S. 1562

Safe and Fair Deposit Insurance Act of 2005

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Contents

II

109th CONGRESS

1st Session

S. 1562

IN THE SENATE OF THE UNITED STATES

July 29, 2005

Mr. Enzi (for himself, Mr. Johnson, Mr. Allard, and Mr. Hagel) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To provide for the merger of the bank and savings association deposit insurance funds, to modernize and improve the safety and fairness of the Federal deposit insurance system, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Safe and Fair Deposit Insurance Act of 2005.

(b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

TITLE I—Merger of the Deposit Insurance Funds

Sec. 101. Short title.

Sec. 102. Merger of BIF and SAIF.

Sec. 103. Establishment of the Deposit Insurance Fund.

Sec. 104. Technical and conforming amendments to the

Federal Deposit Insurance Act.

Sec. 105. Other technical and conforming amendments.

Sec. 106. Effective date.

TITLE II—Deposit insurance modernization and improvement

Sec. 201. Short title.

Sec. 202. Increase in Federal insurance coverage.

Sec. 203. Designated reserve ratio.

Sec. 204. Assessment credits and dividends.

Sec. 205. Regulations required.

Sec. 206. Studies of potential changes to the Federal deposit insurance system.

Sec. 207. Effective date.

2.

Definitions

In this Act—

(1)

the term Administration means the National Credit Union Administration;

(2)

the term Board means the Board of Directors of the Federal Deposit Insurance Corporation (other than in connection with the National Credit Union Administration Board);

(3)

the term Corporation means the Federal Deposit Insurance Corporation;

(4)

the term designated reserve ratio means the reserve ratio designated by the Board under section 7(b)(3) of the Federal Deposit Insurance Act, as amended by this Act;

(5)

the terms Fund and Deposit Insurance Fund mean the Deposit Insurance Fund established under section 11(a)(4) of the Federal Deposit Insurance Act, as amended by this Act;

(6)

the term insured depository institution has the same meaning as in section 3 of the Federal Deposit Insurance Act; and

(7)

the term reserve ratio means the ratio of the fund balance of the Deposit Insurance Fund to the aggregate estimated amount of deposits insured by the Fund.

I

Merger of the Deposit Insurance Funds

101.

Short title

This title may be cited as the Insurance Funds Merger Act of 2005.

102.

Merger of BIF and SAIF

(a)

In general

(1)

Merger

The Bank Insurance Fund and the Savings Association Insurance Fund shall be merged into the Deposit Insurance Fund.

(2)

Disposition of assets and liabilities

All assets and liabilities of the Bank Insurance Fund and the Savings Association Insurance Fund shall be transferred to the Deposit Insurance Fund.

(3)

No separate existence

The separate existence of the Bank Insurance Fund and the Savings Association Insurance Fund shall cease on the effective date of the merger thereof under this section.

(b)

Repeal of outdated merger provision

Section 2704 of the Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is repealed.

103.

Establishment of the Deposit Insurance Fund

(a)

In general

Section 11(a)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended—

(1)

by redesignating subparagraph (B) as subparagraph (C);

(2)

by striking subparagraph (A) and inserting the following:

(A)

Establishment

There is established the Deposit Insurance Fund, which the Corporation shall—

(i)

maintain and administer;

(ii)

use to carry out its insurance purposes, in the manner provided by this subsection; and

(iii)

invest in accordance with section 13(a).

(B)

Uses

The Deposit Insurance Fund shall be available to the Corporation for use with respect to Deposit Insurance Fund members.

;

(3)

by striking (4) General provisions relating to funds.— and inserting the following:

(4)

Establishment of the Deposit Insurance Fund

;

(4)

in subparagraph (C), as redesignated by paragraph (1) of this subsection, by striking Bank Insurance Fund and the Savings Association Insurance Fund and inserting Deposit Insurance Fund; and

(5)

by adding at the end the following:

(D)

Deposits

All amounts assessed against insured depository institutions by the Corporation shall be deposited in the Deposit Insurance Fund.

.

(b)

Merger-Related amendments to the Federal Deposit Insurance Act

(1)

Definitions

Section 3(y) of the Federal Deposit Insurance Act (12 U.S.C. 1813(y)) is amended to read as follows:

(y)

Definitions relating to the Deposit Insurance Fund

(1)

Deposit Insurance Fund

The terms Deposit Insurance Fund and Fund mean the fund established under section 11(a)(4).

.

(2)

Assessments

Section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817) is amended—

(A)

by striking subsection (l);

(B)

by redesignating subsections (m) and (n) as subsections (l) and (m), respectively; and

(C)

in subsection (b), by striking paragraph (2) and inserting the following:

(2)

Assessments

(A)

In general

Each insured depository institution shall pay assessments to the Corporation in such amounts and at such time or times as the Board of Directors may require.

(B)

Factors to be considered

In setting assessments for insured depository institutions, the Board of Directors shall consider—

(i)

the estimated operating expenses of the Deposit Insurance Fund;

(ii)

the estimated case resolution expenditures and income of the Deposit Insurance Fund;

(iii)

the projected effects of assessments on the earnings and capital of insured depository institutions;

(iv)

the need to maintain a risk-based assessment system under paragraph (1); and

(v)

any other factors that the Board of Directors may determine to be appropriate.

(C)

Notice of assessments

The Corporation shall notify each insured depository institution of assessments charged to that institution.

(D)

Newly insured institutions

To facilitate the administration of this section, the Board of Directors may waive the requirements of paragraphs (1) and (2) for any assessment period in which a depository institution becomes insured.

.

(3)

Repeal of separate funds provisions

Section 11(a) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)) is amended—

(A)

by striking paragraphs (5), (6), and (7); and

(B)

by redesignating paragraph (8) as paragraph (5).

