"The term 'insured deposit' means the net amount due to any depositor for deposits in an insured bank (after deducting offsets) less any part thereof which is in excess of $10,000.” Recommendation A provision should be added after this sentence to include in the net amount of deposits in determining insured deposits any interest accruing up to the date of the closing of an insured bank. Reason Interest which has been credited to a deposit account is considered a deposit. Interest which has accrued but which has not been credited to a deposit account is not considered a deposit and is not included in determining insured deposits. Interest is generally paid or credited semiannually and quarterly. We believe that depositors should receive this protection and the paper work involved in any receivership for small interest claims should be eliminated with resulting economies. This change would involve a relatively small increase in insured deposits. 92. TRANSFERRED DEPOSIT AS PAYMENT OF INSURED DEPOSIT IN A CLOSED BANK Existing law Subsection (n) of section 3 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1813 (n)): "The term 'transferred deposit' means a deposit in a new bank or other insured bank made available to a depositor by the Corporation as payment of the insured deposit of such depositor in a closed bank, and assumed by such new bank or other insured bank." Subsection (f) of section 11 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1821 (f)): "Whenever an insured bank shall have been closed on account of inability to meet the demands of its depositors, payment of the insured deposits in such bank shall be made by the Corporation as soon as possible, subject to the provisions of subsection (g) of this section either (1) by cash or (2) by making available to each depositor a transferred deposit in a new bank in the same community or in another insured bank in an amount equal to the insured deposit of such depositor: Provided, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in any case where the Corporation is not satisfied as to the validity of a claim for an insured deposit, it may require the final determination of a court of competent jurisdiction before paying such claim." Recommendation These subsections should be amended to expressly provide that a transferred deposit is payable on demand. Reason 1 A transferred deposit made available to a depositor as payment of his insured deposit in a closed bank is a demand deposit. It was expressly provided in the Federal Deposit Insurance Act before the amendments of 1950 (12 U. S. C. 264 (1) (6)) that a transferred deposit was "subject to withdrawal on demand." The rules and regu lations of the Corporation provide that a transferred deposit is a demand deposit (12 C. F. R. 305.1). The reassurance of depositors on this important matter makes it desirable that the statute again expressly provide that a transferred deposit is payable on demand. Existing law 93. DEFINITION OF BRANCH Subsection (o) of section 3 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1813 (o)): "The term 'branch' includes any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State of the United States or in any Territory of the United States, Puerto Rico, Guam, or the Virgin Islands at which deposits are received or checks paid or money lent." Recommendation This subsection should be amended to change the definition of the word "branch" to include a branch anywhere rather than a branch in the places named in the present definition. Reason An insured State nonmember bank must obtain the consent of the Corporation to establish or move a branch (12 U. S. C. 1828 (d)). The definition of the word "branch" in subsection (o) of section 3 is limited to one located in any State of the United States or in any Territory of the United States, Puerto Rico, Guam, or the Virgin Islands, which are the places where deposits are insured. The establishment of branches by national banks and by State member banks in other places must be approved by the Board of Governors of the Federal Reserve System (12 U. S. Č. 321, 601). Because of the risks involved to the capital funds of an insured State nonmember bank in establishing a branch anywhere, the consent of the Corporation should be required to the establishment of such a branch anywhere. 94. INSURANCE OF DEPOSITS IN NATIONAL BANKS Existing law The first sentence of subsection (b) of section 4 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1814 (b)): "Every national member bank which is authorized to commence or resume the business of banking, and which is engaged in the business of receiving deposits other than trust funds as herein defined, and every such national nonmember bank which becomes a member of the Federal Reserve System, and every State bank which is converted into a national member bank or which becomes a member of the Federal Reserve System, and which is engaged in the business of receiving deposits, other than trust funds as herein defined, shall be an insured bank from the time it is authorized to commence or resume business or becomes a member of the Federal Reserve System." The first sentence of section 5 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1815): "Subject to the provisions of this Act, any national nonmember bank which is engaged in the business of receiving deposits, other than trust funds as herein defined, upon application by the bank and certifi cation by the Comptroller of the Currency in the manner prescribed in subsection (b) of section 4 and any State nonmember bank, upon application to and examination by the Corporation and approval by the Board of Directors, may become an insured bank." Recommendation These provisions should be amended to require any national bank to be an insured bank. Reason All national banks in the States of the United States and the District of Columbia are required to be members of the Federal Reserve System (12 U. S. C. 282 and 222) and to be insured banks. A national bank in Alaska, Hawaii, Puerto Rico, Guam, or the Virgin Islands may become an insured bank. The Bishop National Bank of Hawaii is now the only national bank that is not insured. For the purpose of uniformity no national bank should be able to deny Federal deposit insurance to its depositors. 