The Federal Deposit Insurance Corporation’s (FDIC) plan to review its brokered deposit rules and get feedback from the public drew support from the American Bankers Association (ABA).
ABA said this is an important step toward modernizing regulations so that they better align with how customers want to interact with their banks and do not discourage deposit taking.
The association maintains that deposit taking is fundamental to banking. It is critical for banks to continue to safeguard customer deposits and meet the lending needs, ABA said.
“We appreciate Chairman McWilliams’ leadership on this issue and the FDIC’s decision to ask for input,” ABA President and CEO Rob Nichols said. “We look forward to contributing to the discussion and working with the FDIC as it reviews its deposit rules.”
Brokered deposit regulations were designed to restrict certain kinds of deposits that institutions in a weakened capital position could accept. However, these regulations, drafted in the 1980s, did not have to take into account advancements like the internet, smartphones, or how the banking industry has evolved. For example, deposit regulations typically do not consider how banks have changed the ways that they communicate with their customers. Thus, the rules can interfere with customer interactions and penalize banks for finding new ways to provide deposit services.
ABA also said that while the rate cap is intended to prevent struggling banks from offering excessively high rates, it is often applied to healthy banks. Further, they said it is calculated in a way that doesn’t take into account differences in local markets.
“Brokered deposit regulations affect every bank in this country, and it’s our duty to our members and our members’ customers to try [and] find a better approach to the rules,” Nichols said. “We think they can be updated to reflect the realities of today’s marketplace and better fit how banks serve their customers.”