104.

Technical and conforming amendments to the Federal Deposit Insurance Act

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended—

(1)

in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by striking subparagraph (B) and inserting the following:

(B)

includes any former savings association.

;

(2)

in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking the Bank Insurance Fund or the Savings Association Insurance Fund; and inserting the Deposit Insurance Fund,;

(3)

in section 5(c)(4), by striking deposit insurance fund and inserting Deposit Insurance Fund;

(4)

in section 5(d) (12 U.S.C. 1815(d)), by striking paragraphs (2) and (3);

(5)

in section 5(d)(1) (12 U.S.C. 1815(d)(1))—

(A)

in subparagraph (A), by striking reserve ratios in the Bank Insurance Fund and the Savings Association Insurance Fund as required by section 7 and inserting the reserve ratio of the Deposit Insurance Fund;

(B)

by striking subparagraph (B) and inserting the following:

(2)

Fee credited to the Deposit Insurance Fund

The fee paid by the depository institution under paragraph (1) shall be credited to the Deposit Insurance Fund.

;

(C)

by striking institutions.— and all that follows through general.— and inserting institutions.—; and

(D)

by redesignating subparagraph (C) as paragraph (3) and moving the margin 2 ems to the left;

(6)

in section 5(e) (12 U.S.C. 1815(e))—

(A)

in paragraph (5)(A), by striking Bank Insurance Fund or the Savings Association Insurance Fund and inserting Deposit Insurance Fund;

(B)

by striking paragraph (6); and

(C)

by redesignating paragraphs (7), (8), and (9) as paragraphs (6), (7), and (8), respectively;

(7)

in section 6(5) (12 U.S.C. 1816(5)), by striking Bank Insurance Fund or the Savings Association Insurance Fund and inserting Deposit Insurance Fund;

(8)

in section 7(a)(3) (12 U.S.C. 1817(a)(3))—

(A)

by striking in July; and

(B)

by striking in January;

(9)

in section 7(b) (12 U.S.C. 1817(b))—

(A)

in paragraph (1)—

(i)

in subparagraph (B)(ii), by striking institution’s semiannual assessment and inserting assessments for that institution under subsection (b); and

(ii)

in subparagraph (C)—

(I)

by striking a depository institution’s semiannual assessment and inserting assessments for a depository institution under subsection (b); and

(II)

by striking deposit insurance fund each place that term appears and inserting Deposit Insurance Fund;

(B)

in paragraph (1)(D), by striking each deposit insurance fund and inserting the Deposit Insurance Fund;

(C)

by striking paragraph (4) and redesignating paragraphs (5) through (7) as paragraphs (4) through (6), respectively;

(D)

in paragraph (5), as so redesignated—

(i)

by striking any such assessment and inserting any such assessment is necessary;

(ii)

by striking subparagraph (B);

(iii)

in subparagraph (A)—

(I)

by striking (A) is necessary—;

(II)

by striking Bank Insurance Fund members and inserting insured depository institutions; and

(III)

by redesignating clauses (i), (ii), and (iii) as subparagraphs (A), (B), and (C), respectively, and moving the margins 2 ems to the left; and

(iv)

in subparagraph (C) (as redesignated)—

(I)

by inserting that before the Corporation; and

(II)

by striking ; and and inserting a period; and

(E)

in paragraph (6), as so redesignated, by striking semiannual assessment and inserting assessment under subsection (b);

(10)

in section 7(c) (12 U.S.C. 1817(c))—

(A)

in paragraph (1), by striking institution’s semiannual assessment and inserting assessments for that institution under subsection (b);

(B)

by striking paragraphs (2) and (3); and

(C)

by redesignating paragraph (4) as paragraph (2); and

(11)

in section 7(j)(7)(F) (12 U.S.C. 1817(j)(7)(F)), by striking Bank Insurance Fund or the Savings Association Insurance Fund and inserting Deposit Insurance Fund;

(12)

in section 8 (12 U.S.C. 1818)—

(A)

in subsection (p), by striking semiannual;

(B)

in subsection (q), by striking semiannual and inserting assessment; and

(C)

in subsection (t)(2)(C), by striking deposit insurance fund and inserting Deposit Insurance Fund;

(13)

in section 11 (12 U.S.C. 1821), by striking deposit insurance fund each place that term appears and inserting Deposit Insurance Fund;

(14)

in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by striking , except that— and all that follows through the end of the paragraph and inserting a period;

(15)

in section 11(i)(3) (12 U.S.C. 1821(i)(3))—

(A)

by striking subparagraph (B);

(B)

by redesignating subparagraph (C) as subparagraph (B); and

(C)

in subparagraph (B) (as redesignated), by striking subparagraphs (A) and (B) and inserting subparagraph (A);

(16)

in section 11(p)(2)(B) (12 U.S.C. 1821(p)(2)(B)), by striking institution, any and inserting institution, the;

(17)

in section 12(f)(4)(E)(iv) (12 U.S.C. 1822(f)(4)(E)(iv)), by striking Federal deposit insurance funds and inserting the Deposit Insurance Fund, or any predecessor deposit insurance fund;

(18)

in section 13 (12 U.S.C. 1823)—

(A)

by striking deposit insurance fund each place that term appears and inserting Deposit Insurance Fund;

(B)

in subsection (a)(1), by striking Bank Insurance Fund, the Savings Association Insurance Fund, and inserting Deposit Insurance Fund;

(C)

in subsection (c)(4)(E)—

(i)

in the subparagraph heading, by striking funds and inserting fund; and

(ii)

in clause (i), by striking any insurance fund and inserting the Deposit Insurance Fund;

(D)

in subsection (c)(4)(G)(ii)—

(i)

by striking appropriate insurance fund and inserting Deposit Insurance Fund;

