Summary: | On November 21, 2008, the FDIC adopted the attached Final Rule implementing the Temporary Liquidity Guarantee Program (TLG Program) inaugurated October 14, 2008. The TLG Program consists of two basic components: a guarantee of newly issued senior unsecured debt of banks, thrifts, and certain holding companies (the debt guarantee program) and full guarantee of non-interest bearing deposit transaction accounts, such as business payroll accounts, regardless of dollar amount (the transaction account guarantee program). The purpose of the guarantee of transaction accounts and the debt guarantee is to reduce funding costs and allow banks and thrifts to increase lending to consumers and businesses. As the result of more than 700 comments received, the Final Rule makes several important improvements. |
Highlights:
Continuation of FIL-132-2008
Distribution:
Suggested Routing:
Note:
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html . Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562- 2200).
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Financial Institution Letters
FIL-132-2008 November 21, 2008 |
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Temporary Liquidity Guarantee Program
On November 21, 2008, the FDIC adopted the attached Final Rule relating to the Temporary Liquidity Guarantee Program (TLG Program). The TLG Program consists of two basic components:
The TLG Program (and related government programs like the Troubled Assets Relief Program and the Commercial Paper Funding Facility) are designed to improve the functioning of credit markets and to strengthen capital in the financial system so that banks can continue to make prudent loans during these times of economic distress. The FDIC expects banks to use funds generated through these programs to begin lending again to consumers and businesses. It is critical that lending increase where credit has contracted, such as mortgage lending, consumer credit, and small business lending. Eligible entities Eligible entities under the TLG Program include: (1) all FDIC-insured depository institutions; (2) all United States bank holding companies, including financial holding companies, and all United States savings and loan holding companies that engage only in activities that are permissible for financial holding companies under section 4(k) of the BHCA, 12 U.S.C. §1843(k), or have at least one insured depository institution subsidiary that is the subject of an application under section 4(c)(8) of the BHCA, 12 U.S.C. 1843(c)(8), that was pending on October 13, 2008; and (3) any other affiliates of an insured depository institution that the FDIC designates, after written request and positive recommendation by the appropriate Federal banking agency, as an eligible entity. To be eligible under item two above, a bank holding company or savings and loan holding company must have at least one chartered and operating insured depository institution subsidiary. Election form that all eligible entities must complete by December 5, 2008 Beginning on Monday, November 24, 2008, the TLG Program Election Form will be available via FDIC connect . All eligible entities must complete the Election Form on or before December 5, 2008, to either opt-out of one or both components of the Program or, for those entities remaining in the Program, to provide data to determine each entity's debt guarantee limit, and agree to certain terms. Please refer to FIL-125-2008 for more detailed instructions. Entities that remain in the debt guarantee program must also execute and transmit to the FDIC a Master Agreement. Entities are encouraged to coordinate their election decisions with other members of their consolidated groups as all members of a holding company must make the same election with respect to each component of the TLG Program. A decision by one member of a group to opt-out will be irrevocable and binding on all other group members. Major changes The major changes from the Interim Rule to the Final Rule include:
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