FDIC Federal Register Citations

From: Benjie Guion 
Sent: Thursday, November 06, 2008 3:30 PM
To: Comments
Subject: Assessments - RIN-3064-AD35 

I would like to comment briefly on the proposal to increase deposit insurance rates on Brokered CD’s. I am not in favor of such a change, which is in effect a penalty for those choosing to use this funding source. Some of my reasons include: 

• Brokered funds are often quite cost effective, providing expense savings over retail deposit sources. Sometimes those savings are significant. For example, during the past year, when many banks have been struggling for liquidity they were driving up the costs of retail money to almost ridiculous levels. In my case, being in the same market as Wachovia, because of their thirst for cash the cost of brokered money was often 50 basis points or more less than retail. That is hard to ignore.
• In managing the bank’s interest rate risk, it is often desirable to target certain terms and blocks of money to offset other risks in the balance sheet. This is often difficult to do with retail deposits, since it most often seems that the banks desire for a product conflicts with the customers. The simplest example of this is that in rising rates environments, banks would like fixed rate, longer term deposits while customers want short term, variable rate options. This is quite easily solved with brokered blocks of money.
• Brokered deposits can be very good sources of liquidity. They require no marketing lead time, and very little administrative effort.
• Over time, I believe that many more of what we have considered our core customers in the past will be doing more of their bank shopping online. As bank customers become more transient due to the ease of this online channel, rate will become even more important than it is now. I think the distinction between the stickiness of “core” customers versus brokered will become more dim, and we should not penalize this valid source of funding.

Thank you for your consideration.

Benjie Guion
NewDominion Bank 
P.O. Box 37389
Charlotte, NC  28237