[Federal Register Volume 84, Number 23 (Monday, February 4, 2019)]
[Rules and Regulations]
[Pages 1346-1354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28137]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 327 and 337

RIN 3064-AE89


Limited Exception for a Capped Amount of Reciprocal Deposits From 
Treatment as Brokered Deposits

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is amending its regulations that implement brokered 
deposits and interest rate restrictions to conform with recent changes 
to section 29 of the Federal Deposit Insurance Act made by section 202 
of the Economic Growth, Regulatory Relief, and Consumer Protection Act 
related to reciprocal deposits, which took effect on May 24, 2018. The 
FDIC is also making conforming amendments to the FDIC's regulations 
governing deposit insurance assessments.

DATES: This rule will be effective March 6, 2019.

FOR FURTHER INFORMATION CONTACT: Division of Risk Management 
Supervision: Thomas F. Lyons, Chief, Policy and Program Development, 
(202) 898-6850, <a href="/cdn-cgi/l/email-protection#8ffbe3f6e0e1fccfe9ebe6eca1e8e0f9"><span class="__cf_email__" data-cfemail="13677f6a7c7d605375777a703d747c65">[email protected]</span></a>; Judy Gross, Senior Policy Analyst, 
(202) 898-7047, <a href="/cdn-cgi/l/email-protection#1b716e7c697468685b7d7f7278357c746d"><span class="__cf_email__" data-cfemail="ff958a988d908c8cbf999b969cd1989089">[email protected]</span></a>. Division of Insurance and Research: 
Ashley Mihalik, Chief, Banking and Regulatory Policy, (202) 898-3793, 
<a href="/cdn-cgi/l/email-protection#94f5f9fdfcf5f8fdffd4f2f0fdf7baf3fbe2"><span class="__cf_email__" data-cfemail="2b4a4642434a4742406b4d4f4248054c445d">[email protected]</span></a>. Legal Division: Vivek V. Khare, Counsel, (202) 898-
6847, <a href="/cdn-cgi/l/email-protection#16607d7e7764735670727f7538717960"><span class="__cf_email__" data-cfemail="1264797a7360775274767b713c757d64">[email protected]</span></a>; Thomas Hearn, Counsel, (202) 898-6967, 
<a href="/cdn-cgi/l/email-protection#66120e090e030714082600020f0548010910"><span class="__cf_email__" data-cfemail="cbbfa3a4a3aeaab9a58badafa2a8e5aca4bd">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Policy Objectives

    The policy objective of the final rule is to implement section 202 
of the Economic Growth, Regulatory Relief, and Consumer Protection Act, 
codified in 12 U.S.C. 1831f, which took effect on May 24, 2018.\1\ The 
main effect of the legislation and the final rule is to permit FDIC-
insured financial institutions, under certain circumstances, to except 
certain amounts of reciprocal deposits from treatment as brokered 
deposits.
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    \1\ Public Law 115-174, 132 Stat. 1296-1368 (2018).
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II. Background

    The Economic Growth, Regulatory Relief, and Consumer Protection Act 
(the Act) was enacted on May 24, 2018.\2\ Section 202 of the Act amends 
section 29 of the Federal Deposit Insurance Act (FDI Act) \3\ to except 
a capped amount of reciprocal deposits from treatment as brokered 
deposits for certain insured depository institutions. In addition, 
section 202 ensures that the interest rate restrictions in section 29 
remain applicable to any deposit, including reciprocal deposits, 
whether or not they meet the limited exception. Section 202 was 
effective immediately upon enactment.
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    \2\ Public Law 115-174, 132 Stat. 1296-1368 (2018).
    \3\ See 12 U.S.C. 1831f.
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    As more fully discussed below, well-capitalized institutions are 
not restricted from accepting or soliciting brokered deposits and have 
no restrictions on the rates they pay on deposits. However, under 
section 29, less than well-capitalized institutions may generally not 
accept, renew, or roll-over brokered deposits and may not offer rates 
on any deposits that are significantly higher than the prevailing rates 
in the institution's normal market area. Section 29 defines the term 
``deposit broker'' and provides a list of exclusions to that term. 
Funds obtained through a deposit broker are considered brokered 
deposits. Section 202 amends section 29 to provide that a capped amount 
of reciprocal deposits will not be considered funds obtained through a 
deposit broker for certain insured depository institutions, and thus 
such deposits will be non-brokered. Reciprocal deposits that do not 
meet the section 202 exception are brokered deposits under section 29.

A. Section 29 of the FDI Act

    Under section 29 of the FDI Act, an insured depository institution 
that is less than well capitalized is restricted from accepting 
deposits by or through a deposit broker.\4\ The FDIC may, however, 
waive this restriction if the insured depository institution is 
adequately capitalized; the restriction cannot be waived if the 
institution is less than adequately capitalized.\5\ Section 29 also 
imposes restrictions on the deposit interest rates that an insured 
depository institution may offer if the institution is not well 
capitalized.\6\ These interest rate restrictions cannot be waived. 
Section 337.6 of the FDIC's Rules and Regulations implements section 29 
of the FDI Act.\7\ Through this regulation, the FDIC has largely 
tracked the statutory definition of ``deposit broker'' and its 
exceptions.
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    \4\ 12 U.S.C. 1831f(a).
    \5\ 12 U.S.C. 1831f(c).
    \6\ See generally, 12 U.S.C. 1831f.
    \7\ 12 U.S.C. 1831f(a).
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    A ``deposit broker,'' as defined by section 29 of the FDI Act, 
includes ``any person engaged in the business of placing deposits, or 
facilitating the placement of deposits, of third parties with insured 
depository institutions or the business of placing deposits with 
insured depository institutions for the purpose of selling interests in 
those deposits to third parties. . . . '' Under the FDIC's regulations, 
a ``brokered deposit'' is thus defined as a deposit accepted through a 
``deposit broker.'' \8\ The definition of ``deposit broker'' is subject 
to nine statutory exceptions in section 29 and one regulatory 
exception.\9\
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    \8\ 12 CFR 337.6(a)(2).
    \9\ 12 U.S.C. 1831 f(g)(2), (i); 12 CFR 337.6(a)(5)(ii)(J); see 
also, 57 FR 23933-01 (June 5, 1992).
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B. Reciprocal Deposits

