An FDIC interim final rule updating its reciprocal deposit regulations provides helpful clarifications that simplify compliance for banks, the American Bankers Association said today in a letter to the agency.
Issued in August, the interim rule raises the amount of reciprocal deposits an “agent institution” may exclude from treatment as brokered deposits based on a new tiered liability-based calculation, up to a maximum of $30 billion. It also broadens the definition of agent institution and provides clarifications regarding the operation of the reciprocal deposits framework. The rule updates FDIC regulations to conform with changes made in the 21st Century ROAD to Housing Act, which was passed by Congress earlier this year.
In its letter, ABA noted that reciprocal deposits are an important source of stable, diversified funding for many of its member banks, “enabling these institutions to retain established customer relationships by providing depositors with expanded deposit insurance coverage through a single banking relationship.”
“By helping banks compete for and retain deposits that might otherwise leave their communities, reciprocal deposits strengthen banks’ capacity to meet local credit needs and support households, small businesses, and economic growth,” ABA said.
The association added that it hopes the rule will serve as a meaningful first step toward a broader reassessment of the Federal Deposit Insurance Act’s Section 29, which regulates brokered deposits.
