Deposit Cap Loophole for B of A?: Thrift Escrow Accounts Could Make Difference

By Julavits, Robert; Linder, Craig | American Banker, November 13, 2003 | Go to article overview

Deposit Cap Loophole for B of A?: Thrift Escrow Accounts Could Make Difference


Julavits, Robert, Linder, Craig, American Banker


Bank of America Corp. will file its regulatory application to acquire FleetBoston Financial Corp. this week, forcing the Federal Reserve Board to determine, for the first time, whether the combined company would control more than 10% of the nation's deposits.

It sounds like a simple calculation to satisfy a legal requirement, and assessing each bank's total deposits is easy. The complexity occurs when tallying the nation's total deposits.

The Fed relies on the data supplied by the Federal Deposit Insurance Corp., which recently released figures showing total deposits hit $5.129 trillion on June 30. A combined Bank of America/Fleet would have $513 billion, or 10.01% of that total, just edging past a 1994 federal law prohibiting two companies from merging to create a firm controlling more than 10%.

Bank of America on Wednesday said that the FDIC's figures did not fully and accurately the combined company's deposit share. A representative declined to offer specific figures on how B of A would calculate it share, saying it would include that data in its merger application.

The FDIC considered the question, and late in the afternoon said the Fed might include about $42 billion that thrifts hold in escrow accounts. If the Fed did add in those funds, then the national deposit base would swell to $5. …

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