Rule2026-05652
Clarification of Deposit Insurance Coverage for 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
March 23, 2026
Effective
April 22, 2026
Issuing agencies
Federal Deposit Insurance Corporation
Abstract
The Federal Deposit Insurance Corporation (FDIC) is adopting a final rule to provide that the FDIC will insure deposits of all branches of U.S.-insured depository institutions (IDIs) in the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau, whether operating presently or in the future. This final rule follows an interim final rule with request for comment issued by the FDIC in August 2024.
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 55 (Monday, March 23, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 55 (Monday, March 23, 2026)]
[Rules and Regulations]
[Pages 13703-13705]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05652]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 91, No. 55 / Monday, March 23, 2026 / Rules
and Regulations
[[Page 13703]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 330
RIN 3064-AG06
Clarification of Deposit Insurance Coverage for Branches of U.S.
Banks in the Federated States of Micronesia, the Marshall Islands, and
Palau
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is adopting a
final rule to provide that the FDIC will insure deposits of all
branches of U.S.-insured depository institutions (IDIs) in the
Federated States of Micronesia, the Republic of the Marshall Islands,
and the Republic of Palau, whether operating presently or in the
future. This final rule follows an interim final rule with request for
comment issued by the FDIC in August 2024.
DATES: The final rule is effective April 22, 2026.
FOR FURTHER INFORMATION CONTACT: Legal Division: Ryan McCarthy,
Counsel, 202-898-7301, <a href="/cdn-cgi/l/email-protection#aad8d3c7c9c9cbd8dec2d3eacccec3c984cdc5dc"><span class="__cf_email__" data-cfemail="ff8d86929c9c9e8d8b9786bf999b969cd1989089">[email protected]</span></a>; James Watts, Counsel, 202-
898-6678, <a href="/cdn-cgi/l/email-protection#c2a8b5a3b6b6b182a4a6aba1eca5adb4"><span class="__cf_email__" data-cfemail="d2b8a5b3a6a6a192b4b6bbb1fcb5bda4">[email protected]</span></a>; Shilpa Shah, Acting Associate Director,
International Affairs Branch, 202-898-8546, <a href="/cdn-cgi/l/email-protection#bbc8d3c8d3dad3fbdddfd2d895dcd4cd"><span class="__cf_email__" data-cfemail="c7b4afb4afa6af87a1a3aea4e9a0a8b1">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
In 1981, Congress amended the Federal Deposit Insurance Act (FDI
Act) to permit the FDIC to provide deposit insurance coverage to
branches of U.S.-chartered IDIs located in the Trust Territory of the
Pacific Islands (Trust Territory). At that time, the Trust Territory
included what is now the Federated States of Micronesia (FSM), the
Republic of the Marshall Islands (Marshall Islands), the Republic of
Palau (Palau), and the Northern Mariana Islands. Between 1986 and 1994,
the FSM, the Marshall Islands, and Palau became independent nations
(collectively known as the Freely Associated States), and each entered
a Compact of Free Association (Compacts) with the United States. The
Compacts and associated agreements authorize certain government
agencies, including the FDIC, to provide specific services to each of
the Freely Associated States. In 2023, the United States and each of
the Freely Associated States entered new agreements relating to their
respective Compacts, which were subsequently approved by Congress. The
new agreements authorize the FDIC to provide deposit insurance to IDIs
chartered by any of the Freely Associated States.
Three U.S.-chartered IDIs also operate branches in the Freely
Associated States that have historically been insured under authority
in the FDI Act. After the Compacts and the related agreements were
concluded, the FDIC adopted an interim final rule \1\ to clarify that
it insures the deposits of legacy branches of U.S. IDIs operating in
the Freely Associated States, and requested public comment. The interim
final rule defined ``legacy branches'' as the number of branches
operating in the Freely Associated States by each U.S. IDI as of the
rule's effective date, August 9, 2024. The FDIC received one comment
supporting the clarification but requesting that the FDIC remove
language limiting coverage to legacy branches. In response to that
feedback, the FDIC is adopting this final rule pursuant to its
authorities under section 11 of the FDI Act, relating to deposit
insurance, as well as authorities under sections 9 and 10, to make
deposit insurance available to all branches of U.S.-chartered IDIs in
the Freely Associated States, whether present or future.
