Pending Establishment of the Deposit Insurance Coverage Program | M-004

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Establishment of the Deposit Insurance Coverage Program​

Motion No.: M-004-MAR-2026
Category: Monetary Operations
Legal Basis: Federal Reserve Act (FRA) §§ 4, 5, 6, 8, 9 & 11

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WHEREAS​

The Federal Reserve Bank of Redmont is mandated under the Federal Reserve Act to promote financial stability, safeguard the integrity of the banking system, and maintain public confidence in regulated financial institutions; and

WHEREAS​

Depositors benefit from credible safeguards that ensure the protection of client deposits in the event of institutional insolvency or default; and

WHEREAS​

The Federal Reserve Board has determined that the creation of a voluntary deposit insurance instrument may strengthen depositor confidence while encouraging prudent banking practices, transparency, and sound capital management; and

WHEREAS​

The Federal Reserve Board further recognizes that such insurance coverage must be conditioned upon rigorous financial disclosure, capital adequacy, and prudential safeguards in order to mitigate systemic risk and prevent moral hazard within the financial system;

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NOW, THEREFORE, BE IT RESOLVED THAT​

1. The Deposit Insurance Coverage Program shall constitute a voluntary insurance product made available to regulated deposit-taking financial institutions, providing insurance protection covering up to one hundred percent (100%) of client deposits held by a participating institution, subject to the terms and conditions required by this policy.
2. The Federal Reserve Bank of Redmont shall structure and administer the insurance product such that participating institutions shall remit a monthly premium of an amount, determined by the Board from time to time, in order to maintain active coverage under the program.
3. The Federal Reserve Bank of Redmont shall ensure that any insurance contract issued under this program includes provisions requiring participating institutions to maintain continuous compliance with all eligibility, transparency, capital adequacy, and prudential standards established by this policy.
4. The Federal Reserve Bank of Redmont shall require, as a condition of eligibility for participation in the Deposit Insurance Coverage Program, that participating institutions publish independently audited financial statements covering each completed calendar month of operations.
5. The insurance policy governing the Deposit Insurance Coverage Program shall require that such financial statements be made readily accessible to the public through a clearly visible and easily accessible location, including but not limited to the institution’s official website, public channel on discord, and any other official communications platform.
6. The insurance policy shall further require that each monthly financial statement be released no later than thirty (30) days following the end of the applicable calendar month.
7. The insurance policy shall require that all financial statements produced under the program be prepared in accordance with one of the following accounting standards, at the election of the participating institution:
   1. US Generally Accepted Accounting Principles (US GAAP);
   2. International Financial Reporting Standards (IFRS); or
   3. Accounting Standards for Private Enterprises (ASPE).
8. The insurance policy shall require that the selected accounting framework be applied consistently across reporting periods unless otherwise approved by the Federal Reserve Bank of Redmont.
9. The Federal Reserve Bank of Redmont shall require participating institutions to maintain a minimum Shareholder Capital Ratio of fifteen percent (15%) relative to total client deposits at all times.
10. The insurance policy shall define Shareholder Capital as including all equity accounts attributable to shareholders, including but not limited to paid-in share capital, additional paid-in capital, common shares, preferred shares, retained earnings, and any other permanent equity instruments recognized by the elected accounting standard.
11. The insurance policy shall require that the Shareholder Capital Ratio be calculated as Total Shareholder Capital divided by Total Client Deposits.
12. The insurance policy shall require that any participating institution whose Shareholder Capital Ratio falls below fifteen percent (15%) be deemed non-compliant with the insurance program and required to restore compliance through capital raising, deposit reduction, or other corrective action approved by the Federal Reserve Bank of Redmont.
13. The Federal Reserve Bank of Redmont shall ensure that the insurance policy requires participating institutions to remain in continuous compliance with the reserve requirement ratio established under Policy R-001.
14. The insurance policy shall provide that any failure to comply with the reserve requirement provisions of Policy R-001 may constitute grounds for suspension or termination of insurance coverage.
15. The Federal Reserve Bank of Redmont shall require that the insurance policy include provisions mandating that all financial statements produced pursuant to this program be accurate, complete, and prepared in good faith.
16. The insurance policy shall provide that any participating institution determined by the Federal Reserve Bank of Redmont to have knowingly published or submitted falsified, materially misleading, or fraudulent financial statements shall immediately lose eligibility for participation in the Deposit Insurance Coverage Program.
17. The insurance policy shall further provide that any institution found to have submitted falsified financial statements shall be permanently barred from participation in the Deposit Insurance Coverage Program.
18. The Federal Reserve Bank of Redmont shall structure the insurance policy such that insurance payouts shall only occur in the event that the participating institution has been formally declared bankrupt or insolvent by a competent court of jurisdiction.
19. The insurance policy shall further require that, as a condition precedent to the payment of any insurance claim, all directors serving on the board of the participating institution at the time of bankruptcy shall formally agree that they shall not serve on the board of directors, executive leadership, or otherwise operate or manage any deposit-taking financial institution for a period of twelve (12) months following the declaration of bankruptcy.
20. The Federal Reserve Bank of Redmont shall maintain and publish a publicly accessible register of financial institutions participating in the Deposit Insurance Coverage Program and currently in compliance with all applicable program requirements.
21. Such register shall be made available in a clearly visible public channel or repository maintained by the Federal Reserve Bank of Redmont in order to ensure transparency for depositors and the general public.
22. Any institution listed as compliant and actively insured under the Deposit Insurance Coverage Program may publicly advertise or represent its insured status, provided that such representations are accurate and not materially misleading.
23. The Federal Reserve Bank of Redmont shall require that any advertising or public representation of insured status accurately reflect the scope and conditions of the Deposit Insurance Coverage Program.
24. The Federal Reserve Bank of Redmont shall require that any institution seeking participation in the Deposit Insurance Coverage Program first demonstrate compliance with all prerequisite eligibility requirements prior to approval for insurance coverage.
25. As a condition of initial eligibility, the applying institution must provide independently audited financial statements covering at least the most recently completed calendar month of operations.
26. The applying institution must demonstrate, based on such audited financial statements, that it maintains a Shareholder Capital Ratio of not less than fifteen percent (15%) relative to total client deposits.
27. The Federal Reserve Bank of Redmont shall review the submitted financial statements and supporting documentation to determine whether the institution satisfies the capital adequacy and transparency requirements established by this policy.
28. Insurance coverage under the Deposit Insurance Coverage Program shall not become effective until the Federal Reserve Bank of Redmont has formally determined that the institution has satisfied all prerequisite eligibility requirements and approved the institution for participation.
29. The Federal Reserve Bank of Redmont shall require that participation in the Deposit Insurance Coverage Program be subject to review and approval by the Risk and Compliance Team of the Federal Reserve Bank of Redmont.
30. The Federal Reserve Bank of Redmont shall retain the authority to request additional documentation, conduct supervisory reviews, impose additional prudential safeguards, or suspend, modify, or terminate insurance coverage for any institution failing to comply with the provisions of this policy or the terms of the insurance program.

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VOTING​

This motion shall be adopted upon approval by a simple majority of the sitting members of the Federal Reserve Board.
In the event of a tie, the Secretary of the Department of Commerce shall cast the deciding vote, pursuant to the Federal Reserve Act.

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EFFECTIVE DATE​

This motion shall take effect immediately upon passage.