(ii)

by striking the members of the insurance fund (of which such institution is a member) and inserting insured depository institutions;

(iii)

by striking each member’s and inserting each insured depository institution’s;

(iv)

by striking the member’s each place that term appears and inserting the institution’s; and

(v)

in subclause (II), by striking semiannual and inserting applicable assessment;

(E)

in subsection (c), by striking paragraph (11);

(F)

in subsection (h), by striking Bank Insurance Fund and inserting Deposit Insurance Fund;

(G)

in subsection (k)(4)(B)(i), by striking Savings Association Insurance Fund member and inserting savings association;

(H)

in subsection (k)(5)—

(i)

in subparagraph (A), by striking Savings Association Insurance Fund members and inserting savings associations;

(ii)

by striking member’s each place that term appears and inserting savings association’s; and

(iii)

by striking member each place that term appears and inserting savings association;

(19)

in section 14(a) (12 U.S.C. 1824(a)), in the 5th sentence—

(A)

by striking Bank Insurance Fund or the Savings Association Insurance Fund and inserting Deposit Insurance Fund; and

(B)

by striking each such fund and inserting the Deposit Insurance Fund;

(20)

in section 14(b) (12 U.S.C. 1824(b)), by striking Bank Insurance Fund or Savings Association Insurance Fund and inserting Deposit Insurance Fund;

(21)

in section 14(c) (12 U.S.C. 1824(c))—

(A)

in paragraph (2)(A), by striking (7) and inserting (6); and

(B)

by striking paragraph (3);

(22)

in section 14(d) (12 U.S.C. 1824(d))—

(A)

by striking Bank Insurance Fund member each place that term appears and inserting insured depository institution;

(B)

by striking Bank Insurance Fund members each place that term appears and inserting insured depository institutions;

(C)

by striking Bank Insurance Fund each place that term appears (other than in connection with a reference to a Bank Insurance Fund member or members) and inserting Deposit Insurance Fund;

(D)

by striking the subsection heading and inserting the following:

(d)

Borrowing for the Deposit Insurance Fund from insured depository institutions

;

(E)

in paragraph (3), in the paragraph heading, by striking bif and inserting the deposit insurance fund; and

(F)

in paragraph (5), in the paragraph heading, by striking bif members and inserting insured depository institutions;

(23)

in section 14 (12 U.S.C. 1824) by adding at the end the following:

(e)

Borrowing for the Deposit Insurance Fund from Federal home loan banks

(1)

In general

The Corporation may borrow from the Federal home loan banks, with the concurrence of the Federal Housing Finance Board, such funds as the Corporation considers necessary for the use of the Deposit Insurance Fund.

(2)

Terms and conditions

Any loan from any Federal home loan bank under paragraph (1) to the Deposit Insurance Fund shall—

(A)

bear a rate of interest of not less than the current marginal cost of funds to that bank, taking into account the maturities involved;

(B)

be adequately secured, as determined by the Federal Housing Finance Board; and

(C)

be a direct liability of the Deposit Insurance Fund.

;

(24)

in section 15(c)(5) (12 U.S.C. 1825(c)(5))—

(A)

by striking the Bank Insurance Fund or Savings Association Insurance Fund, respectively each place that term appears and inserting the Deposit Insurance Fund; and

(B)

in subparagraph (B), by striking the Bank Insurance Fund or the Savings Association Insurance Fund, respectively and inserting the Deposit Insurance Fund;

(25)

in section 17(a) (12 U.S.C. 1827(a))—

(A)

in the subsection heading, by striking BIF, SAIF, and inserting the Deposit Insurance Fund; and

(B)

in paragraph (1)—

(i)

by striking the Bank Insurance Fund, the Savings Association Insurance Fund, each place that term appears and inserting the Deposit Insurance Fund; and

(ii)

in subparagraph (D), by striking each insurance fund and inserting the Fund;

(26)

in section 17(d) (12 U.S.C. 1827(d)), by striking , the Bank Insurance Fund, the Savings Association Insurance Fund, each place that term appears and inserting the Deposit Insurance Fund;

(27)

in section 18(m) (12 U.S.C. 1828(m))—

(A)

in paragraph (2), in the matter preceding subparagraph (A), by striking the colon and inserting a dash;

(B)

in paragraph (3)(A)—

(i)

by striking poses a serious threat to the Savings Association Insurance Fund and inserting of an insured savings association poses a serious threat to the Deposit Insurance Fund; and

(ii)

by striking Savings Association Insurance Fund member and inserting insured savings association; and

(C)

in paragraph (3)(C), by striking Savings Association Insurance Fund or the Bank Insurance Fund and inserting Deposit Insurance Fund;

(28)

in section 18(o) (12 U.S.C. 1828(o)), by striking deposit insurance funds and deposit insurance fund each place those terms appear and inserting Deposit Insurance Fund;

(29)

in section 18(p) (12 U.S.C. 1828(p)), by striking deposit insurance funds and inserting Deposit Insurance Fund;

(30)

in section 24 (12 U.S.C. 1831a)—

(A)

in subsections (a)(1) and (d)(1)(A), by striking appropriate deposit insurance fund each place that term appears and inserting Deposit Insurance Fund;

(B)

in subsection (e)(2)(A), by striking risk to and all that follows through the period and inserting risk to the Deposit Insurance Fund.; and

(C)

in subsections (e)(2)(B)(ii) and (f)(6)(B), by striking the insurance fund of which such bank is a member each place that term appears and inserting the Deposit Insurance Fund;

(31)

in section 28 (12 U.S.C. 1831e), by striking affected deposit insurance fund each place that term appears and inserting Deposit Insurance Fund;

(32)

by striking section 31 (12 U.S.C. 1831h);