---------------------------------------------------------------------------
\1\ 89 FR 65166 (Aug. 9, 2024).
---------------------------------------------------------------------------
II. Legal Framework and Overview of the Interim Final Rule
A. Deposit Insurance Coverage for Foreign Branches of U.S. IDIs
Under the FDIC's regulations, 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.\2\ 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.\3\ That is, where obligations booked outside the U.S. are
made dually payable (meaning that the deposits are expressly payable in
an office of the IDI in the United States),\4\ they may be entitled to
depositor preference (payment ahead of the institution's other
creditors), but under the FDIC's rules, are not generally eligible for
deposit insurance coverage.
---------------------------------------------------------------------------
\2\ 12 CFR 330.3(e)(1).
\3\ 12 CFR 330.3(e)(2).
\4\ Obligations of an IDI's foreign branch that would otherwise
fall under the definition of ``deposit'' at 12 U.S.C. 1813(l) do not
constitute a ``deposit'' unless the obligation (1) would be a
deposit if carried on the books and records of the IDI in the United
States; and (2) is expressly payable at an office of the IDI located
in the United States. 12 U.S.C. 3(l)(5)(A). This second requirement
that the obligation be payable at an office in the United States has
historically been referred to as ``dual payability.''
---------------------------------------------------------------------------
B. Deposit Insurance Coverage for U.S. Branches in the Freely
Associated States
The interim final rule amended the FDIC's regulations to provide
that legacy branches of U.S. IDIs in the Freely Associated States are
not considered to be offices located outside any State for purposes of
the deposit insurance rules. Therefore, deposits in those branches, if
dually payable (meaning that the deposits are expressly payable in an
office of the IDI in the United States), are insured by the FDIC. The
interim final rule defined ``legacy branches'' as the number of
branches operated by each U.S. IDI as of August 9, 2024. The interim
final rule limited coverage to the legacy branches of U.S. IDIs in
order to align deposit insurance coverage with the coverage provided
historically for U.S. banks operating in the Freely Associated States.
III. Public Comments
The FDIC received one comment letter from the Bank of Guam
(commenter), a U.S.-chartered IDI, that operates branches in the Freely
Associated States. While the commenter supported the interim final rule
to the extent it clarified the application of FDIC deposit insurance to
legacy branches of U.S. IDIs in the Freely
[[Page 13704]]
Associated States, the commenter raised concerns about the effect of
limiting deposit insurance to just those legacy branches. Specifically,
the commenter requested clarity as to whether a relocated branch would
qualify as a legacy branch. The commenter also noted that the
limitation of coverage to legacy branches would act as a restriction to
growth and expansion that never historically existed prior to the
interim final rule.
IV. The Final Rule
The final rule removes the reference to ``legacy branches'' in the
FDIC's regulations. Under the amended rule, all branches of U.S. IDIs
in the Freely Associated States, whether present or future, are not
considered to be offices located outside any State for purposes of
deposit insurance coverage. As a result, dually payable deposits of all
branches of U.S.-chartered banks in the Freely Associated States,
whether present or future, will be insured by the FDIC.
Providing deposit insurance to all branches of U.S. IDIs in the
Freely Associated States achieves the FDIC's intent to align its
deposit insurance regulations with the historical availability of FDIC
deposit insurance in the Freely Associated States. The final rule also
puts U.S. IDIs operating in the Freely Associated States on equal
footing with IDIs chartered by the Freely Associated States. Further,
removing a limitation that may have served as a barrier to entry will
support a competitive banking environment in the Freely Associated
States. Additionally, the FDIC does not have a clear rationale to limit
deposit insurance only to existing branches of U.S. IDIs and not new
branches of U.S. IDIs.
