This rule would clarify that deposits in overseas branches of U.S. banks are not FDIC-insured if they are dually payable both at the branch outside the U.S. and within the U.S. The proposal is intended to prevent U.S. banks from being forced to convert branches in the United Kingdom into subsidiaries, to establish “trusts” to protect U.K. depositors or, should this not be feasible, to convert these funds into insured deposits that would increase the amount of deposits protected by the FDIC. The proposed approach has broad international impact, addressing growing concerns not limited to the U.K. about U.S. depositor-preference procedures. While the proposal may prevent ring-fencing of host- from home-country banking operations, the proposed “dually-payable” approach would require significant changes in deposit contracts at U.S. branches, perhaps limiting the degree to which U.S. banks would be able to continue their current operations as intended by the FDIC.
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