ABA Urges Narrower Definition of ‘Deposit Broker,’ Changes to National Rate Cap

In a comment letter to the FDIC today, ABA advocated for updates to the agency’s outdated and overly broad brokered deposit rules and interpretations. ABA noted that the scope of what is classified as a brokered deposit far exceeds the original intention of Congress, which was to prevent troubled institutions from holding this kind of deposit.

In its comments, ABA called on the FDIC to significantly narrow who is considered a “deposit broker” under current rules, pointing out that many entities—including social media platforms, fintech partners and bank subsidiaries—could be classified as deposit brokers today. ABA also emphasized that relationship deposits—including affiliate and subsidiary funds, co-branded university products, or health savings accounts—should not be considered brokered, and that “penalizing these deposits is harmful to both banks and consumers.” (ABA’s Health Savings Account Council elaborated further on the brokered deposit rules as they relate to HSAs in a separate comment letter also filed today.)

As the FDIC considers changes to the brokered deposit rules, ABA also highlighted the need for changes to the national rate cap. While the rate cap is intended to prevent struggling banks from offering excessively high rates, ABA noted that 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.