V. Expected Effects
In 2024, the FDIC adopted an interim final rule that provided
deposit insurance to legacy branches of U.S. IDIs operating in the
Freely Associated States. This final rule further amends 12 CFR part
330 to remove the requirement that the branches be ``legacy'' branches.
Under the final rule, FDIC will insure dually payable deposits of all
branches of U.S. IDIs operating in the Freely Associated States.
As described above, the interim final rule clarified continuing
deposit insurance coverage for all legacy branches in the Freely
Associated States--that is, all eight branches operating as of August
9, 2024, the effective date of the interim final rule, by three U.S.
IDIs. of the quarter ending June 30, 2025, there are still eight
branches operated in the Freely Associated States by three U.S.
IDIs.\5\ Taken together, these branches have approximately $803.47
million in deposits.
---------------------------------------------------------------------------
\5\ FDIC Summary of Deposits data as of June 30, 2025. 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 the Compacts negotiated by the U.S.
government and the Freely Associated States. The final rule does not
affect deposit insurance coverage for this bank.
---------------------------------------------------------------------------
As discussed above, the interim final rule did not alter deposit
insurance coverage at the eight branches currently operating in the
Freely Associated States. Costs imposed by the interim final rule on
the operators of these branches, if any, were likely limited to costs
associated with clarifications to their 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 were de
minimis.
The final rule extends deposit insurance coverage to all branches
of U.S.-insured depository institutions in the Freely Associated
States. In contrast to the interim final rule, any new branches formed
by U.S. IDIs in the Freely Associated States will now be eligible to
have their deposits insured under the final rule. As such, the final
rule may affect the formation of new branches in the Freely Associated
States. The FDIC believes that more branches may potentially be opened
as a result of the final rule. In the absence of the final rule, it is
more likely that U.S. IDIs operating in the Freely Associated States
would continue to endeavor to attract new customers and depositors but
without opening new branches. The FDIC does not have data to estimate
these impacts.
Additionally, the FDIC notes that given the very small size of the
Freely Associated States relative to the U.S. population and economy,
and the preexisting availability of deposit insurance for IDIs
operating in the Freely Associated States, the final rule is expected
to have a de minimis impact on the Deposit Insurance Fund.
VI. Administrative Law Matters
A. Administrative Procedure Act
The Administrative Procedure Act requires an agency to publish a
substantive rule not less than 30 days before its effective date,
except when an agency otherwise publishes in the final rule good cause
for providing for an earlier effective date.\6\ Accordingly, the final
rule is effective as of the date set forth above in this document under
the DATES heading.
---------------------------------------------------------------------------
\6\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency,
in connection with a final rule, to prepare and make available for
public comment a final regulatory flexibility analysis that describes
the impact of the final rule on small entities.\7\ However, a final
regulatory flexibility analysis is not required if the agency certifies
that the final rule will not, if promulgated, have a significant
economic impact on a substantial number of small entities. The SBA has
defined ``small entities'' to include banking organizations with total
assets of less than or equal to $850 million.\8\ Generally, the FDIC
considers a significant economic impact to be a quantified effect in
excess of 5 percent of total annual salaries and benefits or 2.5
percent of total noninterest expenses. The FDIC believes that effects
in excess of one or more of these thresholds typically represent
significant economic impacts for FDIC-supervised institutions. The
final rule applies to U.S.-chartered IDIs that operate in the Freely
Associated States presently or in the future. As of the quarter ending
June 30, 2025, there are three U.S. IDIs with eight total branches in
the Freely Associated States.\9\ Of these, one U.S. IDI is considered
small for purposes of the RFA.
---------------------------------------------------------------------------
\7\ 5 U.S.C. 601 et seq.
\8\ The SBA defines a small banking organization as having $850
million or less in assets, where an organization's ``assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201
(as amended by 87 FR 69118, effective Dec. 19, 2022). In its
determination, the ``SBA counts the receipts, employees, or other
measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates.'' See 13 CFR 121.103. Following
these regulations, the FDIC uses an insured depository institution's
affiliated and acquired assets, averaged over the preceding four
quarters, to determine whether the insured depository institution is
``small'' for the purposes of RFA.
