In a letter yesterday led by Reps. Andy Barr (R-KY) and French Hill (R-AR), 20 House lawmakers called on the FDIC to withdraw its proposed rule to expand the definition of brokered deposits, saying the changes under consideration would harm banks and consumers.
The FDIC board voted 3-2 in July to advance a proposed rule that would expand the definition of “deposit broker,” capturing many deposits that critics of the proposal say do not pose enhanced liquidity or other risks. In the letter to FDIC Chairman Martin Gruenberg, the lawmakers said the rulemaking was arbitrary and would “unjustifiably reverse adjustments to the treatment of brokered deposits that were finalized by the FDIC in 2020 following substantial research and analysis.”
The lawmakers also faulted Gruenberg for citing the failure of fintech firm Synapse and last year’s bank failures as reasons for rule change, saying such justifications “are disingenuous as neither of these situations were caused by brokered deposits.”
“This proposal will also have negative consequences for banks and everyday investors,” the lawmakers said. “Without justification, the proposal would likely force banks, including ones that do not face restrictions on acceptance of brokered deposits, to significantly alter their liability structures. By increasing the share of deposits for many banks that would be classified as brokered deposits, the proposal also promises to unnecessarily increase deposit insurance assessment rates for those banks.”
Earlier this month, the American Bankers Association and nearly 60 national and state bankers associations sent the agency a trio of letters arguing that it had failed to justify the need for the proposal changes, that the proposal does meet the legal standards required of new rulemakings, and that it raises numerous policy concerns. They urged the agency to withdraw the proposed rule.
