As was noted in the Kilpatrick Stockton Legal Alert of December 3, 2008, the filing deadline for the FDIC’s Temporary Liquidity Guarantee Program (“TLGP”) is December 5, 2008 at 11:59 p.m. Eastern Standard Time. The TLGP has two components: a Debt Guarantee Program (“Debt Guarantee”), by which the FDIC will temporarily guarantee the payment of certain newly-issued senior unsecured debt, and a Transaction Account Guarantee Program (“Transaction Account Guarantee”) under which the FDIC will temporarily guarantee certain deposit accounts on an unlimited basis.
We have received a number of questions regarding the TLGP election process. The final rule that the FDIC adopted last week provides that failure to opt out of a component of the TLGP by the deadline constitutes an irrevocable decision to participate in that component. However, the FDIC also has indicated that each eligible entity should file the election form regardless of whether it is opting out or continuing to participate. Election forms may only be submitted by FDICconnect.
The Debt Guarantee section of the form (Part III) should be completed by each eligible entity in the banking organization, i.e., the institution and each direct or indirect holding company. Similarly, a Master Agreement should be executed and submitted for each eligible entity that continues to participate in the Debt Guarantee. All tiers of the organizational structure must select the same participation option for the Debt Guarantee, i.e., an institution cannot opt in while its holding company opts out and an institution cannot opt out while its holding company continues participation. Entities that are continuing to participate are required to indicate on the form the amount of their senior unsecured debt (as defined) as of September 30, 2008, that is scheduled to mature on or before June 30, 2009. Participating entities may also select the option of being able to issue non-guaranteed senior unsecured debt before issuing the maximum amount of guaranteed debt. However, a nonrefundable fee must be paid to the FDIC if that option is selected, as is explained on the form.
Only depository institutions need to respond to the section of the form relating to the Transaction Account Guarantee (Part II) because holding companies do not issue such accounts.
The election to participate or opt out of each component is irrevocable. The form must be signed by the Chief Financial Officer (or equivalent) and a copy retained in the entity’s records.