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Federal Register / Vol. 86, No. 13 / Friday, January 22, 2021 / Rules and Regulations
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rule. Additionally, to the extent that the rule supports greater utilization of deposits currently classified as brokered deposits, but classified as non-brokered under the rule, it could increase the funds available to insured depository institutions for lending to U.S.
consumers. If the rule does result in an increase in bank lending, some associated increase in measured U.S.
economic output would be expected, in part because the imputed value of the credit services banks provide is a component of measured GDP.
2. All Insured Institutions The rule could immediately affect the 1,932 FDIC-insured institutions currently reporting brokered deposits.
Going forward, the rule could affect all 5,075 FDIC-insured institutions whose decisions regarding the types of deposits to accept could be affected.
The final rule benefits insured institutions and other interested parties by providing greater legal clarity regarding the classification and treatment of brokered deposits. As result of this increased clarity, the final rule reduces the extent of reliance by banks and third parties on FDIC Staff Advisory opinions and informal written and telephonic inquiries with FDIC staff.
This would have two important benefits. First, the likelihood of inconsistent outcomes, where some institutions may report certain types of deposits as brokered and others do not, would be reduced. Second, to the extent the classification of deposits as brokered or non-brokered can be clearly addressed in regulation, the need for potentially time-consuming staff analyses can be minimized.
The FDIC has heard from a number of insured institutions that they perceive a stigma associated with accepting brokered deposits. Historical experience has been that higher use of deposits currently reported to the FDIC as brokered has been associated with higher probability of bank failure and higher DIF loss rates.63 The funding characteristics of brokered deposits, however, are non-uniform. For example, brokered CDs are often used by bank customers searching for relatively high yields and safety with deposit insurance, rather than as part of a relationship with a bank, and as such these deposits may be less stable and more subject to deposit interest rate competition. The behavior of other types of deposit placement arrangements, such as deposits placed through certain deposit sweep 63 See FDICs 2011 Study on Core and Brokered Deposits, July 8, 2011.

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arrangements or that underlie prepaid card programs, may be more based on a business relationship than on interest rate competition. Given limitations on available data, however, historical studies have not been able to differentiate the experience of banks based on the different types of deposits accepted. To the extent the rule reduces bankers perception of a stigma associated with certain types of deposits, more institutions may be incentivized to accept such deposits.
The rule could incentivize the development of banking relationships between banks and other firms. The new opportunities could spur growth in the types of companies that provide deposit placement services, particularly for third parties that receive the primary purpose exception, potentially resulting in greater access to, or use of, bank deposits by a greater variety of customers. It is difficult to accurately estimate such potential effects with the information currently available to the FDIC, because such effects depend, in part, on the future commercial development of such activities.
FDIC deposit insurance assessments would be affected by the changes, potentially affecting any insured institution that currently accepts brokered deposits or might do so in the future. Since 2009, insured institutions with a significant concentration of brokered deposits may pay higher quarterly assessments, depending on other factors. To the extent that deposits currently defined as brokered would no longer be considered brokered deposits under this rule, a banks assessment may decrease, all else equal. Certain calculations required under the Liquidity Coverage Ratio and NSFR
rules applicable to some large banks could also be affected by the rule.
Available data do not allow for a reliable estimate of the amount of deposits currently designated as brokered that would no longer be designated as such under the rule, and consequently do not allow for an estimate of effects on assessments or the reported Liquidity Coverage Ratio and NSFR.
Insured institutions could benefit from the rule by having greater certainty and greater access to funding sources that would no longer be designated as brokered deposits, thereby easing their liquidity planning in the event they fall below well capitalized and become subject to the restrictions set forth in the law and regulations and reducing the likelihood that a liquidity failure of an otherwise viable institution might be precipitated by the brokered deposit regulations. Another benefit of the rule
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could result if greater access to funding sources supported insured institutions ability to provide credit. However, these effects are difficult to estimate because the decision to receive third party deposits depends on the specific financial conditions of each bank, fluctuating market conditions for third party deposits, and future management decisions.
3. Less Than Well-Capitalized Institutions As discussed previously, the acceptance of brokered deposits is subject to statutory and regulatory restrictions for banks that are not 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. By generally reducing the scope of deposits that are considered brokered, the rule allows not 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 10 adequately capitalized and undercapitalized banks.64 These banks hold approximately $2.5 billion in assets, $1.7 million in domestic deposits, and $21.7 million in brokered deposits.65 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.
4. Entities That May or May Not Be Deposit Brokers The revisions to the brokered deposit regulations would likely give rise to some activity by nonbank third parties seeking to determine whether they are, or are not, deposit brokers under the 64 Information based on June 30, 2020
Consolidated Reports of Condition and Income. The 10 institutions do not include any quantitatively well capitalized institutions that may have been administratively classified as less than well capitalized. See generally, FDIC12 CFR
324.403b1v; Board of Governors of the Federal Reserve System12 CFR 208.43b1v; Office of the Comptroller of the Currency12 CFR
6.4c1v.
65 Call Report Data, June 30, 2020.

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