1346 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 

1Public Law 115–174, 132 Stat. 1296–1368 

(2018). 

2Public Law 115–174, 132 Stat. 1296–1368 

(2018). 

3See 12 U.S.C. 1831f. 

4 12 U.S.C. 1831f(a). 

5 12 U.S.C. 1831f(c). 

6See generally, 12 U.S.C. 1831f. 

7 12 U.S.C. 1831f(a). 

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). 

10See FDIC Advisory Opinion No. 03–03 (July 29, 

2003). 

11Excerpt of the definition of ‘‘deposit broker.’’ 

12 U.S.C. 1831f. 

12See FDIC’s 2011 Study on Core and Brokered 

Deposits, issued July 2011, Sections IV.E. and 

VIII.E. 

13 74 FR 9525 (Mar. 4, 2009). 

Dated: January 29, 2019. 

Bruce Summers, 

Administrator. 

[FR Doc. 2019–00872 Filed 2–1–19; 8:45 am] 

BILLING CODE 3410–02–P 

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. 

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, tlyons@fdic.gov; Judy Gross, 

Senior Policy Analyst, (202) 898–7047, 

jugross@fdic.gov. Division of Insurance 

and Research: Ashley Mihalik, Chief, 

Banking and Regulatory Policy, (202) 

898–3793, amihalik@fdic.gov. Legal 

Division: Vivek V. Khare, Counsel, (202) 

898–6847, vkhare@fdic.gov; Thomas 

Hearn, Counsel, (202) 898–6967, 

thohearn@fdic.gov. 

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. 

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. 

As more fully discussed below, wellcapitalized 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 wellcapitalized 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. 

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

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

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 


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Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 1347 

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). 

16See 12 CFR 327.16(a)(1)(ii). 

17See FDIC’s 2011 Study on Core and Brokered 

Deposits, issued July 2011, Section IV. 18 83 FR 48562 (Sept. 26, 2018). 

19See 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 brokerdealers 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). 

22See 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). 

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. 

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. 

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 § 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. 

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. 

B. Agent Institution 

Consistent with section 202, 

§ 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: 

• Is well capitalized 22 and has a 

composite condition of outstanding 

(CAMELS ‘‘1’’) or good (CAMELS ‘‘2’’) 

when most recently examined under 


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23CAMELS 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). 

24See FFIEC Supplemental Instructions, Call 

Report Date, June 30, 2018 https://www.fdic.gov/ 

news/news/financial/2018/fil18039a.pdf. 

25Since 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. 

26For an example of Section 202’s applicability, 

refer to the NPR at 83 FR 48564. 

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. 

section 10(d) of the FDI Act (described 

as ‘‘well rated’’) 23; 

• has obtained a waiver pursuant to 

section 29(c) of the FDI Act; or 

b 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

b $5 billion or 

b 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

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

1. Well capitalized and well rated. 

Institutions that are both well 

capitalized and well rated can have nonbrokered 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 nonbrokered, 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) 

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 


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Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 1349 

28Transactional reciprocal deposits are viewed as 

being ‘‘received’’ daily. 

29Section 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). 

30The 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). 

31The 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). 

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. 

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 preopening 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. 

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 nonbrokered 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 § 327.8(q) with a new term, 

‘‘brokered reciprocal deposit.’’ A 

‘‘brokered reciprocal deposit’’ is a 

‘‘reciprocal deposit’’ as defined under 

section 202, and § 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 § 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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32 12 U.S.C. 1831f(h). 33 12 U.S.C. 1831f(g)(3) and (e). 

34The 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. 

35All else equal, a higher brokered deposit ratio 

will result in a higher assessment rate. 

36See 12 CFR 327.16(a)(1)(ii). 

37FDIC Call Report, March 31, 2018. 

38The 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. 

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 

§ 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. 

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 nonbrokered 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 (§ 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. 

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 


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

40 12 CFR 337.6(b). 41 5 U.S.C. 601 et seq. 

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. 

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. 

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. 

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: 

• Net Noncore Funding Dependence 

Ratio 

• Brokered Deposits maturing in less 

than one year to Brokered Deposits 

Ratio 

• Brokered Deposits to Deposits Ratio 

• Listing Service and Brokered Deposits 

to Deposits Ratio 

• 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 

§ 337.6 with section 202’s amendments 

will remove confusion that might arise 

if interested parties only consult § 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-LeachBliley 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 


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1352 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 

42The 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. 

