ICBA called on the FDIC to revise how it treats brokered deposits and related interest rate restrictions. In a comment letter on the agency’s comprehensive review of this area, ICBA said brokered deposits can be a stable source of funding and a cost-effective way for community banks to meet their funding needs. However, there is an undeserved stigma surrounding brokered deposits that needs to be dispelled, it said.
ICBA said the FDIC has too expansively interpreted the definition of “deposit broker” and too narrowly implemented statutory exceptions. This hinders community banks as they partner with third parties, such as federal or state agencies that use debit or prepaid cards to deliver funds to government program beneficiaries.
Further, the FDIC’s national rate restrictions on less-than-well-capitalized banks are out of step with the market, ICBA said. It called on the FDIC to raise and reform rate restrictions to ensure the current, faulty methodology doesn’t lead to a liquidity crisis of its own making or unnecessarily loop in well-capitalized institutions.
Read ICBA Comment Letter
Read FDIC Request for Feedback
Read More in Recent ICBA Op-Ed