The FDIC today finalized long-awaited changes to modernize its existing brokered deposit rules and foster greater innovation by financial institutions. The final rule establishes a new framework for designating an entity as a “deposit broker” and amends the methodology for calculating the national rate and national rate cap for specific deposit products.
The final rule narrows the definition of “deposit broker.” It also designates certain business relationships and services that meet the rule’s “primary purpose exemption,” and do not require an application to the FDIC. These designated exemptions include: deposits where the agent has less than 25% of the total “assets under administration” for its customers; health savings accounts; deposits related to certain real estate and mortgage servicing transactions; certain retirement funds; and customer funds held for various regulatory, tax and other government purposes.
To better accommodate fintech partnerships, the rule also provides that entities with exclusive deposit placement arrangements with one bank are not deposit brokers. With respect to the national rate cap, the FDIC would include credit unions in the data that backs the national rate and incorporate Fed funds and Treasury rates into the national rate cap.
The American Bankers Association has long called for an update to the brokered deposit rules, and ABA President and CEO Rob Nichols applauded the FDIC for its efforts. “Today’s final FDIC rule is an important step that recognizes that markets have evolved, and new technologies have changed the ways banks gather deposits and the ways bank customers access and manage their funds,” Nichols said. He also called on Congress to “revisit Section 29 of the [Federal Deposit Insurance] Act, and to consider whether it still achieves the policy goals it was enacted to accomplish.”