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4000 - Advisory Opinions


Temporary measures related to the “permissible ratio” contemplated in FDIC--05--02

FDIC--20--01

March 19, 2020

The FDIC has received the request of [ABC] (the “Bank”) regarding an existing sweep program (“Program”) between the Bank and their affiliated broker dealer [(“broker dealer”)]. As part of this Program, [broker dealer] customers may choose to sweep idle or uninvested funds into deposit accounts at the Bank.

FDIC staff, in [date] letters to the Bank, previously opined that the broker dealer meets the primary purpose exception to the definition of deposit broker based upon certain representations made by the Bank about the Program. One such representation is that the funds swept to the Bank and any other bank do not exceed 10 percent of the total amount of assets (“permissible ratio”) handled by broker dealer for those clients who have elected to participate in the Program.

As described in your letter, the coronavirus pandemic has caused disruptions in the financial markets. As a result, you request that the FDIC suspend the applicability of the permissible ratio-related representations set forth in the [date] letters.

Based upon the circumstances described in your letter, and for a period of six months from the date of this letter, staff will view broker dealer as meeting the primary purpose exception if funds swept to the Bank and any other bank do not exceed 25 percent of the total amount of assets handled by [broker dealer] for those clients who participate in the Program. The Bank may request that staff at the FDIC extend this view for an additional period of time.

In addition to the temporary measure increasing the permissible ratio to 25 percent, as described above, FDIC staff will continue to rely upon the following previous representations provided by the Bank in determining that the Program funds are not brokered:

1. [Broker dealer] is affiliated with the Bank;

2. The Program accounts are not time deposit accounts;

3. The related Program fees paid by the Bank to [broker dealer] are “flat” fees (i.e., a “per account” or “per customer” fee), represent payment for recordkeeping or administrative services, and are not payment for placing deposits;

4. The Bank will provide documentation reflecting the calculations of the permissible ratio for the Program each month. Daily calculations of the permissible ratio should be available for inspection; and,

5. The Bank will notify the FDIC of any changes in the Program.

As noted in the previous letters provided by staff, the primary purpose exception does not apply with respect to funds transferred between non-affiliated entities.

A change in the facts or circumstances could result in different conclusions. Further, the views expressed above do not affect the Bank’s status as a deposit broker in other circumstances nor do they affect the status of other brokered deposits currently maintained by the Bank.


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