On July 30, the FDIC released an NPRM that would provide restrictions, update definitions, and provide new exceptions to the rule on brokered deposits. The FDIC explained that these proposed amendments would simplify definitions, ensure uniform reporting, and strengthen the soundness of the banking system by ensuring lesser capitalized institutions will be “restricted from relying on brokered deposits to support risky, rapid growth.”
The proposed rule would amend the definition of “deposit broker” and revise the “primary purpose” exception to the “deposit broker” definition to consider the third party’s intent in placing funds at a particular institution. Additionally, the FDIC proposed eliminating the exclusive deposit placement arrangement exception and updating the application and notice processes for the primary purpose exception. Through the FDIC’s statistical analyses, the FDIC found a “general” correlation between a depository institution’s use of broker deposits and its probability of failure, resulting in what would be losses to the Deposit Insurance Fund. Comments on the NPRM must be received within 60 days of publication in the Federal Register.
