ABA Urges FDIC to Withdraw Brokered Deposit Proposal

 In a comment letter submitted today to the FDIC, the American Bankers Association called on the agency to withdraw proposed revisions to regulations concerning brokered deposits to avoid harming banks of all sizes and the customers they serve. The ABA letter argues that the proposal does not meet the legal standards required for rulemaking under the Administrative Procedure Act (APA) and is inconsistent with the statute upon which it is based.

Further, the proposal perpetuates a misleading stigma of brokered deposits, based upon an outdated legal construct which fails to account for modern banking practices, and stretches the brokered deposit regulations beyond the intent of the law, creating “de facto” regulations for well-capitalized banks. The rule’s implementation “would have unintended harmful effects on the banking industry, which is not in the public interest.”

“If finalized as proposed,” ABA’s letter states, “the changes to the brokered deposit regulations would needlessly disrupt deposit relationships between IDIs (insured depository institutions) and third parties that were established in reliance upon a brokered deposit rule adopted by the FDIC just four years ago (the ‘2020 Final Rule’). This will result in a cliff effect, whereby a potentially large amount of funding arbitrarily deemed to be ‘risky’ must be replaced. It also will impact lending activities, as IDIs seek alternative sources of funding for loans.”

In addition to its comment letter filed today, ABA joined 52 state bankers associations on an additional letter highlighting the potential harm the proposal would cause to banks across the country. ABA also joined several other trade associations in filing a letter detailing the ways in which the FDIC’s proposal violates the Administrative Procedure Act.

Read ABA’s Full Comment Letter

Read the Letter from ABA and 52 State Bankers Associations

Read the Joint Trades Letter