    The reciprocal deposit arrangement is based upon a network of banks 
that place funds at other participating banks in order for depositors 
to receive insurance coverage for the entire amount of their 
deposits.\10\ In these arrangements, institutions within the network 
are both sending and receiving identical amounts of deposits 
simultaneously. Because reciprocal arrangements can be complex, and 
involve numerous banks, they are often managed by a third-party network 
sponsor. As a result of this arrangement, the institutions themselves 
(along with the third-party network sponsors) are ``in the business of 
placing deposits, or facilitating the placement of deposits, of third 
parties with insured depository institutions.'' \11\ The involvement of 
deposit brokers within the reciprocal network means the deposits are 
brokered deposits.\12\
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    \10\ See FDIC Advisory Opinion No. 03-03 (July 29, 2003).
    \11\ Excerpt of the definition of ``deposit broker.'' 12 U.S.C. 
1831f.
    \12\ See FDIC's 2011 Study on Core and Brokered Deposits, issued 
July 2011, Sections IV.E. and VIII.E.
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    For assessment purposes, reciprocal deposits have been treated more 
favorably than other types of brokered deposits. In 2009, through 
rulemaking, the FDIC amended its risk-based assessment rate methodology 
for small institutions (generally, insured depository institutions with 
less than $10 billion dollars in total assets).\13\ In that rulemaking, 
the FDIC added an ``adjusted brokered deposit ratio'' that

[[Page 1347]]

applied to small institutions that were well capitalized and well 
rated. This ratio measured the extent to which significant reliance on 
brokered deposits helped to fund rapid asset growth. After 
consideration of comments received in response to the proposed rule, 
reciprocal deposits were not included as part of the adjusted brokered 
deposit ratio. In its final rule, the FDIC stated that ``[it] 
recognizes that reciprocal deposits may be a more stable source of 
funding for healthy banks than other types of brokered deposits and 
that they may not be as readily used to fund rapid asset growth.'' \14\ 
When the FDIC updated its risk-based assessment rate methodology for 
established small institutions in 2016, it replaced the adjusted 
brokered deposit ratio with a new brokered deposit ratio.\15\ The new 
ratio, which measures significant reliance on brokered deposits (rapid 
asset growth is considered as a separate measure) and applies to all 
established small institutions, continues to exclude reciprocal 
deposits for institutions that are both well capitalized and well 
rated.\16\ Thus, for well capitalized, well rated institutions under 
$10 billion, reciprocal deposits continue to generally have no impact 
on assessments.
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    \13\ 74 FR 9525 (Mar. 4, 2009).
    \14\ Id. at 9532.
    \15\ Generally, an established small bank is a small institution 
that has been federally insured for at least five years. See 12 CFR 
327.8(v).
    \16\ See 12 CFR 327.16(a)(1)(ii).
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C. Notice of Proposed Rulemaking

    Prior to enactment of the Act, all reciprocal deposits were 
classified as brokered deposits.\17\ Section 202 of the Act amends 
section 29 of the FDI Act to except a capped amount of reciprocal 
deposits from treatment as brokered deposits for certain insured 
depository institutions. Section 202's amendments took effect upon 
enactment on May 24, 2018.
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    \17\ See FDIC's 2011 Study on Core and Brokered Deposits, issued 
July 2011, Section IV.
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    Section 202 defines ``reciprocal deposits'' as ``deposits received 
by an agent institution through a deposit placement network with the 
same maturity (if any) and in the same aggregate amount as covered 
deposits placed by the agent institution in other network member 
banks.'' Network member banks may receive other deposits through a 
network such as (1) deposits received without the institution placing 
into the network a deposit of the same maturity and same aggregate 
amount (sometimes referred to as ``one-way network deposits'') and (2) 
deposits placed by the institution into the network where the deposits 
were obtained, directly or indirectly, by or through a deposit broker. 
Such other network deposits meet the definition of brokered deposits 
but would not meet the definition of reciprocal deposits. Thus, these 
deposits would not be eligible to be excepted from an institution's 
brokered deposits under section 202.
    On September 12, 2018, the FDIC Board authorized publication of a 
notice of proposed rulemaking (NPR) to implement section 202. The NPR 
was published in the Federal Register on September 26, 2018, with a 30-
day comment period.\18\ In the NPR, the FDIC proposed to implement 
section 202's limited exception by incorporating its provisions into 
Sec.  337.6(e)(2) of the brokered deposit rules, without change. These 
provisions, and their definitions, must be satisfied in order for a 
capped amount of reciprocal deposits to be excepted from treatment as 
brokered deposits. The FDIC also proposed to conform its assessment 
regulations with section 202 and the proposed amendments to the 
brokered deposit regulations.
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    \18\ 83 FR 48562 (Sept. 26, 2018).
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    The FDIC received twelve comments from insured depository 
institutions, banking associations, bank service providers, and law 
firms writing on behalf of institutions. The commenters generally 
supported the proposed rule. After careful consideration of all 
comments received, the FDIC is adopting as proposed the amendments to 
12 CFR part 337, which incorporate section 202 of the Act, and the 
conforming amendments to the assessment regulations in 12 CFR part 327. 
Comments are discussed in the relevant sections, below.

III. Discussion of Treatment of Reciprocal Deposits Under the Act and 
Final Rule

A. Deposit Placement Network, Covered Deposits, and Network Member Bank

    The term ``deposit placement network'' is defined in section 202 as 
a network in which an insured depository institution participates, 
together with other insured depository institutions, for the processing 
and receipt of reciprocal deposits. Institutions that are members of 
the deposit placement network are ``network member banks.''
    The deposits that an ``agent institution'' places at other banks in 
return for reciprocal deposits are termed ``covered deposits'' under 
section 202. The term covered deposit is defined as a deposit that (1) 
is submitted for placement through a deposit placement network and (2) 
does not consist of funds that were obtained for the agent institution, 
directly or indirectly, by or through a deposit broker before 
submission for placement through the deposit placement network.
    One commenter requested that the FDIC clarify whether deposits 
placed at an insured depository institution in satisfaction of Section 
29's ``primary purpose exception'' \19\ would meet the definition of 
``covered deposit'' and thus be eligible for the limited exception for 
reciprocal deposits.'' \20\ The term ``deposit broker'' does not 
include an agent or nominee whose primary purpose is not the placement 
of funds with depository institutions.\21\ Deposits placed at an 
insured depository institution by an entity that is not a deposit 
broker because it meets the primary purpose exception are not brokered. 
Thus, if such non-brokered deposits are submitted for placement through 
a deposit placement network, they may qualify as ``covered deposits'' 
eligible for the limited exception for reciprocal deposits, subject to 
the other requirements and definitions in section 202 and the Final 
Rule.
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    \19\ See 12 U.S.C. 1831f(g)(2)(I).
    \20\ Generally, deposits placed by a third party are brokered 
deposits, unless the third party meets one of the exceptions to the 
definition of deposit broker. The commenter specifically references 
the primary purpose exception with respect to certain broker-dealers 
that place a limited amount of customer free cash balances into 
deposit accounts at affiliated banks as agent for their customers. 
These deposits have not been viewed by staff, subject to certain 
conditions, as brokered deposits via an advisory opinion. Note that 
a staff advisory opinion is not binding on the FDIC's Board of 
Directors.
    \21\ 12 U.S.C. 1831f(g)(2)(I).
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B. Agent Institution

