Rule2024-17351
Clarification of Deposit Insurance Coverage for Legacy Branches of U.S. Banks in the Federated States of Micronesia, the Marshall Islands, and Palau
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 9, 2024
Effective
August 9, 2024
Issuing agencies
Federal Deposit Insurance Corporation
Abstract
The FDIC is amending its regulations to clarify that it insures the deposits of legacy branches of U.S. insured depository institutions operating in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau.
Full Text
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<title>Federal Register, Volume 89 Issue 154 (Friday, August 9, 2024)</title>
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[Federal Register Volume 89, Number 154 (Friday, August 9, 2024)]
[Rules and Regulations]
[Pages 65166-65170]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-17351]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 330
RIN 3064-AG06
Clarification of Deposit Insurance Coverage for Legacy Branches
of U.S. Banks in the Federated States of Micronesia, the Marshall
Islands, and Palau
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Interim final rule and request for comment.
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SUMMARY: The FDIC is amending its regulations to clarify that it
insures the deposits of legacy branches of U.S. insured depository
institutions operating in the Federated States of Micronesia, the
Republic of the Marshall Islands, and the Republic of Palau.
DATES: The interim final rule is effective August 9, 2024. Comments
must be received on or before October 8, 2024.
ADDRESSES: You may submit comments, identified by RIN 3064-AG06, by any
of the following methods:
<bullet> FDIC Website: <a href="https://www.fdic.gov/regulations/laws/federal/">https://www.fdic.gov/regulations/laws/federal/</a>. Follow instructions for submitting comments on the agency
website.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#51123e3c3c343f252211373538327f363e27"><span class="__cf_email__" data-cfemail="94d7fbf9f9f1fae0e7d4f2f0fdf7baf3fbe2">[email protected]</span></a>. Include RIN 3064-AG06 in the
subject line of the message.
<bullet> Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments--RIN 3064-AG06, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
<bullet> Hand Delivery to FDIC: Comments may be hand-delivered to
the guard station at the rear of the 550 17th Street NW building
(located on F Street) on business days between 7 a.m. and 5 p.m.
<bullet> Public Inspection: Comments received, including any
personal information provided, may be posted without change to <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>.
Commenters should submit only information that the commenter wishes to
make available publicly. The FDIC may review, redact, or refrain from
posting all or any portion of any comment that it may deem to be
inappropriate for publication, such as irrelevant or obscene material.
The FDIC may post only a single representative example of identical or
substantially identical comments, and in such cases will generally
identify the number of identical or substantially identical comments
represented by the posted example. All comments that have been
redacted, as well as those that have not been posted, that contain
comments on the merits of the proposed rule will be retained in the
public comment file and will be considered as required under all
applicable laws. All comments may be accessible under the Freedom of
Information Act.
FOR FURTHER INFORMATION CONTACT: James Watts, Counsel, Legal Division,
202-898-6678, <a href="/cdn-cgi/l/email-protection#d1bba6b0a5a5a291b7b5b8b2ffb6bea7"><span class="__cf_email__" data-cfemail="dcb6abbda8a8af9cbab8b5bff2bbb3aa">[email protected]</span></a>; Kathryn Marks, Counsel, Legal Division,
202-898-3896, <a href="/cdn-cgi/l/email-protection#ec87818d9e879fac8a88858fc28b839a"><span class="__cf_email__" data-cfemail="9bf0f6fae9f0e8dbfdfff2f8b5fcf4ed">[email protected]</span></a>; Anthony Sinopole, Associate Director,
Division of Insurance and Research, 202-898-6507, <a href="/cdn-cgi/l/email-protection#b0d1c3d9dedfc0dfdcd5f0d6d4d9d39ed7dfc6"><span class="__cf_email__" data-cfemail="86e7f5efe8e9f6e9eae3c6e0e2efe5a8e1e9f0">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
A. Policy Objectives
The Federal Deposit Insurance Corporation (FDIC) has a long history
of providing deposit insurance coverage in the island nations that
formerly were part of the Trust Territory of the Pacific Islands, which
include the Federated States of Micronesia (FSM), the Republic of the
Marshall Islands (Marshall Islands), and the Republic of Palau (Palau).
