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Latest FDIC Statements on Brokered Deposits Require Careful Review

January 16, 2015

Authors

Bryan Cave Leighton Paisner

Latest FDIC Statements on Brokered Deposits Require Careful Review

January 16, 2015

by: Bryan Cave Leighton Paisner

On December 24, 2014, the FDIC released its latest statements on what they consider to be “brokered deposits.”  In Guidance on Identifying, Accepting, and Reporting Brokered Deposits Frequently Asked Questions (the “FAQs”), the FDIC outlined their current views on what they will deem to be brokered deposits, formally stating positions that have been developing over the last few years but which had not previously been stated in writing.  For many FDIC-insured depository institutions (collectively, “banks”), the FAQs might have little or no impact.  For others, the impact could be significant.

Banks that have a large portfolio of brokered

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The FDIC Hosts Roundtable Discussion on Core and Brokered Deposits

March 23, 2011

Authors

Bryan Cave Leighton Paisner

The FDIC Hosts Roundtable Discussion on Core and Brokered Deposits

March 23, 2011

by: Bryan Cave Leighton Paisner

On March 18, 2011, the FDIC hosted a roundtable discussion on core and brokered deposits as part of a study required by Section 1506 of the Dodd-Frank Act.  All members of the FDIC Board of Directors were present.  Panelists included former FDIC Chairman Bill Isaac, a cross section of bankers, a university professor, consultant Randy Dennis, vendor representatives such as Mark Jacobsen of Promontory Interfinancial Network, LLC, and one state bank regulator, Sara Cline of the West Virginia Division of Banking.

The roundtable discussion primarily centered on the continued relevance of the current statutory meaning of “brokered deposit”

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Renewing “High Rate Area” Determinations

November 14, 2010

Authors

Robert Klingler

Renewing “High Rate Area” Determinations

November 14, 2010

by: Robert Klingler

As we have previously discussed, FDIC determinations that a bank is operating in a “high rate area” remains effective only for the calendar year in which it was granted.  All banks that received a high-rate determination in 2010 are required to submit a new request to the FDIC in order to continue their ability to use the local market average calculation method for determining their rate cap in 2011.

The FDIC has informed us that these requests will not be processes prior to year-end, but that banks that submit a request will be entitled to continue to use

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High Rate Area Determination Relief?

March 23, 2010

Authors

Robert Klingler

High Rate Area Determination Relief?

March 23, 2010

by: Robert Klingler

On Friday, March 18, 2009, FDIC Chairman Sheila Bair addressed the inclusion of all branches in the calculation of local rates in a speech at the ICBA convention in Orlando.  This modification may (1) create new or renewed opportunities for community banks to apply for, and receive, high rate area determinations, and (2) increase the relevant local rate for institutions operating in high rate areas.

As some of you may know, last year we changed the rule for complying with the statutory interest-rate restrictions for banks that are less than well capitalized. The new regulation includes a

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Process for Requesting Determination of “High-Rate Area”

December 9, 2009

Authors

Robert Klingler

Process for Requesting Determination of “High-Rate Area”

December 9, 2009

by: Robert Klingler

On December 4, 2009, the FDIC published Financial Institution Letter FIL-69-2009, which outlines the process for requesting a “high-rate area” determination by the FDIC to exempt the institution from compliance with the national rate caps.  As we’ve previously discussed, financial institutions that are less than well capitalized will be barred from paying in excess of 75 basis points above the national rate unless the institution is able to persuade the FDIC that the institution’s local market rate is above the national rate.  The new guidance confirms our previous understanding of the process the FDIC will use in

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Updated Guidance on Seeking a “High-Rate Area” Determination

November 17, 2009

Authors

Robert Klingler

Updated Guidance on Seeking a “High-Rate Area” Determination

November 17, 2009

by: Robert Klingler

The FDIC has not yet formally published the anticipated guidance on how an institution can seek a “high-rate area” determination under the national interest rate restrictions for less than well-capitalized banks.  However, based on conversations with FDIC officials, we understand that the FDIC is accepting requests that a bank be determined to be in a “high-rate area.”

We understand that the request should include a self-identification of the bank’s relevant market area.  The FDIC will not set specified market areas, but rather will consider the market rate identified by the institution.  Institutions are also encouraged to identify competing credit

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FDIC Issues New Guidance Relating to the Brokered Deposit/Interest Rate Restrictions

November 4, 2009

Authors

Michael Shumaker

FDIC Issues New Guidance Relating to the Brokered Deposit/Interest Rate Restrictions

November 4, 2009

by: Michael Shumaker

As we have discussed earlier, the FDIC has revised the brokered deposit/interest rate restrictions to create a presumption in favor of a “national deposit rate” starting January 1, 2010. Under this new rule, financial institutions that are less than well capitalized will be barred from paying in excess of 75 basis points above the national rate unless the institution is able to persuade the FDIC that the institution’s local market rate is above the national rate. As noted earlier, we anticipate that the presumption in favor of the national rate will be difficult to overcome.

On November 3,

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Overcoming the National Deposit Interest Rate Presumption

July 2, 2009

Authors

Robert Klingler

Overcoming the National Deposit Interest Rate Presumption

July 2, 2009

by: Robert Klingler

As we’ve previously discussed, the FDIC has revised the brokered deposit/interest rate restrictions to create a presumption in favor of a “national deposit interest rate” starting January 1, 2009.  Less than well-capitalized institutions will be then barred from paying in excess of 75 basis above the national rate, unless the institution is successful in convincing the FDIC that the institution’s local deposit rate market is above the national rate.

We have had several conversations with FDIC staff over the last few weeks regarding the FDIC’s intentions with respect to the new national deposit rate structure and how FDIC in

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FDIC Issues Final Brokered Deposit and Interest Rate Restriction Regulations

June 2, 2009

Authors

Michael Shumaker

FDIC Issues Final Brokered Deposit and Interest Rate Restriction Regulations

June 2, 2009

by: Michael Shumaker

On May 29, 2009, the FDIC adopted a final rule amending the interest rate restrictions applicable to institutions that are less than well capitalized.  The new regulation, which will take effect on January 1, 2010, will effectively tie interest rate caps to an average of interest rates charged nationally, significantly diminishing the importance of calculating prevailing interest rates within local deposit market areas.  Less than well-capitalized institutions will generally be subject to national rate caps as published by the FDIC.

Existing Rules

Section 29 of the Federal Deposit Insurance Act places statutory limits on the ability of any

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The Lottery is Not an Acceptable Funding Source

March 27, 2009

Authors

Robert Klingler

The Lottery is Not an Acceptable Funding Source

March 27, 2009

by: Robert Klingler

On March 3, 2009, the FDIC published Financial Institution Letter FIL-13-2009 on the use of volatile or special funding sources by financial institutions that are in a weakened condition.  The guidance generally suggests that banks should be run safely and soundly.

Directors and officers of institutions that are in a weakened financial condition are expected to oversee the operations of these institutions in a way that stabilizes the risk profile and strengthens the financial condition. Actions taken by a weak financial institution to increase its risk profile are inconsistent with this expectation.

While the guidance is overly broad, we

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