SIFMA Urges FDIC to Withdraw Brokered Deposit Proposal

SIFMA objected to the FDIC's proposed revisions to brokered deposit regulations and urged the agency to withdraw the proposal and retain the existing framework.

In response to an FDIC Proposed Rulemaking, which would amend rules concerning restrictions on brokered deposits for insured depository institutions that are not well-capitalized (see previous coverage), SIFMA argued that the changes lack a sufficient empirical basis and lack data to estimate its impacts. SIFMA argued that the FDIC's rationale, including references to recent bank failures, does not establish a clear connection between brokered deposits and systemic risks. SIFMA asserted that existing regulations already strike an appropriate balance.

In its comment, SIFMA further claimed that the revisions would impose unnecessary costs on broker-dealers, insured depository institutions and consumers, while also raising legal concerns regarding FDIC's statutory authority under the Federal Deposit Insurance Act. SIFMA also argued that the proposed rule would likely be arbitrary and capricious under the Administrative Procedure Act.

If the proposal is not withdrawn, SIFMA urged the FDIC to revise it as follows:

• Retain the "25 percent assets under administration" test to determine primary purpose. 
• Retain the current "Primary Purpose Exception" notice and application processes.
• Incorporate a transition period of at least two years for any changes to existing exceptions.
• Ensure that the deposit broker definition is risk-based, as the proposed definition "make[s] the definition overinclusive and are unlikely to address operational challenge."
• Retain the exception for exclusive deposit placement relationships.
• Retain the exception for when 100 percent of funds are placed into transactional accounts that do not pay any fees, interest, or other remuneration to the depositor.