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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Rules and Regulations
Again the FDIC does not currently have access to data that would facilitate an accurate estimate of how many of these firms are considered small for the purposes of RFA. Therefore, therefore the FDIC believes it is possible that the reporting requirements of the final rule could pose reporting compliance costs up to $613,740 in the first year for small entities, and up to $51,589 each year after for small entities.

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Other Statutes and Federal Rules The FDIC has not identified any likely duplication, overlap, and/or potential conflict between this proposed rule and any other federal rule.
2. Interest Rate Restrictions RIN 3064
AF02
FDIC is revising its regulations relating to interest rate restrictions that apply to less than well capitalized insured depository institutions, by amending the methodology for calculating the national rate and national rate cap. The also modifies the current local rate cap calculation and process.
Specifically, the rule defines the national rate for a deposit product as the average rate for that product, where the average is weighted by domestic deposit share. The proposed national rate cap is the higher of 1 the national rate, as revised to be based on weighting by deposits rather than branches and including credit unions, plus 75 basis points; or 2 120 percent of the current yield on similar maturity U.S. Treasury obligations, plus 75 basis points.
Because the FDICs experience suggests some institutions compete for particular products within their local market area, the rule would continue to provide a local rate cap process.
Specifically, the rule would allow less than well capitalized institutions to provide evidence that any bank or credit union in its local market offers a rate on particular deposit product in excess of the national rate cap. If sufficient evidence is provided, then the less than well capitalized institution would be allowed to offer 90 percent of the competing institutions rate on the particular product.
As described in section IIG, above, the FDIC is adopting the national rate methodology as proposed, with a revision to include the rates offered by credit unions in addition to the rates offered by FDIC-insured institutions.
Under the final rule, the national rate inflation according to BLS data on the Consumer Price Index for Urban Consumers CPIU, so that it is contemporaneous with the non-wage compensation statistic. The inflation rate was 1.86
percent between May 2018 and June 2019.

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for a particular deposit product will be the deposit-weighted average rate for that product.
The FDIC is also adopting the proposed methodology for calculating the national rate caps, with a modification suggested by commenters.
The proposed methodology defined the national rate cap for a particular deposit product as the higher of the national rate plus 75 basis points, or the 95th percentile of rates weighted by domestic deposits. The adopted methodology defines the national rate cap for a particular deposit product as the higher of the national rate plus 75 basis points or 120 percent of the current yield on a similar maturity U.S. Treasury obligation, plus 75 basis points. This Treasury-based second prong would also provide that, for non-maturity deposits, the rate cap is defined as the midpoint of the target range for the Federal funds rate, plus 75 basis points.
Finally, for the local rate cap the FDIC
is adopting the proposed cap of 90
percent of the highest offered rate. The final rule also eliminates the current two-step process where less than well capitalized institutions request a high rate determination from the FDIC and, if approved, calculate the prevailing rate within local markets. Instead, a less than well capitalized institution must notify its appropriate FDIC regional office that it intends to offer a rate that is above the national rate cap and provide evidence that it is competing against an institution or credit union that is offering a rate in its local market area in excess of the national rate cap.
The institution would then be allowed to offer 90 percent of the rate offered by a competitor in the institutions local market area.
As of June 30, 2020, the FDIC insured 5,075 institutions, of which 3,665 are small for purposes of the RFA.115 The adopted national rate caps will affect less than well-capitalized small institutions if those institutions currently offer deposit products with rates above the adopted caps and their local competitors do not offer similarly high rates. As of June 30, 2020, 10
insured institutions are quantitatively less than well-capitalized, of which nine are small for purposes of the RFA.116
None of the eight small, less than wellcapitalized institutions for which the FDIC had interest rate data offered rates above either the current national rate caps or the national rate caps as defined in this final rule across 11 deposit products analyzed for the month of 115 June
30, 2020, Call Report data.

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September.117 Thus, the FDIC does not believe the final rule will significantly affect any small, FDIC-insured institutions.
Accordingly, the FDIC certifies that this rule will not have a significant economic effect on a substantial number of small entities.
One commenter to the NPR suggested that the FDIC sample a larger group of small banks which could become less than well capitalized and run stress tests simulating various interest rate environments to determine whether the institutions would be able to raise or retain funding under the proposed rate caps. Such a stress testing exercise would be difficult and heavily dependent on assumptions not only about the shape and level of the Treasury yield curve, but about national and local demand for loans and deposits and the nature of deposit interest rate competition resulting from these factors.
In response to the comment, the FDIC
notes that as described throughout this preamble, the rate caps under this rule are constructed to be more responsive to the prevailing interest rate environment and are generally expected to be moderately less restrictive than the current rate caps.
C. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302a of the Riegle Community Development and Regulatory Improvement Act RCDRIA,118 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each Federal banking agency must consider, consistent with the principle of safety and soundness and the public interest, any administrative burdens that such regulations would place on IDIs, including small IDIs, and customers of IDIs, as well as the benefits of such regulations. In addition, section 302b of RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.119 The FDIC
considered the administrative burdens 117 The FDIC surveyed rates offered on savings, interest checking, and money market demand accounts, as well as CDs of 1, 3, 6, 12, 24, 36, 48, and 60-month maturities. Only non-jumbo accounts were considered, and not every institution offered every type of account.
118 12 U.S.C. 4802a.
119 12 U.S.C. 4802.

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