Saying that its proposed brokered deposits rule would have “significantly disrupted many aspects of the deposit landscape,” the FDIC has withdrawn the proposal.
The agency said that it no longer intends to issue a brokered deposits rule.
The FDIC proposed the rule last year, when Democrats controlled the agency. The proposal would have subjected brokered deposits to heightened regulation; it also would have expanded the definition of brokered deposits, including by eliminating certain exceptions to the rule.
It would have eliminated the “exclusive deposit placement arrangement” exception and revised the interpretation of the primary purpose exception (PPE) to consider the third party’s intent in placing customer funds at a particular IDI.
At the time, the FDIC cited the failure of a nonbank deposit broker and also cited the possible risk to banks of relying on brokered deposits as funding sources.
Republicans now control the agency and the brokered deposit rule was one of several proposals that the agency has withdrawn.
In explaining its decision, the FDIC said, “Among other issues, the proposal would have adopted a narrow interpretation of the primary purpose exception inconsistent with the plain meaning of the law, and a broad, sweeping provision related to fees and remuneration.” The agency added, “More generally, the proposal failed to account for the myriad of ways in which deposit arrangements have evolved over the years.”
Banking trade groups had called on the FDIC to withdraw the proposal, saying the agency had not explained the need for the rule, which, they said, would be likely to have significant impact on customers and the products that financial institutions offer.
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