Collectively, these three countries are known as the Freely Associated
States. At one time, the FDIC provided deposit insurance coverage
pursuant to the Federal Deposit Insurance Act (FDI Act) on the basis
that these islands were part of the Trust Territory of the Pacific
Islands administered by the United States. The FSM, the Marshall
Islands, and Palau later became independent nations, and each entered
into a Compact of Free Association (Compacts) with the United States
that provided among other economic benefits, the availability of the
FDIC's deposit insurance. The unique and somewhat complex legal
framework comprised of the Compacts, their relevant subsidiary
agreements, implementing legislation, and the FDI Act, is what has
allowed the FDIC to insure deposits in the Freely Associated States.
The United States recently negotiated, and Congress approved, new
agreements related to the Compacts with each of the Freely Associated
States. Some of these new agreements include provisions relating to
deposit insurance coverage for banks chartered by the Freely Associated
States. In light of this, the FDIC believes it would be beneficial to
clarify the application of the FDI Act and the deposit insurance
regulations to the legacy branches of U.S. insured depository
institutions (IDIs) operating in the Freely Associated States. For
these reasons, the FDIC is issuing this interim final rule to clarify
that it insures the deposits of legacy branches of U.S. IDIs operating
in the FSM, the Marshall Islands, and Palau.
B. Background
The interim final rule implements the FDI Act, rather than the
Compacts. However, a brief historical discussion and overview of the
Compacts provides helpful context for understanding the interim final
rule, which is based upon the special and historic relationship between
the United States and the Freely Associated States.
The FSM, the Marshall Islands, and Palau were once part of the
Trust Territory of the Pacific Islands, established by the United
Nations following World War II and administered by the United States
pursuant to a trusteeship agreement.\1\ In 1981, Congress added the
Trust Territory of the Pacific Islands to the FDI Act's definition of
``State,'' with the result that deposits in banks located in the Trust
Territory were eligible to be insured by the FDIC.\2\
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\1\ In addition to the FSM, the Marshall Islands, and Palau, the
Trust Territory of the Pacific Islands also included the Northern
Mariana Islands. The Northern Mariana Islands became a self-
governing commonwealth of the United States in 1986, and has since
been added to the FDI Act's definition of ``State.'' See 12 U.S.C.
1813(a)(3).
\2\ Public Law 97-110, sec. 103 (Dec. 26, 1981).
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1986 Compacts
The FSM, the Marshall Islands, and Palau each adopted a Compact of
Free Association with the United States that was subsequently approved
by the U.S. Congress. Each of these nations then exited the Trust
Territory of the Pacific Islands by becoming an independent nation.
Specifically, the U.S. Congress approved a Compact with the FSM and the
Marshall Islands through the Compact of Free Association Act of 1985,
which became effective in 1986.\3\ The FSM and the Marshall Islands
became independent effective October 2, 1986, and November 3, 1986,
respectively. Congress approved the Compact with Palau in 1986,\4\ and
Palau became independent effective October 1, 1994.\5\ These Compacts
contained provisions requiring certain agencies of the U.S. Government,
including the
[[Page 65167]]
FDIC, to provide their programs and services to each nation.\6\
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\3\ Public Law 99-239 (Jan. 14, 1986).
\4\ Public Law 99-658 (Nov. 14, 1986); Public Law 101-219 (Dec.
12, 1989).
\5\ Public Law 99-658 was a joint resolution to approve the
Palau Compact. Section 101(d) of that Act provided that the Compact
would not take effect until, among other things, enactment of a
joint resolution authorizing entry into force of the Compact. Public
Law 101-219 was that joint resolution. Further delay, until 1994,
occurred due to the need for multiple plebiscites to secure approval
on Palau for implementation of the Compact.
\6\ See Public Law 99-239, sec. 111(a) (making the programs and
services of the FDIC available to the FSM and the Marshall Islands);
Public Law 99-658, sec. 102(b) (applying sec. 111(a) of Public Law
99-239 to Palau). The Compacts provided continuing authority for the
FDIC to insure banks chartered by the FSM, the Marshall Islands, and
Palau, which, due to their exit from the Trust Territory of the
Pacific Islands, no longer fell within the FDI Act's definition of
``State.''
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2003 Compacts
The United States, the FSM, and the Marshall Islands eventually
renewed negotiations concerning their Compact, resulting in separate
amended agreements between the United States and each of these nations
that took effect in 2003.\7\ The amended Compacts included changes to,
among other things, the provision of deposit insurance coverage.
