In a previous post, we discussed the Federal Deposit Insurance Corporation’s (FDIC) notice of proposed rulemaking aimed at enhancing recordkeeping for bank deposits received from fintech and other third-party, non-bank companies. The proposed rule initially set a public comment period ending on December 2, 2024. This week, the FDIC announced a 45-day extension to this comment period, now allowing stakeholders until January 16, 2025, to submit their feedback.
As a reminder, the proposed rule targets “custodial accounts with transactional features” held by FDIC-insured banks, excluding those specifically exempted under the rule. These accounts often involve funds from end users or other third parties that are originated through fintech companies, fintech intermediaries, and non-bank companies, and are held in a single custodial account at a bank. The bank partner is responsible for maintaining the ledger of the amounts owned or held for the benefit of those third parties.
Under the proposed rule, FDIC-insured banks holding such accounts would be required to take specific steps to ensure accurate account records are maintained. This includes having “direct, continuous, and unrestricted access to the records of the beneficial owners, including, but not limited to, in the event of the business interruption, insolvency, or bankruptcy of the third party.” Additionally, banks would need to reconcile the account for each individual owner on a daily basis and ensure compliance through oversight by the banks’ primary federal supervisor.
The FDIC’s proposal is part of a broader effort to mitigate risks related to third-party deposit relationships and ensure timely access to funds for consumers, whether due to a bank failure or a third-party fintech failure. We encourage stakeholders to take advantage of the extended comment period to provide their insights and feedback on the proposed rule.
