ABA Urges Targeted Changes to FDIC’s Brokered Deposit Proposal

In a comment letter to the FDIC today, ABA raised concerns that the agency’s recent proposal to modernize brokered deposit rules does not go far enough to narrow the definition of “deposit broker” and would continue to impose unnecessary costs on stable funding sources gathered through modern means.

ABA recommended several changes to the proposal, including a more precise definition of “deposit broker” and an explicit exemption for parties not deemed to be deposit brokers. ABA also urged the FDIC to ensure that activities that fall within the rule’s primary purpose exemption do not require an application and to require an annual re-certification of primary purpose exemptions. Finally, ABA called for a transitional period for institutions to comply with the final rule when it is issued and for additional steps that would help to mitigate the stigma of “classic” brokered deposits, including examiner education.

ABA as long called for an update to the brokered deposit rules and expressed appreciation for the FDIC’s willingness to consider changes to the three-decade-old regulatory framework. The association also continues to call for much-needed changes to the national rate cap, which is often used as a proxy for volatile deposits at healthy banks and calculated in a manner that fails to account for differences in local markets and how banks compete.