SUPPORTING STATEMENT
Large-Bank Deposit Insurance Programs
OMB No. 3064-0162
INTRODUCTION
The Federal Deposit Insurance Corporation requests OMB approval to extend for three years the above-captioned collection of information. The clearance for the collection expires on April 30, 2015.
Upon the failure of an FDIC-insured depository institution, the FDIC must determine the total insured amount for each depositor. 12 U.S.C. 1821(f). To make this determination, the FDIC must ascertain the balances of all deposit accounts owned by the same depositor in the same ownership capacity at a failed institution as of the day of failure. The FDIC established a final rule (12 CFR 360.9) to modernize the process of determining the insurance status of each depositor in the event of such a failure.
The final rule requires the largest insured depository institutions to adopt mechanisms that would, in the event of the institution’s failure (1) provide the FDIC with standard deposit account and other customer information, and (2) allow the placement and release of holds on liability accounts, including deposits. The final rule applies only to insured depository institutions having at least $2 billion in domestic deposits and either: more than 250,000 deposit accounts; or total assets over $20 billion, regardless of the number of deposit accounts.
A. JUSTIFICATION
1. Circumstances and Need
Section 360.9 requires the largest insured depository institutions to adopt mechanisms that, in the event of the institution’s failure: (1) provide the FDIC with standard deposit account and customer information; and (2) allow the FDIC to place and release holds on liability accounts, including deposits. Section 360.9 applies only to insured depository institutions having at least $2 billion in domestic deposits and either: (1) more than 250,000 deposit accounts; or (2) total assets over $20 billion, regardless of the number of deposit accounts (referred to hereinafter as “Covered Institutions”).
When handling a depository institution failure the FDIC is required to structure the least costly of all possible resolution transactions, except in the event of systemic risk. In addition, the FDIC is required to pay insured deposits “as soon as possible” after an institution fails. The FDIC places a high priority on providing access to insured deposits promptly and, in the past, has usually been able to allow most depositors access to their deposits on the business day following closing. Doing so enables the FDIC to: (1) maintain public confidence in the banking industry and the FDIC; (2) provide the best possible service to insured depositors by minimizing uncertainty about their status and avoiding costly disruptions that may limit their ability to meet financial obligations; (3) mitigate the spillover effects of a failure, such as risks to the payments system, problems stemming from depositor illiquidity and a substantial reduction in credit availability; and (4) retain, where feasible, the franchise value of the failed institution.
The largest insured depository institutions are growing increasingly complex. Section 360.9 is intended to allow the deposit operations of a failed institution to be continued on the day following failure. It helps facilitate an insurance determination and dramatically improve upon access to depositor funds when one of these institutions fails. It also permits the FDIC to meet its legal mandates regarding the resolution of failed insured institutions, provide liquidity to depositors promptly, enhance market discipline, ensure equitable treatment of depositors at different institutions and reduce the FDIC’s costs by preserving the franchise value of a failed institution.
Making deposit insurance determinations is inherently complex because a single depositor may have more than one account and may hold accounts in different ownership capacities, each of which may be separately insured. To make insurance determinations, the FDIC must aggregate all accounts owned by a depositor in a single ownership capacity. This process often requires reviewing detailed account agreements and other documents. The larger the number of deposit accounts at an institution, the more complex and difficult the insurance determination becomes. Complexity also depends upon the volume of transactions, the amount of uninsured funds, the number of separate computer systems or “platforms” on which deposit accounts are maintained and the speed at which the institution’s deposit operations must be resumed following failure. In most instances, larger institutions are considerably more complex, have more deposit accounts, are more geographically dispersed and have more diverse systems and data-integration issues than small institutions.
Under the final rule, on a case-by-case basis and in consultation with the Covered Institution’s primary federal regulator, the FDIC can accelerate the implementation timeframe for Covered Institutions that are “troubled”. That is, a Covered Institution that either: (1) has a composite rating of 3, 4 or 5 under the Uniform Financial Institutions Rating System (commonly referred to as CAMELS) or (2) is undercapitalized as defined for purposes of the prompt corrective action rules. In determining the accelerated implementation timeframe for such institutions, the FDIC would be required to consider such factors as the: (1) complexity of the institution’s deposit systems and operations; (2) extent of asset quality difficulties; (3) volatility of funding sources; (4) expected near-term changes in capital levels; and (5) other relevant factors appropriate for the FDIC to consider in its roles as insurer and possible receiver of the institution.
2. Use of Information Collected
Provisional holds: Under the final rule, Covered Institutions are required to have in place an automated process for implementing provisional holds concurrent with or immediately following the daily deposit account processing on the day of failure. After completion of the failed institution’s final daily processing, the Successor Institution places provisional holds on selected deposit accounts. Provisional holds, once posted, allow depositors access to the remaining balance in their accounts the day following failure, yet guard against the possibility of an uninsured depositor or unsecured general creditor receiving more than allowed under deposit insurance rules or the depositor preference statute. The FDIC uses a standard set of depositor and customer data to make deposit insurance determinations. These determinations are provided to the Successor Institution shortly after failure.
