate PRA as more fully explained
below. In the proposed rule, the Board
announced that the TAGP will not
continue beyond December 31, 2010,
thereby eliminating the need for an
associated, currently approved
information collection. Consequently,
the FDIC will discontinue its
information titled ‘‘Transaction Account
Guarantee Extension,’’ OMB No. 3064–
0170.
The new disclosure requirements are
contained in § 330.16(c)(1), (2) and (3).
More specifically, § 330.16(c)(1) requires
that each IDI post a ‘‘Notice of Changes
in Temporary FDIC Insurance Coverage
for Transaction Accounts’’ in the lobby
of its main office and domestic branches
and, if it offers Internet deposit services,
on its Web site; § 330.16(c)(2) requires
IDIs currently participating in the TAGP
to provide individual notices to
depositors alerting them to the fact that
low-interest NOWs and IOLTAs are not
eligible for unlimited coverage under
the new temporary insurance category
for noninterest-bearing transaction
accounts; and § 330.16(c)(3) requires
that IDIs notify customers of any action
that affects the deposit insurance
coverage of their funds held in
noninterest-bearing transaction
accounts.
The disclosure requirement in
§ 330.16(c)(1) would normally be subject
to PRA. However, because the FDIC has
provided the specific text for the notice
and allows for no variance in the
language, the disclosure is excluded
from coverage under PRA because ‘‘the
public disclosure of information
originally supplied by the Federal
government to the recipient for the
purpose of disclosure to the public is
not included’’ within the definition of
‘‘collection of information.’’ 5 CFR
1320.3(c)(2). Therefore, the FDIC is not
submitting the § 330.16(c)(1) disclosure
to OMB for review.
The disclosure requirement in
§ 330.16(c)(2) provides that IDIs
currently participating in the TAGP
provide individual notices to affected
depositors alerting them to the fact that
low-interest NOWs and IOLTAs will not
be insured under the new temporary
insurance category for noninterestbearing transaction accounts. The
estimated burden for this new
disclosure requirement has been added
to the burden for an existing
information collection, OMB No. 3064–
0168, currently entitled SWEEP
Accounts: Disclosure of Deposit Status.
In conjunction with the revision of OMB

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No. 3064–0168, the FDIC has requested
permission to modify the title of the
collection as more fully explained
below.
The disclosure requirement in
§ 330.16(c)(3) expands upon a similar,
pre-existing requirement for sweep
accounts offered by IDIs participating in
the TAGP. The existing disclosure
requirement is approved under OMB
No. 3064–0168. The expanded
disclosure requirement is mandatory for
all IDIs, although institutions retain
flexibility regarding the form of the
notice. Therefore, in conjunction with
publication of this final rule, the FDIC,
on September 30, 2010, submitted to
OMB a request to revise OMB No. 3064–
0168 to reflect the estimated burden
associated with the expanded disclosure
requirement and to modify the title of
the collection to ‘‘Disclosure of Deposit
Status’’ to more accurately reflect the
broader application of the requirement.
This final rule results in no changes to
the previously submitted burden
estimates.
The estimated burden for the new
disclosure under §§ 330.16(c)(2) and (3)
is as follows:
Title: ‘‘Disclosure of Deposit Status.’’.
Affected Public: Insured depository
institutions.
OMB Number: 3064–0168.
Estimated Number of Respondents:
Disclosure of action affecting deposit
insurance coverage of funds in
noninterest-bearing transaction
accounts—7,830.
Disclosure to NOW account and IOLTA
depositors of change in insurance
category—6,249.
Frequency of Response:
Disclosure of action affecting deposit
insurance coverage of funds in
noninterest-bearing transaction
accounts—on occasion (average of
once per year per bank).
Disclosure to NOW account and IOLTA
depositors of change in insurance
category—once.
Average Time per Response:
Disclosure of action affecting deposit
insurance coverage of funds in
noninterest-bearing transaction
accounts—8 hours.
Disclosure to NOW account and IOLTA
depositors of change in insurance
category—8 hours.
Estimated Annual Burden:
Disclosure of action affecting deposit
insurance coverage of funds in
noninterest-bearing transaction
accounts—62,640 hours.
Disclosure to NOW account and IOLTA
depositors of change in insurance
category—49,992 hours.