43FDIC Call Report, March 31, 2018. 

44All else equal, a higher brokered deposit ratio 

will result in a higher assessment rate. 

45See 12 CFR 327.16(a)(1)(ii). 

46FDIC Call Report, March 31, 2018. 

47The 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). 

48Public Law 115–174, 132 Stat. 1296 (2018). 

49 83 FR 49160 (Sept. 28, 2018). 

50 12 U.S.C. 4802. 

assets of less than or equal to $550 

million.42

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

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

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

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: 

• Net Noncore Funding Dependence 

Ratio 

• Brokered Deposits maturing in less 

than one year to Brokered Deposits 

Ratio 

• Brokered Deposits to Deposits Ratio 

• Listing Service and Brokered Deposits 

to Deposits Ratio 

• 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

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

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. 

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 


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Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 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 

■ 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. 

■ 2. Amend § 327.8 by revising 

paragraph (q) to read as follows: 

§ 327.8 Definitions. 

* * * * * 

(q) Brokered reciprocal deposits. 

Reciprocal deposits as defined in 

§ 337.6(e)(2)(v) that are not excepted 

from the institution’s brokered deposits 

pursuant to § 337.6(e). 

* * * * * 

■ 3. Amend § 327.16 by: 

■ a. In the table in paragraph 

(a)(1)(ii)(A), revising the entry for 

‘‘Brokered Deposit Ratio’’; and 

■ b. In paragraph (e)(3) introductory 

text, removing ‘‘reciprocal deposits as 

defined in § 327.8(p)’’ and adding in its 

place ‘‘brokered reciprocal deposits as 

defined in § 327.8(q)’’. 

The revision reads as follows: 

§ 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 § 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 

■ 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. 

■ 5. Amend § 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: 

§ 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 

§ 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 


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1354 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 

1Note: While the 1990 Act, as amended by 1996 

and 2015 Acts, uses the term ‘‘civil monetary 

penalties’’ for these penalties or other sanctions, the 

Farm Credit Act and the FCA Regulations use the 

term ‘‘civil money penalties.’’ Both terms have the 

same meaning. Accordingly, this rule uses the term 

civil money penalty, and both terms may be used 

interchangeably. 

2See 28 U.S.C. 2461 note. 

3Public Law 92–181, as amended. 

4The inflation-adjusted CMP in effect on January 

15, 2018, for a violation of a final order is $2,269 

per day, as set forth in § 622.61(a)(1) of FCA 

regulations. 

5The inflation-adjusted CMP in effect on January 

15, 2018, for a violation of the Farm Credit Act or 

a regulation issued under the Farm Credit Act is 

$1,026 per day, as set forth in § 622.61(a)(2) of FCA 

regulations. 

6Prior adjustments were made under the 1990 

Act. 

7 42 U.S.C. 4012a. 

8Public Law 103–325, title V, 108 Stat. 2160, 

2255–87 (September 23, 1994). 

9Public Law 112–141, 126 Stat. 405 (July 6, 

2012). 

10The inflation-adjusted CMP in effect on January 

15, 2018, for a flood insurance violation is $2,133, 

as set forth in § 622.61(b)of FCA regulations. 

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 

FARM CREDIT ADMINISTRATION 

12 CFR Part 622 

RIN 3052–AD33 

Rules of Practice and Procedure; 

Adjusting Civil Money Penalties for 

Inflation 

AGENCY: Farm Credit Administration. 

ACTION: Final rule. 

SUMMARY: This regulation implements 

inflation adjustments to civil money 

penalties (CMPs) that the Farm Credit 

Administration (FCA) may impose or 

enforce pursuant to the Farm Credit Act 

of 1971, as amended (Farm Credit Act), 

and pursuant to the Flood Disaster 

Protection Act of 1973, as amended by 

the National Flood Insurance Reform 

Act of 1994 (Reform Act), and further 

amended by the Biggert-Waters Flood 

Insurance Reform Act of 2012 (BiggertWaters Act). 

DATES: Effective date: This regulation is 

effective on February 4, 2019. 

Applicability date: The inflationadjusted CMP were applicable 

beginning January 15, 2019. 

