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FDIC Issues Overview of Deposit Insurance System

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In response to the recent bank failures, on May 1, 2023, the Federal Deposit Insurance Corporation (FDIC) released a report titled “Options for Deposit Insurance Reform” (Report). The Report provides a comprehensive overview and discusses options to reform the financial stability concerns with the deposit insurance system. As stated in the Report, the leading public policy objectives of deposit insurance are to promote financial stability and protect depositors from loss. In a statement issued along with the Report, FDIC Chairman Martin J. Gruenberg stated that the Report “is an effort to place these recent developments in the context of the history, evolution, and purpose of deposit insurance since the FDIC was created in 1933.” Chairman Gruenberg also expressed his view that the Report serves as a starting point for consideration of the issues surrounding deposit insurance.

The Report provides context surrounding the history of deposit insurance, comparing the differences between today’s landscape and the landscape at the FDIC’s creation in 1933. The Report discusses the objectives of deposit insurance and ways in which the objectives can be supported, and it addresses possible consequences, such as bank regulation and supervision, deposit insurance pricing, and fund adequacy. Finally, the Report details three options for reform of the United States’ national deposit insurance system: Limited (which is the status quo), Unlimited, and Targeted Coverage. The Report identifies Targeted Coverage as having the greatest potential for meeting the fundamental objectives of deposit insurance relative to its costs.

The Report also points out that several developments suggest that the banking system has evolved in ways that could increase its exposure to deposit runs, including technological changes that increase the speed with which information, or misinformation, is disseminated and the speed with which depositors can withdraw funds. The Report also acknowledges the potential “moral hazard” associated with deposit insurance. In this regard, Chairman Gruenberg stated: “While acknowledging that deposit insurance can create moral hazard by providing an incentive for banks to take on greater risk, the report underscores that regulation, supervision, and deposit insurance pricing are essential for helping the deposit insurance system meet its financial stability and depositor protection objectives while constraining moral hazard.”

Reprinted with permission from the American Bar Association’s Business Law Today May Month-In-Brief: Business Regulation & Regulated Industries.

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Published Article

FinCEN Proposes Deadline to File Beneficial Ownership Information (BOI) Reports

November 2, 2023

On September 27, 2023, the Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking (“NPRM”) in order to extend the deadline for reporting companies that were created or registered in 2024 to file the initial beneficial ownership information (“BOI”) reports.

Published Article

FinCEN Releases Beneficial Owner Reporting Compliance Guide

October 2, 2023

On September 18, 2023, the United States Department of the Treasury Financial Crimes Enforcement Network (FinCEN) announced and published a Small Entity Compliance Guide aimed to assist the small business community in complying with the beneficial ownership information reporting rule.

Published Article

Interagency Guidance on Risks Associated with a Third-Party Relationship

July 3, 2023

On June 6, 2023, the Board of the Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) (collectively, “Agencies”) issued final joint guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology companies or “FinTechs” (“Interagency Guidance”).

Published Article

OCC and FDIC Issue Guidance on Overdraft Fees

June 1, 2023

On April 26, 2023, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), (collectively “Agencies”) each individually released supervisory guidance to ensure that each respective Agencies’ supervised institutions are aware of the consumer compliance risks associated with assessing overdraft fees on a transaction that was authorized against a positive balance but settled against a negative balance (APSN). Both sets of guidance expand on previously issued guidance by each respective agency.

Published Article

California DFPI Proposes Second Modification to Student Loan Servicing Regulations

April 3, 2023

On March 6, 2023, the California Department of Financial Protection and Innovation (“DFPI”) issued a notice of second modifications to proposed regulations under the Student Loan Servicing Act (“Act”) (“Amendment”). Previously, in September 2022, DFPI issued proposed rules to provide additional detail and clarity to the Student Loans: Borrower Rights law, which became effective January 1, 2021. The Amendment provides additional clarity in the relevant definitions and regarding the borrower’s rights with respect to electronic payment cutoff times, and also technical reporting requirements.

Published Article

FinCEN Invites Comment on Final Beneficial Ownership Information Reporting Rule

February 2, 2023

On January 17, 2023, the Financial Crimes Enforcement Network (“FinCEN”) published a notice inviting comment on the Beneficial Ownership Information Reporting Requirements final rule (“Final BOI Reporting Rule”) that was published on September 30, 2022. Interested parties are invited and welcome to submit comments on or before March 20, 2023.

Published Article

Federal Banking Agencies Issue Joint Statement on Risks Associated with Crypto-Assets

February 2, 2023

On January 3, 2023, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller of the Currency (“OCC”) (collectively “the Agencies”) issued a joint statement on the risks of crypto-assets to banking organizations. The statement came after a year of twists and turns for the cryptocurrency industry. The Agencies highlighted the “significant volatility and the exposure of vulnerabilities in the crypto-asset sector.”