Notice of Proposed Rulemaking on Brokered Deposits Restrictions

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Treliant Takeaway:

FinTech companies and traditional banks both face unique challenges as they seek to collaborate in bringing new and innovative products to consumers in a constantly changing regulatory landscape. Now more than ever, they need to have risk and compliance operations in place to satisfy their partners, investors, and state/federal regulatory agencies. We have a history of working with traditional banks and FinTech clients and since we understand this industry, we can tailor risk-based compliance programs to meet the business needs of these innovative companies and their bank partners.

Article Highlights:

On December 12, 2019, the Federal Deposit Insurance Corporation (FDIC) issued a Notice of Proposed Rulemaking (NPR) regarding revisions to restrictions on brokered deposits that apply to insured depository institutions that are less than well capitalized. The proposal is intended to create a new framework for analyzing certain aspects of the “deposit broker” definition and to establish application and reporting requirements related to the “primary purpose” exception. If adopted, one of the proposal’s impacts will be to deposit placement collaborations between banks and FinTech companies.

In today’s market, more and more customers want to be served by their banks via online and mobile channels.  Under the existing rules, however, a bank may be reluctant to partner with a FinTech because of the potentially higher deposit insurance assessment resulting from accepting “brokered deposits” from the nonbank’s program.  The proposed revisions would allow a FinTech to apply for a primary purpose exception directly from the FDIC, thus helping to lower one of the potential hurdles to bank/FinTech collaborations.