- FDIC Proposes to Amend Guidance on Brokered Deposits
- December 9, 2015
- Law Firm: Jones Walker LLP - New Orleans Office
- On November 13, 2015, the FDIC announced proposed revisions to its previously issued Frequently Asked Questions (FAQs) on brokered deposits. While the FDIC stated that one of the primary purposes of the proposal was to put the FAQs in "plain English," the proposal includes some important substantive revisions as well.
FDIC regulations define a brokered deposit to be any deposit that is obtained directly or indirectly from or through the mediation or assistance of a deposit broker. It is important for an insured depository institution to properly categorize brokered deposits since, in the event a bank fails to meet the tests to be considered "well capitalized" under the prompt corrective action provisions, it is prohibited from accepting any brokered deposits and cannot renew existing brokered deposits without a waiver from the FDIC.
The FDIC has historically interpreted the term "deposit broker" broadly. For example, insurance agents, attorneys or other professionals who refer clients to a bank are deemed to be "facilitating the placement of the deposit" and, as such, the deposits generated are brokered deposits. Under the proposed revisions, the facts and circumstances of any referral would be examined and generally deposits generated through informal referrals without compensation to the professional would no longer be considered brokered deposits.
The FDIC is also proposing to provide some flexibility to institutions no longer deemed well capitalized with respect to brokered deposits that do not have a fixed maturity. Under existing guidance, the accounts would have to be immediately closed. The proposal provides that, in certain circumstances, a waiver may be obtained after consultation with the institution's primary federal regulator and the FDIC.
The comment period on the proposal expires December 28, 2015.