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Total Annual Burden—112,632 hours.
C. Regulatory Flexibility Act
In accordance with section 3(a) of the
Regulatory Flexibility Act (‘‘RFA’’), 5
U.S.C. 603(a), the FDIC must publish an
initial regulatory flexibility analysis
with this final rulemaking or certify that
the final rule does not have a significant
economic impact on a substantial
number of small entities. For purposes
of the RFA analysis or certification,
financial institutions with total assets of
$175 million or less are considered to be
‘‘small entities.’’ The FDIC hereby
certifies pursuant to 5 U.S.C. 605(b) that
the final rule will not have a significant
economic impact on a substantial
number of small entities.
As of June 30, 2010, there were 4,294
IDIs that were considered small entities.
A total of 1,121 of these institutions do
not participate in the TAGP and receive
additional insurance coverage under the
final rule. Currently 3,173 small IDIs
participate in the TAGP. Within this
group of small institutions, 618, or 19.5
percent, did not have TAGP eligible
deposits as of the June 2010 Report of
Condition and Income for banks and the
Thrift Financial Report for thrifts
(collectively, ‘‘June 2010 Call Reports’’);
thus, they were not required to pay the
fee currently assessed for participation
in the TAGP. As to the remaining 2,555
small entities that had TAGP eligible
deposits as of the June 2010 Call
Reports, they will no longer be assessed
a fee after the termination of the TAGP,
and they will not be charged a separate
assessment for the new deposit
insurance coverage.
The FDIC has determined that under
the final rule, the economic impact on
small entities will not be significant for
the following reasons. Because there is
no separate FDIC assessment for the
insurance of noninterest-bearing
transaction accounts under section 343
of the Dodd-Frank Act, small entities
currently assessed fees for participation
in the TAGP will realize an average
annual cost savings of $2,373 per
institution. All other small entities,
whether they are currently in the TAGP
or not, will gain additional insurance
coverage with no direct cost. The FDIC
asserts that the economic benefit of
additional insurance coverage and
coverage extension until 2013
outweighs any future costs associated
with the temporary insurance of
noninterest-bearing transaction
accounts.
With respect to amending the
disclosures related to Section 343, the
FDIC asserts that the economic impact
on all small entities participating in the
program (regardless of whether they

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Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Rules and Regulations
currently pay a fee) is de minimis in
nature and is outweighed by the
economic benefit of additional
insurance coverage.
Accordingly, the final rule does not
have a significant economic impact on
a substantial number of small entities.
D. The Treasury and General
Government Appropriations Act, 1999—
Assessment of Federal Regulations and
Policies on Families
The FDIC has determined that the
final rule will not affect family wellbeing within the meaning of section 654
of the Treasury and General
Government Appropriations Act,
enacted as part of the Omnibus
Consolidated and Emergency
Supplemental Appropriations Act of
1999 (Pub. L. 105–277, 112 Stat. 2681).
E. Small Business Regulatory
Enforcement Fairness Act
The Office of Management and Budget
has determined that the final rule is not
a ‘‘major rule’’ within the meaning of the
relevant sections of the Small Business
Regulatory Enforcement Act of 1996
(‘‘SBREFA’’) (5 U.S.C. 801 et seq.). As
required by SBREFA, the FDIC will file
the appropriate reports with Congress
and the General Accounting Office so
that the final rule may be reviewed.
F. Plain Language
Section 722 of the Gramm-LeachBliley Act (Pub. L. 106–102, 113 Stat.
1338, 1471), requires the Federal
banking agencies to use plain language
in all proposed and final rules
published after January 1, 2000. The
FDIC has sought to present the final rule
in a simple and straightforward manner,
and has made revisions to the proposed
rule in response to commenter concerns
seeking clarification of the application
of the deposit insurance rules.
List of Subjects in 12 CFR Part 330

jdjones on DSK8KYBLC1PROD with RULES

Bank deposit insurance, Banks,
Banking, Reporting and recordkeeping
requirements, Savings and loan
associations, Trusts and trustees.
■ For the reasons stated above, the
Board of Directors of the Federal
Deposit Insurance Corporation hereby
amends part 330 of title 12 of the Code
of Federal Regulations as follows:
PART 330—DEPOSIT INSURANCE
COVERAGE
1. The authority citation for part 330
continues to read as follows:

■

Authority: 12 U.S.C. 1813(1), 1813(m),
1817(i), 1818(q), 1819 (Tenth), 1820(f),
1821(a), 1822(c).

