FDIC Proposal on Insured Deposits

Cleary Gottlieb Steen & Hamilton
Date Published:
On February 12, 2013, the Federal Deposit Insurance Corporation approved a Notice of Proposed Rulemaking that would revise its deposit insurance regulations to provide that deposits held on the books and records of a foreign branch of a U.S. insured depository institution and that are payable both in the United States and abroad are not insured deposits. Previously, the consensus view had been that such “dually payable” deposits would be insured. While not addressed in the proposed regulatory text, the FDIC’s preamble to the Proposed Rule makes clear that such “dually payable” deposits would be afforded the benefit of “depositor preference” as a “deposit liability” in the liquidation of an IDI. In the attached memo, we address the Proposed Rule’s limitation on the scope of deposit insurance for foreign deposits, the factors driving the FDIC’s decision to release this proposal, and potential alternatives to the FDIC’s current approach.