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Banker Resource Center

Brokered Deposits

For many banks, brokered deposits are an important source of funds, and the marketplace for brokered deposits has evolved in response to technological developments and new business relationships.

Section 29 of the Federal Deposit Insurance Act restricts institutions that are less than well capitalized from accepting brokered deposits, although institutions that are adequately capitalized may request a waiver from the FDIC to accept brokered deposits. Section 29 also prohibits institutions that are less than well capitalized from offering rates on deposits that are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions in its normal market area.

In December 2020, the FDIC updated its regulations that implement Section 29 to establish a new framework for analyzing whether certain deposit arrangements qualify as brokered deposits. The new brokered deposit rule establishes bright-line standards for determining whether an entity meets the statutory definition of “deposit broker,” and identifies a number of business relationships, or “designated exceptions” that automatically meet the “primary purpose exception.” The rule requires entities seeking to rely on two of the “designated exceptions” to send a notice to the FDIC, and also establishes an application process for entities that do not meet one of the “designated exceptions but seek a “primary purpose exception.” Entities that submit notices or whose applications are approved will also be subject to certain reporting requirements.

The FDIC also amended its methodology for calculating the national rate as well as the national rate cap and local rate cap for less than well capitalized institutions.

The brokered deposit and interest rate regulations are effective as of April 1, 2021, although an extended compliance date of January 1, 2022 for the brokered deposit regulation is available for institutions that wish to rely on previous staff opinions. After January 1, 2022, full compliance with the regulation is required.

Regulations

Key regulations that pertain to brokered deposits:

Resources Related to Brokered Deposit and National Rate Regulations

Other Resources

Supplemental information related to brokered deposits.