Federal Deposit Insurance Corporation

55017th Street NW, Washington, D.C. 20429-9990 Division of Risk Management Supervision

March 5, 2019

MEMORANDUM TO: The Board of Directors

FROM: Doreen R. Eberley

Director, Division Risk Management Su rvision

SUBJECT: Technical Amendment to Preamble

Staff recommends that the Board approve technical amendments to preamble text

adopted by the Board on December 19, 2018, relating to the final rule on the treatment of a

capped amount of reciprocal deposits ("final rule").1

The final rule amended the FDIC's 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.

The attached technical amendments are in response to concerns raised by several industry

participants about the meaning of a sentence in the preamble of the final rule. Their concern was

whether the sentence and its corresponding footnote could be viewed as changing existing

interpretations related to accepting or receiving deposits. The sentence is underlined below: 2

The FDIC recognizes that the statute only limits the amount of reciprocal deposits

an institution may "receive" in order to be considered an agent institution. Thus,

an institution that is less than well capitalized or not well rated will still c~uali as

an went institution if it holds a level of reciprocal deposits above the special capes.

as lon as 1) such deposits were received before the institution became less than

well capitalized or not well rated, (2) such deposits are time de~osits,aa 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

' 84 FR 1346 (February 4, 2019).

Z ld. at 1349.

Concur:

Charles Yi

General Counsel
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.

***

as Transactional reciprocal deposits are viewed as being received daily.

Staff does not intend the preamble language to change existing interpretations related to

accepting or receiving deposits. Therefore, in an effort to avoid confusion, staff recommends

deleting the sentence in question along with its corresponding footnote and, amending the

sentence that immediately follows. The revised paragraph would read as follows:

The FDIC recognizes that the statute only limits the amount of reciprocal

deposits an institution may "receive" in order to be considered an agent

institution. To take a simple example, an institution that is well capitalized but

no longer well rated could continue to be an agent institution if it holds

reciprocal certificate of deposits that it received prior to its rating downgrade

until those certificate of 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.

Because these recommended changes are technical, and do not change the rule text, staff

believes that the changes to the preamble text may be effectuated without notice and comment.

Staff further recommends that the changes become effective on the date of publication because

the changes are technical and delaying the effective date would serve no purpose.

For convenient reference, staff recommends republishing the revised preamble and final

rule in their entirety.

Staff contacts:

Legal Division

Vivek Khare, Counsel, (202) 898-6847

Thomas Hearn, Counsel, (202) 898-6967

Thomas F. Lyons, Chief, Policy and Program Development, (202) 898-6850

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