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 a consistent process for application of the primary purpose exception. Specifically, the rule identifies a number of business relationships, or “designated exceptions,” that automatically meet the “primary purpose exception” and also establishes an application process for entities that do not meet one of the “designated exceptions” but seek a “primary purpose exception.” The rule requires entities seeking to rely on two of the “designated exceptions” to send a notice to the FDIC. Entities that submit notices or whose applications are approved may 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.
- Press Release: FDIC Board Approves Final Rule on Brokered Deposit and Interest Rate Restrictions (December 15, 2020)
- Financial Institution Letter: FIL-113-2020 Combined Final Rule on Brokered Deposits and Interest Rate Restrictions (December 15, 2020)
Key regulations that pertain to brokered deposits:
- Section 337.6 — Brokered Deposits
- Federal Register notice of an additional business arrangement that meets the primary purpose exception (without requiring a notice or application)
- Section 337.7 — Interest Rate Restrictions
- Federal Register notice with Preamble and Text of changes to
Sections 337.6 and 337.7 as of April 1, 2021, under the revised
Final Rule, Unsafe and Unsound Banking Practices:
- Section 303.243(a) — Brokered Deposits Waivers sets forth the procedures for institutions that are adequately capitalized to file a brokered deposits waiver application with the FDIC.
- Section 303.243(b) — Application for Primary Purpose Exception sets forth the notice, applications, and reporting procedures for entities that seek the primary purpose exception to the deposit broker definition.
Resources Related to Brokered Deposit and National Rate Regulations
- List of companies that have submitted notices for a Primary Purpose Exception under the 25% or Enabling Transactions tests.
- Questions and Answers Related to the Brokered Deposits Rule
- Instructions for Primary Purpose Exception Submissions (notices, applications, or ongoing reports)
- National Rates and Rate Caps (Applicable to Less Than Well Capitalized Institutions)
- Small Entity Compliance Guide
- Statement of the Federal Deposit Insurance Corporation Regarding Reporting of Sweep Deposits on Call Reports (See also Financial Institution Letter 30-2022 dated July 15, 2022)
Supplemental information related to brokered deposits.
- Section 327.9 of the FDIC's Rules and Regulations - Assessment Pricing Methods
- Section 327.16 of the FDIC's Rules and Regulations - Assessment Pricing Methods
- March 17, 2021 Industry Outreach – Changes to the Brokered Deposit Definition and Interest Rate Restrictions Applicable to Less than Well Capitalized Banks