    Consistent with section 202, Sec.  337.6(e)(2) defines ``agent 
institution'' as an insured depository institution that places a 
covered deposit through a deposit placement network at other insured 
depository institutions in amounts that are less than or equal to the 
standard maximum deposit insurance amount, and specifies the interest 
rate to be paid for such amounts, if the insured depository 
institution:
    <bullet> Is well capitalized \22\ and has a composite condition of 
outstanding (CAMELS ``1'') or good (CAMELS ``2'') when most recently 
examined under

[[Page 1348]]

section 10(d) of the FDI Act (described as ``well rated'') \23\;
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    \22\ See generally, 12 CFR part 325, subpart B, or 12 CFR part 
324, subpart H (FDIC); 12 CFR part 208 (Board of Governors for the 
Federal Reserve System); 12 CFR part 6 (Office of the Comptroller of 
the Currency). 12 U.S.C. 1831o. ``Well capitalized'' is already 
defined in 12 CFR 337.6(a)(3)(i).
    \23\ CAMELS refers to Capital adequacy, Asset quality, 
Management, Earnings, Liquidity, and Sensitivity to market risk. The 
effective date of a CAMELS composite rating is the date of written 
notification to the institution by its primary federal regulator or 
state authority of its supervisory rating. See e.g., 12 CFR 
327.4(f).
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    <bullet> has obtained a waiver pursuant to section 29(c) of the FDI 
Act; or
    [ballot] does not receive an amount of reciprocal deposits that 
causes the total amount of reciprocal deposits held by the agent 
institution to be greater than the average of the total amount of 
reciprocal deposits held by the agent institution on the last day of 
each of the four calendar quarters preceding the calendar quarter in 
which the agent institution was found not to have a composite condition 
of outstanding or good or was determined to be not well capitalized.

C. Caps Applicable to Agent Institutions

    Consistent with section 202, under the regulation, an ``agent 
institution'' can except reciprocal deposits from being classified as 
brokered deposits up to its applicable statutory caps, as explained 
below.
General Cap
    An agent institution may except reciprocal deposits up to the 
lesser of the following amounts (referred to as the general cap) from 
being classified as brokered deposits: \24\
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    \24\ See FFIEC Supplemental Instructions, Call Report Date, June 
30, 2018 https://www.fdic.gov/news/news/financial/2018/fil18039a.pdf.
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    [ballot] $5 billion or
    [ballot] An amount equal to 20 percent of the agent institution's 
total liabilities. Reciprocal deposits in excess of the general cap, as 
well as those reciprocal deposits that do not meet section 202's 
limited exception, are brokered deposits.
Special Cap
    A special cap applies if the institution is either not well rated 
or not well capitalized. In this case, the institution may meet the 
definition of ``agent institution'' if it does not receive reciprocal 
deposits in excess of the special cap, which is the average amount of 
reciprocal deposits held at quarter-end during the last four quarters 
preceding the quarter that the institution fell below well capitalized 
or well rated. Thus, the special cap is applicable to agent 
institutions that were previously well capitalized and well rated. 
Section 202 does not provide a date by which an institution must 
demonstrate that its amount of reciprocal deposits are within the 
special cap.
    The FDIC will calculate an institution's special cap based on 
information reported in its Call Reports as proposed. For an 
institution that falls below well rated or well capitalized, the FDIC 
will evaluate the institution's compliance with the special cap based 
on Call Report data submitted for the reporting date immediately 
following when the determination is made.
    One commenter was concerned that it would not be possible to 
calculate a four quarter history of reciprocal deposits until March 31, 
2019, because reciprocal deposits were not defined separately from 
brokered deposits before section 202 was enacted on May 24, 2018. 
However, reciprocal deposit data prior to the date of enactment is 
available because institutions have reported reciprocal deposits on 
Call Report Schedule RC-O since June 30, 2009.\25\
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    \25\ Since June 30, 2009, institutions reported ``Reciprocal 
brokered deposits'' on Call Report Schedule RC-O. Until the passage 
of the Act, all reciprocal deposits were considered brokered 
deposits. As provided in the supplemental instructions to the 
September 30, 2018 Call Report, a new line item ``Total reciprocal 
deposits'' was proposed to be added to Schedule RC-E. In addition, 
the instructions note a one-time reporting line item of ``Total 
reciprocal deposits as of June 30, 2018'' (when the law was 
effective). These new line items track the new definition of 
``reciprocal deposit'' in Section 202.
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Application of Statutory Caps
    Below are descriptions of how the two statutory caps will apply to 
an agent institution based upon its capital and composite ratings.\26\
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    \26\ For an example of Section 202's applicability, refer to the 
NPR at 83 FR 48564.
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    1. Well capitalized and well rated. Institutions that are both well 
capitalized and well rated can have non-brokered reciprocal deposits up 
to the general cap. Any amount of reciprocal deposits over the general 
cap will not meet the limited exception and therefore that amount will 
be considered to be ``brokered deposits.'' Well capitalized 
institutions may accept brokered deposits, including reciprocal 
deposits that are brokered deposits, without restrictions.
    2. Not well capitalized or not well rated. Institutions that are 
either not well capitalized or not well rated are subject to the lesser 
of either the special cap or the general cap. The amount of reciprocal 
deposits within the institution's applicable cap will not be considered 
brokered deposits. In no event, however, can an institution's non-
brokered reciprocal deposits exceed the general cap. With respect to an 
institution that is well capitalized but not well rated, if it received 
reciprocal deposits above the special cap, it will no longer meet the 
definition of ``agent institution.''
    Institutions that are less than well capitalized, however, are 
subject to restrictions on the acceptance of brokered deposits, 
including reciprocal deposits that are brokered deposits. Because only 
reciprocal deposits of an agent institution that are below the 
applicable cap are considered non-brokered, a less than well-
capitalized agent institution may not accept reciprocal deposits in 
excess of the special cap. (An adequately capitalized institution's 
non-brokered reciprocal deposits may be above the special cap with a 
waiver from the FDIC, but can also never exceed the general cap.\27\)
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    \27\ 12 U.S.C. 1831f(c). Institutions that are adequately 
capitalized may seek a waiver from the FDIC to accept brokered 
deposits. Waivers under section 29(c) are only available (1) on a 
case-by-case basis, (2) upon application to the FDIC, (3) to 
adequately capitalized institutions, and (4) upon a finding that the 
acceptance of such deposits does not constitute an unsafe or unsound 
practice with respect to such institution. Less than adequately 
capitalized institutions (undercapitalized or significantly 
undercapitalized institutions) are not eligible to seek a waiver 
from the FDIC.
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Comments on the Application of the Special Cap
    Two commenters objected to the proposed rule's application of the 
special cap when an institution falls below well capitalized or is no 
longer well rated. They noted that while section 202 limits the amount 
an agent institution can ``receive,'' it does not limit amounts an 
agent institution can maintain, retain, or hold. Thus, according to 
commenters, an institution that falls below well capitalized or well 
rated should not be required to lower the amount of reciprocal deposits 
it holds within the special cap. Rather these institutions should be 
able to retain reciprocal deposits, even if above the special cap, so 
long as when those reciprocal deposits mature or roll off, the 
institution does not receive additional reciprocal deposits that cause 
its total to exceed the special cap (i.e., the previous four-quarter 
average). One commenter argued that this interpretation is consistent 
with the FDIC's current interpretation of Section 29 of the Federal 
Deposit Insurance Act: If an institution drops to adequately 
capitalized, it does not need a waiver for deposits previously accepted 
when it was well capitalized. In this case, the adequately capitalized 
institution would continue to report such deposits as brokered.
    The FDIC recognizes that the statute only limits the amount of 
reciprocal deposits an institution may ``receive'' in

