FDIC extends comment period for brokered deposit proposal

The FDIC extended the comment period on its proposed rule on brokered deposits from Oct. 22 to Nov. 21.

Extension Request: ICBA and other groups in August urged the FDIC to withdraw the proposed rule or extend the comment period by 60 days. The associations said the proposal would:

• Significantly alter the FDIC’s brokered deposit framework.

• Reverse statutory interpretations without sufficient or transparent data or rationale.

• Have a significant impact on financial institutions and undo other recent FDIC rules.

About the Proposal: The FDIC’s proposed rule would revise regulations on brokered deposits following the bankruptcy of nonbank deposit broker Synapse Financial. Among its provisions, the proposal would eliminate the “exclusive deposit placement arrangement” exception and revise rules on the primary purpose exception.

Previous Rulemaking: The FDIC in 2020 approved a revised framework for determining whether deposits made through deposit arrangements qualify as brokered deposits. In a comment letter, ICBA told the agency that brokered deposits can be a stable source of funding and a cost-effective way for community banks to meet their funding needs provided the risks of holding these accounts are managed properly.