Abstract: ABA experts, coordinated by Christine Walika, federal regulatory representative, answer selected banker questions in this space. Write on letterhead to: Steve Cocheo, ABA Compliance Mailbox, c/o ABA Banking Journal, 345 Hudson St., New York, N.Y. 10014. Or fax questions to (212) 633-t165. Chapter 13 Bankruptcy and NOW Eligibility Q. Are Chapter 13 bankruptcy trustees allowed to hold a NOW account under Regulation D? A. Eligibility for NOW accounts is governed by 12 U.S.C. Sect. 1832 and related federal banking regulations, according to Tom Greco, ABA's associate general counsel. The statute provides that NOW accounts are authorized ...only with respect to deposits or accounts which consist solely of funds in which the entire beneficial interest is held by one or more individuals or by an organization... which is not operated for profit .... FDIC's regulation on NOW accounts does not contain an in-depth explanation of these eligibility requirements, but simply refers back to the statute. The Federal Reserve Board's NOW account regulations are more expansive and can be found at 12 C.F.R. Sect. 204.130. FDIC would generally defer to these Fed regulations. With respect to the bankruptcy trustee, the regulation states that ...funds held in a fiduciary capacity ([such as by] ... a trustee in bankruptcy)... may be held in the form of NOW accounts if all of the beneficiaries are otherwise eligible to maintain NOW accounts. Sect 204.130 (e). Conversations with a Federal Reserve Board representative indicate this approach would be used to determine eligibility: 1. The bank must identify the beneficiaries of the funds held by the bankruptcy trustee. If, for example, the account is simply money for the trustee's use (i.e., for the trustee's benefit), then those funds are NOW-eligible. 2, Where other beneficiaries are involved, the answer may be different. For example. while the bankruptcy is pending, the trustee is acting on behalf of the bankruptcy estate (and the debtor). Therefore, if the debtor is entitled to hold a NOW account, so would the trustee. 3. This answer may change when the bankruptcy process is completed (e.g., by liquidation or, in the Chapter 13 context. by adoption of a repayment plan). The trustee can now be viewed as a fiduciary with the beneficiaries of the account being the creditors, rather than the debtor being the beneficiary. If any of the creditors are ineligible for a NOW account then the funds would not be NOW-eligible. Flood Insurance and Lender Liability Q. If a bank has a legal obligation to get a property covered if it lies in a flood-hazard zone, what happens if the bank failed to have insurance attained, and a flood occurs? Can borrowers seek any recourse if they are not instructed by the bank to get coverage?--R.G., Fla. A. Yes. If a bank failed to notify borrowers that they were in a flood zone and a flood occurred, the bank could be held liable. In cases where this has happened, the bank would usually put in a claim under its errors and omissions coverage. …
Publication Year: 1995
Publication Date: 1995-10-01
Language: en
Type: article
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Cited By Count: 1
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