12 CFR Part 330 - DEPOSIT INSURANCE COVERAGE

The FDIC is proposing to amend its deposit insurance regulations, with respect to deposits payable in branches of United States insured depository institutions (“United States bank” or “bank”) outside of the United States. The proposed rule would clarify that deposits in these foreign branches of United States banks are not FDIC-insured deposits. This would be the case whether or not they are dually payable both at the branch outside the United States and at an office within the United States. As discussed further below, a recent proposal by the United Kingdom's Financial Services Authority (“U.K. FSA”) makes it very likely that large United States banks will be changing their United Kingdom foreign branch deposit agreements to make them payable both in the United Kingdom and the United States. This action has the potential to increase significantly the exposure of the Deposit Insurance Fund (“DIF”) and operational complexities were such deposits to be treated as insured. The purpose of this proposed rule is to preserve confidence in the FDIC deposit insurance system, ensure that the FDIC can effectively carry out its critical deposit insurance functions, and protect the DIF against the uncertain liability that it would otherwise face as a global deposit insurer. Should a United States bank make its foreign deposits dually payable, those deposits would be considered “deposit liabilities” under the Federal Deposit Insurance Act's (“FDI Act”) depositor preference regime, and would therefore be on an equal footing with domestic deposits in the event of the bank's liquidation.