(33)

in section 36(i)(3) (12 U.S.C. 1831m(i)(3)), by striking affected deposit insurance fund and inserting Deposit Insurance Fund;

(34)

in section 37(a)(1)(C) (12 U.S.C. 1831n(a)(1)(C)), by striking insurance funds and inserting Deposit Insurance Fund;

(35)

in section 38 (12 U.S.C. 1831o), by striking the deposit insurance fund each place that term appears and inserting the Deposit Insurance Fund;

(36)

in section 38(a) (12 U.S.C. 1831o(a)), in the subsection heading, by striking Funds and inserting Fund;

(37)

in section 38(k) (12 U.S.C. 1831o(k))—

(A)

in paragraph (1), by striking a deposit insurance fund and inserting the Deposit Insurance Fund;

(B)

in paragraph (2), by striking A deposit insurance fund and inserting The Deposit Insurance Fund; and

(C)

in paragraphs (2)(A) and (3)(B), by striking the deposit insurance fund’s outlays each place that term appears and inserting the outlays of the Deposit Insurance Fund; and

(38)

in section 38(o) (12 U.S.C. 1831o(o))—

(A)

by striking Associations.— and all that follows through Subsections (e)(2) in paragraph (2) and inserting Associations.—Subsections (e)(2);

(B)

by redesignating subparagraphs (A), (B), and (C) as paragraphs (1), (2), and (3), respectively, and moving the margins 2 ems to the left; and

(C)

in paragraph (1) (as so redesignated), by redesignating clauses (i) and (ii) as subparagraphs (A) and (B), respectively, and moving the margins 2 ems to the left.

105.

Other technical and conforming amendments

(a)

Section 5136 of the revised statutes

The paragraph designated the Eleventh of section 5136 of the Revised Statutes of the United States (12 U.S.C. 24) is amended in the 5th sentence, by striking affected deposit insurance fund and inserting Deposit Insurance Fund.

(b)

Investments promoting public welfare; limitations on aggregate investments

The 23d undesignated paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 338a) is amended in the 4th sentence, by striking affected deposit insurance fund and inserting Deposit Insurance Fund.

(c)

Advances to critically undercapitalized depository institutions

Section 10B(b)(3)(A)(ii) of the Federal Reserve Act (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking any deposit insurance fund in and inserting the Deposit Insurance Fund of.

(d)

Amendments to the Balanced Budget and Emergency Deficit Control Act of 1985

Section 255(g)(1)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) is amended—

(1)

by striking Bank Insurance Fund and inserting Deposit Insurance Fund; and

(2)

by striking Federal Deposit Insurance Corporation, Savings Association Insurance Fund;.

(e)

Amendments to the Federal Home Loan Bank Act

The Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is amended—

(1)

in section 11(k) (12 U.S.C. 1431(k))—

(A)

in the subsection heading, by striking SAIF and inserting the Deposit Insurance Fund; and

(B)

by striking Savings Association Insurance Fund each place that term appears and inserting Deposit Insurance Fund;

(2)

in section 21 (12 U.S.C. 1441)—

(A)

in subsection (f)(2), by striking , except that and all that follows through the end of the paragraph and inserting a period; and

(B)

in subsection (k), by striking paragraph (4);

(3)

in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by striking affected deposit insurance fund and inserting Deposit Insurance Fund; and

(4)

in section 21B(k) (12 U.S.C. 1441b(k)) by inserting before the colon , the following definitions shall apply.

(f)

Amendments to the home owners’ loan Act

The Home Owners’ Loan Act (12 U.S.C. 1461 et seq.) is amended—

(1)

in section 5 (12 U.S.C. 1464)—

(A)

in subsection (c)(6), by striking As used in this subsection— and inserting For purposes of this subsection, the following definitions shall apply:;

(B)

in subsection (o)(1), by striking that is a Bank Insurance Fund member;

(C)

in subsection (o)(2)(A), by striking a Bank Insurance Fund member until such time as it changes its status to a Savings Association Insurance Fund member and inserting insured by the Deposit Insurance Fund;

(D)

in subsection (t)(5)(D)(iii)(II), by striking affected deposit insurance fund and inserting Deposit Insurance Fund;

(E)

in subsection (t)(7)(C)(i)(I), by striking affected deposit insurance fund and inserting Deposit Insurance Fund; and

(F)

in subsection (v)(2)(A)(i), by striking the Savings Association Insurance Fund and inserting or the Deposit Insurance Fund; and

(2)

in section 10 (12 U.S.C. 1467a)—

(A)

in subsection (c)(6)(D), by striking this title and inserting this Act;

(B)

in subsection (e)(1)(B), by striking Savings Association Insurance Fund or Bank Insurance Fund and inserting Deposit Insurance Fund;

(C)

in subsection (e)(2), by striking Savings Association Insurance Fund or the Bank Insurance Fund and inserting Deposit Insurance Fund;

(D)

in subsection (e)(4)(B), by striking subsection (1) and inserting subsection (l);

(E)

in subsection (g)(3)(A), by striking (5) of this section and inserting (5) of this subsection;

(F)

in subsection (i), by redesignating paragraph (5) as paragraph (4);

(G)

in subsection (m)(3), by striking subparagraph (E), and by redesignating subparagraphs (F), (G), and (H) as subparagraphs (E), (F), and (G), respectively;

(H)

in subsection (m)(7)(A), by striking during period and inserting during the period; and

(I)

in subsection (o)(3)(D), by striking sections 5(s) and (t) of this Act and inserting subsections (s) and (t) of section 5.

(g)

Amendments to the National Housing Act

The National Housing Act (12 U.S.C. 1701 et seq.) is amended—

(1)

in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by striking Bank Insurance Fund for banks or through the Savings Association Insurance Fund for savings associations and inserting Deposit Insurance Fund; and

(2)

in section 536(b)(1)(B)(ii) (12 U.S.C. 1735f–14(b)(1)(B)(ii)), by striking Bank Insurance Fund for banks and through the Savings Association Insurance Fund for savings associations and inserting Deposit Insurance Fund.

