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Banking & Finance

FDIC Extends Transaction Account Guarantee (TAG), Consumers to Benefit

Special to the Savannah Business Journal

10/12/2009 – As of Oct. 1, 2009, the Federal Deposit Insurance Corporation (FDIC) has issued the final rule regarding the Transaction Account Guarantee (TAG) component of the Temporary Liquidity Guarantee Program (TLGP) to ensure an orderly phase-out. The FDIC is extending the TAG program for six months until June 30, 2010 from the originally slated expiration of Dec. 31, 2009. 

Each Insured Depository Institution (IDI) that participates in the extended TAG program will be able to extend the safety of all non-interest bearing transaction accounts (defined as those with rates of 50 basis points or less) that exceed $250,000, helping large businesses and public entities. 

Stipulations amended for the extension of the TAG program include the requirement to post a conspicuous notice in the lobby of its main office and at each branch office that discloses whether the IDI is participating in the TAG program.

In addition, disclosures for participating IDI’s must also contain a statement that indicates that all noninterest-bearing transaction accounts, as defined by the regulations, are fully guaranteed by the FDIC. This includes those IDI’s that are not participating in the TAG program. They are also required to disclose the fact that deposits in noninterest-bearing transaction accounts, as defined, continue to be insured for up to, but not exceeding, $250,000. 

The TAG program was established as a component of the TLGP in October 2008. In essence, the TLGP is part of a coordinated effort by the FDIC, the U.S. Department of the Treasury, and the Federal Reserve to address disruptions in credit markets. The outlined structure of the TLGP was designed to help stabilize the nation’s financial system.

The FDIC’s TLGP is composed of two distinct components: the Debt Guarantee Program (DGP) and the TAG program. Over 7,100 IDIs participate in the TAG program, and the FDIC has guaranteed an estimated $700 billion of deposits in noninterest-bearing transaction accounts, as defined, that would not otherwise be insured.

As a result of this recent change, consumers reap the benefits of increased security for six months longer than originally intended and are now covered through June 30, 2010. This provides comfort to those consumers having large balances on deposit with insured depository institutions, including community banks. The bottom line is that the extension of the TAG program is good for consumers and for the banking industry.    

Marshall S. Withers serves as the Executive Vice President and Chief Financial Officer for The Coastal Bank, a TAG participating community bank headquartered in Savannah.
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