Specifically, section 221(a)(5) of the amended U.S.-FSM Compact stated
that the FDIC would provide deposit insurance ``for the benefit only of
the Bank of the Federated States of Micronesia,'' in accordance with a
Federal Programs and Services Agreement executed by the two nations.\8\
\9\ By contrast, the corresponding provision of the amended Compact
with the Marshall Islands, section 221(a), included no reference to
deposit insurance.\10\
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\7\ Public Law 108-188 (Dec. 17, 2003).
\8\ Public Law 108-188, Sec. 201(a).
\9\ See Federal Programs and Services Agreement Between the
Government of the United States and the Government of the Federated
States of Micronesia Concluded Pursuant to Article III of Title One,
Article II of Title Two (including Section 222), and Section 231 of
the Compact of Free Association, as Amended, available at <a href="https://www.doi.gov/sites/doi.gov/files/uploads/Compact-Subsidiary-Agreements-for-the-FSM.pdf">https://www.doi.gov/sites/doi.gov/files/uploads/Compact-Subsidiary-Agreements-for-the-FSM.pdf</a>. Article XI of this Agreement governed
the provision of FDIC programs and services.
\10\ Public Law 108-188, sec. 201(b).
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Review of Palau Compact
The U.S.-Palau Compact does not include a termination date, but
requires formal review of its terms by the 15-year, 30-year, and 40-
year anniversaries of its effective date. The direct economic
assistance provisions of the Compact expired in 2009, and, following
the required 15-year review, were renegotiated and signed on September
3, 2010. Congress approved a Compact Review Agreement with respect to
the U.S.-Palau Compact in December 2017.\11\
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\11\ Public Law 115-91, sec. 1259C (2017).
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2023 Compact Amendments
During 2023, the United States and each of the Freely Associated
States concluded new agreements relating to their respective Compacts.
The U.S. Congress approved the new agreements in March 2024.\12\ Some
of the new agreements include the provision of deposit insurance by the
FDIC.
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\12\ Public Law 118-42, div. G, tit. II.
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C. Statutory Framework
The FDI Act governs the FDIC's deposit insurance coverage for U.S.
banks and savings associations. The statute includes two provisions on
foreign deposits that are particularly relevant to the interim final
rule.
Section 3
The FDI Act defines the ``deposits'' insured by the FDIC. As early
as the Banking Act of 1933, Congress distinguished between domestic and
foreign deposits, and the current statutory definition of ``deposit''
makes clear that foreign branch deposits of IDIs are not deposits for
the purposes of the FDI Act except under prescribed circumstances. In
particular, section 3(l)(5) of the FDI Act excludes from the definition
of ``deposit'' deposit obligations of a foreign branch of an IDI that
would otherwise fall within the definition of ``deposit'' under section
3(l) of the FDI Act unless they (1) would be deposits if carried on the
books and records of the IDI in the United States; and (2) are
expressly payable at an office of the IDI located in the United
States.\13\ The FDIC has generally referred to this second prong of
subparagraph (A) of section 3(l)(5) of the FDI Act as requiring ``dual
payability'' of a deposit.
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\13\ 12 U.S.C. 1813(l)(5)(A).
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Section 41
Section 41 of the FDI Act generally prohibits the payment of
deposit insurance with respect to certain deposits carried on the books
and records of foreign branches of U.S. IDIs.\14\ Section 41(a)
generally prohibits payment of obligations that would have the direct
or indirect effect of satisfying any claim against an IDI which would
constitute deposits ``but for subparagraphs (A) and (B) of section
3(l)(5).'' \15\
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\14\ 12 U.S.C. 1831r.
\15\ 12 U.S.C. 1831r(a).
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As described above, subparagraph (A) of section 3(l)(5) of the FDI
Act excludes an obligation from being considered a ``deposit'' unless
(1) the obligation would constitute a ``deposit'' if carried on the
IDI's books and records in a State; and (2) the contract expressly
provides dual payability. An obligation that constitutes a deposit
``but for'' subparagraph (A) is one that is excluded from the
``deposit'' definition only because it does not satisfy the two-part
test in subparagraph (A). Put differently, obligations that constitute
deposits ``but for'' subparagraph (A) include those that would
constitute a ``deposit'' if carried on the IDI's books and records in a
State, yet are not expressly payable at a location of the IDI within a
State. Section 41 therefore prohibits the FDIC from paying deposit
insurance on obligations of IDIs' foreign branches that are not dually
payable. Dual payability is, in effect, a statutory prerequisite for
deposit insurance with respect to U.S. IDIs' foreign branch deposits.