(h)

Amendments to the financial institutions reform, recovery, and enforcement act of 1989

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 1811 note) is amended—

(1)

in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by striking Bank Insurance Fund, the Savings Association Insurance Fund, and inserting Deposit Insurance Fund (or any predecessor deposit insurance fund); and

(2)

in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by striking Bank Insurance Fund, the Savings Association Insurance Fund, and inserting Deposit Insurance Fund.

(i)

Amendment to the Bank Holding Company Act of 1956

The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended—

(1)

in section 2(j)(2) (12 U.S.C. 1841(j)(2)), by striking Savings Association Insurance Fund and inserting Deposit Insurance Fund; and

(2)

in section 3(d)(1)(D)(iii) (12 U.S.C. 1842(d)(1)(D)(iii)), by striking appropriate deposit insurance fund and inserting Deposit Insurance Fund.

(j)

Amendments to the Gramm-Leach-Bliley Act

Section 114 of the Gramm-Leach-Bliley Act (12 U.S.C. 1828a) is amended by striking any Federal deposit insurance fund, in subsection (a)(1)(B), paragraphs (2)(B) and (4)(B) of subsection (b), and subsection (c)(1)(B), each place that term appears and inserting the Deposit Insurance Fund.

106.

Effective date

This title and the amendments made by this title shall become effective on the first day of the first calendar quarter that begins more than 90 days after the date of enactment of this Act.

II

Deposit insurance modernization and improvement

201.

Short title

This title may be cited as the Deposit Insurance Reform Act of 2005.

202.

Increase in Federal insurance coverage

(a)

Insured depository institutions

(1)

In general

Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is amended—

(A)

by striking subparagraph (B) and inserting the following:

(B)

Net amount of insured deposits

The net amount of deposit insurance payable to any depositor at an insured depository institution shall not exceed the standard maximum deposit insurance amount, as determined in accordance with paragraph (3) and subparagraphs (C), (D), (E), and (F) of this paragraph.

; and

(B)

by striking subparagraph (D) and inserting the following:

(D)

Coverage for certain employee benefit plan deposits

(i)

Pass-through insurance

The Corporation shall provide pass-through deposit insurance for the deposits of any employee benefit plan.

(ii)

Prohibition on acceptance of benefit plan deposits

An insured depository institution that is not well capitalized or adequately capitalized may not accept employee benefit plan deposits.

(iii)

Definitions

For purposes of this subparagraph, the following definitions shall apply:

(I)

Capital standards

The terms well capitalized and adequately capitalized have the same meanings as in section 38.

(II)

Employee benefit plan

The term employee benefit plan has the same meaning as in paragraph (5)(B)(ii), and includes any eligible deferred compensation plan described in section 457 of the Internal Revenue Code of 1986.

(III)

Pass-through deposit insurance

The term pass-through deposit insurance means, with respect to an employee benefit plan, deposit insurance coverage provided on a pro rata basis to the participants in the plan, in accordance with the interests of each participant.

(E)

Standard maximum deposit insurance amount defined

For purposes of this paragraph, the term standard maximum deposit insurance amount means, until the end of the 5-year period beginning on the date of enactment of the Deposit Insurance Reform Act of 2005, $100,000.

(F)

Inflation adjustment

(i)

In general

As of January 1, 2010, and as of the 1st day of each 5-year period thereafter, the standard maximum deposit insurance amount payable to any depositor at an insured depository institution shall be increased by the product of—

(I)

$100,000; and

(II)

the ratio of the value of the Personal Consumption Expenditures Chain-Type Index (or any successor index thereto), published by the Department of Commerce, for December 31 of the year preceding the year in which the adjustment is calculated under this clause, to the value of such index for December 31 of the year preceding the effective date of the Insurance Funds Merger Act of 2005.

(ii)

Limitation on adjustments

If the application of clause (i) would result in any decrease in the standard maximum deposit insurance amount in effect on the date of the adjustment under clause (i), the standard maximum deposit insurance amount shall remain unchanged until the next scheduled 5-year adjustment that does not result in any such decrease.

(iii)

Rounding

If the amount determined under clause (ii) for any period is not a multiple of $10,000, the amount so determined shall be rounded to the nearest $10,000.

(iv)

Publication

Not later than January 1, 2010, and not later than April 1 of the 1st year of each subsequent 5-year period referred to in clause (i), the Board of Directors shall publish in the Federal Register the standard maximum deposit insurance amount and the amount of deposit insurance coverage under paragraph (3)(A) that may be due to any depositor at an insured depository institution during the applicable 5-year period.

.

(2)

Deposit insurance for retirement accounts

Section 11(a)(3)(A) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(3)(A)) is amended—

(A)

by striking $100,000 and inserting $250,000; and

(B)

by inserting before the period at the end the following: which amount shall be subject to inflation adjustments in the same manner as under paragraph (1)(F) with respect to the standard maximum deposit insurance amount, except that $250,000 shall be substituted for the amount specified in clause (i) of paragraph (1)(F) for purposes of this subparagraph.

(3)

Deposit insurance for municipal deposits

Section 11(a)(2)(A) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(2)(A)) is amended in the matter following clause (v)—

(A)

by striking $100,000 the first place that term appears and inserting the standard maximum deposit insurance amount;

(B)

by striking in an amount not to exceed $100,000 per account the second place that term appears; and

(C)

by inserting before the period at the end the following: , which amount shall be subject to inflation adjustments in the same manner as under paragraph (1)(F).

