FDIC Proposes Changes to National Rate Cap Calculation

The FDIC today proposed a new methodology for calculating the national rate and the national rate cap for specific deposit products. The FDIC is proposing to set the national rate cap at the higher of 75 basis points above the national rate, or the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits. The proposed rule would also allow less than well-capitalized institutions to offer up to 90% of the highest rate paid on a product in the institution’s local market.

While the rate cap is intended to prevent struggling banks from offering excessively high rates, the American Bankers Association has noted previously 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. “We appreciate the FDIC’s recognition that the national rate cap was never intended to be applied to well-capitalized banks, and for updating its supervisory and examination manual to reflect that fact,” said ABA President and CEO Rob Nichols. “We also look forward to working with the FDIC to further improve the national rate cap so that it does not set or interfere with market rates, and provides banks flexibility to meet the needs of their depositors.”

Comments on the proposal are due 60 days after publication in the Federal Register.


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