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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Rules and Regulations complete an application will be in possession of the nonbank third party rather than the bank. The FDIC views the potential burden on small FDICinsured institutions under the rule as minimal.

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Less Than Well-Capitalized Institutions As discussed previously, the acceptance of brokered deposits is subject to statutory and regulatory restrictions for those banks that are less than well capitalized. Adequately capitalized banks may not accept brokered deposits without a waiver from the FDIC, and banks that are less than adequately capitalized may not accept them at all. As a result, adequately capitalized and undercapitalized banks generally hold less brokered deposits as of June 30, 2020, brokered deposits make up approximately 1.3 percent of domestic deposits held by less than well capitalized banks, well below the 7.7
percent held by all IDIs.111 By generally reducing the scope of deposits that are considered brokered, the rule allows less than well capitalized banks to increase their holdings of deposits that are currently reported as brokered but will not be reported as brokered under the final rule. As of June 30, 2020, there are only nine less than well capitalized small, FDIC-insured institutions based on Call Report information. These banks hold approximately $2.5 billion in assets, $1.7 billion in domestic deposits, and $21.7 million in brokered deposits.112 These banks could be directly affected by the rule in that they could potentially accept more or different types of deposits currently designated as brokered.
Broadly speaking with respect to future developments, another aspect of brokered deposit restrictions is that, consistent with their statutory purpose, they act as a constraint on growth and risk-taking by troubled institutions.
Conversely, as noted previously, access to funding can prevent needless liquidity failures of viable institutions.
Nonbank Subsidiaries of Small, FDICInsured Institutions That May or May Not Be Deposit Brokers The revisions to the brokered deposit regulations could have effects on some nonbank subsidiaries of small, FDICinsured institutions. For example, subsidiaries of small, FDIC-insured institutions that may currently meet the deposit broker definition would no longer be a deposit broker under the rule if they solely place deposits at one IDI. Additionally, some nonbank 111 Call
Report data, June 30, 2020.

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subsidiaries of small, FDIC-insured institutions could employ or seek to determine whether they meet the primary purpose exception. This may include submitting notices or filing applications by some third parties that seek to avail themselves of the primary purpose exception, or by banks submitting notices or filing application on behalf of such entities. Ongoing reporting by these entities is also potentially expected under the final rule.
Reporting Requirements As previously discussed, the final rule establishes some reporting obligations for certain insured depository institutions or nonbank third parties 113
that meets the deposit broker definition by either placing or facilitating the placement of customer deposits at insured depository institutions and seeks to be excluded from that definition. The rule establishes, for entities that do not engage in one of the designated expectations, an application process under which any agent or nominee that seeks to avail itself of the primary purpose exception, or an insured depository institution acting on behalf of an agent or nominee, could request that the FDIC consider certain deposits as non-brokered as a result of the primary purpose exception. As previously discussed, relative to the NPR, the final rule establishes additional designated exceptions that will not require an application.
However, institutions that are eligible for these designated exceptions will be required to file a notice submission to the FDIC. Further, certain entities granted an exception under the primary purpose exception may also be subject to periodic reporting requirements under the final rule. These reporting requirements will allow the FDIC to monitor the applicability of the primary purpose exception. Finally, in the event that an entity that has applied and been approved for a primary purpose exception has undergone material changes to its business that renders the business no longer eligible for the primary purpose exception, the FDIC
will be able to require the entity to refile a notice, submit an application, reapply for approval, impose additional conditions on the approval, or withdraw a previously granted approval, with notice to the entity.
As previously discussed in the Expected Effect Section, the final rule 113 The FDIC will look to each separately incorporated legal entity as its own third party for purposes of this application process.

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establishes reporting requirements for an estimated 176 and 703 firms during the year of implementation, and between 9 and 245 firms each year after.
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, the FDIC believes it is possible that the reporting requirements of the final rule could affect up to 703
small entities during the year of implementation, and up to 245 small entities each year afterword.
As previously discussed in the expected Effects Section, in the initial year of implementation the FDIC
estimates that the notice for the 25
percent business relationship will be three hours to complete on average, and 0.5 hours per quarter each year after that. In the initial year of implementation, the FDIC estimates that the notice for the enabling transactions will take 5 hours to complete on average, and 0.5 hours each year after that. In the initial year of implementation, the FDIC estimates that the application for exception based on not enabling transactions and other business arrangements, or placing less that 25 percent of customer assets under management will take 10 hours to complete on average, and 0.25 hour per quarter each year after that. Therefore, based on the above assumptions and methodology, the FDIC estimates the final rule imposes an annual reporting burden of 5,784 hours for the first year and 497.5 hours each year after that for all affected entities. This equates to estimated compliance costs of $613,740
in the first year and $51,589 each year after that for all effected entities.114
114 For the applications relating to exceptions from the definition of deposit broker, the FDIC
used the wage estimates from the Bureau of Labor Statistics BLS National Industry Specific Occupational Employment and Wage Estimates:
Securities, Commodity Contracts, and Other Financial Investments and Related Activities Sector May 2018, while for the Application for Waiver of Prohibition on Acceptance of Brokered Deposits, the FDIC used the wage estimates from the BLS National Industry-Specific Occupational Employment and Wage Estimates: Depository Credit Intermediation Sector May 2018. Other BLS data used were the Employer Cost of Employee Compensation data June 2019, and the Consumer Price Index June 2019. Hourly wage estimates at the 75th percentile wage were used, except when the estimate was greater than $100, in which case $100 per hour was used, as the BLS does not report hourly wages in excess of $100. The 75th percentile wage information reported by the BLS in the Specific Occupational Employment and Wage Estimates does not include health benefits and other non-monetary benefits. According to the June 2019 Employer Cost of Employee Compensation data, compensation rates for health and other benefits are 33.8 percent of total compensation.
Additionally, the wage has been adjusted for
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