95. CHANGE OF TERM "THROUGH EXAMINATION" TO "EXAMINATION” Existing law The second sentence of section 5 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1815): "Before approving the application of any such State nonmember bank, the Board of Directors shall give consideration to the factors enumerated in section 6 and shall determine, upon the basis of a thorough examination of such bank, that its assets in excess of its capital requirements are adequate to enable it to meet all of its liabilities to depositors and other creditors as shown by the books of the bank." Recommendation This sentence should be amended to change the words "a thorough examination" to the words "an examination." Reason Reference is made in the act in several places to examination without the use of "thorough." This is an editorial change to conform this section with the general usage of the act. Existing law 96. MAINTENANCE OF ASSESSMENT RECORDS The fourth sentence of subsection (a) of section 7 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1817 (a)): "Each insured bank, as a condition to the right to make any such deduction or exclusion in determining its assessment base, shall maintain such records as will readily permit verification of the correctness thereof." Recommendation This sentence should be amended to provide that the bank shall be required to maintain such records only for a period of 5 years. Reason It is an unnecessary burden upon the insured banks to require them to maintain such records indefinitely. Subsection (g) of section 7 provides a 5-year statute of limitation on actions brought for the recovery of any assessment due to the Corporation or for the recovery of any amount paid to the Corporation in excess of the amount due, except where the bank has filed a false or fraudulent certified statement with intent to evade the payment of assessment, in which case the claim shall not be deemed to have accrued until the discovery by the Corporation that the certified statement was false or fraudulent. The effect of the proposed amendment would be that, in an action for assessments brought by the Corporation beyond the 5-year period in connection with an allegedly false or fraudulent certified statement, the failure of the bank to retain such records or the destruction thereof would not prejudice the bank's defense. Existing law 97. ASSESSMENT CREDITS Subsection (d) of section 7 of the Federal Deposit Insurance Act (12 U. S. C. 1817 (d)): "As of December 31, 1950, and as of December 31, of each calendar year thereafter, the Corporation shall transfer 40 per centum of its net assessment income to its capital account and the balance of the net assessment income shall be credited pro rata to the insured banks based upon the assessments of each bank becoming due during said calendar year. Each year such credit shall be applied by the Corporation toward the payment of the total assessment becoming due for the semiannual assessment period beginning the next ensuing July 1 and any excess credit shall be applied upon the assessment next becoming due. The term "net assessment income" as used herein means the total assessments which become due during the calendar year less (1) the operating costs and expenses of the Corporation for the calendar year; (2) additions to reserve to provide for insurance losses during the calendar year, except that any adjustments to reserve which result in a reduction of such reserve shall be added; and (3) the insurance losses sustained in said calendar year plus losses from any preceding years in excess of such reserves. If the above deductions exceed in amount the total assessments which become due during the calendar year, the amount of such excess shall be restored by deduction from total assessments becoming due in subsequent years." Recommendation (a) In the first sentence the words "As of December 31, 1950" and "thereafter" should be deleted. (b) The second sentence should be changed to specifically authorize the application of the credit to any assessments due which are not in dispute; and to expressly authorize the refund of the assessment credit to an insured bank in liquidation or to its nominee. (c) The third sentence should be amended to permit the inclusion in "total assessments", i. e., the gross assessment income, any overpayments for previous years which are discovered during the calendar year and, the converse, to permit the deduction of overpayments made in prior years which are discovered during the calendar year. (d) Item (1) in the third sentence should be amended to read "the administrative and operating costs of the Corporation". (e) Items (2) and (3) in the third sentence should be amended to authorize the Corporation in computing the "net assessment income" to include reserves for potential losses other than insurance losses. Reasons (a) Such words are obsolete and therefore should be deleted. (b) Frequently office audits of certified statements show that a bank has erroneously computed its assessment. It would facilitate the handling of the such underpayments, both for the bank and this Corporation, if the Corporation were permitted to apply the credit to such underpayments. There should also be an express authorization in the law to refund assessment credits to a bank going out of business. As the statute now reads the credit "shall be applied" on assessments which become due in the future. (c) The Corporation is required to compute the assessment credit at the end of each calendar year and to credit the same pro rata to the insured banks. When underpayments or overpayments of assessments are later discovered, through audits or otherwise, it is impractical to recompute such credit formula and to readjust the pro rata credit given to the insured banks for that calendar year to include such underpayments or overpayments, as the case may be. Their effect on the credit formula would, of course, be infinitesimal. There should be express authorization permitting such underpayments or overpayments to be allocated to the calendar year in which they are paid or refunded, and thus be subject to the credit ratio applicable for that year. (d) The substitution of the words "administrative and operating costs" for "operating costs and expenses" is merely a technical change to conform the statutory language to accounting terms. To limit such costs to those "for the calendar year" is to restrictive and should be enlarged to permit the inclusion of any such costs which for any reason were incurred and not paid in previous years. (e) As potential losses may include losses which are not technically insurance losses, the reserves should not be limited to those established for insurance purposes. 98. LIMITATION ON ACTIONS FOR ASSESSMENT PAYMENTS Existing law Subsection (g) of section 7 of the Federal Deposit Insurance Act, as amended (12 U. S. C. 1817 (g)): "The Corporation, in a suit brought at law or in equity in any court of competent jurisdiction, shall be entitled to recover from any insured bank the amount of any unpaid assessment lawfully payable by such insured bank to the Corporation, whether or not such bank shall have filed any such certified statement and whether or not suit shall have been brought to compel the bank to file any such statement. No action or proceeding shall be brought for the recovery of any assessment due to the Corporation, or for the recovery of any amount paid to the Corporation in excess of the amount due to it, unless such action or proceeding shall have been brought within five years after the right accrued for which the claim is made, except where the insured bank |