D. 2013 Rulemaking on the Definition of ``Insured Deposit''
While dual payability is a statutory prerequisite for deposit
insurance, the FDIC has also used its authority to limit the
availability of deposit insurance for IDIs' foreign branch deposits. In
2013, the FDIC amended its deposit insurance rules to clarify the
status of deposits maintained in foreign branches of U.S. banks.\16\
This action was taken, among other reasons, to address a proposal by
the Financial Services Authority of the United Kingdom to prohibit non-
European Economic Area banks, including U.S. banks, from accepting
deposits in their United Kingdom branches unless claims of United
Kingdom depositors were treated the same as domestic depositors in
resolution proceedings of the bank.
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\16\ See 78 FR 56583 (Sept. 13, 2013).
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The 2013 rule made clear that if a bank's deposits carried on the
books of its foreign branches were made dually payable under section
3(l)(5)(A) of the FDI Act, this could make them deposits for purposes
of depositor preference in resolution proceedings, but would not make
them insured deposits. Specifically, the 2013 rule amended 12 CFR
330.3(e) of the FDIC's deposit insurance regulations to provide that
obligations of IDIs payable solely at an office of the IDI located
outside any State (as defined in section 3(a)(3) of the FDI Act) are
not ``deposits'' for purposes of 12 CFR part 330. Thus, obligations
that are not dually payable may not be considered ``deposits.'' The
2013 rule further provided that even if such obligations are made
dually payable at an office of the IDI located within a State, they are
not ``insured deposits'' for purposes of 12 CFR part 330. The 2013 rule
also included a rule of construction for overseas military banking
facilities operated under U.S. Department of Defense regulations,
stating that such offices would not be considered to be located outside
any State. While the focus of the 2013 rule was clarifying the effect
of dual
[[Page 65168]]
payability, the FDIC also discussed the rule's effect on deposits in
the Freely Associated States. Specifically, the FDIC stated that the
2013 rule was not intended to ``affect the status of insured deposits,
if any, located in the former Trust Territories.'' \17\
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\17\ 78 FR 56583, 56587 (Sept. 13, 2013). As explained above,
eligibility of a U.S. IDI's foreign branch obligations for deposit
insurance coverage under the FDI Act would depend upon whether the
deposits were expressly payable at an office of the IDI located in a
State.
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E. Statutory Authority for Interim Final Rule
The FDIC issues rules and regulations necessary to carry out the
statutory mandates of the FDI Act. Providing deposit insurance to IDIs
and maintaining public confidence in the banking system through deposit
insurance in the event of a U.S. bank's insolvency are two central
functions of the FDIC. In order to permit the FDIC to carry out these
functions successfully, the FDIC is authorized to undertake rulemaking
to implement the FDI Act effectively, particularly with respect to its
deposit insurance functions.
The FDI Act contains several provisions granting the FDIC authority
to issue regulations to carry out its core functions and
responsibilities, which include the duty ``to insure the deposits of
all insured depository institutions.'' Section 11(d)(4)(B)(iv)
authorizes the FDIC to promulgate ``such regulations as may be
necessary to assure that the requirements of this section [section 11,
which addresses the payment of deposit insurance] can be implemented
with respect to each insured depository institution in the event of its
insolvency.'' \18\ Other grants of FDIC rulemaking authority can be
found in section 9(a)(Tenth) of the FDI Act, authorizing the FDIC's
Board of Directors to prescribe ``such rules and regulations as it may
deem necessary to carry out the provisions of this chapter,'' and
section 10(g) of the FDI Act, authorizing the FDIC to ``prescribe
regulations'' and ``define terms as necessary to carry out'' the FDI
Act.\19\
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\18\ 12 U.S.C. 1821(d)(4)(B)(iv).
\19\ 12 U.S.C. 1819(a)(Tenth); 1820(g).
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F. Interim Final Rule
As noted above, in light of the FDIC's role in the Freely
Associated States under the new Compact-related agreements, the FDIC
believes it would be beneficial to clarify the application of the FDI
Act and the deposit insurance regulations to the legacy branches of
U.S. IDIs operating in the Freely Associated States. The interim final
rule clarifies that the FDIC, pursuant to the FDI Act, insures the
deposits of legacy branches of U.S. IDIs operating in the FSM, the
Marshall Islands, and Palau, better aligning the regulation with the
historical coverage provided for these deposits.