[[Page 1349]]

order to be considered an agent institution. Thus, an institution that 
is less than well capitalized or not well rated will still qualify as 
an agent institution if it holds a level of reciprocal deposits above 
the special cap, as long as (1) such deposits were received before the 
institution became less than well capitalized or not well rated, (2) 
such deposits are time deposits,\28\ and (3) the institution satisfies 
all other qualifications necessary to be an agent institution. For 
example, an institution that is well capitalized but no longer well 
rated could continue to be an agent institution if it holds reciprocal 
time deposits that it received prior to its rating downgrade until 
those time deposits mature or roll off, but would no longer be an agent 
institution if it renewed or rolled over such deposits and doing so 
caused the total amount of reciprocal deposits to exceed the special 
cap. In this case, once the institution receives reciprocal deposits in 
excess of its special cap, it is no longer an agent institution. If an 
institution is not an agent institution, all of its reciprocal deposits 
should be reported as brokered deposits.
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    \28\ Transactional reciprocal deposits are viewed as being 
``received'' daily.
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    Another commenter noted that an institution that is well 
capitalized but not well rated may be treated the same or worse under 
section 202 and the proposed rule than adequately capitalized or 
undercapitalized institutions. This is because, under section 29(c) of 
the FDI Act, only an adequately capitalized institution may be an agent 
institution pursuant to a waiver. Thus, according to the commenter, a 
well-capitalized but not well-rated institution would be treated the 
same as an undercapitalized institution, both of which are not eligible 
for a waiver under section 29(c) and could only qualify as an agent 
institution through application of the special cap. The commenter 
suggested that the FDIC amend the regulation to alleviate this 
discrepancy in relative treatment, arguing that this would better 
reflect congressional intent.
    Amending the final rule in the manner that the commenter suggests 
would be inconsistent with section 29 of the FDI Act, as well as 
section 202 of the Act. Section 202 unambiguously defines ``agent 
institution'' to include an institution that has obtained a waiver 
pursuant to paragraph (c) of section 29. Section 29 of the FDI Act only 
allows the FDIC to grant a waiver for adequately capitalized 
institutions.

D. Treatment of De Novo Institutions

    Several commenters objected that the regulation would not allow de 
novo institutions to benefit from the limited exception for reciprocal 
deposits because they would not have a composite condition rating for 
12 to 14 months after being in operation and would not be eligible for 
the special cap because they would not have a prior four quarter 
average of reciprocal deposits. Commenters therefore proposed that the 
FDIC allow de novo institutions to be treated as agent institutions 
subject to the general cap. Some commenters suggested that the FDIC 
treat a de novo institution's pre-opening activities and approval of 
its business plan from both the FDIC and the chartering authority as 
substitute for a composite condition rating of outstanding or good. 
Another commenter argued that in the absence of a four quarter average 
of reciprocal deposits that precedes an adverse rating or an adverse 
capital determination, no amount of reciprocal deposits would cause its 
total amount of reciprocal deposits to exceed the special cap, and 
therefore qualifies as an agent institution.
    De novo institutions may be eligible for the limited exception for 
reciprocal deposits once they meet the definition of agent institution 
under the statute and Final Rule, which adopts the exact language of 
section 202. The FDIC considered treating a de novo institution as well 
rated as commenters suggested, but section 202 specifically requires 
that an institution ``when most recently examined under section 10(d) 
was found to have a composite condition of outstanding or good.'' Pre-
opening activities are not examinations under section 10(d) of the FDI 
Act.\29\ In addition, a de novo institution that does not have a 
preceding four quarter average of reciprocal deposits would also not be 
able to qualify as an agent institution under the special cap prong.
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    \29\ Section 10(d) requires the appropriate Federal banking 
agency to ``conduct a full-scope, on-site examination of each 
insured depository institution.'' 12 U.S.C. 1820(d).
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    De novo institutions that do not qualify as ``agent institutions'' 
are not prohibited from accepting reciprocal deposits, but would need 
to report them as brokered.
    Although de novo institutions may not be eligible for the limited 
exception for reporting reciprocal deposits as non-brokered until they 
receive their first rating under section 10(d) of the FDI Act, the FDIC 
will make every effort to accelerate the timing of a de novo state 
nonmember bank's first examination. To this end, the FDIC will update 
examiner instructions to make clear to open and operating de novo state 
nonmember banks that wish to make use of the limited exemption for not 
reporting reciprocal deposits as brokered that they may request an 
accelerated on-site examination in order to obtain an examination 
rating. The FDIC will work with the other federal banking agencies to 
encourage similar supervisory treatment.