(4)

Technical and conforming amendment relating to insurance of trust funds

Section 7(i) of the Federal Deposit Insurance Act (12 U.S.C. 1817(i)) is amended in each of paragraphs (1) and (3), by striking $100,000 each place it appears and inserting the standard maximum deposit insurance amount (as determined under section 11(a)(1)).

(5)

Other technical and conforming amendments

The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended—

(A)

in section 11(m)(6) (12 U.S.C. 1821(m)(6)), by striking $100,000 and inserting an amount equal to the standard maximum deposit insurance amount (as determined under subsection (a)(1));

(B)

in section 18 (12 U.S.C. 1828), by striking subsection (a) and inserting the following:

(a)

Insurance logo

(1)

Insured depository institutions

Each insured depository institution shall display at each place of business maintained by that institution a sign or signs relating to the insurance of the deposits of the institution, in accordance with regulations to be prescribed by the Corporation.

(2)

Regulations

The Corporation shall prescribe regulations to carry out this subsection, including regulations governing the substance of signs required by paragraph (1) and the manner of display or use of such signs.

(3)

Penalties

For each day that an insured depository institution continues to violate this subsection or any regulation issued under this subsection, it shall be subject to a penalty of not more than $100, which the Corporation may recover for its use.

; and

(C)

in section 43(d) (12 U.S.C. 1831t(d)), by striking $100,000 and inserting an amount equal to the standard maximum deposit insurance amount (as determined under section 11(a)(1)).

(b)

Insured credit unions

(1)

In general

Section 207(k) of the Federal Credit Union Act (12 U.S.C. 1787(k)) is amended—

(A)

by striking (k)(1) and all that follows through the end of paragraph (1) and inserting the following:

(k)

Insured amounts payable

(1)

Net insured amount

(A)

In general

Subject to the provisions of paragraph (2), the net amount of share insurance payable to any member at an insured credit union shall not exceed the total amount of the shares or deposits in the name of the member (after deducting offsets), less any part thereof which is in excess of the standard maximum share insurance amount, as determined in accordance with this paragraph and paragraphs (5) and (6), and consistent with actions taken by the Federal Deposit Insurance Corporation under section 11(a) of the Federal Deposit Insurance Act.

(B)

Aggregation

Determination of the net amount of share insurance under subparagraph (A), shall be in accordance with such regulations as the Board may prescribe, and, in determining the amount payable to any member, there shall be added together all accounts in the credit union maintained by that member for that member’s own benefit, either in the member’s own name or in the names of others.

(C)

Authority to define the extent of coverage

The Board may define, with such classifications and exceptions as it may prescribe, the extent of the share insurance coverage provided for member accounts, including member accounts in the name of a minor, in trust, or in joint tenancy.

; and

(B)

by adding at the end the following:

(4)

Coverage for certain employee benefit plan deposits

(A)

Pass-through insurance

The Administration shall provide pass-through share insurance for the deposits or shares of any employee benefit plan, subject to subparagraph (B).

(B)

Prohibition on acceptance of deposits

An insured credit union that is not well capitalized or adequately capitalized may not accept employee benefit plan deposits.

(C)

Definitions

For purposes of this paragraph, the following definitions shall apply:

(i)

Capital standards

The terms well capitalized and adequately capitalized have the same meanings as in section 216(c), as added by section 301 of the Credit Union Membership Access Act (Public Law 105–219, 112 Stat. 931).

(ii)

Employee benefit plan

The term employee benefit plan—

(I)

has the meaning given to such term in section 3(3) of the Employee Retirement Income Security Act of 1974;

(II)

includes any plan described in section 401(d) of the Internal Revenue Code of 1986; and

(III)

includes any eligible deferred compensation plan described in section 457 of the Internal Revenue Code of 1986.

(iii)

Pass-through share insurance

The term pass-through share insurance means, with respect to an employee benefit plan, insurance coverage provided on a pro rata basis to the participants in the plan, in accordance with the interest of each participant.

(5)

Standard maximum share insurance amount defined

For purposes of this subsection, the term standard maximum share insurance amount means, until the end of the 270-day period beginning on the date of enactment of the Deposit Insurance Reform Act of 2005, $100,000.

(6)

Inflation adjustment

(A)

In general

As of January 1, 2010, and as of the 1st day of each subsequent 5-year period, the standard maximum share insurance amount payable to any member of an insured credit union shall be increased by the product of—

(i)

$100,000; and

(ii)

the ratio of the value of the Personal Consumption Expenditures Chain-Type Index (or any successor index thereto), published by the Department of Commerce, as in effect on the date of the adjustment under this clause.

(B)

Limitation on adjustments

If the application of subparagraph (A) would result in any decrease in the standard maximum share insurance amount in effect on the date of the adjustment under clause (i), the standard maximum share insurance amount shall remain unchanged until the next scheduled 5-year adjustment that does not result in any such decrease.

(C)

Rounding

If the amount determined under subparagraph (B) for any period is not a multiple of $10,000, the amount so determined shall be rounded to the nearest $10,000.

(D)

Publication

Not later than January 31 of the 1st year of each 5-year period referred to in subparagraph (A), the Board shall publish in the Federal Register the standard maximum share insurance amount and the amount of share insurance coverage under paragraph (3) that may be due to any member at an insured credit union during that 5-year period.

; and

(C)

in paragraph (3), by striking $100,000 per account and inserting the following: $250,000 per account, which amount shall be subject to inflation adjustments in the same manner as under paragraph (6) with respect to the standard maximum share insurance amount (as determined under paragraph (5), except that $250,000 shall be substituted for the amount specified in paragraph (5)(A)(i) for purposes of this paragraph)..

(2)

Technical amendment

Section 202(h) of the Federal Credit Union Act (12 U.S.C. 1782(h)) is amended by striking 207(c)(1) and inserting 207(k).

