CBA Comment Letter re Brokered Deposits NPR

Dear Mr. Feldman,


The Consumer Bankers Association (“CBA”) appreciates the opportunity to offer our views on the Federal Deposit Insurance Corporation’s (“FDIC” or “the agency”) Notice of Proposed Rulemaking (“the NPR” or “the proposed rule” or “the proposal”) concerning the FDIC’s regulatory approach to brokered deposits.


CBA 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 manner in which banks gather deposits to fund their activities.


CBA supports the FDIC’s objectives for revisiting the agency’s approach to brokered deposits and our members agree revisions to the definition of what constitutes a “deposit broker” (and thus a brokered deposit) are necessary.  Banks should be more easily permitted to accept stable and low volatility deposits outside their geographic branch footprint or with the involvement of third parties using digital technologies without running afoul of antiquated brokered deposit restrictions.  At the same time, our members recognize the FDIC must strike the proper balance to improve brokered deposits treatment for low-risk deposits while also ensuring the federal safety net and core deposit treatment does not extend too far to riskier deposits gathered outside the well-regulated banking system.  The NPR reflects a considerable effort by FDIC staff to address this complicated topic and we appreciate the agency’s desire to introduce transparency and clarity in a process that significantly impacts the investments, long-term strategies, and business models banks, third-parties, and fintech companies pursue.

Nevertheless, our members are concerned some of the specific changes in the proposed rule do not align with the agency’s stated goals for revisiting the brokered deposits framework and believe adjustments can be made to improve the proposal.  Under the proposed rule, the definition of a deposit broker remains overly broad and confusing and the application process for seeking exceptive relief from brokered deposit treatment represents a significant departure from current practice that will be lengthy, costly, and more difficult to navigate. 

To help bridge these gaps, we recommend the FDIC:

  1. Enumerate in a final rule specific types of low-risk deposits the agency does not consider to be brokered, as well as provide examples of relationships that do not involve “facilitation” to narrow the definition of “engaged in the business of facilitating the placement of deposits.”


  1. Amend the list of proposed activities that meet the definition of “facilitation” by:


    1. Striking the language “the person directly or indirectly shares any-third party information with the insured depository institution.”


    1. Changing the language “other than in a purely administrative capacity” to “other than in a purely administrative capacity, or as otherwise required by law.”


  1. Replace the term “assets under management” with “assets under administration” to determine whether the primary purpose of a brokerage sweep constitutes the placement of funds.


  1. Ensure banks do not have to file primary purpose applications for affiliate broker dealer sweep deposits.


  1. Specify the Advisory Opinions and interpretive letters the agency intends to preserve or retire as part of a notice and comment rulemaking process.


  1. Grandfather all existing Advisory Opinions which conclude deposits are not brokered to preserve continuity and minimize industry disruption to existing business models, investments and relationships developed in reliance on those opinions.