In November 2016, the Federal Deposit Insurance Corporation (FDIC) finalized its deposit calculations rule that would create new recordkeeping requirements for 38 of the largest banks in order to facilitate a timely payout to depositors if a bank fails. The final rule requires banks to have accessible, within 24 hours of a failure, complete records on each deposit account, account owner, and beneficiary in order to: (a) accurately classify each account into the FDIC’s account ownership taxonomy (see Appendix in download), (b) consistently assign a unique identifier to each depositor, and (c) match each depositor to all the accounts in which they have an ownership or beneficiary interest. Based on that information, banks must be able to quantify the total amount of insured and uninsured deposits for most deposit accounts including all transactional accounts (i.e., accounts which customers rely on to make regular deposits or withdrawals). Currently, most firms have the ability to do this only for selected types of accounts.
The rule was originally proposed in February 2016 and is the latest attempt by the FDIC to improve the resolvability of financial institutions. The proposal garnered substantial industry comments, especially concerning the proposed compliance timeline, the large volume of information required to be collected and its confidentiality, and the exception process for uncollectable data. The final rule provides some relief in all of these areas.
1. Extended compliance runway and reduced certification and testing requirements.
2. Implementation is still a major investment.
3. The final rule introduces a bifurcated approach for data collection.
4. 24 hour requirement for third parties' transactional accounts.
5. Identifying and correcting missing or inaccurate data will be a substantial effort.
This first take expounds on these five key points.