Summary:
The Federal Deposit Insurance Corporation (FDIC) is publishing a Notice of Proposed Rulemaking (NPR) seeking comments on proposed amendments that would strengthen the important prudential protections of the safety and soundness rules on brokered deposits (12 CFR 337.6 and 12 CFR 303.243) that implement section 29 of the Federal Deposit Insurance Act (FDI Act). Based on the FDIC’s experience since the adoption of the 2020 final rule and the large bank failures in 2023, the proposed revisions seek to strengthen the safety and soundness of the banking system, help ensure uniform and consistent reporting of brokered deposits, and reduce operational challenges and reporting burdens on insured depository institutions (IDIs).
Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-insured financial institutions.
Highlights:
- Simplify the definition of “deposit broker,” including by removing the “matchmaking activities” definition and replacing it with a broader definition related to deposit allocation services and add a new factor related to fees;
- Eliminate the “exclusive deposit placement arrangement” exception from the definition of “deposit broker” and clarify that even if a person has an exclusive deposit placement arrangement with one IDI, if it is placing or facilitating the placement of deposits at one or more IDIs, that person is included within the ‘‘deposit broker’’ definition;
- Revise the interpretation of the primary purpose exception (PPE) to consider the third party’s intent in placing customer funds at a particular IDI;
- Allow only IDIs, and not third parties, to file notices or applications for PPEs;
- Revise the “25 percent test” designated business exception to be available only to broker-dealers and investment advisers registered with the United States Securities and Exchange Commission and only if less than 10 percent of the total assets that the broker-dealer or investment adviser has under management for its customers is placed at one or more IDIs;
- Eliminate the enabling transactions designated business exception; and,
- Clarify when an IDI, which has lost its agent institution status, can regain that status for purposes of the limited exception for reciprocal deposits.
Comments on the proposal are due 60 days after publication in the Federal Register.