FOR FURTHER INFORMATION CONTACT:

Michael T. Wilson, Policy Analyst, 

Office of Regulatory Policy, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4124, TTY 

(703) 883–4056, 

Or 

Autumn R. Agans, Senior Attorney, 

Office of General Counsel, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4082, TTY 

(703) 883–4056. 

SUPPLEMENTARY INFORMATION: 

I. Objective 

The objective of this regulation is to 

adjust the maximum CMPs for inflation 

through a final rulemaking to retain the 

deterrent effect of such penalties. 

II. Background 

A. Introduction 

The Federal Civil Penalties Inflation 

Adjustment Act of 1990, as amended by 

the Debt Collection Improvement Act of 

1996 (1996 Act) and the Federal Civil 

Penalties Inflation Adjustment Act 

Improvements Act of 2015 (2015 Act) 

(collectively, 1990 Act, as amended), 

requires all Federal agencies with the 

authority to enforce CMPs to evaluate 

and adjust, if necessary, those CMPs 

each year to ensure that they continue 

to maintain their deterrent value and 

promote compliance with the law. 

Section 3(2) of the 1990 Act, as 

amended, defines a civil monetary 

penalty 1 as any penalty, fine, or other 

sanction that: (1) Either is for a specific 

monetary amount as provided by 

Federal law or has a maximum amount 

provided for by Federal law; (2) is 

assessed or enforced by an agency 

pursuant to Federal law; and (3) is 

assessed or enforced pursuant to an 

administrative proceeding or a civil 

action in the Federal courts.2

The FCA imposes and enforces CMPs 

through the Farm Credit Act 3 and the 

Flood Disaster Protection Act of 1973, as 

amended. FCA’s regulations governing 

CMPs are found in 12 CFR parts 622 and 

623. Part 622 establishes rules of 

practice and procedure applicable to 

formal and informal hearings held 

before the FCA, and to formal 

investigations conducted under the 

Farm Credit Act. Part 623 prescribes 

rules regarding persons who may 

practice before the FCA and the 

circumstances under which such 

persons may be suspended or debarred 

from practice before the FCA. 

B. CMPs Issued Under the Farm Credit 

Act 

The Farm Credit Act provides that 

any Farm Credit System (System) 

institution or any officer, director, 

employee, agent, or other person 

participating in the conduct of the 

affairs of a System institution who 

violates the terms of a cease-and-desist 

order that has become final pursuant to 

section 5.25 or 5.26 of the Farm Credit 

Act must pay up to a maximum daily 

amount of $1,000 4 during which such 

violation continues. This CMP 

maximum was set by the Farm Credit 

Amendments Act of 1985, which 

amended the Farm Credit Act. Orders 

issued by the FCA under section 5.25 or 

5.26 of the Farm Credit Act include 

temporary and permanent cease-anddesist orders. In addition, section 

5.32(h) of the Farm Credit Act provides 

that any directive issued under sections 

4.3(b)(2), 4.3A(e), or 4.14A(i) of the 

Farm Credit Act ‘‘shall be treated’’ as a 

final order issued under section 5.25 of 

the Farm Credit Act for purposes of 

assessing a CMP. 

Section 5.32(a) of the Farm Credit Act 

also states that ‘‘[a]ny such institution or 

person who violates any provision of 

the [Farm Credit] Act or any regulation 

issued under this Act shall forfeit and 

pay a civil penalty of not more than 

$500 5 per day for each day during 

which such violation continues.’’ This 

CMP maximum was set by the 

Agricultural Credit Act of 1987, which 

was enacted in 1988, and amends the 

Farm Credit Act. Current, inflationadjusted CMP maximums are set forth 

in existing § 622.61 of FCA regulations.6

The FCA also enforces the Flood 

Disaster Protection Act of 1973,7 as 

amended by the National Flood 

Insurance Reform Act of 1994,8 which 

requires FCA to assess CMPs for a 

pattern or practice of committing certain 

specific actions in violation of the 

National Flood Insurance Program. The 

existing maximum CMP for a violation 

under the Flood Disaster Protection Act 

of 1973 is $2,000.9 10

C. Federal Civil Penalties Inflation 

Adjustment Act Improvements Act of 

2015 

1. In General 

The 2015 Act required all Federal 

agencies to adjust the CMPs yearly, 

starting January 15, 2017. 

Under Section 4(b) of the 1990 Act, as 

amended, annual adjustments are to be 


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