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Financial Services Law Insights and Observations

FDIC approves final brokered deposits rule, clarifies fintech partnerships

Agency Rule-Making & Guidance FDIC OCC Brokered Deposits Fintech

Agency Rule-Making & Guidance

On December 15, the FDIC approved a final rule, which creates a new framework for brokered deposits by, among other things, establishing bright-line standards for determining the definition of a “deposit broker,” as well as a methodology for “analyzing whether deposits made through deposit arrangements qualify as brokered deposits, including those between insured depository institutions (IDIs) and third parties, such as financial technology companies.” Also released are two fact sheets on brokered deposits and interest rate restrictions (see here and here). The final rule follows a notice of proposed rulemaking issued last December (covered by InfoBytes here), which sought feedback on ways the agency could improve its brokered deposit regulation to ensure the “classification of a deposit as brokered appropriately reflects changes in the banking system, including banks’ use of new technologies to engage and interact with their customers.” The final rule also establishes a series of exceptions that will allow banks and their partners to determine whether they can avoid restrictions on brokered deposits, and will establish a process for entities to apply for a “primary purpose exception” if its relationship with an outside entity supplying deposits does not meet one of the final rule’s “designated exceptions.” Further, the FDIC noted that brokered deposit restrictions will not apply to banks that enter into exclusive deposit placement arrangements, such as those seen often between fintech companies and a partner bank, because, according to a statement released by FDIC Chairman Jelena McWilliams, “[e]ntities who place deposits with only one bank are less likely to present the types of funding stability risks that may arise when deposit brokers place deposits at a range of banks.” Further, the final rule amends the methodology for calculating the interest rate restrictions applicable to less than well capitalized IDIs, and changes the methodology for calculating the national rate and national rate cap for specific deposit products.

Acting Comptroller of the Currency Brian P. Brooks issued a statement in support of the final rule: “These improvements to the brokered-deposit rule help promote greater access to financial services by supporting fintech and bank partnerships and allowing a wider array of services to be available in the market, especially for unbanked and underbanked Americans for whom the easier user interface of fintech apps is a gateway to the mainstream financial system.”

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