The interim final rule amends 12 CFR 330.3(e) of the FDIC's deposit
insurance regulations, which governs deposits of IDIs that are payable
outside of the United States and certain other locations. Currently
under the regulation, an obligation of an IDI that is payable solely at
an office of the IDI located outside any State is not considered a
``deposit'' for purposes of the deposit insurance regulations.\20\
Where an obligation of an IDI is carried on the books and records of an
office of the IDI located outside any State, the regulations provide
that it shall not be considered an insured deposit, even if it is also
made payable at an office of the IDI located within any State.\21\
Essentially, where obligations booked outside the U.S. are made dually
payable, they may be entitled to depositor preference (payment ahead of
the institution's other creditors), but are not generally eligible for
deposit insurance coverage. The regulation at 12 CFR 330.3(e)(3)
includes a rule of construction providing a limited exception to these
general rules for overseas military banking facilities operated under
U.S. Department of Defense regulations. Military banking facilities are
not considered to be offices located outside any State under the
regulation, meaning that military banking facility deposits are
eligible to be insured.
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\20\ 12 CFR 330.3(e)(1).
\21\ 12 CFR 330.3(e)(2).
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The interim final rule amends the rule of construction in 12 CFR
330.3(e) to apply expressly to deposits of legacy branches of U.S. IDIs
operating in the FSM, the Marshall Islands, and Palau. Such branches
will not be considered to be offices located outside any State for
purposes of the deposit insurance rules, meaning that their deposits,
if dually payable, would be eligible to be insured by the FDIC pursuant
to 12 CFR part 330.
The coverage for U.S. IDIs' legacy branches provided by the rule is
intended to function as a limited-scope exception to the general rule
that excludes IDIs' foreign branch deposits from deposit insurance
coverage. This limited exception aligns the regulation with the
historical coverage that has been provided for banks operating in the
Freely Associated States through the special and historical
relationship the United States has maintained with each of the Freely
Associated States. Accordingly, the exception provided by the interim
final rule is limited to the legacy branches of U.S. IDIs, meaning the
number of branches operated by each U.S. IDI as of the interim final
rule's effective date. Any changes to branch locations remain subject
to existing applicable requirements depending on the circumstances.\22\
The FDIC believes that limiting coverage to legacy branches of U.S.
IDIs serves the FDIC's policy objectives while promoting consistency,
to the extent possible, with the rules that generally apply to foreign
deposits.
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\22\ See 12 CFR part 303, subparts C, D, and J.
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As explained above, dual payability is a statutory prerequisite for
deposit insurance with respect to U.S. IDIs' foreign branch deposits.
Therefore, deposits of U.S. IDIs' legacy branches in the Freely
Associated States are only eligible for deposit insurance if they have
been made dually payable. This means that, under the contract, they are
expressly payable at an office of the IDI located in a State (as
defined in 12 U.S.C. 1813(a)(3)).
Importantly, all dually payable deposits of the legacy branches of
U.S. IDIs are eligible for deposit insurance coverage under the interim
final rule.\23\ Coverage is not limited to deposit balances maintained
by the depositor as of the rule's effective date, or limited to deposit
accounts opened prior to the rule's effective date. This aspect of the
interim final rule ensures that coverage will be easily understood by
consumers and bankers. It also reduces operational complexity for the
FDIC in the event of a bank failure that would require a deposit
insurance determination. Under the interim final rule, calculation of
deposit insurance coverage will be determined by application of the
deposit insurance regulations that generally apply to all IDIs, found
in 12 CFR part 330.
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\23\ Deposit insurance coverage only applies to ``deposits'' as
that term is defined in the FDI Act. Other types of products, such
as stocks, bonds, money market mutual funds, securities,
commodities, and crypto assets are not insured under the interim
final rule.
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It is important to note that the interim final rule does not affect
the provision of deposit insurance to banks chartered by any of the
Freely Associated States or branches of such banks. This is because the
rule is intended to clarify the application of the FDI Act to branches
of U.S.-chartered IDIs. Deposit insurance coverage is provided to
certain banks chartered by the Freely Associated States pursuant to
separate authority provided by legislation concerning the Compact-
related
[[Page 65169]]
agreements as discussed in further detail above.\24\
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\24\ The FDIC currently insures deposits of one bank chartered
by the Federated States of Micronesia, the Bank of the Federated
States of Micronesia, pursuant to this separate authority. The
interim final rule does not affect deposit insurance coverage for
this bank.
