In a move long sought by ABA, the FDIC today issued an advanced notice of proposed rulemaking on brokered deposits and the national rate cap. ABA has been actively engaged with the FDIC on the need to revise the regulations so that they accommodate modern banking and don’t discourage healthy banks from gathering deposits. Written over 30 years ago, brokered deposit regulations were designed to restrict certain kinds of deposits that institutions in a weakened capital position could accept. With the advent of the internet, smartphones and new business models, however, brokered deposits have evolved, and ABA has long been concerned that the rules can interfere with customer interactions, penalizing banks for finding new and innovative ways to provide deposit services.
Also at issue is the FDIC’s view on deposits above a rate cap. While the rate cap is intended to prevent struggling banks from offering excessively high rates, it is often used as a proxy for volatile deposits at healthy banks and calculated in a way that doesn’t account for differences in local markets and how banks compete.
“Brokered deposit regulations affect every bank in this country and it’s our duty to our members and our members’ customers to try find a better approach to the rules,” said ABA President and CEO Rob Nichols. “We think they can be updated to reflect the realities of today’s marketplace and better fit how banks serve their customers.”