On March 3, the FDIC announced the withdrawal of its proposed rule on brokered deposits, citing concerns regarding potential disruptions to the financial sector. This move follows significant pushback from industry stakeholders who argued that the proposed changes could have unintended consequences for liquidity management and market stability.
The proposed rule sought to alter the classification and regulatory treatment of brokered deposits by broadening the definition and imposing stricter reporting and supervisory requirements. It aimed to clarify which deposit arrangements qualified as brokered deposits and thus could have resulted in more deposits being subject to restrictions under the FDIC's capital and liquidity rules. Industry participants also raised concerns that the changes could disrupt long-standing banking relationships, reduce funding access, and create additional disruptive compliance burdens.
The FDIC argued that brokered deposits pose risks to financial stability, particularly during times of market stress, contending that the proposed changes would help to mitigate potential overreliance on such funding sources. In its statement, the FDIC indicated that for any future regulatory action it takes related to brokered deposits, it will pursue such initiatives through new proposals or issuances that comply with the Administrative Procedure Act.
Putting It Into Practice: The withdrawal of the brokered deposits rule aligns with Acting Chairman Travis Hill's stated commitment to streamlining the FDIC's supervisory approach (previously discussed here). Given Hill's focus on reducing regulatory burdens, financial institutions should expect further shifts in the FDIC's approach to oversight.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
