Section 343 of the Dodd-Frank Act established the Transaction Account Guarantee (“TAG”) program that provides separate, unlimited FDIC insurance coverage for noninterest-bearing transaction accounts until December 31, 2012. Unless Congress acts to extend the TAG program, such unlimited FDIC deposit insurance coverage of noninterest-bearing transaction accounts will expire on January 1, 2013, and such accounts will be insured up to the standard maximum deposit insurance amount of $250,000 for each deposit ownership category. Although community banks have advocated for an extension of the TAG program, the FDIC issued a Financial Institution Letter, FIL-45-2012, (the “FIL”) to provide guidance to institutions in the event the TAG program expires as scheduled.
Although the Dodd-Frank Act imposes no specific notice requirement for institutions in connection with the expiration of the TAG program, in the FIL the FDIC encourages institutions, “as a matter of prudent commercial practice,” to notify their affected depositors about the pending expiration and the impact that expiration will have on the institution’s deposit insurance coverage. The FIL provides that institutions may use any reasonable method of providing reminders to depositors, such as individual written notices to each [noninterest-bearing transaction account] depositor or notices on regular account statements and includes model language for either a separate notice to depositors or a notice to be included on regular account statements.
The FIL further provides that institutions must remove the required notices of the TAG program coverage from their main offices, branches, and Web sites, and should remove any other notices that they may have made available to customers, no later than January 2, 2013. Additionally, the FIL requires institutions to review all of their account agreements and disclosure statements used in connection with noninterest-bearing transaction accounts to ensure that these documents accurately reflect FDIC insurance coverage for these accounts as of January 1, 2013. The FIL states that such review and necessary adjustments to account documentation should be completed promptly upon expiration of the TAG program.
The FDIC notes in the FIL that in accordance with applicable state law, sufficient collateral should be set aside to secure accounts of government depositors to the extent those accounts exceed $250,000 after December 31, 2012. Moreover, the FIL sets forth changes to call reports pertaining to noninterest-bearing transaction accounts effective for the March 31, 2013 call reports.
Finally, the FDIC states that it will provide additional guidance to institutions should Congress extend the TAG program or otherwise modify the deposit insurance coverage for noninterest-bearing transaction accounts.