In brief
- FDIC Part 370 requires covered institutions with over 2 million deposit accounts to calculate the amount of deposit insurance coverage available for each deposit account
- Data requirements should be built to support FDIC 370 and improve enterprise data capability and analytics. Enhancements to CIF, cross-sell, risk, finance, financial crime and CRM can be supported
During the 2008 financial crisis, the Federal Deposit Insurance Corporation (FDIC) realized that it did not have sufficient resources or information to calculate the potential deposit insurance liability of defaulting banks. FDIC 370 (12 CFR Part 370) was introduced to clarify the classification of accounts and support the FDIC deposit exposure calculation in the event of institutional distress.
FDIC 12 CFR Part 370 requires each covered institution with over 2 million deposit accounts to calculate the deposit insurance coverage available for each deposit account. This regulation is due April 1, 2024.
Here’s a closer look:
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Covered institution data |
• Each covered institution must be able to calculate the FDIC deposit insurance available for each account • If the CI fails, the FDIC 370 rule uses the CI’s IT system to calculate the amount of deposit insurance available and debit the uninsured amount from each deposit account |
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Regulation |
• Classify accounts • Determine ownership right and capacity for each beneficial interest • Receive, store and process information required to calculate deposit insurance coverage as outlined in 12 CFR § 370.3(b) |
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Scope |
• Deposit accounts (demand, checking, debit, prepaid) • Joint accounts • Revocable trusts • Irrevocable trusts • Certain retirement accounts • Employee benefit plan accounts • Business/organization accounts, GOV1 • Government accounts (public unit accounts) • Mortgage servicing • Depository institution trustee accounts • Annuity contract accounts • Public bond accounts • Custodian accounts for American Indians • Department of Energy accounts under the Bank Deposit Financial Assistance Program |
The regulation could not be more timely. Recent inflation and tightening of the monetary policy through increased interest rates have been detrimental to banks. Banks invest heavily in government (treasury and municipal) bonds with regulatory capital, traditionally granted low or “risk-free” status. As interest rates went up, lower-yield bond prices fell, eroding billions in regulatory capital and leaving banks underfunded.
Once a bank is perceived as distressed, a run on deposits compounds the capital shortage and leaves the bank vulnerable. This has created a large and somewhat unknown exposure to the FDIC. The recent failure of Silicon Valley Bank is estimated to cost the FDIC Deposit Insurance Fund approximately $20 billion.
Where’s the opportunity?
FDIC 370 seems straightforward but covers several substantial core banking fundamentals. Going beyond compliance, FDIC 370 information opens up several opportunities to enhance enterprise data capability. Enhancements to CIF, cross-sell/penetration, risk, finance, financial crime and CRM can be supported.
If we look at the individual components of FDIC 370, we see the potential to revisit and improve product information, customer information, account ownership, household aggregation, balance and insurance information. This will yield business benefits supporting core banking modernization and new channel development.
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FDIC 370 requirement |
Improvement opportunity |
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Deposit account ownership category |
Standardize product master |
• Standardized account/product classifications • Account linkages and cross-sell relationships • Household and share-of-wallet relationships |
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Transactional flag |
Transaction standardization |
• Align transactions and standardize • Volume, fee and transaction patterning • Channel usage and cross-sell |
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Retained interest |
Improve balance and usage statistics |
• Balance tracking • Insured/uninsured status • Product diversification and upsell potential |
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Amount of overfunding |
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Amount of account participant’s non-contingent interest |
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Amount of account participant’s contingent interests |
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Account participant full name |
Customer information file |
• CIF consolidation and standardization • Household associations • Business associations • Product and cross-sell associations • Data strategy and data quality |
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Account participant type |
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Account participant's government-issued ID |
Client onboarding and data privacy |
• Onboarding process alignment and optimization • Channel verification and authentication • GLBA data masking and permissions • Regulatory reporting |
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Account participant's government-issued ID type |
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Data convergence
FDIC 370 data requirements should be built to support enterprise data capability and analytics. Enhancements to CIF, cross-sell/penetration, risk, finance, financial crime and CRM can be supported.
Talk to an expert
If you’d like to discuss how Zoreza Global can help you safeguard and guide your organization through the economic and technological complexities of implementing FDIC 370, visit our website or contact us.
Edward Grau
Edward Grau has 30 years of experience in Banking and Capital Markets. He has been a subject matter expert on some of the largest bank enterprise data transformations. Prior to Zoreza Global, he was an interim CFO of a bank and partner at Accenture responsible for financial services risk management. He is a founding member of PRMIA and a Risk Technology Steering Committee member. He holds CFA, Professional Risk Manager (PRMIA), Financial Risk Manager (GARP) and CPA (DE) designations. He is an AWS Certified Cloud Practitioner.