(c)

Effective date

Except as otherwise specifically provided in this section or the amendments made by this section, this section and such amendments shall become effective on the effective date of the regulations required under section 205(a)(2), relating to the implementation of deposit insurance increases under this section.

203.

Designated reserve ratio

(a)

In general

(1)

Amendment to Section 7

Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(3)) is amended to read as follows:

(3)

Designated reserve ratio

(A)

Action by the Board

(i)

In general

Before the beginning of each calendar year, the Board of Directors shall, subject to clause (ii)—

(I)

designate the reserve ratio applicable to the Deposit Insurance Fund for that year; and

(II)

publish the reserve ratio so designated.

(ii)

Rulemaking

Any change to the designated reserve ratio for any calendar year shall be made pursuant to section 553 of title 5, United States Code.

(B)

Range

The reserve ratio designated by the Board of Directors for any year—

(i)

may not exceed 1.50 percent of aggregate estimated insured deposits; and

(ii)

may not be less than 1.0 percent of aggregate estimated insured deposits.

(C)

Factors

In designating a reserve ratio for any year, the Board of Directors shall—

(i)

take into account the risk of losses to the Deposit Insurance Fund in that year and in future years;

(ii)

take into account economic conditions generally affecting insured depository institutions, to provide for an increase in the designated reserve ratio during more favorable economic conditions and to provide for a decrease in the designated reserve ratio during less favorable economic conditions, notwithstanding the increased risks of loss that may exist during such less favorable conditions, as determined to be appropriate by the Board;

(iii)

seek to prevent sharp swings in the assessment rates for insured depository institutions; and

(iv)

take into account such other factors as the Board of Directors may determine to be appropriate, consistent with the requirements of this subparagraph.

.

(2)

Technical and conforming amendments

Section 3(y) of the Federal Deposit Insurance Act (12 U.S.C. 1813), as added by this Act, is amended by adding at the end the following:

(2)

Reserve ratio

The term reserve ratio means the ratio of the fund balance of the Deposit Insurance Fund to aggregate estimated insured deposits held in all insured depository institutions.

(3)

Designated reserve ratio

The term designated reserve ratio means the reserve ratio designated by the Board of Directors under section 7(b)(3).

.

(3)

Effective date

Subject to paragraph (4), this subsection and the amendments made by this subsection shall become effective on the effective date of the regulations required under section 205(a)(1), relating to designation of the reserve ratio by the Board.

(4)

Designation of initial reserve ratio for Deposit Insurance Fund

During the period beginning on the effective date of the merger of the deposit insurance funds under section 102, and ending on the effective date of final regulations designating the reserve ratio, as required by section 205(a)(1), the designated reserve ratio of the Deposit Insurance Fund shall continue to be determined pursuant to section 7(b)(2)(A)(iv), as in effect on the day before the effective date of the merger under section 102.

(b)

Requirements applicable to any modification of the Risk-Based assessment system

Section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(1)) is amended by adding at the end the following:

(E)

Requirements applicable to any modification of the Risk-Based assessment system

(i)

In general

In revising or modifying the risk-based assessment system at any time after the date of enactment of the Deposit Insurance Reform Act of 2005, the Board of Directors—

(I)

may not make any change to the information collected from or required to be retained by insured depository institutions solely for purposes of the assessment risk classification, as defined by regulations of the Board, if the change would result in the imposition of an overall greater regulatory or reporting burden on insured depository institutions than was the case before that date of enactment; and

(II)

may implement any such revision or modification in final form only after notice and opportunity for comment.

(ii)

Rule of construction

An increase in an assessment rate or a revision of the assessment base shall not be considered to be a revision or modification resulting in greater regulatory or reporting burden for purposes of this subparagraph.

.

204.

Assessment credits and dividends

(a)

In general

Section 7(e) of the Federal Deposit Insurance Act (12 U.S.C. 1817(e)) is amended to read as follows:

(e)

Credits and dividends

(1)

One-time credit based on total assessment base at year-end 1996

(A)

In general

The Board of Directors shall, by regulation, provide for a credit to each insured depository institution that was in existence on December 31, 1996, and that had paid a deposit insurance assessment prior to that date (or a successor insured depository institution), based on the assessment base of the institution on that date, as compared to the combined aggregate assessment base of all such institutions, taking into account such factors as the Board may determine to be appropriate.

(B)

Credit limit

The aggregate amount of credits available under subparagraph (A) to all insured depository institutions that are eligible for the credit shall not exceed the amount that the Corporation could collect if it imposed an assessment of 9 basis points on the combined assessment base of the Bank Insurance Fund and the Savings Association Insurance Fund as of December 31, 2001.

(C)

Application of credits

The amount of a credit to any insured depository institution under this paragraph may be applied by the Corporation to those portions of the assessments under subsection (b) applicable to that institution which become due for assessment periods beginning after the effective date of regulations required by subparagraph (A).

(D)

Challenges to credit amounts

The regulations required by subparagraph (A) shall include provisions allowing an insured depository institution a reasonable opportunity to challenge administratively the amount of its credit under this paragraph. The determination of the Corporation of the amount of the credit following such challenge shall be final, and not subject to judicial review.

(2)

Assessment credits

(A)

Authority

The Board of Directors shall, by regulation, establish the qualifications and procedures under which the Corporation would apply assessment credits for the assessment periods beginning on or after the first assessment period to which a credit under paragraph (1) applies.

(B)

Criteria for determination

In determining whether to provide assessment credits under this paragraph and in what amounts, the Board of Directors shall take into account the factors for setting assessments under subsection (b)(2) and the factors for designating the reserve ratio under subsection (b)(3).