\9\ FDIC Summary of Deposits data as of June 30, 2025.
---------------------------------------------------------------------------
The FDIC does not believe that the final rule will have a
significant impact on a substantial number of small entities. The sole
small entity affected by the interim final rule has a single branch. As
discussed in the Expected Effects section, the FDIC expects any effects
of the final rule on this branch and its customers to be de minimis.
The FDIC does not have information on the extent the final rule may
affect business decisions--such as marketing and deposit solicitation
and future branch openings--of IDIs that are not currently doing
business in the Freely Associated
[[Page 13705]]
States but may choose to do so in the future. However, the single small
entity affected by the interim final rule and any additional small
entities that may open a branch in the Freely Associated States are
unlikely to constitute a substantial number of small entities.
In light of the foregoing, the FDIC certifies that the final rule
will not have a significant economic impact on a substantial number of
small entities. Accordingly, a final regulatory flexibility analysis is
not required.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \10\ 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 final
rule does not create any new, or revise any of these existing
assessment information collections pursuant to the PRA; consequently,
no submissions in connection with these OMB control numbers will be
made to the OMB for review.
---------------------------------------------------------------------------
\10\ 44 U.S.C. 3501 through 3521.
---------------------------------------------------------------------------
Any new branch applications that result from this rule will be
reflected in the next information collection renewal.
D. Riegle Community Development and Regulatory Improvement Act of 1994
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 before such time.\11\ The rule
does not impose any reporting, disclosure, or other requirements on
IDIs.
---------------------------------------------------------------------------
\11\ 12 U.S.C. 4802.
---------------------------------------------------------------------------
E. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \12\ requires the Federal
banking agencies to use plain language in all proposed and final
rulemakings published in the Federal Register after January 1, 2000.
The FDIC has sought to present the final rule in a simple and
straightforward manner and did not receive any comments relating to
plain language.
---------------------------------------------------------------------------
\12\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999), 12 U.S.C. 4809.
---------------------------------------------------------------------------
F. 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.\13\ 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.\14\
---------------------------------------------------------------------------
\13\ 5 U.S.C. 801 et seq.
\14\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------
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.\15\
---------------------------------------------------------------------------
\15\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------
The OMB has determined that the final rule is not a major rule for
purposes of the Congressional Review Act.
G. Executive Order 12866
Executive Order 12866, as amended, provides that the Office of
Information and Regulatory Affairs (OIRA) will review all ``significant
regulatory actions'' as defined therein. The FDIC has submitted this
regulatory act to OIRA for review. OIRA has determined that this final
rule is not a ``significant regulatory action'' for purposes of
Executive Order 12866. For more information on the analysis conducted
in connection with Executive Order 12866, refer to other sections of
this SUPPLEMENTARY INFORMATION.
H. Executive Order 14192
Executive Order 14192 directs agencies, unless prohibited by law,
to identify at least 10 existing regulations to be repealed when the
agency publicly proposes for notice and comment or otherwise
promulgates a new regulation with total costs greater than zero.
Executive Order 14192 further requires that new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
10 prior regulations. An Executive Order 14192 deregulatory action is
an action that has been finalized and has total costs less than zero.
This final rule is considered an Executive Order 14192 deregulatory
action.
List of Subjects in 12 CFR Part 330
Bank deposit insurance, Banks, banking, Reporting and recordkeeping
requirements, Savings associations.
Authority and Issuance
For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation adopts as final the interim final rule amending
12 CFR part 330, which was published at 89 FR 65166 on August 9, 2024,
with the following change:
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 and republishing 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) Branches of U.S.-insured depository institutions in the
Federated States of Micronesia, the Republic of the Marshall Islands,
or the Republic of Palau.
* * * * *
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, March 19, 2026.
Jennifer M. Jones,
Deputy Executive Secretary.
[FR Doc. 2026-05652 Filed 3-20-26; 8:45 am]
BILLING CODE 6714-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on March 23, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.