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4000 - Advisory Opinions

Applicability of Brokered Deposit Law to National CD Placement Program


August 21, 1995

Valerie J. Best, Counsel

This is in response to your letter concerning the statutory and regulatory provisions governing brokered deposits (12 U.S.C. §§ 1831f, 1831f-1, and 12 C.F.R. § 337.6). You write that ABC Bank (the "Bank'') owns and operates a national CD placement program and corresponding custodial services as described in more detail in an earlier letter dated June 5, 1992. In connection with your quality improvement efforts, it is the Bank's intention to create an automated system which would permit well-capitalized insured depository institutions to enter their certificate of deposit rates electronically into the Bank's network files.

It is the Bank's view that brokered deposits gathered through such a system may be accepted by well-capitalized institutions without limit. Further, it is the Bank's view that a depository institution that lists its rates on this system would not thereby be deemed to be a deposit broker (and therefore required to register as a deposit broker with the FDIC). You ask us to confirm that both of these conclusions are correct.

Your understanding is correct. The statutory provisions restricting the acceptance of funds obtained through a deposit broker do not apply to well capitalized depository institutions. Moreover, the interest rate restrictions imposed by the brokered deposit statute do not apply to well capitalized depository institutions. Finally, the fact that an institution enters its rates electronically into the Bank's network files does not make the entering institution a deposit broker. That is, institutions entering their rates electronically into the Bank's network files are not themselves deposit brokers.

Institutions acquiring deposits via the Bank's CD placement program may be required to report such deposits as brokered deposits in their call reports or TFRs. Institutions should refer to the instructions accompanying the call reports and TFRs for guidance.

Please call me at (202) 898-3812 if I can be of further assistance. I apologize for the delay in responding to your letter.

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