On May 6, 2009, the FDIC provided updated opt-out lists for the Debt Guarantee Program and Transaction Account Guarantee Program. The decision to opt-out of either program was a binding decision as of December 5, 2008, and the FDIC has not given any explanation for why the opt-out lists have been updated, other than a generic statement that “entities may be added as we finalize the election submissions.”
As of December 12, 2008, 863 banks had elected to opt-out of the Transaction Account Guarantee, but that number is 1,110 banks as of May 6, 2009. Similarly, 3,116 entities (which includes affiliated bank holding companies) had elected to opt-out of the Debt Guarantee as of December 12, 2008, but that number is 6,501 entities as of May 6, 2009 (a 109% increase). In Georgia, 25 banks have opted out of the Transaction Account Guarantee, while 165 entities have opted out of the Debt Guarantee.
The continued updates of the opt-out lists serves as a strong reminder to review these lists before (a) presuming that noninterest bearing deposit accounts have an unlimited guarantee; or (b) accepting any senior unsecured debt as being guaranteed by the FDIC.
The decision to opt out of either of these programs is an interesting one. The fees associated with both programs are directly tied to the use of either guarantee; if a bank doesn’t have large noninterest bearing accounts, or doesn’t issue FDIC guaranteed debt, than there is no cost to participating in either program. While the FDIC’s debt guarantee is likely to be of minimal use to many community banks, the ability to offer unlimited insurance for noninterest bearing deposit accounts would seem to be an opportunity that is difficult to justify turning down.