FDIC Part 370 Deposits Reporting
FDIC Part 370 Deposits Reporting
Ongoing Regional Bank Failures: How Long Does the Market Turmoil Go On?
With the latest domino having fallen on May 1, 2023, many people are talking about what may be contributing to the turmoil. There is the obvious, the currently “under review” deposit-monitoring requirement by the U.S. Federal government. There is also the inadvertent; the worry among regular citizens about the safety of their hard-earned savings, even for those – the majority – with balances below the $250 thousand FDIC threshold, provoking “panic” withdrawals from their banks. This turbulence has thrown the managing, reporting, and analyzing of a bank’s uninsured deposits under the regulatory and consumer spotlights.
The recent turmoil leaves market participants widely anticipating the FDIC zeroing in on Part 370 compliance, including several critical deposit reporting/monitoring elements for which all banks should prepare:
- Expectations around quicker turnaround of Part 370 compliance gaps
- Tighter examination of reconciliations to other key reports such as Consolidated Reports of Condition and Income (Call Reports), FR 2052a, and FR 2900
- More frequent on-site exams and ad hoc regulatory requests
Why are FDIC Part 370 and similar rules important?
The recent turmoil is important for two critical reasons.
Deposits Monitoring And Reporting
First, it has put an intense focus on regulatory compliance both in terms of:
- Accuracy: For example, insurance coverage by customer account
- Timeliness: Ensuring that deposits are paid out as quickly as possible
Deposit Insurance
Second, it has moved deposit insurance to the forefront of consumer awareness and therefore confidence in their banks. Of course, customers want to be sure that if their bank should fail, they will be made whole quickly from the FDIC insurance. Now, even more importantly, customers are also looking for their banks to help them maximize their insurance coverage across their banking relationship. Having the proper tools in place can help banks quickly identify large areas of uninsured deposits and ensure they are helping their customers find ways to maximize their insurance coverage (i.e., by spreading the customer’s total deposited amount over various account structures).
Banks are also seeking to maximize coverage by entering into reciprocal deposit agreements. The regulatory management and optimization of reciprocal deposits also plays a key role in maximizing insurance coverage.
What are the technical challenges created by FDIC Part 370?
Technical challenges revolve around managing millions of records at the granular-record level: accounts, customers, alternative recordkeeping, credit balance, etc. A key Part 370 tenet is that covered institutions need to accurately and timely report insurance coverage.
To accomplish this requirement from a technical perspective, banks must:
- Be able to analyze each customer’s account at the record and attribute level and quickly identify issues in the data or produce accurate insurance coverage.
- Implement an automated process, as the FDIC expects them to execute their Part 370 workflow on a daily basis, iteratively, until all insurance deposits have been released.
Along with this technical challenge, covered institutions need a mechanism to quickly report important deposit metrics to the FDIC to ensure ongoing compliance, both as a summary and at the account level.