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FDIC board approves publication of NPR to tighten recordkeeping for custodial deposit accounts
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Summary
The FDIC board voted to publish a notice of proposed rulemaking that would require certain banks to maintain beneficiary-level records for custodial deposit accounts, impose continuity and contractual controls over third-party recordkeeping, and subject noncompliance to supervisory enforcement; the NPR will be open for 60 days of public comment.
The Federal Deposit Insurance Corporation board voted to publish a notice of proposed rulemaking that would require banks holding certain custodial deposit accounts to maintain records identifying beneficial owners and balances, strengthen internal controls and reconciliation, and ensure direct, continuous access to third-party records.
FDIC staff told the board the rule is intended to "promote the FDIC's ability to promptly make deposit insurance determinations in the event of a bank's failure," citing the recent Synapse bankruptcy as an example of how deficient third-party records can leave consumers unable to access funds for months. "Synapse's bankruptcy has affected consumers' ability to access their funds placed at banks for a number of months," staff said in the presentation.
The proposed rule would apply to custodial deposit accounts that meet three conditions: the account is established for the benefit of beneficial owners, holds commingled deposits for multiple beneficial owners, and permits beneficial owners to authorize transfers through the account. Staff said the definition is intended to capture omnibus custodial accounts used to make payments on behalf of consumers while exempting accounts already subject to other recordkeeping regimes, such as trust deposits and accounts established by brokers, dealers or investment advisers.
Key operational requirements in the NPR include maintaining records that identify each beneficial owner, the balance attributable to each beneficial owner, and the ownership category; maintaining those records in a specific electronic file format; performing reconciliations and daily balance accuracy checks for accounts with transactional features; and establishing internal continuity plans that preserve access to records in the event of business interruption or third-party insolvency. The proposal would allow banks to have third parties maintain records only if the bank retains direct, continuous, and unrestricted access to the records and the bank implements independent annual validations of third-party recordkeeping.
Miron Wamwosin, assistant director in the division of deposit and consumer protection, described compliance requirements, including written policies and procedures and an annual certification and report "signed by the bank's chief executive officer, chief operating officer, or the highest ranking official" attesting to implementation and accuracy. He said supervisory and enforcement tools, including civil money penalties, could be used for noncompliance.
Board members generally expressed support for issuing the NPR but flagged concerns. Vice Chairman Hill said he would vote in favor while asking for a minimum threshold for application of the rule and questioning the CEO/COO certification requirement, arguing it "could be interpreted to impose strict liability in the event any customer balance is found to be inaccurate at any point in time." Hill said that, while supportive, he expects commenters to address exemptions and thresholds.
Director McKinnon said the proposal is a good step but raised questions about whether it is fully within the FDIC's statutory authority and whether it reconciles with existing pass-through insurance regulations. Director Chopra (representing the OCC perspective) urged interagency coordination and called the NPR part of broader efforts to address fintech-related risks.
The chair called the motion to approve the resolution to publish the NPR. The board voted by roll call: Chairman Gruenberg — aye; Vice Chairman Hill — aye; Director McKernan — aye; Director Hsu — aye; Director Chopra — aye. The motion was adopted and the NPR will be published for a 60-day comment period in the Federal Register.
The NPR invites public comment on the scope, exemptions, the certification and reporting requirements, the electronic record format, and implementation details. If adopted as proposed, staff said the rule is intended to "enable the FDIC to pay deposit insurance claims as soon as possible following such a failure" and to help consumers regain timely access to funds when third-party custodians experience disruption.
