On November 15, 2016, the Federal Deposit Insurance Corporation (FDIC) released its final rule regarding deposit account recordkeeping (Final Rule) to help insure prompt access to funds in the event of a bank failure, particularly in large banks with a high number of accounts that use multiple deposit systems, where data aggregation and account identification is otherwise difficult. The Final Rule is effective April 1, 2017. While the Final Rule is designed to apply to institutions with large numbers of deposit accounts, there is some ambiguity with respect to how those accounts should be counted.

The Final Rule applies only to “covered institutions.” A “covered institution” is an insured depository institution that has 2 million or more deposit accounts in two consecutive quarters. There is some uncertainty within the industry whether deposit accounts for prepaid and similar omnibus relationships that (based on previous guidance regarding brokered deposits) have been treated as a single deposit account, should be counted as a single deposit account for purposes of the Final Rule. The FDIC failed to respond to several comments requesting clarification of this particular issue. This issue will continue to be a top question raised by several industry groups to the FDIC as the effective date looms closer.

The Final Rule requires a covered institution to configure its information technology system to be capable of performing the following tasks within 24 hours of the FDIC being appointed as a receiver:

  • Accurately calculating deposit insurance coverage for each deposit account;
  • Generating output records in the specified format and layout;
  • Restricting access to some or all of the deposits in a deposit account until the FDIC has made a deposit insurance determination using the covered institution’s technology system; and
  • Debiting from the deposit account the uninsured amount

The Final Rule includes both general and alternative recordkeeping requirements. The general recordkeeping requirements are robust and include unique identifying information to determine ownership rights. The alternative recordkeeping requirements apply where the covered institution does not maintain the account holder data itself. Under the alternative recordkeeping requirements, the covered institution need only maintain the unique identifier of the account holder and a file code designating the account type as set forth in the File Rule. In cases where the covered institution is able to use the alternative recordkeeping requirements, the covered institution must certify to the FDIC that the account holder for the omnibus account will provide to the FDIC the information needed for the covered institution’s information technology system to calculate deposit insurance coverage as required within 24 hours after the appointment of the FDIC as receiver.

To the extent the “account holder” is a program manager or other party that maintains records on large numbers of persons that have pass-through FDIC deposit insurance, the Final Rule could present a regulatory risk to covered institutions if those account holders are not prepared to comply with the very specific and detailed recordkeeping requirements imposed by the Final Rule.

Not less than 10 business days after a covered institution becomes subject to the Final Rule, it must notify the FDIC of the person(s) responsible for implementing the recordkeeping and information technology system capabilities required by the Final Rule.

Covered institutions must certify compliance (meeting specific certification requirements) before the effective date and then annually thereafter.

In addition, the FDIC has the right to audit compliance beginning the first calendar quarter following the effective date and every three years thereafter (more frequently if there is a particular risk).

The Final Rule also contains several provisions to request temporary relief from the Final Rule. It also grants the FDIC the right to expedite the effectiveness of the Final Rule for certain covered institutions.