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The Upcoming End to Unlimited FDIC Insurance for Non-Interest Bearing Transaction Accounts

November 12, 2012

Authors

Robert Klingler

The Upcoming End to Unlimited FDIC Insurance for Non-Interest Bearing Transaction Accounts

November 12, 2012

by: Robert Klingler

In the Fall of 2008, the FDIC implemented the Transaction Account Guarantee program, which permitted banks to opt-in to a voluntary program which provided an unlimited guarantee for deposits held in non-interest bearing transaction accounts, as well as certain low-interest bearing accounts.  In 2010, the Dodd-Frank Act replaced this voluntary Transaction Account Guarantee with an across the board temporary increase in FDIC insurance to provide unlimited insurance for deposits held in non-interest bearing transaction accounts through December 31, 2012.

Although the initial program was done under the FDIC’s existing statutory authority, the FDIC has taken the position that only Congress can now extend the unlimited insurance program.  Accordingly, unless Congress acts prior to December 31, 2012, as of January 1, 2013, deposits held in non-interest bearing transaction accounts will be subject to the existing $250,000 cap on FDIC insurance.

The possibility of ending the unlimited insurance creates an obligations for

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Dodd-Frank's Proposed FDIC Insurance Changes

July 1, 2010

Authors

Robert Klingler

Dodd-Frank's Proposed FDIC Insurance Changes

July 1, 2010

by: Robert Klingler

The conference report of the Dodd-Frank Wall Street Reform and Consumer Protection Act contains a number of changes to FDIC Insurance limits.  The Dodd-Frank Act will also effectively make permanent the FDIC guarantee currently provided under the FDIC’s Transaction Account Guarantee program, with a few modifications.

As background, the $250,000 FDIC insurance limit has previously been extended through December 31, 2013, and the Transaction Account Guarantee program has previously been extended through December 31, 2010, with the FDIC maintaining the right to further extend through December 31, 2011.

If the conference report version of Dodd-Frank is signed into law, Section 335 will make the $250,000 FDIC insurance coverage limit permanent.  In addition, Dodd-Frank will make that increase retroactive to January 1, 2008, providing the benefit of the increased insurance limits for depositors in the thirteen institutions that were placed into receivership between January 1, 2008 and October

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FDIC Issues Final Rule Extending Transaction Account Guarantee Program until December 31, 2010

June 24, 2010

Authors

Bryan Cave

FDIC Issues Final Rule Extending Transaction Account Guarantee Program until December 31, 2010

June 24, 2010

by: Bryan Cave

On June 22, 2010, the FDIC Board of Directors adopted a final rule extending the Transaction Account Guarantee (TAG) component of the Temporary Liquidity Guarantee Program (TLGP) through December 31, 2010, for insured depository institutions (IDIs) currently participating in the program. The TAG program guarantees all funds held at participating IDIs in qualifying noninterest-bearing transaction accounts beyond the recently increased $250,000 deposit insurance limit. This final rule preserves the interim rule’s assessment fee structure and 25 basis-point interest rate limit for NOW accounts guaranteed by the program.

The final rule also provides that, without additional rulemaking, the Board may further extend the program for a period not more than a year (until and including December 31, 2011) if it finds that economic conditions and circumstances that led to the establishment of the program are likely to continue beyond December 31, 2010, and that extending the program

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FDIC Extends Transaction Account Guarantee until December 31, 2010

April 13, 2010

Authors

Robert Klingler

FDIC Extends Transaction Account Guarantee until December 31, 2010

April 13, 2010

by: Robert Klingler

On April 13, 2010, the FDIC extended the Transaction Account Guarantee (TAG) portion of the Temporary Liquidity Guarantee Program for another six months, through December 31, 2010, and preserved the flexibility to further extend the Transaction Account Guarantee through December 31, 2011 without further rule making.  In addition to extending the expiration date of the TAG program, the FDIC’s final rule (1) maintains the current assessment fees for participation, except that the calculation will now be based on an average daily balance rather than quarter-end balances; (2) reduces the maximum interest rate limit for NOW accounts guaranteed under the program from 50 basis points to 25 basis points; and (3) provides an opportunity for participating institutions to opt out of the program as of July 1, 2010.

All currently participating institutions have until April 30, 2010 to determine whether to continue in the program or opt out of

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Deadline Approaching – Opt-Out Deadline for Extended Transaction Account Guarantee is November 2, 2009

October 22, 2009

Authors

Robert Klingler

Deadline Approaching – Opt-Out Deadline for Extended Transaction Account Guarantee is November 2, 2009

October 22, 2009

by: Robert Klingler

As a reminder, the FDIC has extended the Transaction Account Guarantee portion of the Temporary Liquidity Guarantee Program until June 30, 2010.  Institutions that have not previously opted-out of the program will automatically continue in the program (at increased costs) unless they pro-actively opt-out of the extension.

Starting January 1, 2009, the FDIC assessment for its full guarantee of funds held in non-interest bearing demand deposit accounts will rise to an annualized rate of 15 to 25 basis points, depending on the Risk Category rating of the institution.

The deadline to affirmatively opt out of the Transaction Account Guarantee program is November 2, 2009. We have previously posted information about how to opt out.