(3)

Dividends

(A)

Reserve ratio in excess of 1.50 percent of estimated insured deposits

The Corporation shall provide cash dividends to insured depository institutions in accordance with this paragraph if the reserve ratio of the Deposit Insurance Fund exceeds the maximum amount established under subsection (b)(3)(B)(i), to the extent of that excess amount.

(B)

Amount equal to or in excess of 1.40 percent of estimated insured deposits and not more than 1.50 percent

The Corporation shall provide cash dividends to insured depository institutions in accordance with this paragraph if the reserve ratio of the Deposit Insurance Fund equals or exceeds 1.40 and is not more than 1.50 percent, and that amount shall equal 50 percent of the amount in excess of the amount required to maintain the reserve ratio at 1.40 percent of the estimated insured deposits.

(C)

Limitation

The Board of Directors may suspend or limit dividends paid under this paragraph if the Board determines in writing that—

(i)

a significant risk of losses to the Deposit Insurance Fund exists over the next one-year period; and

(ii)

it is likely that such losses will be sufficiently high as to justify a finding by the Board that the reserve ratio should temporarily exceed the maximum amount established under subsection (b)(3)(B)(i).

(D)

Considerations

In making a determination under subparagraph (B), the Board shall consider—

(i)

national and regional conditions and their impact on insured depository institutions;

(ii)

potential problems affecting insured depository institutions or a specific group or type of depository institution;

(iii)

the degree to which the contingent liability of the Corporation for anticipated failures of insured institutions adequately addresses concerns over funding levels in the Deposit Insurance Fund; and

(iv)

any other factors that the Board determines is appropriate.

(E)

Report to congress

(i)

Submission

Any determination under subparagraph (B) shall be submitted to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives, not later than 270 days after making such determination.

(ii)

Content

The report submitted under clause (i) shall include—

(I)

a complete explanation for the determination; and

(II)

a discussion of the factors required to be considered under subparagraph (C).

(F)

Review of determination

(i)

Annual review

A determination to suspend or limit dividends under subparagraph (B) shall be reviewed by the Board of Directors annually.

(ii)

Action by board

Based on each annual review under clause (i), the Board of Directors shall either renew or remove a determination to suspend or limit dividends under subparagraph (B), or shall make a new determination in accordance with this paragraph. Unless justified under the terms of the renewal or new determination, any amount as is in the Fund in excess of the amount required to maintain the reserve ratio at the maximum amount established under subsection (b)(3)(B)(i) shall be paid as dividends to insured depository institutions in accordance with this paragraph.

.

(b)

Effective date

The amendments made by this section shall become effective on the effective date of the regulations required to be issued under section 205(a)(2), relating to implementation of the one-time assessment credit.

205.

Regulations required

(a)

In general

Not later than 270 days after the date of enactment of this Act, the Board shall issue final regulations, in accordance with section 553 of chapter 5 of title 5, United States Code—

(1)

designating the reserve ratio for the Deposit Insurance Fund in accordance with section 7(b)(3) of the Federal Deposit Insurance Act, as amended by section 203 of this Act, which regulations shall become effective not later than 90 days after the date of their publication in final form;

(2)

implementing increases in deposit insurance coverage in accordance with the amendments made by section 202, which regulations shall become effective not later than 90 days after the date of their publication in final form;

(3)

implementing the one-time assessment credit to certain insured depository institutions in accordance with section 7(e)(2) of the Federal Deposit Insurance Act, as amended by section 204 of this Act;

(4)

establishing the qualifications and procedures under which the Corporation may provide ongoing assessment credits, under section 7(e)(3) of the Federal Deposit Insurance Act, as amended by section 204 of this Act; and

(5)

providing for assessments under section 7 of the Federal Deposit Insurance Act, as amended by this Act, which regulations shall become effective on the effective date of the regulations required by paragraph (3).

(b)

Savings clause

(1)

In general

Nothing in this Act or the amendments made by this Act shall be construed to affect the authority of the Corporation with regard to the setting or collection of deposit insurance assessments prior to the effective date of any regulations required under subsection (a).

(2)

Preservation of minimum assessment provision

Subparagraph (E) of section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)), as in effect on the day before the effective date of title I of this Act, shall continue to apply with respect to deposit insurance assessments imposed prior to the effective date of the regulations required under subsection (a)(5) of this section.

206.

Studies of potential changes to the Federal deposit insurance system

(a)

Study and report by FDIC and NCUA

(1)

Study

The Board of Directors of the Federal Deposit Insurance Corporation and the National Credit Union Administration Board shall each conduct a study of—

(A)

the feasibility of increasing the limit on deposit insurance for deposits of municipalities and other units of general local government, and the potential benefits and the potential adverse consequences that may result from any such increase; and

(B)

the feasibility of establishing a voluntary deposit insurance system for deposits in excess of the maximum amount of deposit insurance for any depositor, and the potential benefits and the potential adverse consequences that may result from the establishment of any such system.

(2)

Report

Not later than 1 year after the date of enactment of this Act, the Board of Directors of the Federal Deposit Insurance Corporation and the National Credit Union Administration Board shall each submit a report to the Congress on the study required under paragraph (1), containing the findings and conclusions of the reporting agency, together with such recommendations for legislative or administrative changes as the agency may determine to be appropriate.

(b)

Study and report regarding appropriate reserve ratio

(1)

Study

The Corporation shall conduct a study on the feasibility of using actual deposits rather than estimated insured deposits in calculating the reserve ratio of the Deposit Insurance Fund.

(2)

Report

Not later than 1 year after the date of enactment of this Act, the Board shall submit a report to Congress on the results of the study required under paragraph (1), together with such recommendations for legislative or administrative actions as may be determined to be appropriate.

207.

Effective date

Except as otherwise specifically provided in this title, this title and the amendments made by this title shall become effective on the date of enactment of this Act.