
|
Inactive Financial
Institution Letters
Determining
Conformance With Interest Rate Restrictions for Less Than Well Capitalized
Institutions
|
FIL-62-2009 November 3, 2009
|
Summary:
|
The FDIC Board approved a final rule on May 29, 2009, changing the way the FDIC
administers its statutory restrictions on the deposit interest rates paid by banks that
are less than well capitalized under Section 337.6 of the FDIC Rules and Regulations
(see FIL-25-2009). The final rule redefines the national rate as "a simple average of
rates paid by insured depository institutions and branches for which data are available"
and deems the national rate to be the prevailing rate for all market areas. Once the
final rule is effective on January 1, 2010, an institution can use the prevailing rates
in its market area to determine conformance only if it seeks and receives a
determination from the FDIC that it is operating in a high rate area.
|
Highlights:
-
The final rule, which takes effect on January 1, 2010, redefines the national
rate as "a simple average of rates paid by all insured depository institutions
and branches for which data are available." The final rule also deems the
prevailing rate in all market areas to be the national rate.
-
Once the rule takes effect, an institution that believes it is operating in a
high-rate area can use the prevailing rates in its market area only if it seeks
and receives a determination from the FDIC that it is operating in a high-rate
area. The FDIC will issue a Financial Institution Letter explaining how banks
can request such a determination in sufficient time for the FDIC to process the
requests before the final rule's effective date.
-
During the interim period ending January 1, 2010, to determine conformance
institutions can use the national rates and rate caps posted weekly on the
FDIC's Web site at http://www.fdic.gov/regulations/resources/rates/index.html.
Institutions choosing not to use the newly defined national rate during the
interim period should continue to determine conformance under the current rules.
Continuation of FIL-62-2009
Distribution:
FDIC-Insured Institutions
Suggested
Routing:
Chief Executive Officer
Chief Operations Officer
Compliance Officer
Related
Topics:
Brokered Deposits
12 C.F.R. Section 337.6
Attachment:
Question and Answer Document
Contact:
Lou Bervid, Senior Examination Specialist, Division of Supervision and Consumer
Protection (DSC), at lbervid@fdic.gov or
202-898-6896; or Robert B. Reddish, Review Examiner, DSC, at roreddish@fdic.gov or 972-761-8425.
Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site
at www.fdic.gov/news/news/financial/2009/index.html.
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may be obtained through the
FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226
(1-877-275-3342 or 703-562-2200).
|
Financial Institution
Letters
FIL-62-2009
November 3, 2009
|
Determining
Conformance With Interest Rate Restrictions for Less Than Well Capitalized
Institutions
On May 29, 2009, the FDIC Board of Directors approved a final rule making certain
revisions to the interest rate restrictions under Section 337.6 of the FDIC Rules
and Regulations (see FIL-25-2009). The rule redefines the national rate as a
simple average of rates paid by all insured depository institutions and branches for
which data are available. In addition, the prevailing rate in all market areas
is deemed to be the national rate as defined by the FDIC. The final rule takes
effect on January 1, 2010.
Once the rule takes effect, an institution that believes it is operating in a
high-rate area can determine conformance using the prevailing rates in its market
area only if it seeks and receives a determination from the FDIC that it is
operating in a high-rate area. The FDIC will issue a Financial Institution Letter on
how insured institutions can file such a request in sufficient time for the FDIC to
process the requests before the final rules January 1, 2010, effective date.
The national rates and associated rate caps are posted weekly to the FDICs Web
site at http://www.fdic.gov/regulations/resources/rates/index.html.
These rates may assist insured depository institutions in complying with the current
and new rules. Under either set of rules, the national rates likely represent the
prevailing rates in many market areas. Therefore, the FDIC would not object to the
immediate use of the posted national rates and rate caps by insured depository
institutions that are not well capitalized, although such use is not mandatory.
During the interim period ending January 1, 2010, the institution can use the newly
defined national rate to determine conformance for all deposits or for deposits
outside the institutions market area. Institutions choosing not to use the
newly defined national rate during the interim period should continue to determine
conformance under the current rules. The interest rate restrictions and guidance for
determining conformance with the interest rate restrictions are outlined in the attached.
Institutions already subject to the Section 337.6 restrictions or close to falling
below well capitalized should strongly consider revising their funding strategies to
place less reliance on brokered and high-cost deposits.
|
Sandra L. Thompson
Director
Division of Supervision and Consumer Protection
|
|
|