ABA, State Associations Raise Concerns About National Rate Cap in Letter to FDIC

The American Bankers Association joined a group of 51 state bankers associations in a letter to FDIC Chairman Jelena McWilliams today voicing concerns that the national rate cap—which is intended to prevent struggling banks from offering excessively high rates—is being used as a proxy for volatile deposits in examinations of healthy banks. The groups noted that FDIC’s calculation methodology has not kept pace with interest rates and does not account for differences in local markets and competition between banks.

As the agency reconsiders its brokered deposit framework, the groups urged the FDIC to also work to ensure that the national rate cap is not being applied to healthy banks through the supervisory process. “Supervisory use of an artificially low national rate cap is discouraging healthy banks from raising or holding what would otherwise be considered stable deposits,” the groups noted.