In a comment letter to the FDIC today, the American Bankers Association offered support for a recent proposal to implement Section 202 of S. 2155, the new regulatory reform law. Under the proposed rule, well-capitalized and well-rated institutions would not be required to treat reciprocal deposits as brokered deposits as long as they were less than 20 percent of a bank’s total liabilities or $5 billion. Institutions that are not both well capitalized and well rated may also exclude reciprocal deposits from their brokered deposits under certain circumstances.
ABA noted that the FDIC’s views on brokered deposits have not kept up with changes in law, technology and the market, and applauded the FDIC taking this “useful first step” toward modernizing brokered deposit rules. They called on FDIC to consider “what is considered a brokered deposit, including whether the term itself is applicable in today’s business environment,” and whether the FDIC’s policy goals are in line with statutory requirements.
The association also highlighted the need to revisit the national rate cap and how it is applied to community banks through the examination process. ABA pointed out that in a rising rate environment, the current rate cap may not accurately reflect the cost of deposits, and that “imposing an artificially low regulatory rate in a rising rate environment” could lead to liquidity crunches.