We previously posted on 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. Today, the proposed rule was published in the Federal Register and the FDIC is accepting public comments until December 2, 2024.
As a reminder, the proposed rule targets “custodial accounts with transactional features” held by FDIC-insured banks, other than those accounts 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 would include the bank 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.”
The FDIC’s proposal is part of a broader effort to address risks related to third-party deposit relationships, and to promote timely access by consumers to their funds (either because a bank fails or a third party fintech fails). We encourage stakeholders to contact us if they wish to submit a comment.
We will continue to monitor closely developments with this proposed rule.
