Banking and Finance Law Daily Rules on recordkeeping, joint account determinations amended
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Tuesday, July 16, 2019

Rules on recordkeeping, joint account determinations amended

By Richard A. Roth, J.D.

The FDIC has amended its deposit insurance regulations to create an alternative way to show joint ownership of a deposit account and make it easier for financial institutions to comply with a requirement that they maintain records that will allow a receiver to determine account ownership and insured balances.

The Federal Deposit Insurance Corporation has adopted amendments to several of its rules that affect a receiver’s ability to decide whether a deposit account is a joint account and to separate insured balances from uninsured balances in an insolvent bank’s deposit accounts. The amendments were proposed at a March 2019 FDIC board meeting (see Banking and Finance Law DailyMarch 29, 2019) and become effective on Oct. 1, 2019.

Recordkeeping. In November 2016, the FDIC adopted a rule that requires financial institutions that hold at least two million accounts to maintain records that will help a receiver determine the deposit insurance coverage that applies to each of those accounts. Institutions are to maintain complete and accurate information so that the agency can determine the coverage, and to have information technology systems that will allow the agency to calculate the insured and uninsured amounts for each account by ownership right and capacity. Either the Chief Executive Officer or Chief Operating Officer of each covered bank is required to certify the bank’s compliance by April 1, 2020, and annually after that.

The amendment to 12 CFR Part 370 affects financial institutions’ burden in a number of respects. According to a staff memorandum:

  1. A covered institution may delay its compliance by up to one year if it notifies the FDIC of the delay and provides the number and dollar amount of deposits in accounts for which the bank’s IT system would be unable to calculate the coverage on April 1, 2020.
  2. The certification is to be on the executive’s "knowledge and belief after due inquiry."
  3. The FDIC can set a grace period for compliance if a compliance deficiency results from a change in the law. Also, a 24-month grace period is added for deficiencies that result from a merger.
  4. The recordkeeping requirements for accounts with transactional features have been clarified, as have the requirements for some trust accounts and some credit balances on loan accounts.
  5. Covered institutions will be allowed to submit requests for exceptions jointly. The amendments provide a process under which the FDIC will publish its response to the requests, with appropriate redactions, in the Federal Register.

Joint accounts. Deposit accounts are insured according to their ownership right and capacity. Accounts of a depositor in a different right and capacity receive separate coverage up to the $250,000 maximum. This means that, under the FDIC’s rules, a depositor’s interests in individual accounts and in joint accounts each receive up to $250,000 coverage.

The FDIC’s rules specify how to differentiate between individual accounts and joint accounts, and one criterion is that each joint owner must sign an account signature card.

The amendment provides alternatives to the traditional signature card. Information in a covered institution’s records can be used to show that an account is a joint account. A staff memo notes as examples that joint ownership can be shown if each co-owner has been issued a debit card or has been permitted to engage in other transactions using the account. The rule does not give an exhaustive list of possibilities, but it says explicitly that electronic signatures are acceptable.

The FDIC’s notice says that the joint account amendment was a result of the "data cleanup" that was required by the recordkeeping rule.

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