Estimating Uninsured Deposits
for your Call Report
Imagine two deposit accounts. On the surface, they look quite similar. Each is held in the name of a revocable trust. On one, however, the grantor of the trust is Katie, and the twelve beneficiaries consist of three of her friends, four charities, and five nieces. The account has $1.2 million, but it will be insured as if it were an individual account in Katie's name because none of the beneficiaries is a "qualified" beneficiary. Maximum coverage, $100,000 -- and that's assuming she doesn't have other funds in a sole ownership account at the same institution. Uninsured - $1.1 million. Rex is the grantor of the other trust and the beneficiaries who are scheduled to receive their share at his death, no strings attached, are his two brothers, two sisters, parents, spouse, six kids, and four grandchildren. Total potential deposit insurance coverage? $1.7 million (17 qualified beneficiaries x $100,000 per beneficiary.)
When it comes time to do your Call Report, how do you tell the two apart?
On the Call Report Instructions for the March 31, 2002 reports, banks are required to report the estimated amount of the bank's deposits that is not covered by federal deposit insurance. The call report instructions recognize that a bank may have multiple automated information systems for different types of deposits and the capabilities of a bank's information systems to provide an estimate of its uninsured deposits will differ from one bank to another and may improve over time within an individual institution.
The ground rules are as follows:
If you have automated systems in place that enable you to identify jointly owned accounts and estimate the deposit insurance coverage of these deposits, the higher level of insurance for joint accounts should be taken into consideration;
If you have automated information systems that enable you to classify accounts by deposit owner and/or ownership capacity, you should incorporate this information into your estimate of the amount of uninsured deposits by aggregating accounts held by the same deposit owner in the same ownership capacity before applying the $100,000 insurance limit. (This would include revocable trusts, retirement accounts, business, irrevocable trusts, single ownership, joint ownership.)
If you don't have automated information systems, you may use nonautomated information, such as paper files or less formal knowledge of your depositors, if such information provides reasonable estimates of appropriate portions of your uninsured deposits. Note, however, that a bank's use of such nonautomated sources of information is considered appropriate unless errors associated with the use of such sources would contribute significantly to an overall error in the FDIC's estimate of the amount of insured and uninsured deposits in the banking system.
How ready are you for this reporting requirement? Do you have success strategies you can share with others? Please tell us what you think in Bankers' Threads.
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