FDIC proposes simplifying insurance coverage rules


The Federal Deposit Insurance Corp. on July 20 issued a proposed rule to simplify aspects of the agency’s insurance coverage standards. 

A key change would simplify coverage for deposits held in connection with trusts by merging those two deposit insurance categories and applying a simpler, common calculation to determine coverage for all trust accounts. Under the proposal, depositor trust accounts would be insured up to $250,000 multiplied by the number of trust beneficiaries, not exceeding five — limiting FDIC coverage for each grantor’s trust deposits to $1.25 million.

The new rule would also make the trust rules consistent and easier to understand for bankers and depositors, and also facilitate prompt payment of deposit insurance by the FDIC in case of an insured depository institution’s failure. The proposal amends the rule that governs coverage for mortgage servicing accounts to allow principal and interest funds advanced by a mortgage servicer to be included in the deposit insurance calculation. 

 Currently, the FDIC receives more inquiries related to deposit insurance coverage for trust deposits than all other types of deposits combined, the agency said.

Doug Wareham, president & CEO of the Kansas Bankers Association, said his organization is aware that “it has been somewhat complicated” for people overseeing irrevocable trusts to determine what FDIC coverage applies and supports the “spirit” of the proposal, adding that the KBA and member banks support insurance coverage changes that make it easier for depositors to maintain and calculate coverage. 

Heather MacKinnon of the Wisconsin Bankers Association said the proposed revisions will likely “have a net-neutral effect” on banks. She added, however, that she is awaiting feedback on the proposal from ABA members and there is potential concern on whether the proposed policy would reduce deposit insurance coverage.   

Comments on the proposed rule will be accepted for 60 days after publication in the Federal Register.



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