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FDIC to ease deposit-rate restrictions on less than well capitalized institutions
On August 20, the FDIC announced a notice of proposed rulemaking (NPR) concerning interest rate restrictions applicable to less than well capitalized insured depository institutions. The NPR provides additional flexibility for these institutions to compete for funds and amends the methodology for calculating the national rate, national rate cap, and local rate cap for specific deposit products. According to the FDIC, the NPR is intended to “provide a more balanced, reflective, and dynamic national rate cap.” Specifically, under the NPR, the “national rate would be the weighted average of rates paid by all insured depository institutions on a given deposit product, for which data are available, where the weights are each institution's market share of domestic deposits,” while the national rate cap for particular products will be set at the higher of either (i) the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits; or (ii) the proposed national rate plus 75 basis points. The NPR also will “simplify the current local rate cap calculation and process by allowing less than well capitalized institutions to offer up to 90 percent of the highest rate paid on a particular deposit product in the institution’s local market area.”
Additionally, the FDIC seeks comments on alternative approaches to setting the national rate caps. According to the FDIC, “[s]etting the national rate cap too low could prohibit less than well capitalized banks from fairly competing for deposits and create an unintentional liquidity strain on those banks competing in national markets. . . . Preventing such institutions from being competitive for deposits, when they are most in need of predictable liquidity, can create severe funding problems.”
Comments on the NPR are due 60 days after publication in the Federal Register.