Joint Trades Letter to FDIC re Recordkeeping for Timely Deposit Insurance Determination

June 27, 2016


Mr. Robert E. Feldman

Executive Secretary

Federal Deposit Insurance Corporation

550 17th Street NW

Washington, DC 20429


Attention: Comments


RE:  Notice of Proposed Rulemaking regarding Recordkeeping for Timely Deposit Insurance Determination (12 CFR §370); RIN 3064–AE331


Dear Mr. Feldman:


The American Bankers Association, The Clearing House Association, the Consumer Bankers Association, and the Securities Industry and Financial Markets Association (collectively, the Associations)2 appreciate the opportunity to respond to the notice of proposed rulemaking (NPR) from the Federal Deposit Insurance Corporation (FDIC) on “recordkeeping for timely deposit insurance determination.” Comments in this letter are drawn from discussions with representa- tives from all of the banks that would be subject to the NPR as proposed (covered banks).3


The NPR seeks to ensure that, should a bank with a large number of deposit accounts fail, depositors would have prompt access to their funds post-failure. The Associations support this goal as a means to reinforce public confidence in the FDIC, bank deposits, and the U.S. banking system, and are committed to working with the FDIC to design and implement cost-effective solutions to achieve these ends.


We recognize the potentially significant operational challenge to find a least costly method to resolve a bank with a large number of deposit accounts, per the FDIC’s statutory obligation.4 However, we believe that the NPR does not appropriately balance the burdens and costs it would impose on covered banks and their customers on the one hand, and the limited improvements for resolving such a bank and expediting payments to its depositors on the other. Put more simply, we do not believe that the potential benefits justify the costs. In particular, the Associations believe that the FDIC has not considered the inconvenience and cost to both financial intermediaries (through which some deposits are placed in covered banks) and the ultimate beneficial owners themselves if daily reporting of individual depositor/beneficiary information were required. Furthermore, we believe that the proposed 12 CFR §370 rule would cause substantial disruption in the deposit markets and increase the risk of breaches of security of depositors’ personal identification information.


Moreover, the Associations respectfully question whether the problem identified in the NPR requires a solution as complex and costly as the proposed rule. First, the NPR asserts that current FDIC regulations and procedures are insufficient to “mitigate the complexities of the largest institution failures” and notes weaknesses in “covered institutions’ deposit data (often finding inaccurate or incomplete data), deposit recordkeeping systems, and capabilities for imposing provisional holds,” among other deficiencies.5 The FDIC does not need another rule to close these deficiencies, as it already has supervisory authority to compel covered banks to comply in full with 12 CFR §360.9.6 The requirements outlined in the NPR would not enhance the FDIC’s enforcement authority to address these deficiencies.


Second, the NPR observes that the FDIC’s current systems would be strained to handle failure of a covered bank.7 As an alternative to requiring a set of banks to upgrade their deposit account systems to compensate for the FDIC’s systems limitations, the FDIC could upgrade its own systems to be prepared to resolve a bank with a large number of deposit accounts. Such an upgrade would also support resolution of any bank – not just a covered bank – and so would provide numerous potential benefits to FDIC operations.


Changes to narrow the cost-benefit imbalance are offered below, as well as the Association’s perspective on the success of a covered bank resolution if FDIC adopts these changes. The Associations would be pleased to facilitate discussions between bankers and FDIC staff to discuss the details of these suggestions...(continue reading)