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G. Expected Effects
The interim final rule amends 12 CFR part 330 to clarify that the
FDIC insures dually payable deposits of the legacy branches of U.S.
IDIs operating in the Freely Associated States. Given that these
deposits have historically been and are currently insured, the interim
final rule will not change the deposit insurance coverage for these
deposits, as compared to a baseline scenario in which the interim final
rule had not been promulgated. Thus, the effects of the rule are likely
limited to the increased awareness of deposit insurance coverage in the
Freely Associated States and the reduced likelihood of confusion
regarding such coverage.
Any costs imposed by the interim final rule will directly affect
IDIs that operate legacy branches in the Freely Associated States.
According to recent Summary of Deposit data,\25\ there are currently
three IDIs operating eight total branches in these areas. As of June
30, 2023, these branches hold approximately $731 million in deposits.
As discussed previously, the interim rule does not affect the provision
of deposit insurance at these branches, so the interim final rule will
likely not result in any operational changes at affected IDIs. Costs
incurred by these IDIs are likely limited to costs associated with
clarifications to the IDIs' customers regarding the nature of deposit
insurance for products offered at these branches. The FDIC does not
have data to quantify these costs, but believes they are de minimis.
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\25\ FDIC Summary of Deposits, as of June 30, 2023.
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The interim final rule will benefit both IDIs operating branches in
the Freely Associated States as well as their customers. The
publication of the interim final rule will remind affected IDIs of the
statutory prerequisites for deposit insurance under the FDI Act with
regards to deposits held in affected legacy branches. To the extent
that customers in the Freely Associated States are unclear as to the
status of deposit insurance for their deposits, the interim final rule
could pose benefits to those customers. The clarity provided by these
IDIs to holders of dually payable deposits could reinforce and/or
increase awareness of the extent to which or the manner in which the
IDIs' products are insured by the FDIC. This clarity will help
customers more clearly understand when their funds are protected by the
FDIC's deposit insurance. These benefits, in whole, will reinforce the
role of FDIC deposit insurance and bolster confidence in the U.S.
banking system in the Freely Associated States. Given that dually
payable deposits in the Freely Associated States have been treated as
FDIC-insured since 1981, the FDIC believes these benefits are likely de
minimis.\26\
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\26\ Public Law 97-110, sec. 103 (Dec. 26, 1981).
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The FDIC invites comments on these expected effects. In particular,
are there effects of the interim final rule that the FDIC did not
consider?
H. Request for Comment
The FDIC invites comments on all aspects of the interim final rule.
In particular, the FDIC requests comment on the following:
1. Is there additional information that would be helpful in further
clarifying the scope of the rule?
2. Are there legal or policy considerations regarding deposit
insurance coverage for U.S. IDIs' branches in the Freely Associated
States that are relevant, but not discussed in the interim final rule?
I. Administrative Law Matters
Administrative Procedure Act
The FDIC is issuing the interim final rule without prior notice and
the opportunity for public comment and the delayed effective date
ordinarily prescribed by the Administrative Procedure Act (APA).\27\
Pursuant to section 553(b)(B) of the APA, general notice and the
opportunity for public comment are not required with respect to a
rulemaking when an ``agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefore in the rules issued)
that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.'' \28\
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\27\ 5 U.S.C. 553.
\28\ 5 U.S.C. 553(b)(B).
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The FDIC believes that the public interest would be best served if
the interim final rule is effective immediately upon publication in the
Federal Register. The interim final rule aligns the FDIC's regulation
with the deposit insurance coverage historically provided by the FDIC
for IDIs in the Freely Associated States, clarifying the application of
12 CFR 330.3(e) of the FDIC's regulations in this context. Moreover, a
delayed effective date could lead depositors of IDIs in the Freely
Associated States to question whether their deposits are insured during
the comment period. The FDIC has therefore determined that the public
notice and participation ordinarily required by the APA before a
regulation may take effect would, in this case, be contrary to the
public interest and that good cause exists for waiving the customary
30-day delayed effective date.
