Rethinking Brokered Deposits: A Call for Transparency and Collaboration

A group of 11 financial services associations has voiced their concerns over the FDIC's proposed rulemaking to strengthen the prudential protections of the agency's safety and soundness rule for brokered deposits. The associations argue that the FDIC has failed to justify the need for the rule and are urging the agency to withdraw the proposal or extend the comment period to allow for further data-driven analysis.

Unlocking the Future of Banking: The Brokered Deposit Debate

Challenging the Brokered Deposit Proposal

The financial services associations, including the American Bankers Association, the American Fintech Council, and the Bank Policy Institute, among others, have expressed their apprehension about the FDIC's brokered deposits proposal. They contend that the proposal would significantly alter the existing framework, potentially reversing statutory interpretations without sufficient data or a robust policy rationale. The group emphasizes the importance of transparency and collaboration, particularly given the extensive, multiyear initiative that preceded the 2020 rulemaking, which involved multiple rounds of public comment and outreach to various stakeholders.

Potential Implications for Banks and Customers

The associations argue that the proposal is likely to have significant effects on bank funding, as well as on the products and services available to customers. They suggest that the proposal could reverse changes implemented in the FDIC's 2020 brokered deposits final rule, disrupt existing business arrangements, and significantly increase the percentage of deposits classified as brokered. The groups also contend that the proposal fails to adequately consider recent technological advancements in the banking and financial services landscape.

Calls for Data-Driven Policymaking

The financial services associations are particularly concerned that the FDIC's proposal does not provide a factual basis for many of the changes it seeks to implement. They argue that the agency has not adequately justified the need for the rule and have called on the FDIC to provide data explaining the rationale behind the proposed changes. The groups have requested that the FDIC extend the comment period by an additional 60 days to allow for a more thorough review and public input.

Navigating the Regulatory Landscape

The brokered deposits issue is not a new one, and the financial services industry has been navigating the regulatory framework for some time. The associations note that the FDIC's proposal overlaps with a pending request for information on deposits, further highlighting the need for a comprehensive, data-driven approach to policymaking in this area.

Fostering Collaboration and Innovation

The financial services industry recognizes the importance of prudential regulation to maintain the stability and soundness of the banking system. However, the associations believe that the FDIC's proposal may have unintended consequences that could disrupt the industry and limit the availability of products and services to consumers. They are calling for a more collaborative and transparent approach to rulemaking, one that considers the needs of banks, fintech firms, investment advisors, and other stakeholders, as well as the evolving technological landscape.