Consumer Financial Services Alert - November 16, 2010

The FDIC approved two proposed rules that would amend the deposit insurance assessment regulations. The first proposal would implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that changes the assessment base from one based on domestic deposits to one based on assets. Because this change would significantly increase the assessment base for banks, the proposal also suggests lowering assessment rates so that the total amount collected through assessments would not materially change. The second proposal replaces a proposed rule revising the deposit insurance assessment system for large banks (with at least $10 billion in assets) that was approved by the FDIC on April 13, 2010. The second proposal would eliminate risk categories and debt ratings from the assessment calculation for large banks and would instead use scorecards. The scorecards would include financial measures that are predictive of long-term performance. Click here for the FDIC’s press release which includes links to the proposals.

The FDIC approved a final rule implementing Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act which provides temporary unlimited deposit insurance for noninterest-bearing transaction accounts and requires banks to notify their customers about any changes to the insurance coverage on their accounts. In the rule, the FDIC creates a new category of deposit insurance for noninterest-bearing transaction accounts that is separate from, and is in addition to, coverage provided for other bank accounts. This new category of insurance is similar to the FDIC’s Transaction Account Guarantee Program, which expires December 31, 2010, but differs significantly in the definition of “noninterest-bearing transaction account” in that it does not include IOLTA and NOW accounts. The rule includes new disclosures that require banks to (1) post notices in their branches and on their websites about the new program, (2) inform customers with IOLTA and NOW accounts that such accounts will no longer be covered by unlimited deposit insurance upon the expiration of the Transaction Account Guarantee Program, and (3) notify customers of actions that affect the insurance coverage of funds held in noninterest-bearing transaction accounts. The rule is effective on December 31, 2010 and expires on December 31, 2012. Click here for the FDIC’s press release which includes a link to the rule.