Nevertheless, the FDIC desires to have the benefit of public
comment before adopting a permanent final rule, and thus invites
interested parties to submit comments during a 60-day comment period.
In adopting a final regulation, the FDIC will revise the interim final
rule if appropriate in light of the comments received.
Riegle Community Development and Regulatory Improvement Act
The Riegle Community Development and Regulatory Improvement Act of
1994 generally provides that new regulations or amendments to
regulations prescribed by a Federal banking agency that impose
additional reporting, disclosure, or other new requirements on IDIs
shall take effect on the first day of a calendar quarter that begins on
or after the date on which the regulations are published in final form,
unless the agency determines, for good cause published with the rule,
that the rule should become effective for such time.\29\ For the
reasons discussed above, the FDIC has determined that good cause exists
for the interim final rule to become effective immediately upon
publication in the Federal Register.
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\29\ 12 U.S.C. 4802.
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Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) states
that no agency may conduct or sponsor, nor is the respondent required
to respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The interim
final rule does not create new or revise any existing information
collection requirements, and therefore, the FDIC will make no
submissions to OMB in connection with this interim final rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires an agency to consider
whether the rules it proposes will have a significant economic impact
on a substantial number of small entities. The RFA applies only to
rules for which an agency publishes a general notice of proposed
rulemaking pursuant to 5
[[Page 65170]]
U.S.C. 553(b). As discussed previously, consistent with section
553(b)(B) of the APA, the FDIC has determined for good cause that
notice and opportunity for public comment prior to the rule's effective
date is contrary to the public interest, and therefore is not issuing a
notice of proposed rulemaking. Accordingly, the FDIC has concluded that
the RFA's requirements relating to initial and final regulatory
flexibility analyses do not apply. Nevertheless, the FDIC is interested
in receiving feedback on ways that it could reduce any potential burden
of the interim final rule on small entities.
Congressional Review Act
For purposes of the Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major'' rule.
If a rule is deemed a ``major rule'' by the OMB, the Congressional
Review Act generally provides that the rule may not take effect until
at least 60 days following its publication.
The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of the Office of Information and Regulatory
Affairs of the OMB finds has resulted in or is likely to result in (1)
an annual effect on the economy of $100,000,000 or more; (2) a major
increase in costs or prices for consumers, individual industries,
Federal, State, or local government agencies or geographic regions, or
(3) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic and
export markets.
The OMB has determined that the interim final rule is not a major
rule for purposes of the Congressional Review Act. The FDIC will submit
the rule and other appropriate reports to Congress and the Government
Accountability Office for review.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act \30\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The FDIC has sought to present the
interim final rule in a simple and straightforward manner. The FDIC
invites comments on whether the interim final rule is clearly stated
and effectively organized and how the FDIC might make the proposal
easier to understand.
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\30\ Public Law 106-102, sec. 722, 113 Stat. 1338, 1471
(codified at 12 U.S.C. 4809)).
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List of Subjects in 12 CFR Part 330
Bank deposit insurance, Reporting and recordkeeping requirements,
Savings associations.
Authority and Issuance
For the reasons stated in the preamble, the Board of Directors of
the Federal Deposit Insurance Corporation amends part 330 of title 12
of the Code of Federal Regulations as follows:
PART 330--DEPOSIT INSURANCE COVERAGE
0
1. The authority citation for part 330 continues to read as follows:
Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q),
1819(a)(Tenth), 1820(f), 1820(g), 1821(a), 1821(d), 1822(c).
0
2. Amend Sec. 330.3 by revising paragraph (e)(3) to read as follows:
Sec. 330.3 General principles.
* * * * *
(e) * * *
(3) Rule of construction. For purposes of this paragraph (e), the
following are not considered to be offices located outside any State,
as referred to in paragraph (e)(1) of this section:
(i) Overseas Military Banking Facilities operated under U.S.
Department of Defense regulations, 32 CFR parts 230 and 231; and
(ii) Legacy branches of U.S. insured depository institutions in the
Federated States of Micronesia, the Republic of the Marshall Islands,
or the Republic of Palau, which for purposes of this paragraph means
the number of branches operated by each U.S. insured depository
institution as of August 9, 2024.
* * * * *
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on July 30, 2024.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2024-17351 Filed 8-8-24; 8:45 am]
BILLING CODE 6714-01-P
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</html>Indexed from Federal Register on August 9, 2024.
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