The generation of deposit account and customer data in a standard structure: A Covered Institution is required to have in place practices and procedures to provide the FDIC with required depositor and customer data in a standard format following the close of any day’s business. Covered Institutions are not required to collect or generate new depositor or customer information. Instead, the standard data files are created through a mapping of pre-existing data elements and internal institution codes into standard data formats. The standard data files would be used in the period immediately before and after a Covered Institution’s failure to calculate the amount of deposit insurance coverage and to identify the least costly of all possible resolution transactions. The FDIC conduct infrequently at institutions that do not make major changes to their deposit systems—perhaps only once every three-to-five years.
3. Use of Technology to Reduce Burden
Insured depository institutions provide deposit account information via electronic file.
4. Efforts to identify duplication
The information sought in this collection is not duplicated elsewhere.
5. Minimizing Burden on Small Entities
The final rule applies to the largest banks only. It does not impose any burden on small entities.
6. Consequences of Less Frequent Collections
Section 360.9 requires the largest insured depository institutions to adopt mechanisms that would, in the event of the institution’s failure, provide the FDIC with standard deposit account and customer information and allow the FDIC to place and release holds on liability accounts, including deposits. Thus, Covered Institutions are required to have the mechanisms in place and are subject to periodic testing, but the collection would be accessed only when a large bank is close to failing.
7. Special Circumstances
None.
8. Consultation with Persons Outside the FDIC
A 60-day notice seeking public comment on the FDIC’s renewal of the information collection was published on January 22, 2015 (80 FR 3233). No comments were received.
9. Payment or Gift to Respondents
No payments are made to respondents.
10. Confidentiality
No individual bank or customer information will be made available outside the FDIC. In addition, to protect financial privacy, the FDIC’s testing process would not require that Covered Institutions transmit any sensitive customer data outside of the institution’s premises. Therefore, all testing involving any sensitive customer data would be conducted on the institution’s premises.
11. Questions of a sensitive nature
No questions of a sensitive nature are involved.
12. Estimate of Annualized Burden and Associated Costs
Activities Encompassed by this Record Collection
This record collection encompasses the following activities:
Covered Institutions must provide the FDIC with completed Annual Testing Questionnaire. The questionnaire contains questions regarding changes to deposit systems, technology service providers, acquisitions and mergers, new deposit products and new sweep investment vehicle products that was not tested before.
Covered Institutions must provide the FDIC with the name(s) of the persons responsible for producing the standard data download and administering provisional holds, both while the functionality is being constructed and on an on-going basis.
Covered Institutions must develop written practices and procedures for providing the FDIC with required deposit account and customer data in a standard format upon the close of any day’s business. The data is to be created through a mapping of pre-existing data elements into standard data formats in separate files.
Covered Institutions must provide data to the FDIC pursuant to onsite testing and verification procedures.
Items A, B, C, and D represent on-going burdens and costs and are discussed below.
Overall Estimated Number of Respondents and Affected Public
OMB Number: 3064-0162.
Frequency of Response: On Occasion.
Affected Public: Insured depository institutions having at least $2 billion in domestic deposits and either at least: (i) 250,000 deposit accounts; or (ii) $20 million in total assets.
Estimated Number of Respondents: 159
On-Going Burden Hours and Costs:
Estimated time per Response: 157 hours to 255.5 hours. These hours are calculated as follows: $4 million low-end, over-all industry estimated costs for on-going burden $160 per hour salary 159 respondents = 157 hours; and $6.5 million high-end, over-all industry estimated costs for on-going burden $160 per hour salary 159 respondents = 255.5 hours.
Estimated Total Annual Burden: 25,000 hours to 40,625 hours. These hours are calculated as follows: 157 hours x 159 respondents = 25,000 hours at a minimum; and 255.5 hours x 159 respondents = 40,624.5 hours at a maximum.
13. Operation /Maintenance Costs
On-going costs for testing, maintenance and other periodic items is estimated to range between $6,000 and $13,000 for those Covered Institutions using software or servicing provided by a vendor. For super-regional organizations on-going costs are estimated to be between $150,000 and $250,000. The largest, most complex Covered Institution was estimated to have on-going costs as high as $500,000 per year. Overall, on-going industry cost estimates ranged from $4 million to $6.5 million. Placed in context, this is 0.8 to 1.4 percent of a one basis point assessment against the deposits of Covered Institutions. This analysis assumes an hourly cost of $160 for Covered Institutions.
14. Annualized cost to the Federal Government
None.
15. Reason for Change in burden
None.
16. Publication
There will be no publication.
17. Display of expiration date
Not applicable.
18. Exceptions to certification
No exceptions.
B. STATISTICAL METHODS
Not applicable.
| File Type | application/msword |
| File Title | _OMB Control Number 1550-UNDETERMINED |
| Author | username |
| Last Modified By | Kuiper, Gary |
| File Modified | 2015-04-01 |
| File Created | 2015-04-01 |