CBA Comment Letter re Brokered Deposits ANPR

Robert E. Feldman, Executive Secretary

Attention: Comments

Federal Deposit Insurance Corporation

550 17th Street NW

Washington, DC 20429

Re:  RIN 3064-AE94



Re: Advance Notice of Proposed Rulemaking Regarding Brokered Deposits and Interest Rate Restrictions/ RIN 3064-AE94


Dear Mr. Feldman:


The Consumer Bankers Association (“CBA” or “the Association”) appreciates the opportunity to offer our views on the Federal Deposit Insurance Corporation’s (“FDIC”) Advance Notice of Proposed Rulemaking (the “ANPR”) concerning the FDIC’s regulatory approach to “brokered deposits” and the interest rate limitations applicable to banks that are less than “well-capitalized,” as those terms are defined and interpreted under Section 29 of the Federal Deposit Insurance Act (the “FDI Act” or “Section 29”).


The Association believes the agency’s regulatory approach to brokered deposits must be modernized to allow banks to better serve their customers and remain competitive in today’s financial services landscape.  Since the FDIC’s brokered deposit restrictions were last amended in 1991, legal developments, consumer preferences and technological advances have drastically transformed the business models, products, and delivery channels that support the banking industry, as well as the types of deposits banks gather to fund their activities.


Banks today are at a competitive disadvantage through overly broad interpretation of brokered deposit rules.  The FDIC’s outdated interpretations of and restrictions on brokered-deposit activities unfairly discourage and penalize institutions utilizing brokered deposits, even if these institutions are adequately capitalized.  More concerning, the FDIC’s broad interpretation of what constitutes a brokered deposit captures many types of deposits that do not possess risky or “hot money” features, thereby restricting legitimate banking activity and subjecting the industry and market to potentially higher deposit insurance premiums, Liquidity Coverage Ratio requirements and added resources needed to track and monitor brokered deposits; ultimately affecting product availability and pricing for consumers. 


Our members encourage the FDIC to revisit its interpretations of what constitutes a deposit broker (and thus a brokered deposit) and to more widely permit banks to accept stable and low volatility deposits outside their geographic footprint or with the involvement of third parties without running afoul of brokered deposit restrictions.  Further, we urge the FDIC to rethink the calculation of a “national” interest rate restriction to ensure the rate represents activities of small, medium, large, and online banks, and is not skewed heavily towards a single bank model: operating the largest number of branches.




  1. The FDIC’s brokered deposit rules and interpretations are outdated and do not account for changes to federal securities and banking laws.

Pursuant to the Gramm-Leach-Bliley Act (“GLBA”), federal securities and banking laws mandate certain activities formerly conducted within a bank now be conducted by a broker-dealer or other affiliate.  Whereas a bank could act as a broker for securities transactions in 1989, a bank today transfers these activities from banking subsidiaries to broker dealers registered by the Securities and Exchange Commission (“SEC”) pursuant to the GLBA. To the extent banks are presently required by law to conduct activities using a licensed broker-dealer, the brokered deposit rules should not operate to punish institutions for outsourcing these activities to a third-party in accordance with the GLBA.   


Additionally, many federal laws, including the Fair Credit Reporting Act (“FCRA”), the Bank Secrecy Act (“BSA”), and the Financial Industry Regulatory Authority Rule 2111(a) (“the Suitability Requirement”) permit or require financial institutions to share customer transaction and experience information with affiliates.  Nonetheless, according to the FDIC’s FAQs, ongoing communications are indicative of a deposit broker’s “continued involvement” and therefore require deposits gathered from the so-called deposit broker to be categorized as brokered.  Financial institutions have many reasons to share customer transaction and experience information with affiliates (including compliance with federal laws), therefore, information-sharing with affiliates should not be a determinative factor for whether the FDIC considers a deposit brokered.  The FDIC should resolve this catch-22 and rethink its current approach by not considering information sharing as a factor for whether deposits are brokered.