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From: Jim Franks [mailto:firstname.lastname@example.org]
1020 West 2nd Street
Robert E. Feldman
Re: RIN 3064-AD35 - Notice of Proposed Rulemaking on Risk-Based Assessments
Dear Mr. Feldman:
Please acecpt this letter as a response and comment from Arkansas Bankers' Bank to the above captioned Notice of Proposed Rulemaking as it applys to CDARS reciprocal certificates of deposit (CDs). While ABB strongly agrees with the intent of FDIC to change the structure of FDIC premium assessments and apply a higher assessment to riskier transactions, for the reasons mentioned below, ABB does not feel CDARS falls into this category. Therefore, we respectfully request that the proposed change also include a change whose defintion of brokered deposits does not include CDARS reciprocal deposits.
Arkansas Bankers' Bank is a bankers bank headquartered in Little Rock, Arkansas. We have some 120 or so customer banks located throughout Arkansas, approximately 85% of all Arkansas commercial banks. One of the main functions of ABB is to provide liquidity to our customer banks via an agency Fed Funds pools. This function qualifies ABB to be imminently aware of the issue of liquidity for community banks. I certainly trust you agree with me that the issue of liquidity has never been more important than it is today. While ABB does not in and of itself participate in the CDARS reciprocal deposit program, we have many customer banks that do for liquidity purposes as well as protecting their respective customers deposits. In discussing the CDARS program with these banks, each shouts its praise for the purpose for which the program was created. I will not bore you with the details of the program, as I know you and your staff are fully aware of CDARS.
The key thing to remember, in my opinion, in the need to change the insurance assessment format, is to charge a higher premium for higher risk. That is only fair, and as it should be. Since CDARS are really local (core) deposits at most community banks, and the setup is simply designed to qualify that deposit for FDIC coverage, then it seems logical that this is not a brokered deposit in the traditional sense. In other words, these deposits are not hot money, for which FDIC should be changing higher insurance premiums on. These deposits come from the actual customer, not from a third party broker. There is a reason brokered deposits are named such; they originate from a broker. Since CDARS do not originate as such, it seems rather illogical to put them in the brokered deposits bucket.
I certainly do not want to get into a dissertation as to how many ways community banks are treated differently from the big banks, for there are too many. However, in this too big to fail world we seem to find ourselves in of late, CDARS provides a way to provide calm and piece of mind to the large deposit, small town, local customer. The temporary increase in FDIC coverage to $250,000, highly advocated by FDIC itself, is an example of what FDIC is doing in this regard to clam deposit customers fears; classifying CDARS as brokered deposits seems to be going just in the reverse.
In closing, CDARS deposits should be excluded from the Notices definition of brokered deposits. Moreover, we see no reason why CDARS deposits should be considered as brokered in the first place. ABB respectfully asks the FDIC to support legislation to exclude CDARS Reciprocal deposits from the definition of brokered deposits in the next Congress. We believe doing so would clarify any uncertainty that would remain in the wake of an FDIC exemption in the risk-based assessment rule.
Thank you for this opportunity to comment.
|Last Updated 10/20/2008||Regs@fdic.gov|