In an American Banker op-ed today, the American Bankers Association called on Congress and the FDIC to reconsider existing brokered deposits rules and regulations and modernize them so that consumers can continue interacting their bank in the manner of their choosing. While the rules — which were written almost 30 years ago — were originally intended to limit the risk of banks losing brokered deposits during times of stress, they have become outdated and are restricting banks’ ability to innovate, wrote ABA VP Alison Touhey.
For example, paying small fees to social media providers like Facebook, Instagram and Twitter to help win new customers could fall within the overly broad definition of “brokered deposit,” Touhey said, “despite those relationships resembling nothing like what was envisioned when the statute was written.” She added that as a result of technology, banks and regulators have more tools to help them effectively manage liquidity and interest rate risk, and are subject to higher capital and liquidity standards than they were when the rules were first written.
The existing brokered deposit rules are also tied to the misapplication of the FDIC’s decades-old national rate cap, which is also in need of updating, Touhey added. She expressed the association’s support for the inclusion of brokered deposit reform in the regulatory reform law, and the FDIC’s recent announcement that it would review the overall treatment of brokered deposits.