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competition for deposit pricing has become increasingly national in scope.
Therefore, through the 2009 rulemaking, the FDIC presumes that the prevailing rate in an institutions market area is the FDIC-defined national rate. 82

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D. Need for Further Rulemaking The current interest rate cap regulations became effective in 2010
and were adopted to modify the
previous national rate cap based on U.S. Treasury securities that had become overly restrictive. Chart 1 below reflects the current national rate cap and the average of the top ten rates paid for a 12-month CD between 2010 and the present.83 Chart 1 illustrates that between 2010 and approximately the second quarter of 2015, rates on deposits were quite low, even for the
top rate payers. For this period, the current regulations methodology for calculating the national rate, to which 75 basis points is added to arrive at the national rate cap, resulted in a national rate cap that allowed less than well capitalized institutions to easily compete with even the highest rates paid on the 12-month CD during this timeframe.

However, from about July 2015
through February 2020, the current national rate methodology resulted in a national rate for the 12-month CD that, when 75 basis points were added, resulted in a national rate cap that remained relatively unchanged. During this period, the FDIC observed that the relatively unchanged national rate could restrict less than well-capitalized banks from competing for market-rate funding.
Market conditions caused similar changes in the rates of other deposit products compared to the applicable
rate cap, although the timing of when such changes occurred varied from product to product. Due to the COVID
19 emergency and the resulting effect on the economy beginning in March 2020, deposit rates in general, including the national rate and the rates paid by the top rate payers dropped, so that less than well capitalized institutions may again easily compete with even the highest rates paid on the 12-month CD
under the current national rate cap.
There are several reasons that the national rate cap remained fairly
unchanged from mid-2015 to approximately February 2020.
Primarily, interest rates were relatively low following the financial crisis that began in 2007. Towards the end of 2015, however, some banks began to increase rates paid on deposits as the Federal Reserve increased its federal funds rate targets. During this time, and up to the present day, the largest banks have been, on average, slower to raise their published interest rates on deposits.
This has held down the simple average of rates offered across all insured banks
83 The average of the top ten rates paid for 12
month CDs is meant to illustrate a competitive offering rate for wholesale insured deposits and
show the general direction of the movement of the market for deposit rates.

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FR 26516, 26519 2009.

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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Rules and Regulations