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2. In § 330.1, paragraph (r) is added to
read as follows:

■

§ 330.1.

Definitions.

*

*
*
*
*
(r) Noninterest-bearing transaction
account means a deposit or account
maintained at an insured depository
institution—
(1) With respect to which interest is
neither accrued nor paid;
(2) On which the depositor or account
holder is permitted to make
withdrawals by negotiable or
transferable instrument, payment orders
of withdrawal, telephone or other
electronic media transfers, or other
similar items for the purpose of making
payments or transfers to third parties or
others; and
(3) On which the insured depository
institution does not reserve the right to
require advance notice of an intended
withdrawal.
*
*
*
*
*
■ 3. New § 330.16 is added to read as
follows:
§ 330.16 Noninterest-bearing transaction
accounts.

(a) Separate insurance coverage. From
December 31, 2010, through December
31, 2012, a depositor’s funds in a
‘‘noninterest-bearing transaction
account’’ (as defined in § 330.1(r)) are
fully insured, irrespective of the
SMDIA. Such insurance coverage shall
be separate from the coverage provided
for other accounts maintained at the
same insured depository institution.
(b) Certain swept funds.
Notwithstanding its normal rules and
procedures regarding sweep accounts
under 12 CFR 360.8, the FDIC will treat
funds swept from a noninterest-bearing
transaction account to a noninterestbearing savings deposit account as being
in a noninterest-bearing transaction
account.
(c) Disclosure and notice
requirements. (1) Each depository
institution that offers noninterestbearing transaction accounts must post
prominently the following notice in the
lobby of its main office, in each
domestic branch and, if it offers Internet
deposit services, on its Web site:
NOTICE OF CHANGES IN TEMPORARY
FDIC INSURANCE COVERAGE FOR
TRANSACTION ACCOUNTS
All funds in a ‘‘noninterest-bearing
transaction account’’ are insured in full by
the Federal Deposit Insurance Corporation
from December 31, 2010, through December
31, 2012. This temporary unlimited coverage
is in addition to, and separate from, the
coverage of at least $250,000 available to
depositors under the FDIC’s general deposit
insurance rules.

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69583

The term ‘‘noninterest-bearing transaction
account’’ includes a traditional checking
account or demand deposit account on which
the insured depository institution pays no
interest. It does not include other accounts,
such as traditional checking or demand
deposit accounts that may earn interest,
NOW accounts, money-market deposit
accounts, and Interest on Lawyers Trust
Accounts (‘‘IOLTAs’’).
For more information about temporary
FDIC insurance coverage of transaction
accounts, visit www.fdic.gov.

(2) Institutions participating in the
FDIC’s Transaction Account Guarantee
Program on December 31, 2010, must
provide a notice by mail to depositors
with negotiable order of withdrawal
accounts that are protected in full as of
that date under the Transaction Account
Guarantee Program and to depositors
with Interest on Lawyer Trust Accounts
that, as of January 1, 2011, such
accounts no longer will be eligible for
unlimited protection. This notice must
be provided to such depositors no later
than December 31, 2010.
(3) If an institution uses sweep
arrangements, modifies the terms of an
account, or takes other actions that
result in funds no longer being eligible
for full coverage under this section, the
institution must notify affected
customers and clearly advise them, in
writing, that such actions will affect
their deposit insurance coverage.
Dated at Washington DC, this 9th day of
November 2010.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010–28627 Filed 11–12–10; 8:45 am]
BILLING CODE P

DEPARTMENT OF HOMELAND
SECURITY
U.S. Customs and Border Protection
19 CFR Parts 4 and 10
[CBP Dec. 10–33]

Technical Corrections to Customs and
Border Protection Regulations
Customs and Border Protection,
Department of Homeland Security.
ACTION: Final rule.
AGENCY:

Customs and Border
Protection (CBP) periodically reviews its
regulations to ensure that they are
current, correct, and consistent.
Through this review process, CBP
discovered a number of discrepancies.
This document amends various sections
of title 19 of the Code of Federal

SUMMARY:

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