FDIC Rule: Unlimited Insurance on Non-Interest Accounts

FDIC Chairman Sheila BairBeginning Dec. 31 of this year, federally-insured non-interest bearing transaction accounts will have unlimited deposit insurance coverage through Dec. 31, 2012, the Federal Deposit Insurance Corp. announced today.
The FDIC issued the proposed rule as it begins implementing provisions of the Wall Street Reform and Consumer Protection Act signed into law by President Obama in July.
Under the proposal, the FDIC creates a temporary deposit insurance category for traditional, non-interest bearing transaction accounts – most often business checking accounts. These types of accounts are used by businesses for payrolls, accounts payable and other functions.
A similar program was implemented by the FDIC at the height of the financial crisis in late 2008.
“In October 2008, the FDIC instituted a program providing unlimited protection for non-interest bearing transaction accounts at participating banks and found it to be highly successful in providing stability at those institutions during one of the most severe economic downturns in our history,” said FDIC Chairman Sheila C. Bair.
The FDIC’ current voluntary Transaction Account Guarantee (TAG) program will expire at the end of the year. But the reform legislation’s program applies to all FDIC-insured institutions and it will cover only traditional checking accounts that do not pay interest.
The proposed rule emphasizes that starting Jan. 1, 2011, low-interest consumer checking accounts and Interest on Lawyer Trust Accounts (IOLTAs) — currently protected under the TAG Program —  will no longer be eligible for an unlimited guarantee.
The FDIC will accept comments on the proposed rule until Oct. 15.
“The shorter than usual comment period is necessary to give insured institutions adequate time to implement the notice and disclosure requirements by December 31, 2010,” the FDIC’s statement said.
See the FDIC’s proposed rule.

Leave a Reply

Your email address will not be published. Required fields are marked *