ABA Calls for Legislative Fix to Brokered Deposit Rules

Current laws and regulation related to brokered deposits—which were enacted three decades ago—are in “urgent need of modernization to ensure that banks are not prohibited from holding stable funding, engaging in modern business practices or serving the needs of their customers,” ABA wrote in a letter today to Rep. Gregory Meeks (D-N.Y.), who chairs the House Financial Services Subcommittee on Consumer Protection and Financial Institutions.

The association called for lawmakers to consider a legislative solution that would modernize the existing statute and clarify what constitutes as a brokered deposit, noting that the current laws have not kept up with the significant technological and regulatory changes that have taken place in recent years. Consequently, many entities today—including social media platforms, fintech partners and bank subsidiaries—could be classified as deposit brokers, the association said.

Under the current framework, “a broad swath of stable deposits, such as those raised with the help of advertising, affiliates or modern technology, are unnecessarily subjected to supervisory stigma, limits and additional regulatory costs, even when held by well-capitalized banks,” ABA said. “This, in turn, limits bank access to stable sources of deposits.”