Quarterly Banking Profile
TEMPORARY LIQUIDITY GUARANTEE PROGRAM
For more detailed information regarding the Temporary Liquidity Guarantee Program please Click Here
FDIC Responds to Market Disruptions with TLGP
The FDIC Board approved the Temporary Liquidity Guarantee Program (TLGP)1 on October 13, 2008, as major disruptions in credit markets blocked access to liquidity for financial institutions. The TLGP improves access to liquidity by fully guaranteeing non-interest-bearing transaction deposit accounts and by guaranteeing eligible senior unsecured debt. The final rule for the TLGP was adopted on November 21, 2008.
Non-Interest-Bearing Transaction Accounts at Participating Institutions Are Fully Guaranteed
The Transaction Account Guarantee Program provides a full guarantee of non-interest-bearing transaction deposit accounts above $250,000, regardless of dollar amount, at depository institutions that elected to participate in the program. The guarantee is in effect until December 31, 2009. Accounts covered by the guarantee also include NOW accounts where interest rates are maintained at 0.5 percent or less and IOLTA2 accounts.
FDIC Offers Guarantees on Senior Unsecured Debt
The Debt Guarantee Program provides a full guarantee of senior unsecured debt issued by eligible institutions between October 14, 2008, and June 30, 2009, with the guarantee expiring on or before June 30, 2012. Senior unsecured debt must have a stated maturity of more than 30 days and may include term Federal funds purchased, promissory notes, commercial paper, unsubordinated unsecured notes, and U.S. dollar denominated certificates of deposit owed to an insured depository institution. Institutions eligible for participation in the Debt Guarantee Program include insured depository institutions, U.S. bank holding companies, certain U.S. savings and loan holding companies, and other affiliates of an insured depository institution that the FDIC designates as eligible entities.
The TLGP does not rely on taxpayer funding or the Deposit Insurance Fund. Both components of the program will be paid for by direct user fees. Institutions participating in the Transaction Account Guarantee Program provide customers full coverage on non-interest-bearing transaction accounts for an annual fee of 10 basis points. Fees for participation in the Debt Guarantee Program depend on the maturity of debt issued. The cost of the guarantee to insured depository institutions is 50 basis points for maturities of 180 days or less, 75 basis points for maturities of 181 days to 364 days, and 100 basis points for maturities 365 days or greater. Bank holding companies and participating affiliates are required to pay an additional 10 basis points if, as of September 30, 2008, the combined assets of all insured depository institutions affiliated with such entity constitute less than 50 percent of consolidated holding company assets.
A Majority of Eligible Entities Have Chosen to Participate in the TLGP
According to submissions received by the FDIC, more than 85 percent of FDIC-insured institutions have opted in to the Transaction Account Guarantee Program, and more than half of all eligible entities have elected to opt in to the Debt Guarantee Program. Lists of institutions that opted out of the guarantee programs are posted at http://www.fdic.gov/regulations/resources/TLGP/optout.html.
According to fourth quarter Call Reports, insured institutions reported 522,862 non-interest-bearing transaction accounts over $250,000. These accounts totaled $814 billion, of which $684 billion in deposit accounts was guaranteed under the Transaction Account Guarantee Program. Almost 6,000 FDIC-insured institutions reported non-interest-bearing transaction accounts over $250,000 in value.
Limits on Debt Issuance Based on Third Quarter 2008 Balances
The amount of FDIC-guaranteed debt that can be issued by each eligible entity, or its "cap," is based on the amount of senior unsecured debt outstanding as of September 30, 2008, that matures on or before June 30, 2009. Eligible entities may issue debt up to 125 percent of that outstanding amount. The cap for FDIC-insured institutions that had no outstanding short-term senior unsecured debt other than Fed funds is set at 2 percent of liabilities as of September 30, 2008. Holding companies with no short-term senior unsecured debt outstanding must apply to the FDIC to raise the limit on their issuance of FDIC-guaranteed debt above $0. Initial caps for all 8,191 entities that could exercise their option to issue guaranteed debt under the TLGP total almost $1.0 trillion.
Sixty-four financial entities-39 insured depository institutions and 25 bank and thrift holding companies and nonbank affiliates-had $224 billion in guaranteed debt outstanding at year-end. Some banking groups issued FDIC-guaranteed debt at both the subsidiary and holding company level, but most guaranteed debt was issued by holding companies or nonbank affiliates of depository institutions. Bank and thrift holding companies and nonbank affiliates issued 86 percent of FDIC-guaranteed debt outstanding at year-end. Short-term commercial paper and medium-term notes represented 86 percent of outstanding debt instruments, in almost equal shares. Almost one-half of guaranteed debt outstanding as of December 31, 2008, matures in 180 days or less, and one-fourth matures between two and three years of issuance.
TABLE I-C. Participation in Temporary Liquidity Guarantee Program
TABLE II-C. Cap on FDIC-Guaranteed Debt for Opt-In Entities
TABLE III-C. Transaction Account Guarantee Program
TABLE IV-C. Debt Issuance under Guarantee Program
TABLE V-C. Fees Assessed under TLGP Debt Program
TABLE VI-C. Term at Issuance of Debt Instruments Outstanding
1The FDIC invoked the systemic risk exception pursuant to section 141 of the Federal Deposit Improvement Act of 1991, 12 U.S.C 1823(c)(4) on October 13, 2008. For further information on the TLGP, see http://www.fdic.gov/regulations/resources/TLGP/index.html.
|Last Updated 02/26/2009||Questions, Suggestions & Requests|