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Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules
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the 249 institutions, 247 99 percent reported having trust accounts at time of failure. Of the 247 failed banks that reported trust accounts, 212 reported not having trust powers as of their last Call Report. Assuming the percentage of trust accounts at failed banks is representative of the percentage of trust accounts among all FDIC-insured institutions, the FDIC estimates, for purposes of this analysis, that there are approximately 71.4 million trust accounts in existence at FDIC-insured institutions.69 Additionally, based on the observed number of trust account depositors per trust account in the population of 249 failed banks, the FDIC
estimates, for purposes of this analysis, that there are approximately 53.2
million trust depositors.70 These estimates are subject to considerable uncertainty, since the percentage of deposit accounts that are trust accounts and the number of depositors per trust account for all FDIC insured institutions may differ from what was observed at the 249 failed banks. The FDIC does not have information that would shed light on whether or how the numbers of trust accounts and trust depositors at failed banks differs from the corresponding numbers for other FDIC-insured institutions.
The FDIC also does not have detailed data on depositors trust arrangements that would allow the FDIC to precisely estimate the quantitative effects of the proposed rule on deposit insurance coverage. Thus, the effects of the proposed changes to the insurance rules are outlined qualitatively below. The FDIC expects that most depositors would experience no change in the coverage for their deposits under the proposed rule. However, some depositors that maintain trust deposits would experience a change in their insurance coverage under the proposed rule.
The FDIC anticipates that deposit insurance coverage for some irrevocable trust deposits would increase under the proposed rule. The FDICs experience suggests that the provisions of the current irrevocable trust rules that 69 There were approximately 641 million deposit accounts reported by FDIC-insured institutions as of March 31, 2021, based on Call Report data.
Assuming that 11.14 percent of accounts are trust accounts, then there are an estimated 71.4 million trust accounts as of March 31, 2021.
70 Using the data from failed banks, 250,139
distinct depositors held 335,657 revocable or irrevocable trust accounts, or there were 0.745 trust account depositors per trust account 250,139
divided by 335,657. The estimated number of trust depositors at FDIC-insured institutions 53.2
million is obtained by multiplying the estimated number of trust accounts by the number of trust account depositors per trust account 71.4 million multiplied by 0.745.

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require the identification and aggregation of contingent interests often apply due to the inclusion of contingencies in such trusts.71 Thus, even where an irrevocable trust names multiple beneficiaries, the current trust rules often provide a total of only $250,000 in deposit insurance coverage.
The proposed rule would not consider such contingencies in the calculation of coverage, and per-beneficiary coverage would apply.
In limited instances, the proposed merger of the revocable trust and irrevocable trust categories may decrease coverage for depositors.
Deposits of revocable trusts and deposits of irrevocable trusts are currently insured separately. The proposed rule would require aggregation for purposes of applying the deposit insurance limit, thereby increasing the likelihood of the combined trust account balances exceeding the insurance limit.72 However, the FDICs experience is that irrevocable trust deposits comprise a relatively small share of the average IDIs deposit base,73
and that it is rare for IDIs to hold deposits in connection with irrevocable and revocable trusts established by the same grantors.74 Individual grantors trust deposits held for the benefit of up to five different beneficiaries would continue to be separately insured.
With respect to revocable and irrevocable trusts, depositors who have designated more than five beneficiaries and structured their trust accounts in a manner that provides for more than $1,250,000 in coverage per grantor, per IDI under the current rules would experience a reduction in coverage. The FDICs experience suggests that the $1,250,000 maximum coverage amount per grantor, per IDI would not affect the vast majority of trust depositors, as most 71 As discussed above, the provisions relating to contingent interests may not apply when a trust has become irrevocable due to the death of one or more grantors. In such instances, the revocable trust rules continue to apply.
72 As discussed above, deposits maintained by an IDI as trustee of an irrevocable trust would not be included in this aggregation, and would remain separately insured pursuant to section 7i of the FDI Act and 12 CFR 330.12.
73 Data obtained in connection with IDI failures during the recent financial crisis suggests that irrevocable trust deposits comprise less than one percent of trust deposits. However, as discussed above, the FDIC does not possess sufficient information to enable it to estimate the effects of the proposed rule on trust account depositors at all IDIs.
74 In the data obtained in connection with IDI
failures during the recent financial crisis, only 51
out of 250,139 depositors with trust accounts had both revocable and irrevocable types. Of these 51
depositors, nine had total trust account balances greater than $250,000, and only one had a total trust balance of more than $1.25 million.

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trusts have either five or fewer beneficiaries, less than $1,250,000 per grantor on deposit at the same IDI, or are structured in a manner that results in only $1,250,000 in coverage under the current rules. The FDIC estimates that approximately 21,268 trust account depositors and approximately 28,539
trust accounts could be directly affected by this aspect of the proposed rule, representing about 0.04 percent of both the estimated number of trust account depositors and the estimated number of trust accounts.75 The actual number of trust depositors and trust accounts impacted will likely differ, as the estimates rely on data from failed banks, and failed banks may differ from other institutions in their percentages of trust depositors or trust accounts. It is also possible depositors may restructure their deposits in response to changes to the rule, thus mitigating the potential effects on deposit insurance coverage.
Clarification of Insurance Rules The proposed merger of certain revocable and irrevocable trust categories is intended to clarify deposit insurance coverage for trust accounts.
Specifically, the merger of these categories would mostly eliminate the need to distinguish revocable and irrevocable trusts currently required to determine coverage for a particular trust deposit. The benefit of the common set of rules would likely be particularly significant for depositors that have established arrangements involving multiple trusts, as they would no longer need to apply two different sets of rules to determine the level of deposit insurance coverage that would apply to their deposits. For example, the 75 To estimate the numbers of trust account depositors and trust accounts affected, the FDIC
performed the following calculation. First, based on data from 249 failed banks between 2010 and 2020, the FDIC determined that there were 335,657 trust accounts out of 3,013,575 deposit accounts trust account share. Second, the FDIC determined the number of trust accounts per trust depositor 335,657/250,139. The FDIC then estimated the number of trust accounts by multiplying the trust account share 335,657/3,013,575 by the number of deposit accounts across all IDIs 640,918,226
according to March 31, 2021, Call Report data. This step yielded an estimate of 71,386,539 trust accounts. Based on the estimated number of trust accounts per trust depositor from the failed bank data, the FDIC estimated the total number of trust depositors to be 53,198,823. Using failed bank data, 100 out of 250,139 trust depositors had balances in excess of $1.25 million in their trust accounts.
Thus, the FDIC estimated that, of the approximately 53.2 million trust depositors, 100/250,139 of themapproximately 21,268had balances in excess of $1.25 million in their trust accounts, and therefore could be directly affected by the proposal.
These estimated 21,268 trust depositors are associated with an estimated 28,539 trust accounts, based on the observed number of trust accounts per trust depositor from the data from 249 failed banks between 2010 and 2020.

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