We have two customers, both of which are owned by the same holding company, with separate EINs. If we hold CDs for both corporations, will they be separately insured? We’re concerned that this arrangement does not pass the “independent activity” test.

If the two corporations are operated for any purpose other than simply to increase deposit insurance, their CDs will be separately insured. The “independent activity” test hinges on whether separate entities are “operated primarily for some purpose other than to increase deposit insurance.”

As noted in FDIC Advisory Opinions, the fact that two corporations are separately incorporated, with separate taxpayer identification numbers, suggests that they should be separately insured, though those facts are not dispositive. In addition, the fact that multiple corporations have common owners does not preclude them from obtaining separate deposit insurance, provided that the corporations meet the independent activity test.

For resources related to our guidance, please see:

12 CFR 330.1(g) (“A corporation, partnership or unincorporated association shall be deemed to be engaged in an ‘independent activity’ if the entity is operated primarily for some purpose other than to increase deposit insurance.”)

The FDIC has informed the IBA that it has removed all of its advisory opinions from its website due to a high risk of staleness. We have provided links to archived versions of the advisory opinions for your convenience. If you have a question about an advisory opinion, the FDIC recommends that you contact your FDIC Field Office, which you can find by clicking here.

FDIC, Advisory Opinion 95-5 (March 30, 1995) (“The fact that the Hospital and Foundation have separate boards of directors and different tax identification numbers suggests that the Hospital and Foundation are separate entities which would be separately insured. However, these facts would not be conclusive.”)
FDIC, Advisory Opinion 87-10 (“Although tax identification numbers do not determine deposit insurance coverage, the fact that all three entities share a common number would seem to support a conclusion that [Company X] and [Company Y] are not separately incorporated.”)

FDIC, Advisory Opinion 95-14 (August 23, 1995) (“. . . the fact that the corporations are solely owned by the same individual does not preclude each from entitlement to its own separate $100,000 insurance coverage, as long as each corporation is separately chartered and is engaged in the independent activity referred to above. . . . (The fact that each corporation has its own tax ID number is not dispositive as to whether each corporation is separately chartered and is engaged in independent activity.)”)

FDIC, Advisory Opinion 91-27 (April 8, 1991) (“If the four corporations satisfy the ‘independent activity’ test, then each corporation’s accounts would be separately insured up to $100,000. As noted above, this is true regardless of whether or not the four corporations are owned by the same person or entity (in your hypothetical, a revocable trust).”)