On July 17, the Federal Deposit Insurance Corporation (FDIC) adopted a Final Rule requiring certain “covered institutions” to modify their systems to facilitate determination of the insurance status of depositors in the event such institution fails. A “covered institution” is any insured depository institution with at least $2 billion in domestic deposits and either more than 250,000 deposit accounts or total assets over $20 billion.

The Final Rule requires covered institutions to adopt mechanisms that would, in the event of the institution’s failure, provide the FDIC with standard deposit account and other customer information and allow the placement and release of holds on liability accounts, including deposits.

In the same release, the FDIC also adopted an Interim Rule establishing practices for determining deposit and other liability account balances at a failed insured depository institution. In particular, the Interim Rule addresses how the FDIC will treat sweep accounts in the event of an institution’s failure and requires insured institutions to disclose to customers whether the swept funds will be treated as deposits or uninsured claims in the event of such a failure.

The effective date for both rules is August 18, although the requirements in the Interim Rule regarding customer disclosure of the treatment of sweep account funds in the event of an institution’s failure will not be effective until the termination of a public comment period on July 1, 2009.