Assuming that a bank or thrift is participating in the Debt Guarantee Program, does a CD that it issues to a bank through a broker qualify for the guarantee on senior unsecured debt?
Under the Final Rule, senior unsecured debt includes “U.S. dollar-denominated certificates of deposit owed to an insured depository institution, an insured credit union … or a foreign bank ….” If the issuing bank or thrift owes the CD to a broker, the CD does not meet the definition of senior unsecured debt, and will not be guaranteed, even where an insured depository institution, an insured credit union or a foreign bank is the beneficiary of the CD. (However, the CD will often be insured—in whole or in part—under deposit insurance rules.) Where a broker merely arranges placement of a CD, and the issuing bank or thrift owes the CD directly to another insured depository institution, an insured credit union or a foreign bank, rather than to the broker as agent for one of these institutions, the CD meets the definition of a senior unsecured debt and will be guaranteed, provided that the debt is owed to the insured depository institution, insured credit union, or foreign bank solely i
Related Questions
- Assuming that a bank or thrift is participating in the Debt Guarantee Program, does a CD that it issues to a bank through a broker qualify for the guarantee on senior unsecured debt?
- Will the debt guarantee component of the Temporary Liquidity Guarantee Program cover unsecured debt to affiliates? Will debt to affiliates be counted in the 125 percent limit?
- Would a bank pay an assessment under the Debt Guarantee Program for newly issued interbank CDs as well as regular deposit insurance premiums? Isn this a "double-assessment?
