The 10 Parts Of FDIC Part 370

Part 370 is broken into 10 parts, as follows.

370.1 Purpose and scope

The purpose of Part 370 is to improve the FDIC’s ability to fulfill its two mandates related to paying deposit insurance:

1. Pay deposit insurance as soon as possible after the failure of a covered bank; and
2. Resolve a covered institution with the least possible cost to the Deposit Insurance Fund

The scope of Part 370 is limited to financial institutions with more than two million deposit accounts. The FDIC believes there are unique complications at institutions of that size which make necessary the provisions of Part 370.

370.2 Definitions

For purposes of this rule, the following definitions are in force:

1. Account holder: The person or entity who opened an account and with whom the institution has a legal and contractual relationship
2. Brokered deposit: Taken from 12 CFR 337.6(a)(2), any deposit that is obtained, directly or indirectly, from or through the mediation or assistance of a deposit broker
3. Covered institution: Any insured depository with two million or more deposit accounts during two consecutive quarters according to its Reports of Condition and Income
4. Compliance date: The later of April 1, 2020 or three years after an institution has two million deposit accounts for two consecutive quarters
5. Deposit: Any deposit as defined in the Federal Deposit Insurance Act, section 3(l)
6. Deposit account records: Taken from 12 CFR 330.1(e), account ledgers, signature cards, certificates of deposit, passbooks, corporate resolutions authorizing accounts, and other books and records related to deposit-taking (but not account statements, deposit slips, items deposited or cancelled checks)
7. Ownership rights and capacities: Ownership capacities defined in 12 CFR part 330 are:
   • 6: Single ownership accounts
   • 7: Accounts held by an agent, nominee, guardian, custodian or conservator
   • 8: Annuity contract accounts
   • 9: Joint ownership accounts
   • 10: Revocable trust accounts
   • 11: Accounts of a corporation, partnership or unincorporated association
   • 12: Accounts held by a depository institution as the trustee of an irrevocable trust
   • 13: Irrevocable trust accounts
   • 14: Retirement and other employee benefit plan accounts
   • 15: Accounts held by government depositors
8. Payment instrument: Check, draft, warrant, money order, traveler’s check, electronic instrument, or other instrument, payment of funds, of monetary value (other than currency)
9. Standard maximum deposit insurance amount: $250,000 per depositor per account, as laid out in the Federal Deposit Insurance Act
10. Transactional features: The ability for a depositor to make withdrawals or transfers to a third party or another account from a deposit account
11. Unique identifier: An alpha-numeric identifier that uniquely identifies an account holder (person or entity) across the covered institution

370.3 Information technology system requirements

Each covered institution must have IT systems capable of:

• Calculating deposit insurance coverage for each deposit account
• Generating and retaining output records in a specified format
• Restricting access to funds in a covered account until the FDIC has made a coverage determination
• Debiting uninsured monies from a covered account

The IT systems must be capable of performing these functions within 24 hours of the FDIC being appointed as a receiver for the bank, except in certain instances where alternative record keeping is allowed as described in section 4.

370.4 Recordkeeping requirements

Covered institutions must keep records that will enable them to perform the functions listed in section 370.3 in a timely manner. For each account, these records must include:

• A unique identifier for each
  • Account holder
  • Beneficial owner of a deposit if different than the account holder
  • Grantor and beneficiary of an informal revocable trust
• Ownership right and capacity code
• Balance of each beneficial owner’s deposits grouped by ownership right and capacity

Additionally, the bank must be able to aggregate balances across accounts for each beneficial owner by ownership right and capacity, including a breakdown by insured and uninsured amounts.

In certain circumstances, account records might provide a basis for additional insurance and the data required to satisfy Part 370 might not be held at the depositing institution. In these cases, the bank must still maintain a unique identifier for each account holder and submit a “pending reason code” in lieu of maintaining ownership right and capacity code.

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370.5 Actions required for certain deposit accounts with transactional features

For deposit accounts with transactional features that are held in the name of a third party, rather than the beneficial owner(s), the bank must certify to the FDIC that the account holder will provide the information required to calculate deposit insurance within 24 hours. This requirement does not apply to mortgage servicing accounts, lawyers trust accounts, real estate trust accounts, or employee benefit plans.

If a covered institution is not able to meet these certification requirements, it must apply to the FDIC for an exemption.

370.6 Implementation

Covered institutions must comply with Part 370 on or before the compliance date. If a bank does not believe it will be able to meet these requirements in the specified time, it can apply for an extension. In order to apply for an extension, the bank must determine the total number and dollar value of any accounts that it could not calculate deposit coverage for in the event of a failure, as of the date of the request.

370.7 Accelerated implementation

The FDIC may, under certain scenarios, deem it necessary to accelerate implementation of Part 370 for a covered institution. The following three scenarios could trigger an accelerated implementation:

1. A bank has a CAMELS rating of 3, 4, or 5
2. A bank is undercapitalized. This is defined in 12 CFR part 325 as: total risk-based capital ratio under 8%; Tier 1 risk-based capital ratio under 4%; leverage ratio under 4%; or leverage ratio under 3% for a bank with a CAMELS rating of 1 and no significant growth expected
3. A bank is determined by the appropriate Federal banking agency to be experiencing a serious deterioration of capital or liquidity stress

The FDIC understands that imposing an accelerated timeline during any of the above three scenarios would complicate an already bad situation for the affected institution. This decision would be made in concert with the relevant federal banking agency and would consider the bank’s complexity, funding sources, volatility, etc.

370.8 Relief

A covered institution may request an exemption from Part 370 if it can demonstrate that it does not and will not take deposits that would exceed the insurable amount per depositor. In this case, the insurance calculations will be simplified and the FDIC has determined that the additional recordkeeping requirements of Part 370 are not required.

Additionally, a covered institution may request an exception for an individual account or class of accounts from the provisions of Part 370. In this case, the institution must describe the reason it cannot meet the requirements of Part 370 and calculate the number and dollar value of affected accounts.

If a covered institution subsequently falls under the two million account threshold for three consecutive quarters, it may submit a request to the FDIC to be released from the Part 370 requirements.

Lastly, once a covered institution has reached full compliance with Part 370 requirements, it may submit a request to be relieved of the account hold and reporting requirements of rule 360.9.

370.9 Communication with the FDIC

Within 10 days of either the effective date or of becoming a covered institution, the bank must identify for the FDIC a point of contact who will be responsible for implementing the recordkeeping and IT provisions of Part 370.

370.10 Compliance

Beginning on the compliance date, and annually thereafter, the covered institution must submit a certification to the FDIC stating that it has implemented and tested the IT systems required to comply with Part 370, to be signed by the CEO or COO. Additionally, the bank must submit a deposit insurance coverage report which includes:

• Any changes to IT systems or deposit-taking operations since the last report
• The number of deposit accounts, account holders, and dollar amounts by ownership right and capacity code
• The number and dollar value of fully insured accounts
• The number of accounts with uninsured amounts and the corresponding uninsured amounts
• The number and dollar value of accounts, by account type, for which the bank cannot calculate insurance coverage

In addition to the two annual reports, the FDIC will conduct on-site testing of covered institutions. The tests will begin no sooner than the end of the first quarter following the compliance date and will occur no more frequently than every three years after (unless there is a material change to the institution’s IT systems, deposit-taking, or financial condition). The FDIC has committed to providing data integrity and IT system testing instructions prior to the rule’s effective date. Covered institutions will be required to facilitate the FDIC’s on-site tests.

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