FDIC extends brokered deposit comment period, citing coronavirus
WASHINGTON — The Federal Deposit Insurance Corp. announced it is extending the comment period for the public to weigh in on proposed changes to brokered deposit rules, citing “challenges associated with COVID-19.”
With an extension of 60 days, the new deadline is June 9.
The FDIC proposed its update in December clarifying how customer relationships with an institution affect the definition of brokered deposits. Banks that do not meet the standard of "well capitalized" face restrictions on accepting new brokered deposits.
The current regulation grew out of the savings and loan crisis of the late 1980s, when the use of brokered deposits by banks with a weakening capital position caused a liquidity crunch. The FDIC rule was intended to prevent struggling banks from leaning on volatile cash resources to fund risky assets.
Before the proposed changes were unveiled in December, FDIC Chair Jelena McWilliams called on Congress to update the statute governing brokered deposit rules.
“The emergence of the internet and other technological innovations has fundamentally changed how banks interact with their customers,” McWilliams said in a speech at the Brookings Institution the day before the FDIC published its proposal. “The statute mandates that the FDIC use a blunt tool to address an important policy problem.”