The US Federal Deposit Insurance Corporation is introducing recordkeeping requirements for the institutions it ensures that have large numbers of deposit accounts, the better to ensure that they pay insured deposits to customers rapidly in the event of their failure.

Its proposal for a rule is limited to insured depository institutions with more than two million deposit accounts. According to the proposal, these institutions should have to maintain complete and accurate data on each depositor. Furthermore, the FDIC wants to require them to ensure that their information technology systems are capable of calculating the amount of insured money for each depositor within 24 hours of any failure.

The FDIC believes that timely access to insured deposits is crucial to the maintainance of public confidence in the banking system and wants to "bolster the FDIC's ability to provide depositors at banks with a large number of deposit accounts [with] the same rapid access to their insured funds in the case of a failure as the FDIC does in smaller resolutions."

The FDIC is required to provide depositors with access to their insured accounts as soon as possible after an institution fails. Typically, this money is available by the next business day. However, for a bank with a large number of deposit accounts, payments might be delayed if the bank's records are unclear or incomplete, making it difficult to determine what is insured and what is not. A failed bank with many deposit systems, or a sudden failure with little advance notice, could muddy the waters considerably.

The FDIC issued an advanced notice of proposed rulemaking on deposit account recordkeeping for institutions with a large number of deposit accounts in April 2015 to solicit public comment. That feedback helped shape the current proposal. The regulator will accept comments on the proposal for 90 days after it is published in the Federal Register.

The notice adds: "The 36 institutions projected to be covered by the proposed rule each hold between 2 million and 85 million deposit accounts. Requiring the covered institutions to enhance their deposit account data and upgrade their IT systems so that the FDIC can perform the deposit insurance determination on all of their deposit accounts without a data transfer would address many of these issues."

The FDIC aims to require banks to maintain necessary depositor information on the beneficial owners of pass-through deposit accounts. Some banks expressed a desire to preserve the status quo (the maintenance of the information off-site in the deposit broker's or other agent's records) during the consultation but the FDIC is not in the mood to preserve the status quo. It adds: "For example, the volume of pass-through accounts for which beneficial ownership information would be unavailable in the covered institution's records at failure [sic] could far exceed the number of accounts handled in any of the FDIC's previous resolutions. Moreover, some of these pass-through accounts could be transactional in nature. Depositors may require immediate access to deposit accounts insured on a pass-through basis such as brokered money market demand account (MMDA) funds, transaction account s(including both negotiable order-of-withdrawal (NOW) accounts and demand deposit accounts offered by a financial intermediary) and certain types of prepaid cards. If funds in these transactional accounts are not available when the bridge bank or another assuming institution opens the next business day, then outstanding items could be returned unpaid and affected depositors might not have immediate access to their funds. This proposal does not aim to directly address this challenge, but instead would cause covered institutions to identify and report such accounts so that they can be further considered."