On February 12, 2013, the FDIC issued a proposed rule and release clarifying that, while deposits in foreign branches of US banks will be considered deposits under the Federal Deposit Insurance Act's depositor preference rules if they are dually payable at both the foreign branch and the bank's US office, they are not FDIC-insured. A recent proposal by the UK's Financial Services Authority (FSA) created a likelihood that some US banks will change their deposit agreements to make their UK branch deposits dually payable in the UK and US (see Legal Update, FSA Consults on Non-EEA National Depositor Preference Regimes). Absent the proposed rule, this change could potentially extend FDIC deposit insurance to foreign deposits and increase the liability of the Deposit Insurance Fund.

The FDIC is accepting comments until 60-days after publication of the proposed rules in the Federal Register.

For more information on foreign branch and banking issues, see Practice Note, International Banking.