E. Conforming Assessments Amendments

    The FDIC is finalizing as proposed the conforming amendments to its 
assessments regulations to be consistent with the statutory definition 
of reciprocal deposits. Prior to enactment of section 202, all 
reciprocal deposits as defined in the assessment regulations met the 
definition of brokered deposits. Because section 202 excepts certain 
reciprocal deposits from treatment as brokered deposits, the FDIC is 
replacing the current definition of ``reciprocal deposits'' in Sec.  
327.8(q) with a new term, ``brokered reciprocal deposit.'' A ``brokered 
reciprocal deposit'' is a ``reciprocal deposit'' as defined under 
section 202, and Sec.  337.6(e)(2)(v), that does not meet the statute's 
limited exception (for example, deposits over the applicable caps 
discussed above). The FDIC is also making conforming amendments to 
Sec.  327.16(a)(1)(ii) and (e)(3), which reference reciprocal deposits.
    For assessment purposes, ``brokered reciprocal deposits'' will 
continue to be excluded from the brokered deposit ratio for established 
small institutions that are well capitalized and well rated.\30\ For 
new small banks and large and highly complex banks that are less than 
well capitalized or not well rated, ``brokered reciprocal deposits'' 
will continue to be included in an institution's total brokered 
deposits for the brokered deposit adjustment.\31\
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    \30\ The brokered deposit ratio may increase assessment rates 
for established small banks with brokered deposits greater than 10 
percent of total assets. Since 2009, when the ratio was first used 
as one of the financial measures used to determine an established 
small bank's assessment rate, the ratio has excluded reciprocal 
deposits from brokered deposits if the bank is well capitalized and 
well rated. See 12 CFR 327.16(a)(1)(ii).
    \31\ The brokered deposit adjustment applies to all new small 
institutions in Risk Categories II, III, and IV, and all large and 
all highly complex institutions, except large and highly complex 
institutions (including new large and new highly complex 
institutions) that are well capitalized and have a CAMELS composite 
rating of 1 or 2. The brokered deposit adjustment can increase 
assessments for institutions that have brokered deposits in excess 
of 10 percent of domestic deposits. See 12 CFR 327.16(e)(3).

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[[Page 1350]]

    The FDIC notes that the statutory definition of ``reciprocal 
deposit'' is substantially similar to the current regulatory definition 
in part 327, with one difference. Section 202's definition of 
``reciprocal deposits'' is limited to funds obtained from a deposit 
placement network in exchange for funds placed into the network that 
meet the definition of ``covered deposits,'' which excludes funds that 
were obtained, directly or indirectly, by or through a deposit broker 
before submission for placement through the deposit placement network. 
As such, funds that do not meet the statutory definition of 
``reciprocal deposit'' because they are obtained in exchange for funds 
that the institution acquired by or through a deposit broker are 
``brokered deposits'' and would not meet the definition of ``brokered 
reciprocal deposits.''
    One commenter supported the amendments to the assessment rules to 
conform to the changes in the treatment of certain reciprocal deposits. 
Another commenter suggested adding the term ``non-brokered reciprocal 
deposits'' to the assessment regulations in order to allow all well 
capitalized institutions to benefit from the reciprocal deposit limited 
exception. The FDIC believes this addition is unnecessary. Under the 
Final Rule, all institutions that qualify under section 202 will be 
allowed to exclude reciprocal deposits from brokered deposits for both 
the brokered deposit ratio and the brokered deposit adjustment. The 
assessments regulations, amended as proposed, only include brokered 
reciprocal deposits for the brokered deposit adjustment, and, for 
institutions that are well capitalized and well rated, exclude brokered 
reciprocal deposits from the brokered deposit ratio. Non-brokered 
reciprocal deposits would not be included in either the brokered 
deposit adjustment or the brokered deposit ratio by definition.

F. Interest Rates

    Section 202 applies the statutory interest rate restrictions under 
section 29 to all reciprocal deposits. More specifically, section 202 
amends section 29(e) of the FDI Act by ensuring that the interest rate 
restrictions apply to less than well capitalized banks that accept 
reciprocal deposits.\32\ As a result, section 202 confirms that the 
current statutory and regulatory rate restrictions for less than well 
capitalized institutions continue to apply to any deposit, including a 
reciprocal deposit that is a covered deposit.\33\ To ensure consistent 
treatment of the interest rate restrictions under section 202, the FDIC 
is adopting conforming amendments to Sec.  337.6(b)(2)(ii) of its rules 
and regulations as proposed. The FDIC did not receive comments 
objecting to the adoption of these conforming changes.
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 1831f(h).
    \33\ 12 U.S.C. 1831f(g)(3) and (e).
---------------------------------------------------------------------------

G. Other Brokered Deposit Comments

    Several commenters suggested that the FDIC eliminate all limits on 
the acceptance of reciprocal deposits and two commenters suggested that 
the FDIC treat all reciprocal deposits as core deposits. However, 
section 202 did not change the definition of deposit broker in section 
29 of the FDI Act and only allows a limited amount of reciprocal 
deposits to be excepted from being treated as brokered deposits in 
certain circumstances (where the institution qualifies as an agent 
institution). Thus, the statute does not provide a blanket exception 
for all reciprocal deposits to be treated as nonbrokered.
    Commenters also responded to a question about whether reciprocal 
deposits that are no longer considered brokered deposits under section 
202 would be viewed by a potential acquiring institution in the same 
way it views traditional retail deposits. Commenters indicated that 
reciprocal deposits increase franchise value. In light of these 
comments that taking non-brokered reciprocal deposits in failed bank 
transactions may provide a benefit to some acquiring banks, the FDIC 
will include nonbrokered reciprocal deposits in the calculation of the 
deposit premium paid by the assuming institution of a failed bank.
    A number of commenters addressed general brokered deposit issues 
not specifically related to the limited exception for reciprocal 
deposits under section 202. For example, some commenters discussed the 
FDIC's interpretation of ``deposit broker'' and the need to update the 
calculation of the national rate cap. The FDIC is planning to publish 
an advanced notice of proposed rulemaking (ANPR) seeking comment on all 
parts of the brokered deposit regulation (Sec.  337.6) and will 
consider these comments when reviewing comments on the ANPR. The FDIC 
encourages interested parties to submit comments about the brokered 
deposit regulations when the ANPR is published.

IV. Expected Effects

    As noted previously, section 202 of the Act took effect upon 
enactment, and the rule will conform part 337 with the legislation and 
align the assessment rules with the statute's definition of 
``reciprocal deposits.'' The rule applies to all FDIC-insured 
depository institutions. As of March 31, 2018, there were 5,616 FDIC-
insured institutions.\34\ Of these, 2,528 institutions reported having 
brokered deposits, which totaled $980 billion. Of the institutions 
reporting brokered deposits, 1,185 institutions also reported having 
reciprocal deposits, totaling $48 billion.
---------------------------------------------------------------------------

    \34\ The FDIC is analyzing expected effects based on March 31, 
2018 Call Report data, which is the last available Call Report data 
prior to enactment of section 202 on May 24, 2018.
---------------------------------------------------------------------------

