A group of 11 financial services associations is calling on the FDIC to withdraw its notice of proposed rulemaking intended to strengthen the prudential protections of the agency’s safety and soundness rule for brokered deposits (12 CFR 337.6).
The agency, the groups wrote in a letter, has failed to justify the need for the rule.
If the FDIC does not withdraw the rule, the trade groups asked the FDIC to provide data explaining why the rule is needed and then extend the comment period for the proposal for an additional 60 days. The comment period currently ends 60 days after the proposal is published in the Federal Register.
“We are concerned that the brokered deposits proposal would significantly alter the FDIC’s brokered deposit framework, and reverse statutory interpretations without sufficient or transparent data or robust policy rationale,” the group wrote, in a letter to the FDIC. “This is particularly concerning given the extensive, multiyear initiative that preceded the 2020 rulemaking, a process which included multiple rounds of public comment and outreach to industry, policymakers and a variety of stakeholders.”
The proposal would subject brokered deposits to heightened regulation as well as expand the definition of brokered deposits, including by eliminating certain exceptions to the rule.
In proposing these rules, the FDIC cited the recent failure of a nonbank deposit broker and also cited the possible risk to banks of relying on brokered deposits as funding sources.
The trade groups said that the proposal is likely to have significant effects on bank funding and on the products and services that are available to customers.
Specifically, the groups contend that the proposal would:
- Reverse changes that the FDIC implemented in its 2020 brokered deposits final rule;
- Have a significant effect on banks, broker-dealers, investment advisers, third-party service providers, and customers.
- Disrupt business arrangements made in reliance on the existing rules;
- Significantly increase the percentage of deposits that would be classified as brokered deposits;
- Implement changes without adequate support for the changes proposed. “Notably, the proposal does not provide a factual basis for many of the changes it seeks to make,” the groups contend;
- Make changes to the regulatory framework governing brokered deposits without taking into account recent technological changes; and
- Overlap with the pending request for information on deposits.
The groups sending the letter are the American Bankers Association, the American Fintech Council, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, the Financial Technology Association, the Independent Community Bankers of America, the Innovative Payments Association, the Institute of International Bankers, the National Association of Industrial Bankers and the Securities Industry and Financial Markets Association.
