Treatment of U.S. Banks’ Foreign Branch Deposits: FDIC Board of Directors Issues Proposed Rule to Exclude All Foreign Branch Deposits of U.S. Banks from the Definition of “Deposit” for Purposes of Deposit Insurance Coverage, But Treat Dually-Payable Foreign Branch Deposits as Deposit Liabilities for Purposes of Depositor Preference

Sullivan & Cromwell LLP - February 13, 2013

Yesterday, the FDIC issued a Notice of Proposed Rulemaking (the “NPR”) to amend its deposit insurance regulations to provide that deposits carried on the books and records of a foreign branch of a U.S. bank are not insured by the FDIC, whether or not those deposits are also payable at a U.S. office of the bank. Foreign branch deposits of a U.S. bank that are payable at both the foreign branch and at a U.S. office (dually-payable deposits), however, would be considered “deposit liabilities” for purposes of the Federal Deposit Insurance Act’s (the “FDI Act”) depositor preference regime.