Benefits
    The rule could affect deposit insurance assessments for a small 
number of FDIC-insured institutions. As discussed in Section II: 
Background, the brokered deposit ratio is one of the financial measures 
used to determine assessment rates for established small banks. The 
brokered deposit ratio may increase assessment rates for established 
small banks with brokered deposits greater than 10 percent of total 
assets.\35\ Among these banks, those that are well capitalized and well 
rated can already deduct reciprocal deposits from brokered deposits and 
generally would not be affected by the final rule, for assessment 
purposes.\36\ Furthermore, the final rule will not affect the 
assessment rates of any banks that do not have reciprocal deposits or 
whose brokered deposits comprise less than 10 percent of total assets. 
The FDIC estimates that fewer than ten (0.178 percent) small FDIC-
insured institutions that are either not well capitalized or not well 
rated (or both) could have a lower assessment rate under the final rule 
if their reciprocal deposits are excepted from brokered deposits.\37\ 
For large institutions, generally insured depository institutions with 
greater than $10 billion in total assets, the final rule may alter the 
core deposit ratio, resulting in a change in the bank's assessment.\38\ 
The FDIC estimates that 20 (0.356 percent) FDIC-insured institutions 
could have a lower assessment due to the effect of the final rule on 
their core deposit ratio for assessment purposes, if their reciprocal

[[Page 1351]]

deposits are excepted from treatment as brokered. Based on data as of 
March 31, 2018, the FDIC estimates that no more than 30 institutions 
would have reduced assessment rates, all else equal, and the FDIC's 
aggregate assessment revenue would be reduced by an estimated $4.3 
million annually.
---------------------------------------------------------------------------

    \35\ All else equal, a higher brokered deposit ratio will result 
in a higher assessment rate.
    \36\ See 12 CFR 327.16(a)(1)(ii).
    \37\ FDIC Call Report, March 31, 2018.
    \38\ The core deposit ratio applies to large and highly-complex 
institutions and is measured as domestic deposits, excluding 
brokered deposits and uninsured non-brokered time deposits, divided 
by total liabilities. Reciprocal deposits that are brokered 
reciprocal deposits will continue to be excluded from the ratio. See 
12 CFR 327.16(b) and 12 CFR part 327, appendix B to subpart A.
---------------------------------------------------------------------------

    Adequately capitalized institutions may also benefit from the final 
rule through a reduction in administrative costs. Before this rule 
change, these institutions must have sought and received a regulatory 
waiver from the FDIC in order to accept brokered deposits.\39\ The 
Final Rule allows these institutions that previously accepted 
reciprocal deposits to continue to receive reciprocal deposits up to 
the lesser of the general or special cap without requesting a waiver. 
This allowance results in a de minimis savings of administrative 
expenses for affected institutions. The number of institutions that may 
benefit from this reduction in administrative costs is difficult to 
accurately estimate with available data because it depends on the 
specific financial conditions of each bank, fluctuating market 
conditions for reciprocal deposits, and future management decisions.
---------------------------------------------------------------------------

    \39\ 12 U.S.C. 1831f(c); 12 CFR 337.6(c).
---------------------------------------------------------------------------

    Undercapitalized institutions also benefit from the final rule by 
being allowed to accept reciprocal deposits up to the lesser of either 
the general or special cap, even though they are otherwise prohibited 
from receiving brokered deposits.\40\ Before this rule change, 
undercapitalized institutions could not solicit or accept any 
reciprocal deposits because all reciprocal deposits were treated as 
brokered deposits. Because the final rule excepts a certain amount of 
reciprocal deposits from treatment as brokered, undercapitalized 
institutions that, when better capitalized, previously accepted 
reciprocal deposits may now be allowed to receive reciprocal deposits 
up to the lesser of the general or special cap despite being 
undercapitalized. If undercapitalized institutions can receive 
reciprocal deposits, the result may be increased utilization of 
reciprocal deposits in the future. However, this effect is difficult to 
estimate with available data because the decision to receive reciprocal 
deposits depends on the specific financial conditions of each bank, 
fluctuating market conditions for reciprocal deposits, and future 
management decisions.
---------------------------------------------------------------------------

    \40\ 12 CFR 337.6(b).
---------------------------------------------------------------------------

    As of March 31, 2018, there were 2,528 (45 percent) institutions 
that reported holding some amount of brokered deposits and 1,185 (21 
percent) that reported holding some amount of reciprocal deposits. The 
changes could affect some metrics that rely on the amount of brokered 
deposits reported on the Call Report, such as:

<bullet> Net Noncore Funding Dependence Ratio
<bullet> Brokered Deposits maturing in less than one year to Brokered 
Deposits Ratio
<bullet> Brokered Deposits to Deposits Ratio
<bullet> Listing Service and Brokered Deposits to Deposits Ratio
<bullet> Reciprocal Brokered Deposits to Total Brokered Deposits Ratio
Costs
    With regard to the difference in the previous regulatory definition 
of ``reciprocal deposits'' for assessment purposes, which was added 
pursuant to the FDIC's assessment authority under section 7 of the FDI 
Act, and the statutory definition of reciprocal deposits that was added 
to section 29 of the FDI Act, the FDIC notes that banks do not report 
data on the amount (if any) of deposits that were obtained, directly or 
indirectly, by or through a deposit broker before submission for 
placement through the deposit placement network. As a result, the FDIC 
cannot estimate whether this change to align the assessment regulation 
definition of ``reciprocal deposits'' with the statutory definition of 
that term in section 29 of the FDI Act would affect the amount of 
reciprocal deposits that a bank would report or whether it would affect 
any bank's assessment rate.
    With regard to costs to the Deposit Insurance Fund, the FDIC 
estimates that, assuming all currently reported reciprocals align with 
the statutory definition, all else equal, the FDIC's aggregate 
assessment revenue would be reduced by an estimated $4.3 million 
annually. Additional reduced assessment revenue could occur if 
institutions shift their funding mix in ways that affect assessment 
rates, such as less use of traditional brokered deposits, and increased 
use of reciprocal deposits. Historically, when resolving failed 
institutions, the FDIC has found that potential acquiring institutions 
have generally been unwilling to pay a premium for reciprocal deposits, 
typically treating them consistent with other brokered deposits. It is 
not clear whether reciprocal deposits that are no longer treated as 
brokered as a result of section 202 would be viewed by potential 
acquiring institutions as more akin to traditional retail deposits for 
purposes of warranting a premium. Additionally, the final rule could 
pose some additional regulatory costs associated with changes to 
internal systems or processes, or changes to reporting requirements.

V. Alternatives

    The FDIC considered alternatives but believes that the final rule 
represents the most appropriate option. In particular, the FDIC 
considered whether a rulemaking implementing section 202 was necessary 
or appropriate, because section 202's amendments to section 29 became 
effective upon the Act's enactment on May 24, 2018. However, the FDIC 
believes that conforming Sec.  337.6 with section 202's amendments will 
remove confusion that might arise if interested parties only consult 
Sec.  337.6 for requirements related to brokered deposits.
    Section 202 did not address the assessment rules in part 327 with 
respect to reciprocal deposits. The definition of ``reciprocal 
deposits'' in part 327 varies with the definition of that term in 
section 202. As an alternative, the FDIC considered whether it should 
continue to use the existing definition of ``reciprocal deposits'' for 
assessment purposes. However, the FDIC was concerned that having two 
different definitions of ``reciprocal deposits'' could cause confusion 
as well as undue burden in the industry, particularly for reporting 
purposes.

