The FDIC board today announced it will withdraw proposed rules relating to brokered deposits, corporate governance, executive compensation and the Change in Bank Control Act. The decisions were part of a larger push by the Republican-led board to reverse or delay several policies pursued during the Biden administration.
The board withdrew:
- A proposed rule to expand the definition of deposit broker to capture many deposits that currently do not meet the criteria. The rule “would have significantly disrupted many aspects of the deposit landscape,” according to the FDIC statement.
- Proposed guidelines for governance and risk management at supervised banks with at least $10 billion. The rule “would have created a number of overly prescriptive and process-oriented expectations for management and boards of directors of FDIC-supervised institutions with $10 billion or more in total consolidated assets,” the agency said.
- A proposed interagency rule to create new limits on incentive compensation for executives at certain financial institutions. The Dodd-Frank Act requires six agencies — including the FDIC — to jointly issue regulations or guidelines to prohibit incentive-based compensation arrangements that encourage excessive risk-taking at financial institutions with at least $1 billion in assets. A 2016 proposal to do just that was reintroduced last year by the FDIC and three agencies, but not the Securities and Exchange Commission nor Federal Reserve.
- A proposal to remove an exemption from the requirement to submit a notice to the FDIC for an acquisition of voting securities of a depository institution holding company for which the Fed reviews a Change in Bank Control Act notice.
The FDIC board decisions came the same day it proposed to rescind a 2024 agency statement on bank merger policy and to delay implementation of a rule on the use of FDIC signage by financial institutions. All the policies were pursued when Democrats held a majority on the board. Republicans now hold three of the board’s five seats, with the other two vacant. (Federal law states that only three board members can come from the same political party.)
“If the FDIC pursues regulatory action on these matters in the future, it will do so by publishing new proposals or other issuances consistent with the Administrative Procedure Act,” the FDIC said.
ABA welcomes withdrawals
In a statement, American Bankers Association President and CEO Rob Nichols said the association welcomed the board’s decision to rescind and withdraw a range of regulatory actions advanced by the agency’s prior leadership.
“In particular, we applaud the decision to rescind the 2024 merger policy statement, which created more uncertainty in the marketplace for banks looking to make strategic decisions about their future, as well as the decision to withdraw the misguided brokered deposits proposal,” Nichols said. “As we shared previously, that proposal threatened to undermine important relationships between banks and third parties, and it was inconsistent with the law. The three other proposals withdrawn today also had significant flaws that, if adopted, would have made it harder for banks to focus on serving their customers and communities, and ultimately support the economy.
“We look forward to providing our perspective on what a rational merger review process should look like in the future, as we also encourage policymakers to make it easier for entrepreneurs to launch new banks, so we can ensure the U.S. continues to have the deepest and most competitive banking system in the world,” Nichols added. “If the FDIC decides to re-propose any of the rules withdrawn today, we will be prepared to comment on behalf of our members across the country.”