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FDIC Extends Transaction Account Guarantee until June 30, 2010

August 28, 2009

Authors

Robert Klingler

FDIC Extends Transaction Account Guarantee until June 30, 2010

August 28, 2009

by: Robert Klingler

Update: On April 13, 2010, the FDIC granted a further extension until December 31, 2010.

On August 26, 2009, the FDIC extended the Transaction Account Guarantee (TAG) portion of the Temporary Liquidity Guarantee Program for six months, through June 30, 2010.  In addition to extending the expiration date of the TAG program, the FDIC’s final rule (1) increases the assessment fee for participation; and (2) provides an opportunity for participating institutions to opt out of the program as of January 1, 2010 (and thereby avoid the additional assessments).

All currently participating institutions have until November 2, 2009 to determine whether to continue in the program (at increased cost) or opt out of the program.  Attorneys in Bryan Cave’s financial institutions practice can discuss the advantages and disadvantages of opting out for particular financial institutions.

Six-Month Extension

Funds held in non-interest bearing demand deposit accounts (as well

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FDIC Proposes Possible Extension of Transaction Account Guarantee

June 23, 2009

Authors

Robert Klingler

FDIC Proposes Possible Extension of Transaction Account Guarantee

June 23, 2009

by: Robert Klingler

On June 23, 2009, the FDIC voted to seek comment on whether to extend the Transaction Account Guarantee under beyond its current expiration date of December 31, 2009.  The Transaction Account Guarantee provides unlimited deposit insurance for funds held in noninterest-bearing accounts (as well as IOLTA accounts and certain NOW accounts).  The Transaction Account Guarantee is part of the FDIC’s Temporary Liquidity Guarantee Program.

The FDIC proposal offers two alternatives:

  • allow the guarantee to expire as scheduled on December 31, 2009; or
  • extend the guarantee through June 30, 2010, with increased fees.

If the guarantee is allowed to expire, then insurance limits will revert to the $250,000 threshold.

If the guarantee is extended for six months through June 30, 2010, then the FDIC proposes to also increase the fee to 25 basis points annualized (from the 10 basis points currently charged).  In light of this increase, the

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Enhanced Deposit Insurance Extended Through 2013

May 21, 2009

Authors

Robert Klingler

Enhanced Deposit Insurance Extended Through 2013

May 21, 2009

by: Robert Klingler

On May 20, 2009, President Obama signed the Helping Families Save Their Homes Act of 2009 (Senate Bill 896).  Among other things, the Act:

  • extended the $250,000 deposit insurance limit through December 31, 2013;
  • extended the length of time the FDIC has to restore the Deposit Insurance Fund from five to eight years;
  • increased the FDIC’s borrowing authority with the Treasury Department from $30 billion to $100 billion;
  • increased the SIGTARP’s authority vis-a-vis public-private investment funds under PPIP (including the implementation of conflict of interest requirements, quarterly reporting obligations, coordination with the TALF program); and
  • removed the requirement, implemented by the American Recovery and Reinvestment Act of 2009, for the Treasury to liquidate warrants of companies that redeemed TARP Capital Purchase Program preferred investments.  The Treasury is now permitted to liquidate such warrants at current market values, but is not required to do so.

This extension does not

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FDIC Updates TLGP Opt-Out Lists

May 7, 2009

Authors

Robert Klingler

FDIC Updates TLGP Opt-Out Lists

May 7, 2009

by: Robert Klingler

On May 6, 2009, the FDIC provided updated opt-out lists for the Debt Guarantee Program and Transaction Account Guarantee Program.  The decision to opt-out of either program was a binding decision as of December 5, 2008, and the FDIC has not given any explanation for why the opt-out lists have been updated, other than a generic statement that “entities may be added as we finalize the election submissions.”

As of December 12, 2008, 863 banks had elected to opt-out of the Transaction Account Guarantee, but that number is 1,110 banks as of May 6, 2009.  Similarly, 3,116 entities (which includes affiliated bank holding companies) had elected to opt-out of the Debt Guarantee as of December 12, 2008, but that number is 6,501 entities as of May 6, 2009 (a 109% increase).  In Georgia, 25 banks have opted out of the Transaction Account Guarantee, while 165 entities have opted out

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TLGP Opt-Out Lists

December 12, 2008

Authors

Robert Klingler

TLGP Opt-Out Lists

December 12, 2008

by: Robert Klingler

On December 10, 2008, the FDIC published preliminary lists of financial institutions that have elected to opt-out of either the Debt or Transaction Account Guarantees under the Temporary Liquidity Guarantee Program.  As noted by the FDIC,  the decision to opt-out should not be read as a signal, either positive or negative, about the financial health of the entity.  The FDIC recommends that depositors and investors with questions ask the entities on either of these lists for a further explanation concerning the entity’s decision to opt-out of the TLGP.

As of December 12, 2008, 863 banks elected to opt-out of the Transaction Account Guarantee, while 3,116 entities (which includes affiliated bank holding companies) elected to opt-out of the Debt Guarantee.  Looking specifically at Georgia, 16 banks elected to opt-out of the Transaction Account Guarantee, while 54 entities elected to opt-out of the Debt Guarantee.

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