VI. Regulatory Analysis and Procedure

A. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The FDIC requested comments on this issue but received 
none.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires an agency, in connection with a rule, to prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities.\41\ However, a regulatory flexibility analysis is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Small Business Administration (SBA) has defined ``small entities'' 
to include banking organizations with total

[[Page 1352]]

assets of less than or equal to $550 million.\42\
---------------------------------------------------------------------------

    \41\ 5 U.S.C. 601 et seq.
    \42\ The SBA defines a small banking organization as having $550 
million or less in assets, where ``a financial institution's assets 
are determined by averaging the assets reported on its four 
quarterly financial statements for the preceding year.'' See 13 CFR 
121.201 (as amended, effective December 2, 2014). ``SBA counts the 
receipts, employees, or other measure of size of the concern whose 
size is at issue and all of its domestic and foreign affiliates.'' 
See 13 CFR 121.103. Following these regulations, the FDIC uses a 
covered entity's affiliated and acquired assets, averaged over the 
preceding four quarters, to determine whether the covered entity is 
``small'' for the purposes of RFA.
---------------------------------------------------------------------------

    As of March 31, 2018, there were 5,616 FDIC-insured institutions, 
of which 4,177 are considered small entities for the purposes of 
RFA.\43\
---------------------------------------------------------------------------

    \43\ FDIC Call Report, March 31, 2018.
---------------------------------------------------------------------------

    The rule could affect deposit insurance assessments for a small 
number of FDIC-insured, small entities. As discussed in Section II: 
Background, the brokered deposit ratio is one of the financial measures 
used to determine assessment rates for established small banks. The 
brokered deposit ratio may increase assessment rates for established 
small banks with brokered deposits greater than 10 percent of total 
assets.\44\ Among these banks, those that are well capitalized and well 
rated can already deduct reciprocal deposits from brokered deposits and 
generally would not be affected by the proposed rule, for assessment 
purposes.\45\
---------------------------------------------------------------------------

    \44\ All else equal, a higher brokered deposit ratio will result 
in a higher assessment rate.
    \45\ See 12 CFR 327.16(a)(1)(ii).
---------------------------------------------------------------------------

    Furthermore, the rule will not affect the assessment rates of small 
banks that do not have reciprocal deposits or whose brokered deposits 
comprise less than 10 percent of total assets. The FDIC estimates that 
seven (0.2 percent) small, FDIC-insured entities that are either not 
well capitalized or not well rated (or both) could have a lower 
assessment rate under the proposed rule if their reciprocal deposits 
are excepted from brokered deposits.\46\
---------------------------------------------------------------------------

    \46\ FDIC Call Report, March 31, 2018.
---------------------------------------------------------------------------

    There are 611 (14.6 percent) small entities that report holding 
some amount of reciprocal deposits and 1,499 (35.9 percent) that report 
holding some amount of brokered deposits. These changes could affect 
some metrics that rely on the amount of brokered deposits reported on 
the Call Report, such as:

<bullet> Net Noncore Funding Dependence Ratio
<bullet> Brokered Deposits maturing in less than one year to Brokered 
Deposits Ratio
<bullet> Brokered Deposits to Deposits Ratio
<bullet> Listing Service and Brokered Deposits to Deposits Ratio
<bullet> Reciprocal Brokered Deposits to Total Brokered Deposits Ratio

    Based on available information, it is difficult to determine 
whether additional regulatory costs or costs to the Deposit Insurance 
Fund could result. Nonetheless, the rule could pose some additional 
regulatory costs associated with changes to internal systems or 
processes, or changes to reporting requirements. Based on the 
information above, the FDIC certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget has determined that the final 
rule is not a ``major rule'' within the meaning of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121, Title 
II).

D. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (44 U.S.C. 3501-3521) (PRA), the FDIC may not conduct or 
sponsor, and a respondent is not required to respond to, an information 
collection unless it displays a currently valid Office of Management 
and Budget (OMB) control number. The FDIC has reviewed the rule and 
determined that it revises certain reporting requirements that have 
been previously cleared by the OMB under various control numbers.\47\
---------------------------------------------------------------------------

    \47\ The reporting requirements are found in the three 
Consolidated Reports of Condition and Income (Call Reports) 
promulgated by the Federal Financial Institutions Examination 
Council (FFIEC). The Call Reports are designated FFIEC 031 
(Consolidated Report of Condition and Income for a Bank with 
Domestic and Foreign Offices); FFIEC 041 (Consolidated Report of 
Condition and Income for a Bank with Domestic Offices Only); and 
FFIEC 051 (Consolidated Report of Condition and Income for a Bank 
with Domestic Only and Total Assets of Less than $1 Billion). The 
FFIEC constituent bank regulatory agencies (the Board of Governors 
of the Federal Reserve System (the Board), the Office of the 
Comptroller of the Currency (the OCC) and the FDIC) (the Agencies) 
have each obtained information collection clearances from OMB under 
the following Control Numbers: 7100-0036 (Board); 1557-0081 (OCC); 
and 3064-0052 (FDIC).
---------------------------------------------------------------------------

    On May 24, 2018, the Act amended various statutes administered by 
the Agencies and affected regulations issued by the Agencies.\48\ As 
described above, certain amendments made by the Act took effect on the 
day of the Act's enactment and immediately impacted institutions' 
regulatory reports. In response to emergency review requests, the 
Agencies received approval from OMB to revise the reporting of 
information in the Call Reports including the reciprocal deposits 
provisions described in this rule. As a result of OMB's emergency 
approval of revisions to the information collections affected by the 
above statutory changes, the expiration date of these collections has 
been revised to February 28, 2019. The Agencies have begun the regular 
PRA process for revising and extending these information collections 
for three years and they published the required 60-day notice in the 
Federal Register on September 28, 2018.\49\
---------------------------------------------------------------------------

    \48\ Public Law 115-174, 132 Stat. 1296 (2018).
    \49\ 83 FR 49160 (Sept. 28, 2018).
---------------------------------------------------------------------------

E. Riegle Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act of 
1994 (RCDRIA), 12 U.S.C. 4701, requires that each Federal banking 
agency, in determining the effective date and administrative compliance 
requirements for new regulations that impose additional reporting, 
disclosure, or other requirements on insured depository institutions, 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the 
benefits of such regulations.\50\ In addition, new regulations that 
impose additional reporting, disclosures, or other new requirements on 
insured depository institutions generally must take effect on the first 
day of a calendar quarter that begins on or after the date on which the 
regulations are published in final form.
---------------------------------------------------------------------------

    \50\ 12 U.S.C. 4802.
---------------------------------------------------------------------------

    The changes relating to ``reciprocal deposits'' and section 29 are 
effective upon enactment of section 202, and as described previously, 
institutions have already begun reporting reciprocal deposits as per 
the new law. This final rule relating to the amendments to part 337 of 
the FDIC's regulations is effective 30 days after publication in the 
Federal Register. The rule also includes changes to conform section 
202's statutory definition of ``reciprocal deposit'' with the current 
definition of ``reciprocal deposit'' in the FDIC's assessments 
regulations in part 327. The FDIC requested comments on any 
administrative burdens that the changes would place on depository 
institutions, including small depository institutions and customers of 
depository institutions and received one comment; that comment 
supported the change in the assessment rule. Consistent with RCDRIA, 
changes to the assessment

[[Page 1353]]

regulations are effective on the first day of the calendar quarter that 
begins after the date on which this final rule is published.

