Source: https://www.fdic.gov/news/financial-institution-letters/2023/fil23037.html
The FDIC observed that some insured depository institutions (IDIs) are not reporting estimated uninsured deposits in accordance with the instructions to the Consolidated Reports of Condition and Income (Call Report). For example, some institutions incorrectly reduced the amount reported to the extent that the uninsured deposits are collateralized by pledged assets; this is incorrect because in and of itself, the existence of collateral has no bearing on the portion of a deposit that is covered by federal deposit insurance. Additionally, some institutions incorrectly reduced the amount reported on Schedule RC-O by excluding intercompany deposit balances of subsidiaries.
In reporting uninsured deposits, if an IDI has deposit accounts with balances in excess of the federal deposit insurance limit that it has collateralized by pledging assets, such as deposits of the U.S. Government and of states and political subdivisions in the U.S., the IDI should make a reasonable estimate of the portion of these deposits that is uninsured using the data available from its information systems.
The General Instructions for the Call Reports state that all deposits of subsidiaries (except an insured depository institution subsidiary that is accounted for under the equity method of accounting instead of consolidating) that are consolidated and, therefore, eliminated from reported deposits on the balance sheet, must be reported in Schedule RC-O, items 1 through 3, Memorandum item 1, and, if applicable, Memorandum item 2, estimated amount of uninsured deposits.1
Each IDI is responsible for the accuracy of the data in its Call Report and for filing amendments as necessary to ensure Call Report accuracy. The chief financial officer (or the individual performing an equivalent function) and multiple directors of each IDI are required to attest to the correctness of the Call Report. If your institution incorrectly reduced the amount of reported uninsured deposits, for example, to reflect collateralization of deposits by pledged assets or by excluding intercompany deposit balances of subsidiaries, those reports are inaccurate. Consistent with the requirement to file accurate Call Reports, IDIs that have incorrectly reported uninsured deposits should amend their Call Reports by making the appropriate changes to the data, and submitting the revised data file to the Central Data Repository (CDR) using the same processes as the original filing. Institutions can submit up to three years of revisions, or more, if appropriate.
Please reference the complete set of Call Report instructions for more information on reporting estimated uninsured deposits. In particular, for more information on reporting deposit information, reference the following sections of the instructions:
General Instructions: Rules of Consolidation, Deposit Insurance Assessments2
Schedule RC-O – Other Data for Deposit Insurance Assessments:
General Instructions3
Instructions for item 1, “Total deposit liabilities before exclusions (gross) as defined in Section 3(l) of the Federal Deposit Insurance Act and FDIC regulations”4
Instructions for Memorandum item 2, “Estimated amount of uninsured deposits in domestic offices of the bank and in insured branches in Puerto Rico and U.S. territories and possessions, including related interest accrued and unpaid“5 , 6
The Call Report forms and instructions can be accessed from the FDIC Call Reports webpage. These forms and instructions are also available for printing and downloading from the Federal Financial Institutions Examination Council’s (FFIEC’s) Reporting Forms webpage for each version of the Call Report.
Wut mean?:
- The FDIC noticed that some banks aren’t correctly reporting the amount of deposits they have that aren’t covered by federal insurance. Some banks mistakenly think that if a deposit is backed by assets (like collateral), it doesn’t need to be reported as uninsured.
- This isn’t right! The deposit’s status doesn’t change just because it has collateral.
- Also, some banks were leaving out deposits made by their own subsidiary companies.
TLDRS:
- When banks incorrectly report uninsured deposits, it could create a perception in the market that these banks are more stable than they actually are.
- Banks that incorrectly report uninsured deposits might face liquidity challenges in extreme circumstances, where depositors simultaneously demand their funds.
- The FDIC noticed that some banks aren’t correctly reporting the amount of deposits they have that aren’t covered by federal insurance. Some banks mistakenly think that if a deposit is backed by assets (like collateral), it doesn’t need to be reported as uninsured.
- This isn’t right! The deposit’s status doesn’t change just because it has collateral.
- Also, some banks were leaving out deposits made by their own subsidiary companies.