WASHINGTON — The Federal Deposit Insurance Corp. board of directors on Tuesday is set to finalize a regulation dealing with the agency's handling of uninsured deposits held in foreign branches.

The FDIC in February proposed a solution to international criticism of U.S. policy favoring domestic-based commercial depositors over foreign-based ones in the payment of uninsured bank-failure claims. But the agency's proposal met with protests from large U.S. banks.

At issue is a 1993 U.S. statute establishing "national depositor preference." Such regimes are opposed abroad, particularly in the United Kingdom, which threatened to impose regulations on branches of U.S. banks if customers of the host nation were not treated more equitably. (The dispute affects primarily commercial deposits, and only those above the FDIC's standard $250,000 account limit.)

The large, internationally-active U.S. banks had urged the FDIC to reverse a 1994 legal opinion stating that depositor preference does not apply to "obligations payable solely at a foreign branch," but the FDIC fears reversing that opinion could mean granting certain foreign deposits an insurance guarantee by the agency.

Instead, the FDIC proposed steps which would open the door to U.S. banks making foreign deposits payable both at the foreign branch and on U.S. soil. Such "dual-pay" structures — which banks can already pursue but have largely avoided because of the costs — are not included in the U.S. depositor preference policy. As a result, uninsured foreign depositors with dual-pay accounts would be on level ground with uninsured U.S. depositors.

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