List of Subjects

12 CFR Part 327

    Bank deposit insurance, Banks, banking, Savings associations.

12 CFR Part 337

    Banks, banking, Reporting and recordkeeping requirements, 
Securities, Savings associations.

Authority and Issuance

    For the reasons stated in the preamble, the FDIC amends 12 CFR 
parts 327 and 337 as follows:

PART 327--ASSESSMENTS

0
1. The authority citation for 12 CFR part 327 continues to read as 
follows:

    Authority: 12 U.S.C. 1441, 1813, 1815, 1817-19, 1821.


0
2. Amend Sec.  327.8 by revising paragraph (q) to read as follows:


Sec.  327.8  Definitions.

* * * * *
    (q) Brokered reciprocal deposits. Reciprocal deposits as defined in 
Sec.  337.6(e)(2)(v) that are not excepted from the institution's 
brokered deposits pursuant to Sec.  337.6(e).
* * * * *

0
3. Amend Sec.  327.16 by:
0
a. In the table in paragraph (a)(1)(ii)(A), revising the entry for 
``Brokered Deposit Ratio''; and
0
b. In paragraph (e)(3) introductory text, removing ``reciprocal 
deposits as defined in Sec.  327.8(p)'' and adding in its place 
``brokered reciprocal deposits as defined in Sec.  327.8(q)''.
    The revision reads as follows:


Sec.  327.16  Assessment pricing methods--beginning the first 
assessment period after June 30, 2016, where the reserve ratio of the 
DIF as of the end of the prior assessment period has reached or 
exceeded 1.15 percent.

    (a) * * *
    (1) * * *
    (ii) * * *
    (A) * * *

       Definitions of Measures Used in the Financial Ratios Method
------------------------------------------------------------------------
               Variables                           Description
------------------------------------------------------------------------
 
                              * * * * * * *
----------------------------------------
Brokered Deposit Ratio.................  The ratio of the difference
                                          between brokered deposits and
                                          10 percent of total assets to
                                          total assets. For institutions
                                          that are well capitalized and
                                          have a CAMELS composite rating
                                          of 1 or 2, brokered reciprocal
                                          deposits as defined in Sec.
                                          327.8(q) are deducted from
                                          brokered deposits. If the
                                          ratio is less than zero, the
                                          value is set to zero.
 
                              * * * * * * *
------------------------------------------------------------------------

* * * * *

PART 337--UNSAFE AND UNSOUND BANKING PRACTICES

0
4. The authority citation for 12 CFR part 337 continues to read as 
follows:

    Authority: 12 U.S.C. 375a(4), 375b, 1463(a)(1),1816, 1818(a), 
1818(b), 1819, 1820(d), 1828(j)(2), 1831, 1831f, 5412.


0
5. Amend Sec.  337.6 by revising paragraph (b)(2)(ii) introductory 
text, redesignating paragraph (e) as paragraph (f), and adding a new 
paragraph (e) to read as follows:


Sec.  337.6  Brokered deposits.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Any adequately capitalized insured depository institution that 
has been granted a waiver to accept, renew or roll over a brokered 
deposit, or is an agent institution that receives a reciprocal deposit 
(under Sec.  337.6(e)(2)(i)(C)), may not pay an effective yield on any 
such deposit which, at the time that such deposit is accepted, renewed 
or rolled over, exceeds by more than 75 basis points:
* * * * *
    (e) Limited exception for reciprocal deposits--(1) Limited 
exception. Reciprocal deposits of an agent institution shall not be 
considered to be funds obtained, directly or indirectly, by or through 
a deposit broker to the extent that the total amount of such reciprocal 
deposits does not exceed the lesser of:
    (i) $5,000,000,000; or
    (ii) An amount equal to 20 percent of the total liabilities of the 
agent institution.
    (2) Additional definitions that apply to the limited exception for 
reciprocal deposits. (i) Agent institution means an insured depository 
institution that places a covered deposit through a deposit placement 
network at other insured depository institutions in amounts that are 
less than or equal to the standard maximum deposit insurance amount, 
specifying the interest rate to be paid for such amounts, if the 
insured depository institution:
    (A)(1) When most recently examined under section 10(d) of the 
Federal Deposit Insurance Act (12 U.S.C. 1820(d)) was found to have a 
composite condition of outstanding or good; and
    (2) Is well capitalized;
    (B) Has obtained a waiver pursuant to paragraph (c) of this 
section; or
    (C) Does not receive an amount of reciprocal deposits that causes 
the total amount of reciprocal deposits held by the agent institution 
to be greater than the average of the total amount of reciprocal 
deposits held by the agent institution on the last day of each of the 
four calendar quarters preceding the calendar quarter in which the 
agent institution was found not to have a composite condition of 
outstanding or good or was determined to be not well capitalized.
    (ii) Covered deposit means a deposit that:
    (A) Is submitted for placement through a deposit placement network 
by an agent institution; and
    (B) Does not consist of funds that were obtained for the agent 
institution, directly or indirectly, by or through a deposit broker 
before submission for placement through a deposit placement network.
    (iii) Deposit placement network means a network in which an insured 
depository institution participates, together with other insured 
depository institutions, for the processing and receipt of reciprocal 
deposits.
    (iv) Network member bank means an insured depository institution 
that is a

[[Page 1354]]

member of a deposit placement network.
    (v) Reciprocal deposits means deposits received by an agent 
institution through a deposit placement network with the same maturity 
(if any) and in the same aggregate amount as covered deposits placed by 
the agent institution in other network member banks.
* * * * *

    Dated at Washington, DC, on December 18, 2018.

    By Order of the Board of Directors.

Federal Deposit Insurance Corporation.

Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018-28137 Filed 2-1-19; 8:45 am]
BILLING CODE 6714-01-P


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